pcl business and strategy briefing

7/28/2019 Pcl Business and Strategy Briefing

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BUSINESS AND STRATEGY BRIEFING20th SEPTEMBER 2010


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DR MATHEWS CHIKAONDAGroup Chief Executive

MR PIUS MULIPA- Group Operations Executive

MR ANDREW SESANI- Group Financial Controller

MRS AGNES VARELA- Group Projects Executive

MISS NINA KAPEZI Legal Officer


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This presentation might contain forward lookingstatements. These statements, which reflect PCLsassessment and future expectations with regard tothe development of the business, the timings and

the benefits, maybe influenced by a number ofrisks and uncertainties that could cause actualresults to differ materially from expectations. PressCorporation Limited is under no obligation to

update or amend forward looking statementsbased on new information, future events or for anyother reason.


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GCEs statement Performance Over Five Years

Divestures and Acquisitions

2010 Highlights Corporate Governance

Financial Highlights

State of Operations

Going Forward Question and Answers


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Turnover tripled from 15.7billion in 05 to47.6billion in 09 representing 202% growth

Profitability increased by 154% from 3.391in 05 to 8.611 in 09

Basic EPS grew by 80.8% from 15.06 to27.23

Ordinary shareholder funds improved by an

enormous 194% from 8.366billion to24.611billion


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DIVESTURES ACQUISITIONS Malawi Pharmacies

2005

Sold 30% interest inFDH - 2006

Chombe Tea - 2007

PGI - 2009

Presscane 2003/2006 Maldeco Aquaculture -

2004 MTL - 2006 TNM - 2007 Increased stake in BBGL

2009/2010

Divestures & acquisitions are strategic to position

PCL as a dominant company in the private sectorInvest only in businesses that have a leading

position or have the potential to become a leaderin their industry


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The Fish Eagle arrives in the country Fibre optic network cable connects Mzuzu

Mac steel increases sales of roofing products

due to introduction of Harvey Tiles National Bank switches over to T24 system

from Bank Master

BBGL setting up new plant in Lilongwe


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THE BOARD Responsible to shareholders for setting the

direction through establishment of strategicobjectives and key policies

STRUCTURE AND COMPOSITION Consists of six (6) Non Executive Directors and two

(2) Executive Directors

Chairperson is Non Executive Director Meets quarterly


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COMMITTEESAudit Two Non Executive Directors, One Non Board

Member

Meets at least bi-annually Group Chief Executive, Group Financial Controller,

Group Internal Audit Manager attend by invitation

Appointments & Remuneration

Three Non Executive Directors Meets three to four times a year


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POLICIES Share Trading Policy - to prevent insider trading

violations byDirectorsManagersEmployeesOther related individuals

Corporate Fraud Policy

HIV/AIDS policy on non discrimination

Sexual Harassment


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CODES Code of Ethics Business Code of Conduct (BAAC) Malawi Code of Best Practice for Corporate Governance Code II

All Governed by King III

REGULATIONS MSE - -Listing Rules and Continuing

obligations LSE- - Listing Rules and continuing

obligations Statutory - Companies Act -Taxation Act -etc


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PCL Clinic Open to - PCL- Subsidiaries- Public

United Nations Global Compact -Communication On Progress

PCL going green campaign - tree planting

- recycling


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2006/2007 took in huge losses from LimbeLeaf

Sold loss making/insignificant investments tostabilize the Groups earnings

2007/2008 saw a complete turnaround inPresscane

2008 full year impact of the acquisition of

TNM


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2009 2008 2007 2006 2005

Dividend paid 295 473 353 400 223

Dividend per share 2.45 4.17 3.21 3.64 2.03

Earnings per share 27.23 27.67 15.53 14.62 15.06

Return on investment 13% 12% 11% 11% 18%

Issued share capital 120.2 113.5 110 110 110

Share price 163 205 205 96.5 50


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(2,000)

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Fin. services Retail and

consumer

Telecom Food &

beverages

Real Property Discontinued

Turnover 4,074 12,729 7,005 397 88

PAT 2,148 423 140 (20) (368) 2

Segmental results


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Segmental resultsThe Financial Services consists of NBM.

