Increase shareholder value through organic growth

Transcription

1 Increase shareholder value through organic growth 2013 Mizuho Investment Conference September, 2013 Kirin Holdings Company, Limited 1

2 Management summary MTBP Overseas integrated beverages: Key Group driver Expand profit contribution Domestic integrated beverages: Enhance core competitive strengths Raise shareholder value through steady cash flow generation and improved profitability Normalized EBITDA:Midsingle digit CAGR Normalized EPS:High single digit CAGR Enhance shareholder returns Dividend growth to reflect EPS growth Additional shareholder returns through share buyback (Upper limit: 50 billion; Time limit: end December 2013) In Q2, we achieved steady growth in overseas business and implemented initiatives for renewed growth in Japan. 2

3 KV2021,, FY Mediumterm Business Plan 3

4 Wellbalanced, global business portfolio Emerging ~High growth~ Pharmaceuticals and Biochemicals 27% Others Normalized EBITDA 2013(E) 314.0bn Overseas integrated beverages 41% Japan integrated beverages 32% Developed ~Stable High profitability~ Beer #1 Dairy #1 Emerging ~Large scale High growth~ Beer #2 Carbonated #3 *Source: Kirin research 4

5 Building on KV2015 towards a new stage; generate steady, strong results Moving Forward Stepping Out KV2015 KV2021 Secured overseas integrated beverages business foundation Strengthened cost competitiveness and increased efficiency Realized integration synergies in pharmaceuticals business Grow Japan integrated beverages business Pursue organic growth at overseas acquisitions Deepen synergies within integrated beverages group strategy 5

6 KV2021 Business model Sustainably increase enterprise value through organic growth ~Leverage diversity and cocreate brand value with consumers and communities~ Organic Pursue organic growth within the areas developed under KV2015 High value Insightful & Innovative Produce strong results and increase enterprise value Sustainable Generate sustainable growth through a virtuous cycle of growth and investment Achieve deep insight into consumers and society to cocreate brand value Diversity within One Kirin Values Underpinned by shared values, leverage Kirin s diversity to enable autonomous management by businesses closely aligned with customers in each region 6

7 Growth strategy / MTBP Organic Threeyear shift to organic growth Overseas integrated beverage business, the driver of Group growth, work to strengthen the core elements of the Japan integrated beverage business Generate stable cash flow Target: Mid singledigit CAGR in normalized EBITDA* Guidance for business performance in 2015 (to be updated every year): Consolidated sales 2,300bn plus, operating income 180bn plus Increase shareholder value through stronger profitability Target: High singledigit CAGR in normalized EPS* Enhance shareholder returns Increase dividends with 30% consolidated payout ratio on normalized EPS* * Normalization: Removing extraordinary gains and losses and other nonoperating items to reflect actual earnings more accurately 7

8 Further growth through fostering strong brands New business structure of integrated beverages business in Japan (From Jan. 2013) Kirin Alcoholic beverages Kirin Brewery Mercian Soft drinks Kirin Beverage Optimize resource allocation beyond alcohol and soft drinks framework Pursue brandcentered management (strong products, strong KIRIN brand) ~Manage brands based on deeper customer insight to strengthen core brands and stimulate innovation Increase specialist capabilities and strengthen organizational capabilities Allocate strategic resources to optimize overall performance, beyond alcohol and soft drinks framework Free up resources by integrating overlapping functions and increasing efficiency 8

9 Further strengthen cost competitiveness Mediumterm Business Plan Mediumterm Business Plan Created crossgroup cost synergies Greatly exceeded projections Under the new management structure we will continue measures to improve cost competitiveness Original projection over 20 billion results 38.4 billion Projection over 15 billion Production and distribution Procurement Sales, IT, Others 16.8 billion 14.9 billion 6.7 billion Lower depreciation and amortization costs by optimizing capital investment Lower manufacturing costs by revising manufacturing processes, and other initiatives Improve production efficiency by optimizing manufacturing bases Lower cost of raw materials through joint procurement 9

