CHINA HUISHAN DAIRY HOLDINGS COMPANY LIMITED

Transcription

1 CHINA HUISHAN DAIRY HOLDINGS COMPANY LIMITED

2 Disclaimer This presentation has been prepared by China Huishan Dairy Holdings Company Limited ("Huishan" or the "Company") and is solely for the purpose of corporate communication and general reference only. The presentation is not intended as an invitation, offer, recommendation or solicitation for you to buy or sell securities or to engage in any investment activities whatsoever, or to form any basis of investment decision for any securities (whether or not in relation to the Company) in any jurisdiction. All such information should not be used or relied on without professional advice. The presentation is a brief summary in nature and do not purport to be a complete description of the Company, its business, its current or historical operating results or its future business prospects. This presentation material may contain forward-looking statements. These forward-looking statements are based on a number of assumptions about the future, some of which are beyond the Company s control. The Company does not undertake any obligation to update any information contained in this presentation (including but not limited to the forward-looking statements) to reflect events that occur or circumstances that arises after the date of this presentation. Potential investors should bear in mind that actual financial results may differ materially from the forward-looking statements contained herein. The information contained in this presentation is not verified by any independent third party. No warranty or representation of any kind, whether express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information contained herein. The information contained in this presentation should be interpreted under the prevailing circumstances. There will be no update of matters in the presentation to reflect any significant change in the development. The Company, its directors, management, employees, agents or advisers specifically disclaim all responsibilities in respect of any use or reliance of any information, whether financial or otherwise, contained in this presentation, and shall not be liable for any and all losses incurred (whether directly or indirectly, financial or otherwise) by any person in reliance on any information contained in this presentation. 1

3 Contents Index #1 Company Update #2 Industry Overview #3 Company Overview #4 Update on Operation #5 Financials #6 Outlook and Strategies 2

4 Presenters Mr. Eddie So Chief Financial Officer Mr. Michael Chou Head of Corporate Finance 3

5 Company Update

6 Company Update Signed contracts to import 32, heifers over next 12 months with potential to upsize further Consistent with our strategy to speed up development of upstream business, we have signed contracts with our supplier partners to import 32, heifers over next 12 months with potential to upsize even further Secured additional c. 19, mu of land for feeds growing In order to maintain our cost competitiveness in raw milk production, we continue to increase the size of our land bank for feeds growing in preparation for the needs of our ever-expanding herd size. We recently finalised securing 19, mu of land for corn silage growing in addition to our existing feed materials plantation field of 24, mu Opportunity to capture additional value along value chain acquiring a cow slaughtering business Beef prices in China have been on a strong upward trend. Growth rate of beef price outpaced that of the raw milk price over the last two years as a result of changing dietary habits of the Chinese We are evaluating an opportunity to acquired a cow slaughtering business with an annual capacity of 5, heads to capture additional value in beef products processing and distribution as our population of culled dairy cows and male calves continue to expand along with the size of our ever-expanding herd 5

7 Company Update Huishan Deal Polled as the Best IPO of 213 by Asia Money Magazine When choosing the best regional deals of the year, Asia Money requests Asia s leading banks to submit the detailed pitches about the transactions they consider most worthy of being awarded The editorial team then conducts a great deal of internal research about these and all other notable deals in the year and picks the deal we feel to be the most impressive The winning transaction needs to display a mixture of innovation, the ability to be either a trailblazer or demonstrate a strong influence on the market, and strong relative market performance ---- Asia Money Winning the Best Regional IPO category is a badge of honor for the issuer and the intermediaries and advisers involved the company that did it is an important entrant into the equity markets and one of the most important issuers from their country ---Asia Money Selected brand by China Dairy Industry Association Unique grass to glass business model: most innovative, quality assurance Endorsement by China Dairy Industry Association Recognition, assistance & long-term benefits Winner in IMF industry consolidation process (from 3+ brands to 5) 6

