ATLANTIC GRUPA. Financial results in 2014 (unaudited) Business growth coupled with the largest investment cycle in the company s history

Transcription

1 ATLANTIC GRUPA Financial results in 2014 (unaudited) Business growth coupled with the largest investment cycle in the company s history Zagreb 24th February 2015

2 CONTENT KEY DEVELOPMENTS IN 2014 PERFORMANCE ON CAPITAL MARKET IN 2014 FINANCIAL RESULTS IN 2014 GUIDANCE FOR 2015 APPENDIX 2

3 KEY BUSINESS DEVELOPMENTS IN 2014 Performance in line with guidance despite unfavourable macroeconomic situation Further deleveraging and growth of cash flow from operating activities Distribution of Unilever portfolio in Croatia and Slovenia Development of own brands and opening of new pharma locations New energy bars factory in Nova Gradiška the largest capex in Atlantic Grupa s history Signing the agreement for the acquisition of Foodland d.o.o., Serbia Continued integration of information technologies Risk management 3

4 KEY BUSINESS DEVELOPMENTS: OWN AND PRINCIPAL BRANDS DISTRIBUTION: UNILEVER Globally famous brands Knorr, Hellman's, Axe, Rexona, Brut, Signal, Coccolino, Domestos, Cif and many others Distribution started at the beginning of 2014 Distribution in Croatia and Slovenia Confirms status of the leading distributor in the region SBU BEVERAGES Donat Mg won several distinguished marketing and product quality awards Financial Times: Cockta among 4 best cola drinks in the world New Cedevita packaging for home and HoReCa consumption 4

5 KEY BUSINESS DEVELOPMENTS: OWN AND PRINCIPAL BRANDS SBU COFFEE Barcaffe: 4 gold medals on International Coffee Tasting SBU SAVOURY SPREADS Argeta won Euro Effie for campaign Approved by moms Argeta exclusive a la Subida in cooperation with chef from Michelin starred restaurant SBU SNACKS Launching chips under brand Chipsos SBU PHARMA AND PERSONAL CARE 7 new specialized stores Market share Barcaffe/ Grand kafa Argeta Smoki Cedevita Volume share Croatia 10.1% 7.2% 12.0% 8.7% 16.6% 10.9% 73.6% 66.9% Serbia 48.8% 48.1% 12.7% 11.8% 62.8% 61.4% 81.9% 82.7% Slovenia 65.7% 63.8% 34.7% 33.7% 42.7% 41.1% 80.2% 79.7% B&H % 40.50% 42.3% 40.9% 74.0% - Source: Nielsen Retail Panel for food and non-food categories. Period: YTD 11/2014 5

6 KEY BUSINESS DEVELOPMENTS: OWN AND PRINCIPAL BRANDS Top 10 in the region Top 5 Slovenia Top 5 Croatia Top 5 Serbia Top 5 B&H Top 5 Macedonia 1 Milka Barcaffe Jana Plazma Argeta Argeta 2 Coca Cola Milka Cedevita Milka Milka Stobi flips 3 Vegeta Radenska Vegeta Smoki Coca Cola Coca Cola 4 Cedevita Argeta Jamnica Coca Cola Violeta Milka 5 Argeta Alpsko mleko Coca Cola Knjaz Miloš Vegeta Pelisterka 6 Orbit 7 Smoki 8 Cockta 9 Nivea 10 Pepsi Research of the Valicon agency: Argeta, Barcaffe, Cedevita, Cockta and Smoki are among top 10 brands inthe region The strength of brands was calculated on the basis of their recognisability, experience and use. 6

7 KEY BUSINESS DEVELOPMENT: NEW ENERGY BARS FACTORY IN NOVA GRADIŠKA Transferring the production from the contractual producer to own plant Project with the total value of HRK 100 million All works performed in time: 11/2013 Real estate acquired 01/2014 Permissions acquired 03/2014 Technology chosen/equipment ordered 04/2014 Building work starts 10/2014 Building work finished 11/2014 First line delivered & installed 12/2014 Test productions start 02/2015 Full scale production starts 7

