Podravka Group. Erste Investor Conference, Stegersbach, 10 th -11 th October 2018

Transcription

1 Podravka Group Erste Investor Conference, Stegersbach, 0 th - th October 208

2 The Company Business Investment highlights 207 results H 208 results

3 Podravka Group at a glance BUSINESS: Branded food primary business, Generic pharmaceuticals. 207 FIGURES: HRK 4,m (EUR 54m) of sales, HRK 5,06m (EUR 672m) of assets, 6,306 employees. YEAR OF ESTABLISHMENT: years in food production, HEADQUARTERS: 46 years in pharma production, Koprivnica, Croatia. Culinary institution in SEE. MAIN MARKETS: SHARE LISTING: South East Europe, Zagreb Stock Exchange, Croatia, Central Europe, 7,20,003 ordinary shares, Eastern Europe. MCap of HRK 2,407m (EUR 37m).* Note: all figures in this presentation are translated to euros at HRK/EUR FX rate of 7.6 to avoid FX differences; *MCap on 5 th October 208, calculated on weighted average number of shares excluding treasury shares. 9 October 208 Investor Relations Podravka Group 3

4 Long tradition of food and pharmaceutical production Fruit processing and Wolf brothers workshop Condiments, dried and Famous Podravka soups Production of meat Vegeta, universal marmalade workshop by became publicly owned sterilized vegetables, etc. production established products established seasoning, production brothers Wolf under Podravka name production established established established Baby food production Belupo pharmaceutical Podravka became a joint- Commencement of full- Žito, Slovenian food Construction of new established company established, stock company, free scale restructuring producer, acquisition pharmaceutical factory, pharmaceutical production share trading from 994 process the largest greenfield established investment in Group history 9 October 208 Investor Relations Podravka Group 4

5 Podravka Group is present in 25 countries with subsidiaries and representative offices International network of subsidiaries and representative offices Podravka d.d. Croatia Žito d.d. Slovenia 4 production companies 22 subsidiaries and representative offices Belupo d.d. Croatia 2 production companies 4 subsidiaries and representative offices Podravka Group 0 production companies 22 subsidiaries 7 representative offices production company 3 subsidiaries and representative offices Own distribution network in countries Podravka Group sales split by regions in 207. Bosnia and Herzegovina 2. Czech Republic 3. Montenegro 4. Croatia 5. Hungary 6. Macedonia 7. Poland 8. Slovakia 9. Slovenia 0.7% 7.0%.7% 0.3% % Adria WE and Overeas Central Europe Eastern Europe Market HRKm EURm % Croatia, % Slovenia % B&H % Russia % Other m., % 0. Serbia. Russia New markets Group 4, % 9 October 208 Investor Relations Podravka Group 5

6 Institutional investors provide stable ownership structure Management board Marin Pucar, MB president Ljiljana Šapina, MB member Davor Doko, MB member Hrvoje Kolarić, MB member Marko Đerek, MB member Supervisory board Shareholder structure as at 30 June 208 Audit committee President: Dubravko Štimac president of MB of PBZ CO OPF President: Ivana Matovina Members: Vice President: Luka Burilović president of Croatian Chamber of Economy Members: Ksenija Horvat workers representative Krunoslav Vitelj director of regional CCE Croatian pension funds 49.5% Republic of Croatia 25.4% Treasury shares 2.3% Dubravko Štimac, Petar Vlaić Remuneration committee President: Luka Burilović Members: Dajana Milodanović banker in HPB Damir Grbavac president of MB of RBA OPF Petar Vlaić president of MB of Erste Plavi OPF Ivana Matovina professional auditor Petar Miladin academy professor of law Others 22.8% Dubravko Štimac, Petar Miladin Corporate governance committee Members: Petar Miladin, Petar Vlaić, Luka Burilović 9 October 208 Investor Relations Podravka Group 6

7 Snapshot of key financial figures Reported sales revenues split Normalized EBITDA split Reported sales revenues in 207 Food Pharma 207 sales HRKm Food 3,244 Pharma 867 Normalized EBITDA in 207 Food Pharma 207 EBITDA HRKm Food 277 Pharma 57 Group 4, Group % 2.% 207 sales EURm 63.8% 36.2% 207 EBITDA EURm Food 427 Food 36 Pharma 4 Pharma 2 Group 54 Group 57 Stable cash position Low and sustainable debt level 2 Net cash flow from operating activities as % of sales revenues 5% 0% 5% 7.0% 8.3% 8.5% 7.6%.4%.5% 2. Net debt/ normalized EBITDA 9.3 Normalized EBIT/ interest expense 57.2% Equity/ total assets 0% Due to sales revenues reclassification in 206, % are made by approximation. 9 October figures. Investor Relations Podravka Group 7

8 The Company Business Investment highlights 207 results H 208 results

9 207 sales; HRKm A well diversified product portfolio divided in two business areas 78.9% of sales revenues PODRAVKA GROUP 2.% of sales revenues Food Pharmaceuticals BU ŽITO AND LAGRIS BU CULINARY BU PODRAVKA FOOD BU BABY FOOD, SWEETS & SNACKS BU MEAT PRODUCTS, MEALS & SPREADS BU FISH OTHER SALES FOOD PRESCRIPTION DRUGS NON PRESCRIPTION PROGRAMME OTHER SALES PHARMA % 2.4% 63 9 October % 9.2% % % 4.2% % 5.3% Investor Relations Podravka Group % %