8 Industry Overview

9 Cumulative change (base = Mar 29) (Million farms) Raw milk ASP (RMB/kg) Raw Milk Supply and Demand (Million tonne) E 214E 215E 216E 217E Raw milk prices are expected to continue to rise Raw milk ASP continue to increase 6. Huishan 5.5 Huishan Apr-9 Oct-9 Apr-1 Nov-1 May-11 Dec-11 Jun-12 Dec-12 Jul-13 Jan-14 China avg YST CMD Huishan Source: Company data, Wind, Macquarie Research, November 213 Fueled by increasing gap between supply and demand Raw Milk supply Raw Milk demand Gap between Supply and Demand Note: 1. Raw milk only represents cow milk and excludes other types of milk; 2. Raw milk supply is represented by annual raw milk production; 3. Raw milk demand is estimated based on dairy products production. Source: Raw milk supply from 27 to 212 is sourced from National Bureau of Statistics of China, Frost&Sullivan Beef price has been rising faster than raw milk Smaller farms slaughtered cows to sell beef 2% 18% 16% 14% 12% 1% 8% Mar-9 May-1 Jul-11 Sep-12 Oct % 92% 87% 85% 84% % 94% 92% 9% 88% 86% 84% 82% 8% 78% (% of total raw milk production) Raw milk Beef % of total raw milk production No of small farms (<1k head) Source: National Bureau of Statistics, Macquarie Research, November 213 Source: Euromonitor, Macquarie Research, November 213 8

10 Industry sales (RMB bn) Industry sales (RMB bn) Premiumization trend in dairy consumer products Premium liquid milk sales to rise above 2% Powder market to double in 4 years, led by premium E 214E 215E 216E 217E 25% 2% 15% 1% 5% % % premium E 214E 215E 216E 217E 45% 4% 35% 3% 25% 2% 15% 1% 5% % % premium Premium milk Regular milk Premium % Premium milk Regular milk Premium % High-end milk brands driving premium growth Consumers willingness to pay a premium for quality for their children, particularly for the younger generation of Chinese parents (those that are born after 198) Premium milk sales as a percentage of total liquid milk rose from.5% in 25 to 15% by 212 Euromonitor estimates the premium segment could further rise to 21 % by 217, implying a premium sales CAGR of 19%, far outpacing 8% for regular milk One-child policy further relaxed Government toughened policies and supervision on imported dairy products Source: National Bureau of Statistics, Euromonitor 9

11 Company Overview

12 Business Overview Grass to Glass Feeds Growing and Processing Largest commercial alfalfa fields in China (14, mu 1 of land, approximately the size of Hong Kong Island) Rapidly expanding plantation base. 1, mu of land for supplementary feeds and in the advance stage of securing another 2, mu of land Significant cost benefits and feeds with higher nutritional value Scaled plantations with fixed rents and strategically located in the Golden Corn Belt No.1 Market Share in Northeastern China Liquid Milk Only major dairy company in China using solely self-produced raw milk for production #1 player and #1 brand satisfaction in Northeastern China Brand well known in Northeastern China for its quality and safety assurance Dairy cow farm Alfalfa/other feeds plantation Liquid milk/milk powder production facility Second largest herd in China with 128,352 dairy cows 54 dairy farms in operation and 12 under construction Industry leading milk yield Premium quality raw milk with high nutritional value Transportation cost savings from strategic layout of production base Golden Corn Belt Suitable weather, particularly precipitation Yixian Zhangwu Shenyang Unique Grass to Glass Business Model Faku Fushun A leading F&B brand from Taiwan A Chinabased major IMF brand Only IMF brand in China using solely self-produced raw milk for production Only company in China with official approval for production and sales of D9 whey powder Faku milk powder facility GMP certified. In process of having all facilities GMP certified Dairy Farming Milk Powder and Dairy Ingredients Note: Note: 1. 1 mu m2 11

13 Our History Vertical Integration Journey China s Most Trusted Dairy Brand by Consumers Commenced dairy farming operations Established dairy products processing facilities 195 s 22 辉山 (Huishan) brand was first used in association with dairy products Commenced liquid milk production and sales 29 Mr. YANG began to be involved in the dairy business and had since envisioned the vertically integrated business model Commenced operation of alfalfa plantation 21 Liaoning Huishan Holdings established Commenced production and sales of infant milk formula and D9 whey powder 211 Mr. YANG established an infant formula JV with Hero Group Issued US$29mm EB to financial investors led by Dr. Cheng Yu- Tung IPO on HKSE in September 213 Hero Group became a minority shareholder 12