10 Financial strategy / MTBP Enhance shareholder returns Steadily reduce debt and increase financial flexibility <Cash flow during 2013MTBP> Operating Cash Flow 700bn plus Investment Cash Flow Approximately 300bn (Excluding strategic investment for growth) FCF 400bn+ Enhance returns to shareholders Increase dividends in line with growth in normalized EPS Consolidated payout ratio of 30% Additional returns to shareholders, including share buybacks, will also be considered Repay debt Increase financial flexibility by steadily reducing debt 10

11 Strong cash generation Continuing to produce stable, high levels of cash flow (Million yen) 300, ,000 Operating Cash Flow 700bn plus 100, , , , ,000 Investment Cash Flow Approx. 300bn (E) Cumulative 11

12 Plan for

13 2013 Basic policy: First year in shift to organic growth Realize overall Group sales and profit growth by building on overseas growth and focusing on restoring growth in Japan MTBP quantitative targets 2013 Target (Revised) Mid singledigit CAGR in normalized EBITDA* High singledigit CAGR in normalized EPS* billion yen (up 2.2% YoY) 123 yen (up 5.1% YoY) Segment Sales Operating Income before amortization of goodwill etc Ordinary Income Net Income 2,280.0bn yen +4.3% YoY 205.8bn yen +1.6.% YoY 132.0bn yen (4.7% YoY) 90.0bn yen +60.1% YoY Unchanged Unchanged *Normalization: Removing special income and expenses and other extraordinary items to reflect actual earnings more accurately actuals: Normalized EBITDA was billion yen, Normalized EPS was 117 yen. 13

14 FY2013 financial targets Sales Operating Income before amortization of goodwill etc 2,280.0bn yen +4.3% YoY 205.8bn yen +1.6.% YoY Operating margin : 9.0% Indices of major subsidiaries Sales Operating profit Operating margin Kirin Brewery * ** 14.6% Kirin Beverage ** 1.7% Lion % Alcohol beverages % Soft drink beverages % Sales EBITDA EBITDA margin Brasil Kirin % *After deduction of liquor tax **Before deduction of management fee and brand royalty 14

15 FY2013 financial strategies Allocate free cash flow in accordance with MTBP financial policy Operating Operating Cash cash Flow flow 220.0bn Investment Cash Flow ± 0.0 bn Capital expenditure 140.0bn () Sale of shares in Fraser & Neave etc bn (+) FCF 220.0bn Enhance returns to shareholders Planned annual dividend of 36 per share (up 7) Consider responsive returns to shareholders, including share buybacks Repay debt Increase financial flexibility 15

16 Further enhance shareholder returns Changes in dividend per share 40 ( ) Mediumterm Plan Increase dividends in line with growth in normalized EPS Consolidated payout ratio of 30% Additional returns to shareholders, including share buybacks, will also be considered years to kickstart growth 3years of implementation to increase profitability 3years shift to organic growth 16

17 From CSR to CSV In support of Kirin s brandcentered management approach through which Kirin aims to deepen engagement with stakeholders and take its CSR activities to the next level Kirin is adopting a CSV approach to business. With CSV, Kirin aims to create value together with a wide range of stakeholders through its overall business activities along the value chain. Cocreate value with a wide range of stakeholders Customers Starting lineup against UAE national football team in the Kirin Challenge Cup 2012, September 6, 2012 Employees Cocreation with employees and organization Cocreate value through a brand centered management approach Kirin Group Achieve sustainable growth of enterprise value Shareholders, Investors Community Cocreate values with various communities Develop mutual trust and collaboration Create a sustainable society Environment Starting lineup against the Australian women s national football team in the Kirin Challenge Cup 2012, July 11, 2012 Business partners 17

18 Second quarter & annual revised forecast of FY

19 Summary for second quarter of FY2013 Increased sales and profits in the first half over previous year, and the highest sales ever Company performance driven by overseas topline growth, and initiatives for renewed growth in Japan steadily implemented Net income targets set at the start of year unchanged. Operating income revised through the fiscal year due to the downward revision in pharmaceuticals business and subsidiary s share transfer Implementation of shareholder returns in line with mediumterm policy ~ Increase dividends in line with growth in normalized EPS and share buyback ~ Progress towards targets FY2013 Q2 YoY change FY2013 Revised forecast YoY change FY2013 Initial forecast YoY change Normalized EBITDA % % % Normalized EPS (Yen) % % % 19

