INGHAMS GROUP LIMITED — AGM Information 2019

Oct 16, 2019

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Inghams Group Limited 2019 Annual General Meeting

17 OCTOBER 2019

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01

Introduction and Chairman’s Address

Welcome to Ingham’s 2019 AGM

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Inghams Group Limited Board of Directors

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Ricky Lau* Non-Executive Director

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Jackie McArthur Independent Non-Executive Director

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Jim Leighton Managing Director & Chief Executive Officer

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Peter Bush* Chairman (Independent Non-Executive Director)

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Helen Nash Andrew Reeves^ Independent Independent Non-Executive Director Non-Executive Director

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Robert Gordon^ Linda Bardo Nicholls, AO Independent Independent Non-Executive Director Non-Executive Director

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Note: * Standing for re-election; ^ Standing for election

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02 CEO’s Address

Financial highlights – FY19 vs FY18

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Core Underlying Underlying Underlying Cash Underlying Final
Poultry Gross Gross EBITDA EBITDA NPAT NPAT Conv EPS EPS Dividend
Volume Profit Profit Ratio
414.9kt $483.8m $480.2m $242.2m $208.6m $126.2m $103.2m 112.7% 34.0 cps 27.8 cps 10.5 cps
↑ 4.3% ↑ 1.4% ↑ 3.0% ↑ 14.2% ↑ 2.9% ↑ 10.1% ↓ 4.4% ↓ 15.9% ↑ 13.0% ↓ 2.1%
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• Core poultry volume grew at 4.3% (total poultry volume including Ingredients grew at 2.4%)

• Underlying EBITDA growth of 2.9% to $208.6m excl. profit on sale, restructuring and Mitavite

• Profit on sale of assets of $49.7m offset by restructuring initiatives of $18.3m, net impact $31.4m

• Underlying NPAT decline of 4.4% to $103.2m due to the increase in the effective tax rate

Financial

performance

• Underlying Earnings Per Share (EPS) decline of 2.1% to 27.8 cps[1 ]

• Final dividend of 10.5 cps. Total dividend for FY19 of 19.5 cps – 70% of underlying NPAT

• Net Debt of $263.8m (underlying leverage ratio 1.3x) post capital return of $125.5m (33 cps) and on-market buy-back $36.4m

• Cash position strong with operating cash conversion of 112.7% and cash on hand of $134.5m

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1. EPS - calculation based on shares on issue at Jun-19 371.7m and Jun-18 380.2m

FY19 Results – Segment Information – Australia

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$ millions(AUD)	Jun-19	Jun-18	Variance	%
Australia
Core Poultry volumes (kt)	351.3	334.5	16.8	5.0
Feed volumes (kt)	302.2	367.4	(65.2)	(17.7)
Revenue	2,109.4	2,003.9	105.5	5.3
EBITDA	213.1	175.2	37.9	21.6
EBITDA %	10.1%	8.7%	1.4
Underlying EBITDA	179.0	165.9	13.1	7.9
EBITDA %	8.5%	8.3%	0.2

Summary: Australia

• Core poultry volume and revenue growth excluding ingredients of 5.0% and 7.1% respectively

• Price increases offsetting higher feed and other costs

Retail

• Solid performance in a price competitive market

• Early momentum from a reinvigorated new product development process to drive growth

QSR & Food Service

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• Stronger than expected QSR demand growth for further processed products

• Robust Food Service demand

Wholesale & Other

• Wholesale volume growth in line with expectations

• Demand for edible poultry products (e.g. paws) included new export opportunities

Third Party Feed Sales

• Solid year cycling volume losses and Mitavite sale

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FY19 Results – Segment Information – New Zealand

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$ millions(AUD)	Jun-19	Jun-18	Variance	%
New Zealand
Core Poultry volumes (kt)	63.6	63.2	0.4	0.6
Feed volumes (kt)	130.3	137.3	(7.0)	(5.1)
Revenue	380.4	370.0	10.4	2.8
EBITDA	29.1	36.8	(7.7)	(20.9)
EBITDA %	7.6%	9.9%	(2.3)
Underlying EBITDA	29.6	36.8	(7.2)	(19.6)
Underlying EBITDA %	7.8%	9.9%	(2.1)
Note: All financial numbers are in AUD

Summary: New Zealand

• Volume for core poultry in line with prior year, with some growth in 2H

• Free-Range segment continues to grow

• Trading performance reflects price competition, increased farming costs and network issues

• New management team in place to deliver operational improvements across the network

• Recent indications suggest the NZ market moving into a period of less over-supply

• Expected to return to year on year growth in FY2020

Third Party Feed Sales

• Dairy feed demand impacted by excellent pasture conditions

• Third party chicken feed sales in line with expectations

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Feed cost update

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 Feed is our largest input cost

Wheat price (as observed by Ingham’s) $A per tonne

Feed cost update

 Feed prices have continued to remain at close to historically high levels, driven by continued dry conditions in Australia during FY2019

 We are in the fortunate position of having a number of arrangements where we are able to pass through this cost

 These contractual arrangements and our market position delivered intended outcomes in FY2019 to partially offset costs

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 Outlook for FY2020 feed prices remains uncertain due to the uncertainty regarding the outlook for rains across southern states in the coming months (which is required for a higher FY2020 crop)

 We are well placed to minimise feed costs, with different execution strategies available depending on market and weather conditions

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FY2020 outlook

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• Trading to plan through Q1 FY2020

• EBITDA run rate is planned to be lower in the first half than the second half of FY2020

• Current feed costs remain close to historic highs, impacting the outlook into 2H FY2020 dependent upon the next domestic grain harvest

• Australian margins are being negatively impacted by higher input costs and channel mix

• Further Processing network rationalisation project has not delivered to plan. Stronger customer demand has impacted operations, mix and resulted in higher costs

• had a significant impact on our profitability toward the end of FY2019 and into FY2020.

• New Zealand performance is returning to year-on-year growth and remains below historical profit levels

• EBITDA in FY2020 will be below underlying FY2019, with a return to growth expected in FY2021

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Future Opportunity

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• Leadership team rebuild complete

• Bring the right mindset, capability, experience and diversity to get after the opportunity

Team Update

• decades of global best practice poultry operational experience from around the world

 New leadership team is challenging the status quo and looking for accretive growth from the core business as well as through new product development and innovation

• New leadership team executing plans to get more out of our core business:

• utilise latent capacity

• balance the supply chain

Business Update

 Executing a proven strategy that to the extent possible will mitigate the influence of external factors on our business

• Moving from a capital led operational improvement program to an asset efficiency culture

 Pivoting from a commodity-centric transactional company to a consumer-centric strategic company

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