10 Culinary category is a cornerstone of food business Food segment products overview 207 sales; % of total BU ŽITO AND LAGRIS Core food, bakery and mill products, tea, confectionery, cereals for adults, private labels, service production. HRK 894m EUR 8m 2.7% BU CULINARY Seasonings, monospices, soups, ready-to-cook meals and bouillons, food mixes, private labels, service production. HRK 880m EUR 6m 2.4% BU PODRAVKA FOOD Condiments, tomato, sauces, fruit, vegetables, Podravka flour, private labels, service production. HRK 389m EUR 5m 9.5% BU BABY FOOD, SWEETS & SNACKS Dehydrate baby food, cream spreads, cereals, sweets, snacks, drinks, private labels, service production. HRK 378m EUR 50m 9.2% BU MEAT PRODUCTS, MEALS AND SPREADS Canned meat, sausages, other meat, Food Solution, private labels, service production. HRK 27m EUR 36m 6.6% BU FISH Fish products, private labels, service production. HRK 75m EUR 23m 4.2% OTHER SALES Trade goods, other. HRK 257m EUR 34m 6.2% 9 October 208 Investor Relations Podravka Group 0

11 Prescription drugs category is a cornerstone of pharmaceutical business Pharmaceutical segment products overview 207 sales; % of total PRESCRIPTION DRUGS For skin disorders For heart and blood vessels, HRK 63m EUR 83m 5.3% For central nervous system, For 8 more areas. NON-PRESCRIPTION PROGRAMME OTC medicine, Dietary products, HRK 98m EUR 3m 2.4% Natural products. OTHER SALES Trade goods, Services. HRK 39m EUR 8m 3.4% 9 October 208 Investor Relations Podravka Group

12 High-quality brands with exceptional recognisability and strong international potential VEGETA Culinary brand whose products are sold in over 60 countries in the world, Synonym for universal seasoning category in the Adria region, For years No. FMCG brand in Croatia and among top 3 in Adria region, PODRAVKA SOUPS Dehydrated instant soups, Sold in 25 countries around the world, Market leader or among top 3 in the Adria region, LINO Umbrella brand for dehydrated baby food, cream spreads and cereals, Synonym for baby food category in Adria region, Sold in more than 20 countries around the world, DOLCELA Product for preparation of sweets and ready-made sweets, Market leader/strong No. 2 brand in Adria region, Sold in 20 countries around the world, EVA (MEDITERANNEAN ASSORTMENT) One of the most recognisable brands in canned fish category in the Adria region, Widest range of canned fish tuna, sardines, mackerel and Baltic fish. Number brand in Europe in universal food seasoning category, Superbrand award in more than 5 European countries. Vol. MP ADRIA POL SLK CZE RUS Vegeta Quadal (Quality Medal) award in Croatia, Best Buy award in Croatia and B&H. Vol. MP CRO SLO B&H SER MAC RUS Soups Trusted brand award and Best Buy award winner in Croatia, Superbrand awards winner in Croatia, Slovenia and B&H. Vol. MP CRO SLO B&H SER Lino Quadal (Quality Medal) award in Croatia, Best Buy award in Croatia and B&H. Vol. MP CRO SLO B&H Dolcela 2 Quadal (Quality Medal) award and Superior taste award in Croatia, Best Buy award in Croatia and B&H. Vol. MP CRO SLO B&H SER Eva 6 3 BELUPO DERMATICS Strong international position in niche dermatology segment. Vol. MP 2 CRO RUS CZE SLO B&H SER MAC SLR D Source: Nielsen; 2 Source: IMS; 3 Corticosteroids for the treatment of skin disorder. 9 October 208 Investor Relations Podravka Group 2

13 The Company Business Investment highlights 207 results H 208 results

14 Continuous restructuring process in order to improve efficiency and profitability August October March December October December st redundancy labour programme 3 rd redundancy labour programme 4 th redundancy labour programme closing the factory in Poland meat company Danica merged disposal of soft beverages February December April February December June nd redundancy labour programme exit from fresh meat and cold programme exit from local bakery shop 5 th redundancy labour programme 6 th redundancy labour programme 7 th redundancy labour programme 23% workforce reduction in food segment (exc. acquisition impact) 7 redundancy labour programmes implemented RESTRUCTURING & REORGANIZATION 4 non-profitable business segments closed or sold beverages (sold), fresh meat, cold programme, local bakery shop EFFECTS 3% of total SKU-s in the Adria Region that existed at the beginning of 205 were classified for termination portfolio optimization 9 October 208 Investor Relations Podravka Group 4

15 Financial position under the influence of one-off items Restructuring related one-off items burdened profitability Normalized profitability margins movement 2 (in HRKm) H 208 Value adjustments (32) (8) (28) (35) () (89) - Severance payments (50) (57) (72) (4) (2) (40) (2) Other (44) (8) - Total net one-offs (26) (33) (90) 222 (5) (47) (2) HRK 6m of gain on a bargain purchase from Žito acquisition (badwill), HRK 64m of deferred tax income from Croatian government s incentives for the construction of new Belupo pharmaceutical factories, HRK 9m refers to other items. EBITDA margin EBIT margin Net profit margin after MI 4.0%.2% 0.6% 2.0% 2.% 0.2% 0.0% 9.4% 9.4% 8.0% 6.% 6.4% 7.7% 6.0% 4.6% 4.4% 3.7% 5.5% 4.0% 4.4%.9% 3.3% 4.0% 2.0% 2.7% 0.0% H 208 Note: Due to sales revenues reclassification in 206, margins are made by approximation. Normalized return rates movement 2 Normalized debt level movement 2 ROaE ROaIC ROaA 4.0 EBIT/Interest exp. Net debt/ebitda % 6.0% 4.0% 2.0% 0.0% 8.0% 6.2% 6.5% 5.9% 5.5% 6.9% 4.% 4.7% 4.8% 5.6% 5.2% 4.7% 4.0% 3.4% 3.7% 2.7% 3.3%.9% H H figures include pro-forma Podravka Group and Žito Group full year figures, excluding consolidation effects and tax incentives for Belupo factories. 9 October 208 Investor Relations Podravka Group 5