20 Second quarter performance highlights YoY increased sales and profits driven by overseas topline growth Japan integrated beverages FY2013 Q FY2012 Q YoY change (%) (2.4) (0.5) Sales and Operating Income Sales Overseas integrated beverages Pharmaceuticals and biochemicals Others , , (1.0) (2.3) 5.2 Lion drastically increased sales and profits. Increased sales volumes and improved product mix in the Australian alcohol beverage business Japan integrated beverages Overseas integrated beverages Pharmaceuticals and biochemicals (2.5) (13.0) Brasil Kirin increased sales volume Kirin Beverage increased sales volume Others Operating income Equity in earnings of affiliates Ordinary income (0.1) Nonoperating and Special incomes/ expenses Special income and expenses Income before income taxes and minority interests Gains from sale of shares in Fraser and Neave (special income of 46.2 billion yen) Net income * New reporting segments were created in FY

21 Annual sales forecast (Revised on August 1, 2013) Net income targets unchanged despite downward revision in pharmaceuticals and subsidiary s share transfer Sales Japan integrated beverages Overseas integrated beverages Pharmaceuticals and biochemicals Others Japan integrated beverages Overseas integrated beverages Pharmaceuticals and biochemicals Others Operating income Equity in earnings of affiliates Ordinary income Special income and expenses Income before income taxes and minority interests Net income FY2013 Revised forecast * New reporting segments were created in FY , , Difference to Initial forecast (40.0) (10.0) (1.0) 1.5 (4.0) (1.0) (5.0) 4.8 (5.0) (5.0) YoY change (%) (0.0) (40.1) 93.8 (9.4) 11.8 (1.5) 0.2 (3.0) 1.1 (6.4) (0.0) (41.8) 4.3 (13.7) 42.9 (2.7) 5.8 (2.0) (4.7) Major differences to initial forecast Sales 1) Overseas integrated beverages: Impact of exchange rates (Lion billion yen, Brasil Kirin billion yen) 2) Others: Exclusion of Kirin Kyowa Foods from Q3, etc. (40.0) billion yen Operating income 1) Pharmaceuticals and Biochemicals: Kyowa Hakko Kirin (4.0) billion yen (Impact of some initially planned revenue from technology licensing shifting to the next FY, etc.) 2) Others: Exclusion of Kirin Kyowa Foods from Q3, etc. (1.5) billion yen 21

22 Updated quantitative targets Normalized EBITDA Normalized EPS FY2013 Q2 FY2013 Revised forecast FY2013 Initial forecast FY2013 Q2 FY2013 Revised forecast FY2013 Initial forecast Operating income Net income Depreciation Goodwill amortization Goodwill amortization Dividends received from equity method affiliated companies Normalized EBITDA Special incomes/expenses after income taxes and minority interests Normalized net income (A) Average number of shares outstanding during period (thousand) (B) (43.2) ,063 (38.8) ,748 (35.3) ,497 Normalized EPS (A) / (B) 51 yen 123 yen 121 yen 22

23 Q2 review and issues for the achievement of annual targets Favorable overseas growth and steady implementation of measures for renewed growth in Japan Japan: Increasing brand value Achievements Issues Steady development of new measures for a stronger brands from a mediumterm perspective Achievement of topline goals and minimization of cost increases due to changes in circumstances Oceania: Accelerating sales increase and income growth Achievements Issues Increased sales and profits driven by favourable sales in Australian alcohol business Continuing implementation of high valueadded strategy in Australian beverage business and companywide costreduction Brazil: Moving toward stage of increased profits through strategic investment Achievements Growth exceeding market by steadily expanding customer touch points focusing on key brands Issues Maximizing presence in the peak period, and implementing thorough cost control 23

