Meatco AGM 2012 - CEO Presentation
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Transcript of Meatco AGM 2012 - CEO Presentation
Meat Corporation of Namibia
Annual General Meeting
Chief Executive Officer Report
22 June 2012
2011/12 Highlights
Highlights - Markets Further development of world class & unique Brand
Realised 50% growth in B grade returns from RSA market via Woolworths “Free Range” products
Obtained acceptance of NCA product as “Free Range”
Secured entry to retail market in Norway
Cost of re-allocated Norway quota amounted to N$ 1.35 kg
Further development of EU and Scandinavian markets;
Further creation of logistical and production capabilities to implement market-led strategy
Obtained market access to middle east, with other markets being pursued
Successfully completed audits by BRC, ISO, SABS, Heinz & Woolworths
Further enhancement of quality systems; and
Significant decrease in non-conformances and claims
Highlights - Operations Further improvements on plant flexibility
Radically improved marketing logistics through direct shipping and use of Walvis Bay
Improved yields and production efficiencies
Improved performance of Cannery
Integrated daily production and marketing planning
Live procurement in communal areas
Introduced world class precision feeding and controls.
Highlights - Performance Significant cost savings against prior year (N$ 27.8 m)
Improved stock control and stock management
Improved working capital management with the utilisation of only N$ 4.9 million for operational activities
Simplified group structure through the deregistration of two subsidiaries
Establishment of fully-fledged Internal Audit division
Refinement of Board and subcommittee charters
Commencement of Board evaluation process.
Highlights - Other Passed ethical audits
Received peer review awards for recognition of business practices
Utilised Meatco Foundation for the implementation of several major projects and by using donor funding completed water project amounting to approximately N$ 1 million
Successful completion of veld-lotting trials.
2010/11: OverviewThe Group reported a net profit for the year amounting to N$ 5.7 million.
Highlights are:• Increase of 9.95% in revenue;• Increase of N$ 3.76 / kg or 18.19% in producer prices;• Gross profit margin increased from 1.8% to 13.89%; • Producer payments above SARMAA = N$ 24.4 million;• Decrease in overall administration costs = N$ 27.8 million; and• Total cash generated from operating activities = N$ 59.1 million.
However,• Overall 7.1% decrease in slaughter numbers (11,890).
The annual financial statements will be discussed in more detail during the next session
2010/11 2011/12
Exchange rate similar to that of prior year – except for period Nov ‘11 & Dec ‘11
However, only 14.98% of our sales occurred during this period
Year Volume N$ / kg
1992/93 152,285 4.90
1993/94 168,463 5.00
1994/95 160,330 7.60
1995/96 158,958 7.80
1996/97 169,969 7.60
1997/98 91,435 8.15
1998/99 127,461 9.00
1999/00 158,073 9.75
Year Volume N$ / kg
2000/01 141,133 10.25
2001/02 143,161 12.20
2002/03 149,109 15.00
2003/04 142,843 11.80
2004/05 143,305 12.35
2005/06 138,949 12,85
2006/07 110,397 18.03
2007/08 109,468 17.93
2008/09 118,732 23.59
2009/10 117,567 22.29
2010/11 114,150 20.67
2011/12 102,680 24.43
R/Kg Difference
11.40 1.45 / kg
16.19 1.84 / kg
16.16 1.77 / kg
17.57 6.02 / kg
18.11 4.18 / kg
18.84 1.83 / kg
23.54 0.89 / kg
Change in average producer price (SVCF)
18.19 % increase
N$ 24.4 million in premiums
Volumes are major concern
Decrease during 2012/13 mainly due to change in sales mix
(8.95% more manufacturing cuts sold)
Number of units
Contribution to gross profit for 2011/12:
Ekwatho / Feedlot contribution
8,906 cattle
N$ 0.42 / kg
Ekwatho
18,330 cattle
N$ 0.42 / kg
Feedlot
These initiatives supported the producer price with N$ 0.84 / kg during the year under review.
Change in producer price structure• The target carcass weight amended
relate to a range of between 200 kg and 219.9 kg per carcass;
• Introduction of “Fat equalization premium”;
• Introduction of “Age Gap Adjustment”; and
• Off-season premium to also include cattle with 5-6 teeth as well as C-grade cattle (at 50% of premium).
Northern Communal AreasHighlights:
Losses in NCA decreased by 22.2% from N$ 29.3 million to N$ 23.3 million
Slaughter volumes increased by 2,771 (18.2%)
Food and Mouth Disease caused closure of Katima Mulilo
NCA product certified to be sold as “Free Range”
What are the CRITICAL issues?
Decrease in slaughter volumes
Declining slaughter numbers are not just a factor of producer price.
• Producer price cycles;
• Bush encroachment;
• Production diversification;
• Declining commercial productivity;
• Export of live animals;
• Competitiveness of farming system (cost of weaner production vs. slaughter ox production.
Namibia has been experiencing a consistent decline in slaughter cattle volumes since the early 1990’s
Feedlot unfair competitive advantages• Purchase of dry Namibian weaners• Use of growth stimulants• Relatively low feed cost• Purchase power (Karan = 500,000)• A Grade carcass market• Export weight cut-off (450 kg)• Weaner to carcass ratio• Increased live exports• Shortage of weaners in RSA
The main concern is that neither Meatco, nor Namibian ox farmers can compete with the production efficiencies of South African Feedlots.
Converting Namibian production to simulate South African production will further decrease producer value and add to market diversification risks.
Industry Dilemma / Challenge
Other key issuesOther key issues that has a significant impact on the financial results of the Corporation and, if left unattended, will continue to negatively affect the Corporation :
• Underutilisation of existing slaughter capacity
• Inflexible labour regime
• Relative strength and volatility of the ZAR/N$
• Decreasing commercial slaughter numbers
• Increasing local slaughter capacity / overcapacity in local market
• Perception of low slaughter prices despite benchmarking
• Constraints of the Namlits database
Other key burning issues• Government industry policy positions (Norway / imports / grading - standards
/ capacity / live exports)
• Namibia NETT EXPORTER but HIGH COST and LOW VOLUME
• Unfair South African Feedlot competitive advantage: Hormones etc
• financial , geographic and volume dominance of South African Feedlots/ geographic advantage
• Veterinary health status of NCA
• Ineffective control and monitoring over live exports (weights etc.)
What does 2012/13 hold?
2012/13 and beyond World Economy – very tough next 3 years
• ownership status of Meatco will be key to future success
• Focus on customer/market centric strategies in high value markets;
• Further develop logistical and operational capabilities
• Penetrate new high value markets (e.g. Iran and others )
2012/13 and beyondIn addition, to continue to:
• address the declining volumes & re-align capacity/utilization • maintain our cost saving and efficiency enhancement drive • unlock further commercial value through value addition • through the Meatco Foundation, make an impact on the developmental
challenges facing the agricultural sector, specifically the livestock industry – leveraged with donor funding
Thank you