8 KEY BUSINESS DEVELOPMENT: ACQUISTION OF FOODLAND (1/2) Established in 1998 with headquarter in Belgrade,Serbia Production of high-quality products under own brands: Bakina Tajna or Granny s Secret (paprika relish, jams, fruit butters, juices) Amfissa (olives, cornichons, roasted red peppers, capers, dried tomatoes, etc) Own production facility in Igros, southern Serbia Sales of EUR 8.3 m* in FY2014 * Preliminary unaudited results 8

9 KEY BUSINESS DEVELOPMENT (IV): ACQUISTION OF FOODLAND (2/2) REASONING FOR THE ACQUISTION International expansion potential Granny Secret with its palette of supreme quality products prepared in a traditional way, without additives or preservatives, meets both aims defined in AG s development strategy: expanding the current brand portfolio with international potential (alongside Argeta, Donat Mg, Multipower, Bebi and Cedevita GO!) and internationalization. Regional expansion Using the strength of AG s distribution network and infrastructure to increase distribution reach of brand Granny s Secret across the region andamfissa and principal brands in Serbia and Montenegro. Cost synergies More efficient procurement of raw/packaging materials, centralized transportation management, merging of logistics activities, processes and spaces, more efficient production, better customer control, higher marketing power. Geographic sales profile in 2014 Sales profile 2014 Regional markets 12% Serbia 60% Other markets 28% Principal brands 15% Other 9% Amfissa 26% Granny's secret 50% Sweet products 30% Vegetables product 20% 9

10 CONTENT KEY DEVELOPMENTS IN 2014 PERFORMANCE ON CAPITAL MARKET IN 2014 FINANCIAL RESULTS IN 2014 GUIDANCE FOR 2015 APPENDIX 10

11 PERFORMANCE ON CROATIAN CAPITAL MARKET 40% 0% -40% -80% Performance on capital market ATGR-R-A 48% 34% 31% 18% 16% 3% 7% 10% 0% 5% 1% 2% Crobex Crobex10-3% -1% -15% -18% -38% -47% -67% Valuation Last price in reporting period Market capitalization* (in HRK millions) 3, ,394.0 Average daily turnover (in HRK thousands) EV (in HRK millions) 5, ,504.7 EV/EBITDA EV/EBIT EV/sales EPS (in HRK) P/E * Closing price multiplied by the total number of shares Management Tedeschi Fiorio Lada 1.1% 5.8% EBRD 8.5% * Free float: 35.5% Other 14.1% Pension funds 20.3% Tedeschi Emil 50.2% Ownership structure as of AZ OMF 3.9% Raiffeisen OMF 9.6% In August 2014 the highest historic price of HRK 1, With growth of 31% in 2014 it outperformed both indices. November 2014: German development bank DEG reduced its ownership share from 8.5% to 2.3% in the accelerated bookbuilt process (ABB). Strong demand of investors: oversubscribed book by 1.7x The complete offering was allocated at HRK 925 The transaction amounted to EUR 25 million Erste Plavi OMF 3.3% 58% investment funds, 39% pension funds and 3% banks and individual investors 65% domestic investors and 35% foreign investors PBZ CO OMF 1.4% Raiffeisen DMF 1.4% Other pension funds 0.6% 11

12 CONTENT KEY DEVELOPMENTS IN 2014 PERFORMANCE ON CAPITAL MARKET IN 2014 FINANCIAL RESULTS IN 2014 GUIDANCE FOR 2015 APPENDIX 12

13 RESULTS IN LINE WITH GUIDANCE (in HRKm) 2014A/2014E: A/2014E : A/2014E : A/2013A: A/2013A: A/2013A: ,118 5, A 2014E A 2014E 5,200 5,000 4,999* 2013A A , , ,400 Sales 0 EBITDA EBIT * Sales for 2013 were restated, as explained on the following slide 13