16 Expansion of pharmaceutical capacities to satisfy international demand Construction of new pharmaceutical facility Project: Production facility for solid oral forms, Production facility for semi solid and liquid forms, Project started in 205, ended in 207. Project reasoning: Insufficient production capacities due to perennial volume growth 50% capacity increase, Investment in new technologies that will enable production of new-age products in the form of foams, sprays, bandages etc. Project financing: Total value of investment HRK 535m (EUR 70m), 55% loan from HBOR, 45% own funds, Government incentive through income tax benefits in the amount of 40% of total investment. Business reasons for choosing Croatia as facilities location: High speed in obtaining all permits, Tax incentives for strategic investments, Availability of highly-educated workforce at acceptable cost level, Incentives for hiring young workforce, Proximity to other Belupo locations. 9 October 208 Investor Relations Podravka Group 6

17 Podravka s share price movement in H 208 (HRK; units) 207 H 208 % change Average daily price (23.8%) Average daily number of transactions 23 3 (44.9%) Average daily volume,66,493 (0.%) Average daily turnover 64, ,770 (3.5%) Reported earnings per share % Normalized earnings per share % 30% 20% 0% 0% -0% 3/2/7 28/02/8 30/04/8 30/06/8 3/08/8 00% 80% 60% 40% 20% 0% -20% PODR CROBEX CROBEX0 PODR CROBEX CROBEX0 PODR performance PODR performance 3/2/ 3/2/2 3/2/3 3/2/4 3/2/5 3/2/6 3/2/7 28.% -4.% -4.4% 49.8% 5.4%.5% Analysts Recommendation Target price Potential Peer group multiples 2 EV/Sales EV/ EBITDA EV/EBIT P/B P/E Under review - n/a Hold HRK % Accumulate HRK % Buy HRK % Hold HRK % Weighted average peer group Normalized weight. av. peer group Podravka Group reported Podravka Group normalized Peer group food: Atlantic Grupa, Ebro, Hochdorf, La Doria, McCormick, Orkla; Peer group pharma: Alkaloid, Richter Gedeon, Hikma Pharmaceuticals, Krka, Recordati, Stada Arzneimittel. Compared to the last price on 5 th October 208; 2 Obtained from Bloomberg on 9 th October 208; 3 Calculated excluding max. and min. Values; 4 Normalized for items stated in the publication of H 208 and 207 results. 9 October 208 Investor Relations Podravka Group 7

18 The Company Business Investment highlights 207 results H 208 results

19 Strong growth of Pharmaceutical segment sales in 207 in HRKm 4,500 4,000 3,500 3,000 4,86 -.8% Reported sales revenues by segment 4, 3, % 3, in HRKm 4,500 4,000 3,500 3,000 4,066 Adjusted sales revenues by segment +.2% 4,3-0.2% 3,25 3, ,500 2,500 2,000,500, % 867 2,000,500, % Group Food Pharma 0 Group Food Pharma Excl. FX -.9% -3.6% +4.8% +.0% +0.0% +4.8% Adjusted sales revenues exclude/include: Estimated net foreign exchange (FX) impact on reported sales revenues: Beverages business sold at the end of 206; HRK 82.2m excluded from 206 and HRK 0.4m from 207 to provide like-for-like comparison, One-off sales of BU Meat in February 206 extraordinary delivery of buffer stock to the Ministry of Economy was made related to the migration of population from war-torn areas; HRK 2.0m excluded from 206 to provide like-for-like comparison, HRKm Own brands Other sales Total Food (6) (0) (6) Pharmaceuticals 4 () 3 Group 8 () 7 Currency HRKm EUR (5) RUB 23 Other () Inconsistencies in the treatment of recording revenue identified in the Food segment on the Russian market, largely a result of a different trade marketing activities classification; HRK 25.4m excluded from 206 and HRK 2.2m included in 207 to provide LFL comparison. Performance in 207 compared to 206 excluding the estimated net impact of foreign exchange differences. Total 7 FX impact on sales revenues shows for how much sales revenues would have been higher or lower in 207 if FX rates had remained on the same levels as in October 208 Investor Relations Podravka Group 9