14 Update on Operation

15 Feeds Growing and Processing Continue to secure upstream resources for expanding planation of alfalfa and supplementary feeds ( mu) 5 4 June 213 Ministry of Agriculture of China ( 农业部 ) organized a national alfalfa conference at Huishan s alfalfa plantation field in Jinzhou, Liaoning Highly favorable remarks for Huishan s unique vertically-integrated dairy business model August 213 Huishan alfalfa awarded Premium rating and obtained the highest score in a competition held at China s Alfalfa Development Convention( 中国苜蓿发展大会 ) organized by China Animal Agriculture Association ( 中国畜牧协会 ) 1H H Alfalfa fields Supplementary feed fields Newly secured land 14

16 Dairy Farming Herd size Total raw milk production 2, (tonnes) 25, 15, 2, 1, 5, 49,889 57,4 62,962 71,312 15, 1, 5, 154,36 23,39 31 March September 213 1H H Milkable cows Calves and Heifers Average milk yield Average selling price of raw milk (tonnes) (RMB / tonne) ,9 4,8 4,838 4, ,7 4,6 4,5 4,4 4,461 4, H H ,3 4,2 4,1 1H H Internal sales External sales 15

17 Liquid Milk Enhancing Liquid Milk Product Mix Expanding retail network coverage Jersey Farm series( 杰茜牧场 ) - exclusive series of ultra-premium UHT products Protein level at 3.6% We have the largest Jersey cow herd in China Sharing Global Flavors( 全球甄享 ) - a series of premium yoghurt products retail network coverage by Mar 31, 213 retail network coverage by Sep 3, 213 Developing differentiated products which leveraged on our industry-leading upstream resources 33 distributors and 341 supermarkets as at Sep 3, % growth rate from customer base as at Mar 31, 213, approximately 1, households under a new initiative Freshness Delivery ( 新鲜送 ) 16

18 Milk Powder and Dairy Ingredients Milk Powder: Expanding distribution network Dairy Ingredients: Launching new products D9 whey powder Nondairy creamer Wholemilk powder IMF base powder Internally used Industrial customers retail network coverage as of Mar 31, 213 retail network coverage as of now Increased to 27 distributors from only 69 as at Mar 31, 213 A leading F&B brand from Taiwan A China-based major IMF brand 17

19 Brand Building New Safety Power in China s Dairy Industry ( 中国乳业安全新力量 ) Advertisements on TV and other media platforms Sole Title Sponsor of Reality Programme Miracle Audition ( 奇迹梦工厂 ) Innovative advertising campaign featuring popular TV anchors Acting enthusiasts audition before a panel of popular actors and directors 18

20 Financials

21 Highlights Compared with the corresponding period last year: Turnover increased by 47.6% Total raw milk production increased by 49.5% Operating profit before biological fair value adjustments (1) increased by 41.8% Liquid milk segment 65.3% of the Company s total turnover Turnover increased by 4.1% Total volume sold increased by 3.3% ASP increased to RMB7,222 /tonne from RMB6,712 /tonne Gross margin (2) improved to 6.9% from 52.2% 2.45x net cash generated from operating activities Notes: 1. Operating profit before biological fair value adjustments represents profit for the period before biological fair value adjustments, share option expenses and IPO expenses. Biological fair value adjustments and share option expenses are non-cash in nature and IPO expenses are non-recurring in nature 2. After inter-segment elimination 2

22 Consolidated Financial Performance Overview Turnover Gross profit and gross margin (RMB m) (RMB m) 1,8 1,6 1,4 1,2 1, , 1,6 1, % 1,534 6% 1, % 1, % 4% % H H % FY21-11 FY FY Turnover Gross profit Growth rate 2, 1,6 1, % 58.% H H Gross profit Gross margin Operating Profit (1) Operating Cashflow (2) (RMB m) (RMB m) , % 6% 6 2, 54.% 5 51,6 41.2% 1,6 46 1, % 1, % 4% 4 1,2 1,2 32.% % H H H H % FY21-11 FY FY FY21-11 FY FY Operating Gross profit Profit Growth rate Operating Gross profit Cashflow Growth rate Notes: 1. Operating profit before biological fair value adjustments represents profit for the period before biological fair value adjustments, share option expenses and IPO expenses. Biological fair value adjustments and share option expenses are non-cash in nature and IPO expenses are non-recurring in nature 2. Net cash generated from operating activities 6% 4% 2% % 21