14 SALES BY STRATEGIC BUSINESS UNITS AND STRATEGIC DISTRIBUTION UNITS (HRK 000) * 2014/ 2013 SBU Beverages 638, ,137 (0.8%) SBU Coffee 1,026,680 1,091,348 (5.9%) SBU (Sweet and Salted) Snacks 614, ,517 (0.3%) SBU Savoury Spreads 471, , % SBU Sports and Functional Food 779, ,080 (0.3%) SBU Pharma and Personal Care 493, ,939 (1.1%) SDU Croatia 844, , % SDU Serbia 1,083,149 1,145,258 (5.4%) SDU International markets 582, , % DU Slovenia 725, , % Other segments** 820, ,106 (3.6%) Reconciliation*** (2,961,173) (3,021,979) n/a Sales 5,118,373 4,998, % SBU Beverages: unstable weather conditions, floods in May, drop in the overall market categories; strong growth of Donat Mg and Kala. SBU Coffee: price competition in Serbia, partially compensated by the growth in Slovenia and Croatia. SBU Snacks: drop of flips, biscuits and wafers, partly mitigated by launching chips as a new category. SBU Savoury spreads: growth in the region and on international markets (Russia and Austria). SBU Sports and Functional Food: drop of private label; growth of own brands Multipower and Champ. SBU Pharma and Personal Care: drop of Dietpharm product range which is partially compensated by the growth of the pharmacy chain Farmacia. SDU Croatia and DU Slovenia: primarily influenced by Unilever s distribution. SDU Serbia: depreciation of the dinar, natural disasters, price competition. SDU International markets: growth in the sports and functional food and Donat Mg. * In 2014 the classification of contracted marketing expenses has changed from Marketing and selling expenses to decrease in Sales revenues, and classification of support for contracted marketing expenses has changed from decrease in Marketing and selling expenses to decrease in Cost of merchandise sold. In accordance with this change, sales revenue, referring to sales from the distribution company Atlantic Trade Zagreb and sales of SBU Savoury Spreads and BU Baby Food in the market of Russia for segment information in 2013 has been restated, but no restatement has been made for sales revenue referring to SBU Savoury Spreads on markets outside the region and Russia due to immateriality. ** Other segments include SDU HoReCa, SDU CIS, BU Baby Food, DU Macedonia and business activities not allocated to business and distribution units (headquarters and support functions in Serbia, Slovenia and Macedonia) which are excluded from the reportable operating segments. *** Line item Reconciliation relates to the sale of own brands which is included in the appropriate SBU and BU and in SDUs and DUs through which the products were distributed. 14

15 SALES BY MARKETS AND SEGMENTS 2014 Other markets 6.5% Russia and CIS 5.7% Key European markets** 11.4% Other regional markets* 6.1% Croatia 25.1% Serbia 22.4% 2013 Other markets 6.4% Russia and CIS 5.9% Key European markets** 11.8% Other regional markets* 6.3% Croatia 24.2% Serbia 24.3% Bosnia and Herzegovina 7.0% Slovenia 15.8% Bosnia and Herzegovina 7.3% Slovenia 13.8% 2014 Beverages 12.5% Baby food 3.6% Principal brands 18.0% 2013 Beverages 12.9% Baby food 4.1% Principal brands 14.5% Savoury spreads 9.2% Sweet and salted snacks 12.0% Coffee 20.1% Sports and Functional Food 15.2% Pharma & Personal care 9.4% Savoury spreads 9.1% Sweet and salted snacks 12.3% Coffee 21.8% Sports and Functional Food 15.6% Pharma & Personal care 9.6% * Macedonia, Montenegro, Kosovo; ** Germany, United Kingdom, Italy, Switzerland, Austria, Sweden, Spain 15

16 (in HRKm) SALES PROFILE BY MARKETS (I) % -5.8% 1, , , , , , , , % % -1.4% Croatia Serbia Slovenia Bosnia and Herzegovina Other regional markets* Croatia: higher sales due to (i) the beginning of the Unilever product range distribution, (ii) an increase in sales of own brands - Barcaffe, Argeta, Kala and Smoki, (iii) an increase in sales of principals brands - Rauch, Johnson&Johnson and Duracell, and (iv) the effect of the previous year s temporarily suspended distribution in March during negotiations related to the implementation of new commercial terms and conditions. Serbia: drop due to depreciation of dinar, decrease in sales of coffee, carbonated soft drinks, vitamin instant drinks and flips segments and strong price competition. Slovenia: growth as a result of the beginning of the Unilever product range distribution (growth without Unilever: 1.9%) Bosna and Herzegovina: adverse macroeconomic conditions resulted in lower sales of the coffee, carbonated soft drinks, vitamin instant drinks and snacks segments. Other regional markets* (Macedonia, Montenegro, Kosovo): growth of Donat Mg and Ferrero and Nescafe from principals brands. 16