20 Business units facing internal and external challenges in HRKm, in HRKm, % % -9.0% BU Žito and Lagris BU Culinary BU Podravka food BU Baby food BU Meat products BU Fish Prescription drugs Non-prescription Other sales -0.8% % -.7% 88 Reported sales revenues by business unit and category +2.2% -3.4% % 75 Adjusted sales revenues by business unit and category -.9% % % % BU Žito and Lagris BU Culinary BU Podravka food BU Baby food BU Meat products BU Fish Prescription drugs Non-prescription Other sales % % % % % 395 Adjusted business unit and category performance in 207 : BU Žito and Lagris (-0.0% excl. FX) sales increase in Italy, Germany and Spain due to the product range extension and distribution, annulled by unlisting of a certain bakery range that began at the end of 206 on the Slovenian market, BU Culinary (-2.0% excl. FX) lower sales primarily due to lower sales in Western Europe related to the sales dynamics to the new distributor, BU Podravka food (+.8% excl. FX) higher sales on the back of extended range of vegetables in the Croatian market, BU Baby food, sweets and snacks (-.4% excl. FX) lower sales of the snacks range due to poor acceptance of the redesign launched in mid 206, BU Meat products, meat solutions and savoury spreads (+2.% excl. FX) sales growth of Food Solution sub segment, BU Fish (+0.8% excl. FX) sales growth primarily due to higher sales of own brands in the Croatian market, Prescription drugs (+5.5% excl. FX) revenue growth in the Russian market as a consequence of the product range extension and positive FX effect, Non-prescription programme (+.3% excl. FX) extension of the product range and positive effect of foreign exchange differences in the Russian market; implemented selling and marketing activities in the Croatian market, Other sales (+4.3% excl. FX) trade goods sales growth. Percentages in the text relate to performance in 207 compared to October 208 Investor Relations Podravka Group 20

21 Positive developments of Eastern Europe region in 207 in HRKm -3.6% 2,997 2,889 3,000 Reported sales revenues by region in HRKm -0.5% 2,904 2,888 3,000 Adjusted sales revenues by region ,500 2,500 2,000 2,000,500, % +0.6% +9.4% % Adria Central Europe WE and Overs. Eastern Europe New Markets,500, % +0.6% +22.% % Adria Central Europe WE and Overs. Eastern Europe New Markets Adjusted region performance in 207 : Adria (+0.% excl. FX) food sales 0.6% lower due to the decrease of the BU Žito and Lagris revenues on the Slovenian market as a result of unlisting of a certain bakery range that began at the end of 206. The most significant sales growth was recorded by the BU Podravka food due to expansion of the vegetables range distribution on the Croatian market; pharmaceuticals sales were slightly lower than in 206, Central Europe (-0.3% excl. FX) food sales 0.7% lower due to lower sales of trade goods of the Lagris company that was offset by higher sales of own brands; pharmaceuticals sales 9.8% higher due to growth in markets of Poland and Czech Republic, Western Europe and Overseas (+.% excl. FX) food sales 0.6% higher due to the extension of the product range and distribution of the BP Žito in the markets of Italy, Germany and Spain and from trade goods sales growth. This positive effect was partially offset by a decrease in sales due to sales dynamics with the new distributor to which total sales in the last two months of 206 amounted to the sales realised in the first four and half months of 207; pharmaceuticals sales records a mild revenue growth in the market of Germany, Eastern Europe (+2.3% excl. FX) food sales 7.8% higher due to selling activities in the Culinary range with the most significant customers and the increase in sales of trade goods of the Lagris company; pharmaceuticals sales rose 33.% due to extension of product range, New markets (+22.5% excl. FX) food sales.% higher due to sales growth in BU Baby food, sweets and snacks and of trade goods of the company Lagris; pharmaceuticals sales 4.7% higher due to the Prescription drugs category growth in the market of Turkey. Percentages in the text relate to performance in 207 compared to October 208 Investor Relations Podravka Group 2

22 Food profitability burdened by significant one-off items in 207 Food segment REPORTED NORMALIZED (in HRKm) Δ % Δ % Sales revenue 3,370 3,244 (27) (3.8%) 3,370 3,244 (27) (3.8%) Gross profit,07,039 (68) (6.%),07,058 (49) (4.4%) EBITDA (74) (23.3%) (37) (.7%) EBIT 58 8 (50) (94.7%) (30) (8.3%) Net profit after MI (30) (4) (26.6%) 2 83 (38) (3.6%) Gross margin 32.8% 32.0% -80 bp 32.8% 32.6% -23 bp EBITDA margin 9.4% 7.5% -9 bp 9.3% 8.6% -77 bp EBIT margin 4.7% 0.3% -444 bp 4.9% 4.% -74 bp Net profit margin after MI 3.3% (0.9%) -42 bp 3.6% 2.6% -04 bp Food segment profitability in 207: Normalized gross profit impacted by lower sales revenues, but also by unfavourable changes in sales structure, Normalized EBIT additionally impacted by lower profitability of the Žito Group, higher expenses of exercised share options (HRK 2.5m in 207; HRK 7.0m in 206), unfavourable movements of FX differences from trade receivables and payables (HRK 5.2m losses in 207; HRK 3.m gains in 206), One-off impacts in HRKm Value adjustments (9) (89) Severance payments (2) (3) Other (expenses)/revenues above EBIT 4 (6) ESOP 2 financial expenses (2) (3) Deferred tax assets () 6 Normalized net profit after MI additionally impacted by unfavourable movements of FX differences on borrowings (HRK 0.6m losses in 207; HRK 8.6m gains in 206) which was partly mitigated by lower interest expense. Normalized for one-off impacts, normalization of results doesn't include potential tax impacts that would arise from the normalization process; 2 Employee stock ownership programme. 9 October 208 Investor Relations Podravka Group 22