The Retail & Consumer Goods consists of BpMalawi, PTC, Ethanol, Presscane.

Telecommunications consists of TNM and MTL.Food and beverages consists of Maldeco fisheries

and Aquaculture.

Real Property & Investments consists of Press

Properties and Corporate Office


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Results were driven by the strong performance ofthe bank, BP Malawi. PTC, BBGLLimbe Leaf made a loss as a result tax provision

made relating to prior yearsMTL made a loss because could not generate

planned revenues. Most projects still atdevelopment stageAquaculture made a loss due to growth problems

carried forward from prior year. Problem has sincebeen resolved

Ethanol manufacturing companies has just comefrom seasonal shut down


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105 outlets nationwide, and 4 Kwikfoods canteens

45 retail outlets, contributing 28% turnover; 30 wholesale,

49% turnover; 30 combination outlets, 23% turnover.

80% of stock-holding is sourced locally, which assists inpreserving jobs in the supplier companies.

Competition is rapidly emerging largely from single-

operator shops A big capital expenditure budget in place to refurbish

stores, replace aging equipment, re-arrange physicaloutlook, in order to meet competition and maintain marketposition.

The business has grown too big to be managed withmanual systems and a store/warehouse computerisationprogram has been embarked upon, the end result of whichwill be to link all stores real-time.


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PET plant installed two years ago helped to significantlyreduce stock-out problems but the market is still notadequately supplied with the key brands.

New products (Fanta Passion, Fanta Exotic, Malawi Rum)have been introduced to enhance the product portfolio.

A new brewery and combi-bottling line is to be installedin Lilongwe, which will double current productionvolumes and truly satisfy the market fro some time tocome.

It is also planned to export some products as this will befacilitated by the increased volumes.

Mzuzu plant is also being revamped. There has been a major truck replacement program in

the last 4 years such that the fleet is fairly young


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Inadequate raw material (Molasses) supplies acritical problem; production is consequentlyat around 50% of installed capacity.

Serious efforts underway to find addition raw

materials from other sources. Further development of export market

necessary and on-going, because localuptake is frequently inadequate to exhaust

stock holding Consideration to revert to a fuel blending

ratio of 20% is at an advanced stage.


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The installation of the FOC project is MTLs biggest andmost expensive project; it will create a platform on which

so many products will ride. The link from Blantyre-Lilongwe-Mzuzu is now complete

and work is underway on the back-loop to Blantyrethrough the lakeshore.

Currently there is one link to a sea-cable through Mwanzato Mozambique. However, insufficient capacity is being

provided on that link. To counter the above problem, a new link is expected to

be operational through Songwe and Dar es Salaam by theend of September.

Looking further into the future, two more links will beestablished through Mulanje and Chipata and Zambia

Vandalism and sabotage remain key threats toinfrastructure, but nothing is being spared to deal withthis challenge.


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Network reach has been expanded significantly in

the past two years, leading to greater newcustomer recruitment. In terms of network coverage, the gap with the

leading competitor is very nearly being closed. In view of the fact that most of the equipment

has been installed or upgraded recently, thenetwork contains the most modern technologiesin its systems.

The subscriber base exceeded the 1 million markin July and market-share has increased.

There is indeed growing competition with theadvent of a new entrant, but the entity is ready tohold its position...and more.


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The company still hold the leadershipposition in tobacco processing, although thisposition has been eroded in the past twoyears by the advent of new competing

processing facilities. The industry is facing threats from external

sources, but the real effect of this will taketime to settle.


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Head office building is expected to be complete by year-end, which will significantly improve efficiencies, as alldepartments will be in the same building.

We expect an impairment on the head office building, themagnitude of which we are yet to determine.

A new banking system has just been installed (went live on

6th September 2010) and this will also bring increasingoperational efficiencies. Refurbishment of branches is on-going in order to

maintain the Banks image and leadership position. New geographical locations are being explored to expand

the branch network in pursuit of better customer

satisfaction. Similarly, more ATMs are being installed at non-bank

premises for greater customer convenience.


