2015 Annual Results. Innovation Integration Growth

Transcription

1 2015 Annual Results Innovation Integration Growth March 2016

2 Disclaimer This presentation and the accompanying slides (the Presentation ) have been prepared by WH Group Limited ("WH Group " or the "Company") solely for information purposes. This Presentation does not constitute or form part of and should not be construed as, an offer or invitation to acquire, purchase or subscribe for any securities of the Company nor is it calculated to invite any such offer or invitation nor shall it constitute any offer or sale of such securities in any jurisdiction. No part of this Presentation shall form the basis of or be relied upon in connection with any investment decision, contract or commitment whatsoever. This Presentation has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes no representation or warranty, express or implied, whatsoever, on the truth, accuracy, completeness, fairness and reasonableness of the contents of this Presentation. The Company reserves the right to amend or update all or any part of this Presentation at any time, but the Company shall not be under any obligation to provide the recipient of this Presentation with any such amended or updated information or correct any inaccuracies herein unless otherwise required by the Rules Governing The Listing Of Securities On The Stock Exchange Of Hong Kong Limited or any applicable law. This Presentation may not be all-inclusive and may not contain all of the information that you may consider material. Neither the Company nor any of its affiliates or representatives make any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein or any other written or oral communication transmitted or made available to any recipient. The Company and its affiliates and representatives expressly disclaim any and all responsibility or liability based, in whole or in part, on any of the information contained herein, errors herein or omissions here from. In all cases, interested parties should conduct their own investigations and analyses of the Company, its businesses, assets, financial conditions and prospects, and of the information set forth in this Presentation. This Presentation contains statements that reflect the Company's intentions, beliefs or expectations about the future or future events (the "forward- looking statements"). These forward looking statements are based on a number of assumptions about the Company's operations, its future development plans, market (financial and otherwise) conditions, growth prospects and certain plans and objects of the management of the company, and are subject to significant risks, uncertainties and other factors beyond the Company's control, and accordingly, actual results may differ materially from these forward-looking statements. You should not take any forwardlooking statements contained in this Presentation regarding past trends or activities as a representation that such trends or activities will continue in the future. The Company expressly disclaims any obligation to update these forward-looking statements. 1

3 Contents 2015 Annual Results Highlights 2015 Business Review China US and Europe Growth Strategy and Outlook 2

4 2015 Annual Results Highlights

5 Highlights of the Year Achieved satisfactory performance under the adverse macro environment and market dynamics through the competitive advantages of our fully integrated business model. Continuous improvement in capital structure. Significant reduction in debts. Realised synergies and growth in trading between China and U.S. subsidiaries. Smithfield brand products launched in China. Further integration in management cultures. Promoting continuous enhancement in operational efficiency. 4

6 Overview of Consolidated Financial Results Key Operating Metrics Key Financial Indicators 2015 Full-Year (1) 2014 Full-Year (1) YoY Change Hog production volume ( 000 heads) 19,077 17, % Hogs processed ( 000 heads) 48,335 47, % Fresh pork external sales volume ( 000 metric tons) 3,870 3, % Packaged meat sales volume ( 000 metric tons) 3,183 3, % US$ million 2015 Full-Year (1) 2014 Full-Year (1) YoY Change Revenue 21,209 22, % EBITDA 1 2,044 2, % Operating profit 1 1,557 1, % Net profit attributable to Parent Company (Reported) % Net profit attributable to Parent Company (Core) % Diluted earnings per share (US$ cents) % Underlying diluted earnings per share (US$ cents) % Proposed dividend per share (HK$ ) Before biological fair value adjustments 5

7 Revenue and Operating Profit Breakdown WH Group 2015 revenue by core business segments (1) Hog production 4.7% Others and corporate 1.8% 2015 operating profit by core business segments (2) % 3.5% (14.3%) 14.5% 100.0% 96.3% Fresh pork 40.5% Packaged meats 53.0% Packaged meats Fresh pork Hog production Others Total revenue 2015 revenue by region (1) 2015 full-year operating profit by region (2) Europe 6.5% Europe 3.2% China 33.4% U.S. 60.1% China 52.1% U.S. 44.7% 1. External sales 2. Before biological fair value adjustments 6

8 Financial Highlights China Operating profit and margin (1) Packaged meats (2) Fresh pork (2) US$ million US$ million US$ million Operating profit margin % 9.4% 10.3% % % % Regional operating profit margin = regional operating profit / (segment/regional sales + external sales) 2. Segment operating profit margin = segment operating profit / (segment/regional sales + external sales) 7

9 Financial Highlights U.S. Operating profit and margin (1) Packaged meats (2) Fresh meat (2) Hog production (2) US$ million US$ million US$ million US$ million Operating profit margin % % 4.0% 6.3% % % 2.4% % Regional operating profit margin = regional operating profit / (segment/regional sales + external sales) 2. Segment operating profit margin = segment operating profit / (segment/regional sales + external sales)