23 Pharma profitability positively impacted by favourable sales structure Pharmaceuticals segment REPORTED NORMALIZED (in HRKm) Δ % Δ % Sales revenue % % Gross profit % % EBITDA 54 3 (23) (5.2%) % EBIT 83 (28) (25.2%) % Net profit after MI 7 48 (23) (32.7%) % Gross margin 52.5% 5.3% -25 bp 52.8% 54.2% +39 bp EBITDA margin 8.9% 5.% -383 bp 9.3% 8.% -5 bp EBIT margin 3.6% 9.5% -404 bp 4.2% 3.5% -74 bp Net profit margin after MI 8.7% 5.5% -32 bp 9.4% 9.5% +5 bp Pharmaceuticals segment profitability in 207: Normalized gross profit impacted by increase in revenues, but also by favourable changes in sales structure, Normalized EBIT additionally impacted by higher marketing expenses due to higher investments in the Russian market and extremely unfavourable movements of FX differences from trade receivables and payables (HRK 7.3m losses in 207; HRK 5.4m gains in 206). Share option expenses were slightly below the comparative period (HRK 0.2m in 207; HRK.0m in 206), One-off impacts in HRKm New pharmaceuticals factory expenses (2) (25) Severance payments () (9) Value adjustments (2) - ESOP 2 financial expenses () () Deferred tax assets 0 - Normalized net profit after MI additionally impacted by higher financial income and positive movement of FX differences on borrowings (HRK 0.3m gains in 207; HRK 2.6m losses in 206). Normalized for one-off impacts, normalization of results doesn't include potential tax impacts that would arise from the normalization process; 2 Employee stock ownership programme. 9 October 208 Investor Relations Podravka Group 23

24 Group profitability movement under the influence of Food segment profitability Podravka Group REPORTED NORMALIZED (in HRKm) Δ % Δ % Sales revenue 4,86 4, (74) (.8%) 4,86 4, (75) (.8%) Gross profit,535,484 (5) (3.3%),538,528 (0) (0.6%) EBITDA (97) (20.6%) (37) (7.8%) EBIT (78) (66.%) (29) (0.4%) Net profit after MI 82 8 (64) (90.0%) (32) (6.2%) Gross margin 36.7% 36.% -58 bp 36.7% 37.2% +43 bp EBITDA margin.3% 9.% -26 bp.3% 0.6% -69 bp EBIT margin 6.4% 2.2% -42 bp 6.7% 6.% -59 bp Net profit margin after MI 4.4% 0.4% -39 bp 4.7% 4.0% -70 bp Group profitability in 207: Normalized gross profit Pharmaceuticals segment gross profit growth to the high extent compensated for the lower gross profit of the food segment, Normalized EBIT additionally impacted by lower profitability of the Žito Group, higher expenses of exercised share options (HRK 2.8m in 207; HRK 8.0m in 206), unfavourable movements of FX differences from trade receivables and payables (HRK 2.5m losses in 207; HRK 8.5m gains in 206), Normalized net profit after MI additionally impacted by unfavourable movements of FX differences on borrowings (HRK 0.3m losses in 207; HRK 6.0m gains in 206) which was partly mitigated by lower interest expense. One-off impacts in HRKm Value adjustments () (89) Severance payments (2) (40) New pharmaceuticals factory expenses (2) (25) Other (expenses)/revenues above EBIT 4 (6) ESOP 2 financial expenses (3) (4) Deferred tax assets () 6 Normalized for one-off impacts, normalization of results doesn't include potential tax impacts that would arise from the normalization process; 2 Employee stock ownership programme. 9 October 208 Investor Relations Podravka Group 24

25 Successful cost side optimization in 207 Operating expenses 7 vs. 6 % change REPORTED NORMALIZED Cost of goods sold (COGS) (0.9%) (2.4%) Key highlights of normalized operating expenses in 207: Cost of goods sold (COGS): Lower 2.4% primarily as a result of lower sales in the Food segment, General and administrative expenses (G&A) 0.8% 0.7% Sales and distribution costs (S&D) 6.6% (.5%) General and administrative expenses (G&A): Higher 0.7% than in the comparative period primarily due to the higher costs of exercised share options (HRK 2.8m in 207; HRK 8.0m in 206), Marketing expenses (MEX) (0.5%) (0.5%) Other expenses / revenues, net n/a n/a Sales and distribution expenses (S&D): Lower.5% due to, among other, disinvestment of the Beverages business that was incurring significant distribution costs, Total 2.6% (.2%) Normalized expenses as % of reported sales revenues 6.0% 4.0% 4.% 4.2% 2.0% 0.0% 8.9% 9.0% 8.0% 7.7% 7.9% S&D MEX G&A Marketing expenses (MEX): Lower 0.5% as a result of fewer marketing activities in the Food segment, while the Pharmaceuticals segment recorded an increase in marketing expenses, primarily in the Russian market, Other expenses / revenues, net: Item includes FX differences from trade receivables and trade payables that were HRK 2.5m negative in 207, while in 206 they were HRK 8.5m positive. In 207, other expenses/revenues item amounted to negative HRK 2.5m, while in the comparative period it amounted to positive HRK 25.4m. 6.0% Normalized for one-off impacts October 208 Investor Relations Podravka Group 25

26 Lower interest expenses and weighted average cost of debt reflects successful debt management (in HRKm) % change Currency structure of debt as at 3 December 207 Net debt, (2.7%) BAM 3.5% HRK 6.4% AUD, CZK, MKD 2.2% Interest expense 3 27 (4.6%) Net debt / normalized EBITDA (5.3%) Normalized EBIT / interest expense % Equity to total assets ratio 55.4% 57.2% +87 bp EUR 77.9% Key highlights: Net debt decrease repayment of a part of borrowings, Lower interest expenses repayment of a part of borrowings, Net debt/normalized EBITDA drop due to lower net debt, Weighted average cost of debt: As at 3 December %, As at 3 December %.,200, Net debt components in HRKm as at 3 December Long-term debt Short-term debt Financial liabilities at fair value through profit or loss Cash and cash equivalents 909 Net debt All P&L figures are calculated on the trailing 2 months level, while BS figures are taken at the end of period. 9 October 208 Investor Relations Podravka Group 26