17 (in HRKm) SALES PROFILE BY MARKETS (II) % % % Key European markets* Russia and Commonwealth of Independent States Other markets Key European markets* (Germany, the United Kingdom, Italy, Switzerland, Austria, Sweden, Spain): lower sales in UK, Switzerland and Sweden, which was largely compensated by growth in sales in Germany. Russia and the Commonwealth of Independent States: drop in sales due to the strong depreciation of the ruble (HRK 30m) and political instability in Ukraine. Other markets: growth in sales due to higher sales of sports and functional food segment. 17

18 SALES PROFILE BY CATEGORIES 2014 Principal brands 18.0% Own brands : Decline of 2.2% due to drop in sales: (i) Grand Kafa, (ii) Cockta and Cedevita, (iii) Smoki and (iv) Bebi. Drop was partly compensated by the growth in sales of: Own brands 67.0% Private label 8.8% Farmacia 6.2% Donat Mg, Kala and Kalnička Argeta Multipower i Champ Barcaffe Principal brands : 2013 Own brands 70.2% Principal brands 14.5% Private label 9.2% Farmacia 6.2% Strong growth of 27.5% that is primarily driven by the beginning of the Unilever product range distribution. Private labels : Drop of 2.0% due to drop in sales in sports and functional food segment due to termination of cooperation with one customer. Farmacia: Growth of 2.2% On 31 December 2014 Farmacia consisted of 48 pharmacies and 25 specialized stores (7 new). 18

19 PROFITABILITY DYNAMICS IN EBITDA EBIT Net profit/(loss) 7.2% higher net profit: Improvement of business processes and active hedging of main raw materials Despite net foreign exchange losses due to the strong depreciation of the Russian ruble and the Serbian dinar Significant decrease in interest expense by 21% due to a successful refinancing of long-term borrowings completed at the end of 2012 Decrease in the effective tax rate to 15% from the previous year s 21%. 19

20 OPERATING COSTS STRUCTURE IN 2014 (in HRK millions) 2014 % of sales 2013 % of sales Cost of goods sold 1, % 1, % 15.9% Change in inventory (30.0) (0.6%) (4.6) (0.1%) n/a Production materials 1, % 1, % (5.6%) Energy % % (3.8%) Services % % 10.6% Staff costs % % 4.8% Marketing and selling expenses % % 6.8% Other operating expenses % % (11.4%) Other gains/(losses), net (6.3) (0.1%) % n/a Depreciation and amortisation % % (5.9%) Total operating expenses 4, % 4, % 2.4% 2014/ 2013 Cost of goods sold: change in the sales mix caused by the beginning of the Unilever product range distribution. Production material expenses: lower by 5.6% despite a significant growth in prices of raw coffee in the global commodity markets. Negative effect of higher prices of raw coffee in the global commodity markets was avoided by the continuous hedging. The positive impact is also a result of lower prices of other raw materials (sugar, fat and oil) and lower packaging expenses, which compensated for higher prices of cocoa and powdered milk. Costs of services: higher transportation and logistics costs following the beginning of the Unilever range distribution and higher rent expenses following the opening of new specialized stores in the pharmacy chain Farmacia and relocation of the office in Russia. Staff costs: higher number of employees as a result of increased business volume (increase of employees for 229 to 4,457). Marketing expenses: aggressive marketing activities (especially in the coffee segment). Other operating expenses: reduced due to lower bad debt expenses following better receivables control. 20

21 PRICE DYNAMICS OF RAW COFFEE IN 2014 Average price of raw coffee (Arabica) in the global commodity markets was 22% higher in 2014 compared to Growth is a result of a longer drought period in Brazil, resulting in significantly lower coffee yields than in previous years and a low level of raw coffee stocks transferred from