10 Financial Highlights Europe Operating profit and margin (1) Packaged meats (2) Fresh meat (2) Hog production (2) US$ million US$ million US$ million US$ million 93 Operating profit margin % 3.6% 7.7% % 4.7% % -1.3% -2.6% Regional operating profit margin = regional operating profit / segment/regional sales + external sales 2. Segment operating profit margin = segment operating profit / segment/regional sales + external sales 9

11 Cash Flow and Debt Profile Operating cash flow Capital expenditure US$ million US$ million ,560 1, Capital structure China U.S. Europe US$ million Interest-bearing liabilities Interest-bearing liabilities/total equity 237.0% 7,432 4,670 3, % 58.4% End of 2013 End of 2014 End of 2015 End of 2013 End of 2014 End of

12 2015 Business Review

13 China operations - major achievements in 2015 Results hit record high Core segment saw steady growth in market share and profitability Increased efforts in new product development and continuous product mix optimization Measures taken to reduce costs and enhance operational efficiency 12

14 Results hit record high Operating profit of China operations hit record high (US$ million) % % 9.4% Operating profit Operating profit margin 13

15 Core segment saw steady growth in market share and profitability Steady growth of Shuanghui s packaged meats in market share (1) Others 44.0% Shuanghui 36.9% Others 43.0% Shuanghui 37.7% 2nd to 4th 19.1% 2nd to 4th 19.3% Accumulative market share in convenience stores and supermarkets ended June 2015 Accumulative market share in convenience stores and supermarkets ended December 2015 Packaged meats business in China showed an upward trend in terms of profitability (US$ million) H H H H 2015 Operating profit (US$ million) Profit per unit (US$/ton) 1. Source: CICC national supermarket chains information network, CICC Research 14

16 Increased efforts in new product development and continuous product mix optimization Product mix optimization Launched high-end American-style products Transition from snack to table food Introducing Western-style products Developing products customized for food service Mass production of authentic Chinese-style products Enriching the snack product lines High-end American-style products Western-style products Customized products for food service Smithfield American-style Ham Smithfield American-style Sausage Haway Breakfast Sausage Secret-recipe Sparerib Smithfield American-style Bacon American Hotdog Sausage Grill Patties 15

17 New Zhengzhou factory brings packaged meats business to a next level Shuanghui s American-style packaged meats factory in Zhengzhou with the total investment of RMB 800 million, officially commenced production on 18 December It marked the official entry of the Smithfield brand into China. The factory mainly produces three types of products, namely American-style bacon, ham and sausage. The production capacity reaches100 tonnes per day. The factory was built strictly adhere to the construction requirements for Chinese food enterprises, while making reference to the food safety standards of U.S. Department of Agriculture. It leverages the brand, raw materials and technologies from the U.S. operations, also take into consideration that the emerging consumer trends of pursuing quality lifestyle, thus further promoting the transformation and upgrading of the industry. 16

18 Measures taken to reduce costs and enhance operational efficiency Closely monitor the market with proper procurement strategy to reduce the overall cost level Achieved synergies through expanded imports of raw materials Promoting process reengineering: through automation, technology intelligence and ERP to enhance efficiency 17

19 U.S. and Europe operations - major achievements in 2015 Transforming from a commodity company into a consumer goods company, and achieved growth in all segments Business realignment under One Smithfield initiative to enhance operational efficiency Increased marketing spending to enhance the market share and profitability of packaged meats Leverage the advantages across pork value chain and effective hedging strategy to enable stable growth of the company Rapid growth in European brands 18

20 Growth in all segments Hog production volume ( 000 heads) Hogs processed ( 000 heads) 27,890 31,307 14,725 15, 年 2015 年 2014 年 2015 年 Packaged meats sales volume ( 000 metric tonnes) 1,290 1, 年 2015 年 19

21 Market Share Leading across pork value chain #1 Across pork value chain (1) 15% 19% Others Others 26% 17.8% 25.3% Others 64% 2nd to 3rd 11% 10% 4th to 6th #1 US HOG PRODUCER 17% 4th to 6th 20% 18% 2nd 3rd #1 US PORK PROCESSOR 17.1% 2nd 16.2% 5th to 7th 8.2% 15.4% 4th to 6th 3rd #1 US PACKAGED PORK COMPANY Largest pork exporter in the U.S. with leading position in a number of markets (2) 97.1% 32.7% 50.6% 48.0% 45.0% 42.3% 38.2% 28.6% 24.4% 20.3% Global China All of Asia Philippines Taiwan Columbia South Korea Mexico Japan Canada Smithfield Other US competitors 1. Source: 2015 Daily Livestock Report; 2015 Hogs Production Report of Chicago Mercantile Exchange (as of 21 May); statistical data of Information Resources Inc. (IRI) and Nielsen Perishables Group for Packaged pork sales adjusted to include store brands.such sales are based on the Company s internal shipment data. Residual store brands volume was allocated based on % to total volume for the category.. 2. Source: US Department of Commerce 20