27 Stable level of net cash from operating activities Working capital movement in BS 3 December 207 / 3 December 206 Impact Inventories 4.2% Increased plans for the production of own products and trade goods led to higher level of inventories. Trade and other receivables (9.5%) Value adjustment of Agrokor receivables, a portion of recourse bills of exchange was collected, lower sales in Food segment, better collection in the Pharmaceuticals segment in the domestic and foreign markets. Trade and other payables (0.6%) Settlement of a portion of trade payables for the construction of the new pharmaceuticals factory and the repurchase of recourse bills of exchange from a factoring company. Recourse bills of exchange on 3 December 206 were booked under other payables position. (in HRKm) Δ Net cash from operating activities (3) 4.0% Net cash flow from operating activities as % of sales Net cash from investing activities (359) (9) 68 Net cash from financing activities (72) (258) (86) 2.0%.4%.5% Net change of cash and cash equivalents (2) 0.0% CAPEX in 208 is expected to be at the level of HRK 27m, in 209 at the level of HRK m, and in 2020 and 2022 at the level of HRK 200m. 8.0% October 208 Investor Relations Podravka Group 27

28 One-off items in 207 and 206 One-off items (in HRKm) Group Food Pharma Group Food Pharma Group Food Pharma +expense related to China closing () () - () () - +severance payments expenses (3) (2) () (40) (3) (9) (27) (9) (8) +revenues from Beverages sales (8) (8) - +revenues from reverse leasing Umag (7) (7) - +value adjustments (expenses)/revenues () (9) (2) (89) (89) - (78) (80) 2 +Warzyvko & Perfecta brands (8) (8) - (8) (8) - +inventories in Serbia () () - (4) (4) - +assets in MENA () () - () () - +assets in Africa (6) (6) - (6) (6) - +Beverages assets (9) (9) Agrokor receivables (44) (44) - (44) (44) - +other one-off value adjustments (2) 0 (2) amortization expenses (3) (3) - (3) (3) - +ESOP programme expenses (3) (2) () (4) (3) () () () (0) +new Belupo factory expenses (+amortization) (2) - (2) (25) - (25) (23) - (23) +other one-off expenses (2) (2) - (2) (2) - +deferred tax assets () () (0) 9 October 208 Investor Relations Podravka Group 28

29 The Company Business Investment highlights 207 results H 208 results

30 Strong sales revenues growth of both segments in HRKm 2,000, % 2,035 Sales revenues by segment +3.7% H 207 H 208 Net foreign exchange (FX) impact on sales revenues: HRKm Own brands Other sales Total Currency HRKm,600,544,602 Food (2) () Pharmaceuticals (5) (0) (5) EUR (20) RUB (4),200 Group (27) (26) Other (2) % Total (26) FX impact on sales revenues shows for how much sales revenues would have been higher or lower in if FX rates had remained on the same levels as in Group Food Pharma Food segment in H 208 : Pharmaceuticals segment in H 208 : Podravka Group in H 208 : Own brands 4.8% higher sales (+5.7% excl. FX), primarily due to the growth in sales of business units Žito and Lagris, Culinary and Baby food, sweets and snacks, as a result of increased selling and marketing activities and expanded distribution of certain categories, Other sales 9.3% lower sales (-0.0% excl. FX), primarily as a result of trade goods sales decrease, Total Food 3.7% higher sales (+4.5% excl. FX). Own brands 7.% higher sales (+.4% excl. FX) primarily due to the increase in sales in the Russian market and the expanded distribution in the central European markets, Other sales 2.8% higher sales (+3.% excl. FX) as a result of higher sales in Deltis Pharm pharmacies, Total Pharmaceuticals 6.4% higher sales (+0.% excl. FX). Own brands 5.3% higher sales (+6.8% excl. FX), Other sales 4.9% lower sales (-5.2% excl. FX), Total Podravka Group 4.3% higher sales (+5.6% excl. FX). Percentages in the text relate to performance in compared to October 208 Investor Relations Podravka Group 30

31 All business units recorded sales revenues growth in HRKm Sales revenues by business unit and category H 207 H % +4.4% % +7.0% % % % % % BU Žito and Lagris BU Culinary BU Podravka food BU Baby food BU Meat products BU Fish Prescription drugs Non-prescription Other sales Business unit and category performance in H 208 : BU Žito and Lagris (+6.5%; +6.7% excl. FX) increased sales in the Bakery and mill products and the Core food categories, which is supported by the continuous growth of the Bakery and mill products category in the Western Europe region markets and, among other things, the stabilization of sales to the key customer in the market of Slovenia, BU Culinary (+4.4%; +6.2% excl. FX) sales growth primarily in the categories Seasonings and Soups, due to intensive promotional activities resulting in sales growth in most regions, BU Podravka food (+4.2%; +5.5% excl. FX) higher sales due to selling and marketing activities in the categories Condiments, Flour and Tomato in the markets of Croatia and Poland, BU Baby food, sweets and snacks (+7.0%; +7.3% excl. FX) sales growth due to selling and marketing activities in categories Creamy spreads and Baby food in the market of Croatia. The Percentages in the text relate to performance in compared to Creamy spreads category records a significant increase in sales as a result of well-received new and innovated products of the Lino Lada brand, BU Meat products, meat solutions and savoury spreads (+0.5%; +.2% excl. FX) sales growth in the Ready-to-eat meals category as a result of selling and marketing activities, BU Fish (+.9%; +.6% excl. FX) higher sales primarily due to selling activities in the Adria region markets, Prescription drugs (+7.9%; +2.5% excl. FX) the most significant sales growth in the market of Russia due to higher demand, and in the Central Europe region markets as a result of positive market response to new products, Non-prescription programme (+2.4%; +5.2% excl. FX) sales growth in the OTC drugs subcategory on the markets of the Adria region, Other sales (-4.9%; -5.2% excl. FX) lower trade goods sales revenues. 9 October 208 Investor Relations Podravka Group 3