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An ethanol distillery plant with capacity to produce60,000 litres of alcohol per day using molasses.

The plant was revamped two years ago at a totalcost of K1 billion.

A lot of production efficiencies are now beingachieved following this revamp.

Production stands at 65% Extra Neutral Alcohol(ENA), 23% in Absolute Alcohol and 12% in RectifiedAlcohol. ENA is all for export market.

Company operating at 50% capacity due to rawmaterial shortage (inadequate supply of molasses).Efforts are undergoing to find long lasting solutionsto the problem


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Joint venture between BP Africa and PCL.

Company leads in petroleum fuels distribution in Malawi(market share 40%).

Has 46 roadside service stations and supplies fuel to thekey economic drivers in the agriculture, industrial, miningand construction sectors.

BP sole supplier of aviation fuel in the country. Major challenge -fuel supply problems due to forex

shortages New service stations under construction and upgrading.

Kabula (construction), Chikhwawa (upgraded andcommissioned) Ntchisi (being upgraded).

BP Africa has indicated its desire to exit from Malawi andare seeking buyers for their 50% shareholding in BPMalawi.


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Joint venture partnership with Macsteel Exportsof South Africa. Largest and leading manufacture and distributor

of steel, wire and roofing products in the

country. Last year, introduced Harvey tiles to its range of

products. So far sales have been encouraging Business heavily dependent on imported raw

materials from South Africa hence performanceaffected by forex shortages and forex losses(when ZAR strengthens against the MK).


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Property portfolio comprises of residential properties in

an exclusive low density residential area in Blantyre andcommercial and industrial properties for letting acrossthe country.

The company has just completed a major propertydevelopment project (at a cost of K1.7 billion) on a 120ha site at Chapima Heights 6 km from centre of Blantyre.

The project involves sale to the public about 550serviced freehold high, medium and low density plotsand commercial plots. Provision has also been made fora recreation area and a school. Press Properties is toconstruct about 260 (30 already constructed) three

bedroom medium density houses for sale. Chapima Heights project offers an excellent opportunity

to individuals and corporate investors. The company isnow taking bookings for houses and plots.


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Largest commercial fishing and processing company in Malawi,fishes using three stern trawlers.

Annual catch amounts to about 7% of the total Lake Malawicatch, which fluctuates between 26,000 tonnes and 47,000tonnes annually.

Major catches: Ndunduma (diplotaxodomspp) contributing 60-70% of the total catch and Utaka (haplochromines). Tilapia(Chambo and Makumba) catches have been falling and are nowat their lowest point ever.

Population of Chambo (oreochromis karongae), fish in the lakehas declined due to overfishing and is presently not targeted byMaldeco Fisheries.

Main product is fresh fish representing over 90% of sales, 10%processed including smoked, frozen gutted and frozen fillets.

So far, fishing program mostly in the Southern part of the Lake.

A project (at an estimated cost of K500 million) to expand trawl fishing further up Lake Malawi, through the development of afish-land site at Domira in Salima and construction of newfishing vessel is almost at completion stage. The new vessel willbe launched in November 2010.


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Established 2003 with sole objective of farming and selling

Chambo (oreochromis karongae) using both pond and cageculture.

Established due to decline in availability of the nations favouritefish, Chambo.

PCL reasoned that any project increasing Chambo productionwould have significant socio-economic benefits. From a

developmental point of view Press Corporation also consideredthat Maldeco Aquaculture would act more generally as a catalystfor aquacultural expansion in Malawi.

Construction of all infrastructure completed in 2007 at a cost ofabout K500 million, including 2.5 km water pipeline, breedingponds, fingerling production facilities, sinking of net cages in to

the Lake, building a feed mill. Has 50 floating cages in the Lake with fish at various stages of

growth. First commercial Chambo harvest and sales commenced in 2008.

Fish harvest and sales over the last two years has averaged 450tonnes per year. The target is 1,000 tonnes per annum.


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