22 Business realignment under One Smithfield initiative to enhance operational efficiency One Smithfield realignment to improve competitive cost structure and align organization to better serve customer needs The project is expected to bring in broad-based gains in market share, distribution and margins in the past Cumberland Gap Provision Farmland Foods, Inc. John Morrell & Co. Murphy-Brown LLC North Side Foods Patrick Cudahy Quik-to-Fix Smithfield Beef Group Smithfield Packing Company Smithfield RMH Foods Group Stefano Foods International Packaged Meats Packaged Meats Packaged Meats Hog Production Packaged Meats Packaged Meats Packaged Meats Beef Packaged Meats Packaged Meats Packaged Meats Hog Production Sales & Marking Fresh Pork Fresh Pork Administrative Functions Sales & Marking Sales & Marking Sales & Marking Sales & Marking Fresh Pork Sales & Marking Sales & Marking Packaged Meats Administrative Functions Sales & Marking Sales & Marking Administrative Functions Administrative Functions Administrative Functions Administrative Functions Sales & Marking Administrative Functions Administrative Functions Fresh pork Administrative Functions Administrative Functions Administrative Functions Sales & Marking at present Administrative Functions Packaged meats Dept. Fresh pork Dept. Hog production Dept. International Business Dept. Sales and Marketing Dept. Administrative functions 21

23 Increased marketing spending to enhance the market share and profitability of packaged meats Profits from packaged meats (1) Marketing, advertising and promotional expenses (US$ million) CY13 CY14 CY15 Marketing, advertising and promotional expenses (US$ million) Packaged meats EBIT ($millin) Innovations related to consumer products (2) Convenience Snacking Breakfast Protein elevated Wellness & Sustainability 1. Smithfield US GAAP financials 2. Performance appraisal for products which were introduced in the past 24 months over a 12-month period including delicatessens, retailers, caterers, brands and self-owned brands 22

24 Effective hedging strategy to enable stable growth of the company U.S. hog price has experienced a sharp decline during Smithfield s hogs production segment has outperformed its peers, largely attributable to proper hedging strategy In 2015, the industry recorded an average loss of approximately US$12.2 per head, while Smithfield achieved a profit of US$0.8 per head, which outperformed the industry s average level Hedging program effectively managed price volatility (1.0) (1.3) (9.1) (12.2) CY11 CY12 CY13 CY14 CY15 Smithfield hog production hedge adjusted EBIT (US$/head) "Industry average"- ISU wean-to-finish model EBIT (US$/head) 23

25 Growth Strategy and Outlook

26 Growth strategy and outlook Integrating global resources to implement the global expansion strategy. Integrating across industrial value chain to enhance competitive advantage. On track to become a global consumer goods company. Promoting synergies and integration to enhance operational efficiency and create value for the group. Utilizing the competitive advantage of Hong Kong to promote international trading business in addition to the current platform. Continuous enhancement of global corporate management and capital structure to support the further growth of the group. Promoting innovative marketing, optimize product structure to expand the market and fully utilize the production capacity. Create the future through innovation and transformation, while achieving growth against economic downturn. Driving the growth of Smithfield through implementing Operational Excellence initiatives to enhance management, increase efficiency, streamline processes and lower costs. 25

27 Q&A Session

28 Results Overview Shuanghui (China GAAP) Packaged meats Fresh pork Others Total US$ million 2015 Change (%) 2015 Change (%) 2015 Change (%) 2015 Change (%) Turnover (1) 3,603.1 (11.9)% 3, % % 7,113.7 (4.1)% Operating profit % 77.9 (47.9)% (18.5) (58.5)% % Operating margin (2) (%) 21.5% up 460 bps 2.0% down 200 bps (6.5)% up 1390 bps 11.7% up 100 bps Note: 1. External sales 2. Segment operating margin = segment operating profit / internal and external sales 3. Exchange rate for 2014: US$1=RMB6.1624; exchange rate for 2015: US$1=RMB

29 Results Overview Smithfield (US GAAP) Packaged meats Fresh pork Hog production International Corporate Total US$ million 2015 Change (%) 2015 Change (%) 2015 Change (%) 2015 Change (%) 2015 Change (%) 2015 Change (%) Turnover (1) 7,089.1 (1.2)% 5,089.9 (11.9)% 3,069.7 (9.3)% 1,422.8 (14.0)% 0 N/A 14,438.4 (3.9)% Operating profit % % 19.7 (94)% 66.1 (58)% (142.6) (14)% (15)% Operating margin (%) 9.5% up 310 bps 3.5% up 180 bps 0.6% down 960 bps 4.6% down 480 bps N/A N/A 5.5% down 70 bps Note: 1. Income prior to offsetting inter-segment sales 28