32 Majority of regions recorded sales growth in in HRKm,600,400, %,408 Sales revenues by region H 207 H 208,200, % +.2% +9.7% % Adria Central Europe Western Europe and Overseas Eastern Europe New Markets 6 Region performance in H 208 : Adria (+3.4%; +3.7% excl. FX) food sales 3.9% higher where all business units record sales growth, primarily as the result of selling and marketing activities, acceptance of new and innovated products and the stabilization of sales to the key buyer in the market of Slovenia; pharmaceuticals sales.9% higher where all categories record sales growth, Central Europe (+0.0%, +8.7% excl. FX) food sales 9.% higher with the most significant impact on the Food segment came from the Žito and Lagris business unit and from the Culinary business unit following stronger selling and marketing activities; pharmaceuticals sales rose 6.7% due to the acceptance of new products in the markets of Poland, the Czech Republic and Slovakia, Western Europe and Overseas (+.2%; +3.6% excl. FX) food sales.3% higher as a result of continuous expansion of the product range and distribution of the Žito and Lagris business unit in the markets of Italy, Germany and Spain and Condiments in the German market; pharmaceuticals revenues recorded a mild decrease of HRK 0.3m, Eastern Europe (+9.7%, +24.7% excl. FX) food sales 5.0% lower which is primarily a consequence of the decrease in sales of the Podravka Food business unit; pharmaceuticals sales rose 20.4% following the increased demand for the Prescription drugs category, New markets (-5.7%; -5.0% excl. FX) food sales is HRK.6m lower where the most significant impact on the sales decrease came from lower sales of the Lagris company trade goods; pharmaceuticals sales is HRK 0.6m higher. Percentages in the text relate to performance in compared to October 208 Investor Relations Podravka Group 32

33 Strong growth of food profitability in H 208 Food segment REPORTED NORMALIZED (in HRKm) H 207 H 208 Δ % H 207 H 208 Δ % Sales revenue,544, %,544, % Gross profit % % EBITDA % % EBIT % % Net profit after MI (5) n/a % Gross margin 3.4% 33.8% +235 bp 3.4% 33.8% +235 bp EBITDA margin 5.5% 0.7% +526 bp 6.8% 0.9% +404 bp EBIT margin 0.6% 6.6% +598 bp 2.0% 6.7% +476 bp Net profit margin after MI (0.3%) 5.3% +560 bp.0% 5.4% +437 bp Food segment profitability in H 208: Normalized gross profit higher due to higher sales revenues and favourable sales structure, One-off impacts in HRKm H 207 H 208 Severance payments (2) (2) Normalized EBIT an additional positive impact came from: i) the absence of share option expenses that amounted to HRK 9.3m in H 207, ii) lower selling costs as a result, among other, of the changed business model in the MENA markets, terminated business activities in the market of Tanzania and lower amortisation and iii) absence of provisions for trade receivables, Normalized net profit after MI an additional positive effect came from lower interest expense following the refinancing of borrowings under more favourable commercial terms and positive effects of foreign exchange differences on borrowings, partly compensating for higher tax expenses. Normalized for one-off impacts, normalization of results doesn't include potential tax impacts that would arise from the normalization process. 9 October 208 Investor Relations Podravka Group 33

34 Pharma profitability positively impacted by favourable sales structure Pharmaceuticals segment REPORTED NORMALIZED (in HRKm) H 207 H 208 Δ % H 207 H 208 Δ % Sales revenue % % Gross profit % % EBITDA % % EBIT % (4) (7.8%) Net profit after MI % (6) (3.4%) Gross margin 5.2% 50.7% -50 bp 52.8% 50.7% -205 bp EBITDA margin 3.7% 6.6% +289 bp 6.6% 6.6% -5 bp EBIT margin 8.7% 0.% +38 bp.7% 0.% -56 bp Net profit margin after MI 7.3% 8.3% +03 bp 0.3% 8.4% -9 bp Pharmaceuticals segment profitability in H 208: Normalized gross profit higher due to the sales revenues growth and positive impact of the sales structure itself, One-off impacts in HRKm H 207 H 208 New pharmaceuticals factory expenses (6) - Severance payments (6) (0) Normalized EBIT lower mainly due to higher depreciation costs related to the new factory and revenues recorded in H 207 from the collection of trade receivables, for which provisions were made in 206, Normalized net profit after MI additional negative effect came from lower net finance income and higher tax liability. Normalized for one-off impacts, normalization of results doesn't include potential tax impacts that would arise from the normalization process. 9 October 208 Investor Relations Podravka Group 34