22 OPERATING RESULT OF SBUs AND SDUs IN 2014 (in HRK millions) / 2013 SBU Beverages % SBU Coffee (2.9%) SBU (Sweet and Salted) Snacks (11.1%) SBU Savoury Spreads % SBU Sports and Functional Food (29.9%) SBU Pharma and Personal Care % SDU Croatia (31.6%) SDU Serbia (25.7%) SDU International markets (6.4%) DU Slovenia % Other segments* (131.7) (157.0) 16.2% Group EBITDA % SBU Beverages: Growth of Donat Mg, lower costs of production materials and lower staff costs. SBU Coffee: Decreased sales of coffee and increased marketing costs. SBU Snacks: The decrease in profitability is a consequence of launching chips, depreciation of the dinar and increased investments in price discounts. SBU Savoury spreads: Improved gross profit margin and marketing savings. SBU Sports and functional food: Launch of new factory and more intensive investments in the development of new products. SBU Pharma and personal care: Improvement in the gross profit margin, despite higher staff costs due to the opening of new specialized stores. SBU Croatia: Higher staff and transport costs due to the beginning of the distribution of Unilever and new sales organization. SBU Serbia: The decrease in profitability is a consequence of the drop in sales and depreciation of the dinar. SBU International markets: Development of infrastructure, including new recruitments. DU Slovenia: The growth in profitability due to higher sales and lower marketing investments, despite higher staff and transportation costs resulting from the beginning of the Unilever range distribution. Profitability by segments was restated in 2013 in order to be comparable with the new organisational structure and, accordingly, the new model of segment reporting in * Other segments include SDU HoReCa, SDU CIS, BU Baby Food, DU Macedonia and business activities not allocated to business and distribution units (headquarters and support functions in Serbia, Slovenia and Macedonia) which are excluded from the reportable operating segments. 22

23 FINANCIAL INDICATORS IN 2014 (in HRK millions) Net debt 1, ,059.3 Total assets 5, ,082.8 Total Equity 1, ,674.5 Current ratio Capital and liabilities structure as of Other liabilities 5.4% Trade and other payables 16.7% Capital and reserves 33.3% Gearing ratio 52.3% 55.2% Net debt/ebitda Interest coverage ratio Capital expenditure Cash flow from operating activities Bond 2.2% Short term borrowings 10.9% Long term borrowings 31.5% Continuous focus on further deleveraging The majority of capital expenditure relates to the construction of the energy bars production plant in Nova Gradiška. Growing 6.1% compared to the previous year, cash flow from operating activities is growing faster than EBITDA, indicating stability of the business model. 23

24 CONTENT KEY DEVELOPMENTS IN 2014 PERFORMANCE ON CAPITAL MARKET IN 2014 FINANCIAL RESULTS IN 2014 GUIDANCE FOR 2015 APPENDIX 24

25 STRATEGIC GUIDANCE FOR 2015 Strategic management guidance Focus on organic business growth through active brand management with a special emphasis on (i) strengthening the position of regional brands (Cockta, Cedevita, Smoki, Grand Kafa, Barcaffe, Bananica, Štark) and (ii) brands with international potential (Multipower, Argeta, Donat Mg, Bebi, Cedevita GO!) as well as active development of the regional HoReCa segment. In 2015, Atlantic Grupa's management expects increased pressures on the price of raw coffee in the global commodity markets (with an additional unfavourable impact of the EURUSD exchange rate) driven by fundamental factors, including: (i) downward trend in global supply due to draughts in Brazil, (ii) upward trend in global demand for coffee, and (iii) low levels of global stocks. Additional business pressures are a consequence of the volatility of the Serbian dinar and the Russian ruble Management plans to largely compensate the listed pressures by active hedging, continuous cost management and optimisation of business processes. (in HRK millions) 2015 Guidance /2014 Sales 5,300 5, % EBITDA (5.4%) EBIT (8.1%) Interest expense (0.7%) The effects of higher coffee prices and unfavourable exchange rates between the Russian ruble and the US dollar will be stronger in the first two quarters of In 2015, we expect capital expenditure in the amount of around HRK 150 million. The expected effective tax rate in 2015 should be at the level of the statutory tax rate for Croatia. 25

26 CONTENT KEY DEVELOPMENTS IN 2014 PERFORMANCE ON CAPITAL MARKET IN 2014 FINANCIAL RESULTS IN 2014 GUIDANCE FOR 2015 APPENDIX 26