23 Consolidated Financial Performance By Segment Turnover breakdown by segment Gross profit breakdown (1) by segment (RMB m) (RMB m) 2, 1,5 1,8 1,6 1,2 1, , , 5.3 1, H H H H Dairy farming Liquid milk Milk powder Milk powder Liquid milk Dairy farming Grain Processing and Trading Grain Processing and Trading Note: 1. After inter-segment elimination 22

24 Segment Overview: Dairy Farming Turnover Raw milk sales volume (RMB m) (tonnes) 1,8 1,6 1,4 1,2 1, , H H Internal uses External sales 3, 2, 1, 148,665 85,772 62, ,63 133,289 88,341 1H H Volume (internal) Volume (external) Gross profit and gross margin (1) Raw milk ASP (RMB m) (RMB/tonne) 1, % % 241 4,9 4,8 4,7 4,6 4,5 4,4 4,3 4,2 4,355 4,461 4,81 4,838 1H H Gross profit Gross margin 4,1 1H H ASP (external) ASP (internal) Note: 1. After inter-segment elimination 23

25 Segment Overview: Liquid Milk Turnover Liquid milk sales volume and ASP (RMB m) (tonnes) (RMB/tonne) 1,2 2, 1, 1, , % 1,2 6% % 1, % 4% % H H % FY21-11 FY FY Turnover Gross profit Growth rate 5, 4, 3, 2, 1, 7,222 6, ,776 16,544 1H H Volume ASP 1, 8, 6, 4, 2, Gross profit and gross profit margin (1) (RMB m) 1,2 1, % % 611 1H H Gross profit Gross margin Note: 1. After inter-segment elimination 24

26 Segment Overview: Milk Powder Turnover (RMB m) (RMB m) Gross profit and gross profit margin (1) Gross Margin (1) 36.1% , 54.% 6% 2, 54.% 6% 2 1,6 1,2 32.% 41.2% 1, % 2 1,6 1,2 32.% 41.2% 1, % % H H % FY21-11 FY FY Gross Turnover profit Growth rate H H FY21-11 FY FY Gross profit Profit Growth rate 2% % Note: We began to sell our milk powder products and dairy ingredients in January After inter-segment elimination 25

27 Outlook and Strategies

28 Our Strategies 1 Enhance distribution network and penetrate additional geographical end-markets beyond Northeastern China and expand industrial customer base 2 Expand upstream operations and resources to uphold highest standards of product safety and quality Most Trusted Dairy Brand in China 3 Continuously expand product portfolio and offer innovative products to improve profitability 4 Strengthen brand recognition across China and enhance consumer loyalty 27

29 Well Positioned to Capture Future Opportunities Full value chain business model brings an array of opportunities As China s most vertically-integrated dairy company with complete control over quality raw milk, Huishan is uniquely best positioned to capture unprecedented market opportunities in China s dairy industry Event Opportunities Huishan is well positioned to capture the benefits Upstream Downstream Demand for dairy products growing rapidly Supply of raw milk stagnant Government toughened policies & supervisions on imported dairy ingredients Government further relaxed One Child policy Consumers demand for high value-added, high quality premium dairy products that guarantee food safety Demand and supply gap for raw milk to further widen Demand for premium raw milk rising even faster Prices of imported dairy ingredients surge to all time high Game changing opportunity for domestic dairy ingredient player Market space growth for IMF brands Stronger effects expected in tier 2 and tier 3 cities High quality premium dairy products require premium raw milk Market opportunity for dairy players with control over quality raw milk Strong demand driving raw milk base price to RMB5,, RMB 5,5 & RMB 6, per tonne Imported additional 9,754 heifers and another 16, contracted this year Rapid feeds plantation expansion Upsize heifer importation in year ahead Quality domestic producer with safety and quality assurance GMP certified facility Leading F&B brand from Taiwan as customer Leading IMF brand from China as customer Huishan has advantage of penetrating tier 2 and tier 3 cities markets First IMF brand in Liaoning to distribute IMF products through pharmaceutical channels Product mix enhancement lifting ASP of products New ultra-premium UHT products Jersey series New premium yoghurt products Share global taste Further ads to promote products 28

30 Thank you!