35 Group profitability movement under the strong influence of Food segment profitability Podravka Group REPORTED NORMALIZED (in HRKm) H 207 H 208 Δ % H 207 H 208 Δ % Sales revenue,95 2, %,95 2, % Gross profit % % EBITDA % % EBIT % % Net profit after MI % % Gross margin 35.6% 37.4% +82 bp 35.9% 37.4% +50 bp EBITDA margin 7.2% 2.0% +479 bp 8.9% 2.% +32 bp EBIT margin 2.3% 7.3% +504 bp 4.0% 7.4% +345 bp Net profit margin after MI.3% 5.9% +466 bp 3.0% 6.0% +308 bp Group profitability in H 208: Normalized gross profit the increase in gross profit came from both business segments, Normalized EBIT EBIT growth is the result of the Food segment operating profit growth, while the Pharmaceuticals segment had a negative effect on the growth in Group s operating profit, primarily due to higher depreciation costs related to the new factory, One-off impacts in HRKm H 207 H 208 Severance payments (27) (2) New pharmaceuticals factory expenses (6) - Normalized net profit after MI higher as a result of the increase in net profit after minority interests of the Food segment, while the Pharmaceuticals segment had a negative effect on the growth in Group s net profit after minority interests, primarily due to higher depreciation costs related to the new factory. Normalized for one-off impacts, normalization of results doesn't include potential tax impacts that would arise from the normalization process. 9 October 208 Investor Relations Podravka Group 35

36 Lower operating expenses as % of sales revenues Operating expenses 8 vs. 7 % change REPORTED NORMALIZED Cost of goods sold (COGS).3%.9% General and administrative expenses (G&A) (8.5%) (5.9%) Sales and distribution costs (S&D) (3.0%) (3.0%) Marketing expenses (MEX) 4.3% 4.3% Key highlights of normalized operating expenses in H 208: Cost of goods sold (COGS): Higher.9% as a consequence of higher sales in both business segments. Recorded costs are also impacted by higher depreciation costs related to the new Belupo factory, which are calculated from July 207 and amount to HRK 6.2m in H 208, General and administrative expenses (G&A): Lower 5.9% primarily as a result of the absence of share option expenses that amounted to HRK 0.0m in H 207, Other expenses / revenues, net (38.8%) (38.8%) Total (.%) 0.5% Normalized expenses as % of sales revenues 6.0% 4.7% 4.0% 3.7% 2.0% 0.0% 8.9% 8.9% 8.0% 7.9% 7.% 6.0% H 207 H 208 Normalized for one-off impacts. S&D MEX G&A Sales and distribution expenses (S&D): Lower 3.0% due to: i) lower selling costs as a result of the changed business model in the MENA markets and terminated business activities in the market of Tanzania, ii) lower amortisation costs where in H 207 we had HRK 3.3m of distribution rights amortisation costs, that are not present in H 208 and iii) the absence of provisions for trade receivables in the Food segment, Marketing expenses (MEX): Growth of 4.3% mainly as a result of higher marketing activities in the Food segment, Other expenses / revenues, net: In H 208, other income and expenses amounted to negative HRK 4.5m, while in the comparative period they amounted to negative HRK 7.4m. This line item includes foreign exchange differences from trade receivables and trade payables that amounted to negative HRK.9m in H 208, while in the comparative period they amounted to negative HRK.3m. 9 October 208 Investor Relations Podravka Group 36

37 Further improvement of debt indicators (in HRKm) 207 H 208 % change Net debt (5.6%) Currency structure of debt as at 30 June 208 BAM 3.0% HRK 6.% AUD, CZK, MKD, USD.6% Interest expense (3.0%) Net debt / normalized EBITDA 2..7 (9.2%) Normalized EBIT / interest expense % Equity to total assets ratio 57.2% 60.9% +364 bp EUR 89.3% Key highlights: Net debt decrease result of the repayment of a part of borrowings, Lower interest expenses repayment of a part of borrowings, Net debt/normalized EBITDA drop due to higher normalized EBITDA, Weighted average cost of debt: As at 30 June 208.7%, As at 3 December %.,200, Net debt components in HRKm as at 30 June Long-term debt Short-term debt Financial liabilities at fair value through profit or loss 2 Cash and cash equivalents 858 Net debt All P&L figures are calculated on the trailing 2 months level, while BS figures are taken at the end of period. 9 October 208 Investor Relations Podravka Group 37

38 Lower level of net cash from operating activities reflects working capital movement in H 208 Working capital movement in BS 30 June 208 / 30 June 207 Impact Inventories 3.7% The increase in inventories was impacted, among other, by higher inventories of raw materials and supplies in the Pharmaceuticals segment in line with the planned production dynamics in 208, and the increase in inventories of finished products in the new Belupo factory. Trade and other receivables (0.%) The significant decrease in trade and other receivables is a result of significant impairments at the end of 207 related to receivables from the Agrokor companies in the amount of HRK 44.m, and better collection of receivables in the Pharmaceuticals segment. Trade and other payables 5.7% The increase in trade and other payables compared to 30 June 207 was impacted by the increase in other payables, as a result of the approved dividend payable that was booked in June this year, while in 207 it was booked in July. (in HRKm) H 207 H 208 Δ Net cash from operating activities (38) Net cash from investing activities (20) (65) % 7.0% Net cash flow from operating activities as % of sales 7.0% Net cash from financing activities (69) (85) (6) Net change of cash and cash equivalents (52) (5) (99) CAPEX in 208 is expected to be at the level of HRK 27m, in 209 at the level of HRK m, and in 2020 and 2022 at the level of approximately HRK 200m. 6.0% 5.0% 4.0% H 207 H % 9 October 208 Investor Relations Podravka Group 38

39 Contact Podravka d.d. Ante Starčevića 32, Koprivnica, Croatia Investor relations tel: October 208 Investor Relations Podravka Group 39

40 Podravka Group Erste Investor Conference, Stegersbach, 0 th - th October 208