27 CONSOLIDATED INCOME STATEMENT FOR 2014 (in HRK thousands) 2014 % of sales 2013 % of sales 2014/2013 Turnover 5,168, % 5,039, % 2.6% Sales revenues 5,118, % 4,998, % 2.4% Other revenues 50, % 40, % 22.8% Operating expenses 4,571, % 4,449, % 2.8% Cost of merchandise sold 1,405, % 1,212, % 15.9% Change in inventories (29,964) (0.6%) (4,636) (0.1%) 546.3% Production material and energy 1,620, % 1,715, % (5.5%) Services 359, % 324, % 10.6% Staff costs 704, % 672, % 4.8% Marketing and selling expenses 331, % 310, % 6.8% Other operating expenses 186, % 210, % (11.4%) Other - net (6,284) (0.1%) 7, % n/a EBITDA 597, % 590, % 1.1% Amortization and depreciation 156, % 166, % (5.9%) EBIT 440, % 424, % 3.8% Financial expenses (125,861) (2.5%) (159,265) (3.2%) (21.0%) Net FX differences (62,151) (1.2%) (12,201) (0.2%) 409.4% EBT 252, % 253, % (0.2%) Current tax 39, % 54, % (27.5%) Net income 213, % 198, % 7.2% Minority interest 13, % 4, % 224.8% Net income II 200, % 194, % 2.6% 27

28 CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2014 (in HRK thousands) 31 December 2014 % of total assets 31 December 2013 % of total assets Property, plant and equipment 1,099, % 1,060, % Investment property 1, % 1, % Intangible assets 1,804, % 1,851, % Available-for-sale financial assets % 1, % Trade and other receivables 22, % 9, % Deferred tax assets 41, % 47, % Non-current assets 2,969, % 2,971, % Inventories 582, % 537, % Trade and other receivables 1,169, % 1,126, % Non-current assets held for sale 99, % 99, % Prepaid income tax 12, % 22, % Deposits given % % Derivative financial instruments 22, % - - Cash and cash equivalents 417, % 325, % Current assets 2,304, % 2,111, % Total assets 5,274, % 5,082, % 0 0.0% 0 0.0% Capital and reserves attributable to owners of the Company 1,752, % 1,623, % Non-controlling interest 2, % 51, % Borrowings 1,776, % 1,968, % Deffered tax liabilities 181, % 181, % Derivative financial instruments 8, % 9, % Other non-current liabilities % % Provisions 51, % 59, % Non-current liabilities 2,018, % 2,219, % Trade and other payables 881, % 736, % Borrowings 578, % 387, % Current income tax liabilities 7, % 16, % Derivative financial instruments 4, % 18, % Provisions 28, % 29, % Current liabilities 1,500, % 1,188, % Total liabilities 3,519, % 3,408, % Total equity and liabilities 5,274, % 5,082, % 28

29 CONSOLIDATED CASH FLOW STATEMENT FOR 2014 (in HRK thousands) Jan - Dec 2014 Jan - Dec 2013 Cash flows from operating activities Net cash flow from operating activities before interest and income tax paid 622, ,471 Interest paid (123,509) (146,761) Income tax paid (52,879) (31,417) Net cash flow from operating activities 445, ,245 Cash flow from investing activities Purchase of tangible and intangible assets (190,100) (99,994) Proceeds from sale of property, plant and equipment 6,481 21,360 Advance for acquisition of subsidiary (5,332) (6,775) Acquisition of available-for-sale financial assets 0 (58,005) Proceeds from sale of assets available for sale 0 58,048 Loans and deposits given - net (4,486) 18,833 Interest received 4,511 8,189 Net cash flow used in investing activities (188,926) (58,344) Cash flow from financing activities Purchase of treasury shares (502) (9,063) Proceeds from borrowings, net of fees paid 293,101 85,111 Repayment of borrowings (322,891) (334,591) Acquisition of non-controlling interest (93,349) 0 Dividend paid to Company shareholders (34,901) (30,008) Net cash flow used in financing activities (158,542) (288,551) Net increase in cash and cash equivalents 98,251 73,350 Exchange gains/(losses) on cash and cash equivalents (5,997) 1,119 Cash and cash equivalents at beginning of period 325, ,865 Cash and cash equivalents at end of period 417, ,334 29

30 Q & A Thank you for your attention