24 Japan integrated beverages: Q2 results Steady development of new measures for stronger brands Kirin Brewery (11.1) Kirin Beverage FY2013 Q FY2012 Q YoY change 7.6 YoY change (%) (3.2) 5.0 Created drinking styles with new brand communication Concept shop Shop front Mercian Other (1.0) 2.1 (3.3) 18.0 Restaurants & bars, talk of the town SNS Sales (2.4) (0.5) Kirin Brewery (2.4) (12.7) Kirin Beverage Mercian Other Operating income (4.7) (2.5) Strong launch of Sumikiri (2.1) (0.4) 2.5 (2.5) Representing a new standard within new genre beverages. Sold 2.4 million cartons in just over 2 months since the launch, reaching half the annual target. The turnaround in sales for new genre products overall. (90.4) (13.0) Boost of key brands Increased Kirin IchibanShibori Nama Beer large keg sales Increased Kirin GogonoKocho sales by 4.0% YoY Created new customer value in growing categories Kirin Mets Cola: Ranked No. 1* in the FOSHU carbonated drink category SekainoKitchenKara Salty Litchi : Approx. double sales volume over previous year RTD sales volume : +5.3% over previous year *FOSHU carbonated drinks: MBI Index Food for Specified Health Uses carbonated drinks market June 2012 to May 2013 total sales figures (target businesses: supermarkets, convenience stores and drug stores) 24

25 Japan integrated beverages: Annual forecast Achieve topline goals by boosting key brands. Minimize cost increases due to changes in circumstances Sales Kirin Brewery (7.6) Kirin Beverage Mercian Other Kirin Brewery Kirin Beverage Mercian Other Operating income FY2013 Revised Forecast , Difference to initial forecast 0.1 (0.5) (0.8) (1.7) 1.5 (1.0) YoY change 14.5 (2.0) (4.8) (0.0) (6.1) (3.1) (2.0) 1.9 (9.4) YoY change (%) (1.0) 4.3 (2.9) (15.5) (0.0) (10.7) (79.7) (95.3) 38.1 (13.7) Improve trend in Nodogoshi Nama sales Maximize impact of new brand communication by boost ties between advertising and promotions Promotion Shop front Boost promotion of new value to customers Manage ingredient costs increases caused by weaker yen Continually review procurement methods Review production costs and companywide costs Revise price of wine (in September) Further reinforcement of key brands 25

26 Lion: Q2 results Good progress in the Australian alcohol business boosts Lion s performance, and group earnings increase realized F2013 Q2 F2012 Q2 YoY change Y o Y change(%) Bn Yen Mil AUD Bn Yen Mil AUD Bn Yen Mil AUD Yen basis AUD basis Leading market in Craft Beer Alcohol , , Soft Drink , , (72) 4.4 (5.5) Sales , , Alcohol Soft Drink (3) 3.0 (6.8) Corporate (4.3) (48) (3.4) (42) (0.9) (6) Operating income Goodwill Amortization (15.0) (164) (12.7) (154) (2.2) (10) Brand Amortization (2.0) (22) (1.9) (23) (0.1) 0 Operating income after amortization No.1 Dairy Beverage Consolidated period:oct 2012 Mar 2013 Currency exchange rate:91.01 yen(oct 2012 Mar 2013 :82.38 yen) Alcohol Change in Operating Income (Million AUD) Soft Drink 323 FY Change in sales volume (21) 36 Other FY Sales Volume (YoY) Alcohol + 9.0% Soft Drink (5.8%) Alcohol Business: Realised volume increase and premiumisation through addition of new international premium and craft brands Soft Drink Beverage Business: Efficiency focus, and growth in valueadded categories, such as impressive growth of Dare 26

27 Lion: Annual forecast Aiming for the achievement of the original profit target FY2013 Revised Forecast Difference to initial forecast YoY change YoY change (%) Bn yen Mil AUD Bn yen Mil AUD Bn yen Mil AUD Yen basis AUD basis Alcohol , Soft Drink , (55) 27.4 (16) 13.3 (0.6) Sales , Alcohol Soft Drink (2.0) (26) Corporate (10.0) (107) (2.1) (10) Operating income Goodwill Amortization (30.6) (329) (1.0) (0) (5.4) (20) Brand Amortization (4.2) (45) (0.2) (1) (0.4) 1 Operating income after amortization (0) Consolidated period:oct 2012 Sep 2013 Currency rate:93.00 yen(oct 2012 Sep 2013 :81.58 yen) Alcohol Business: Strengthen profitability by focusing on major brands and growing categories such as international premium and craft Innovation to reignite interest in the beer category Soft Drink Beverage Business: Pursue profitability through growth of high value segments and further improvement of efficiency A new home draught beer TAP KING Dairy Beverage performs well 27

28 Brasil Kirin: Q2 results Achieved growth exceeding market by further boosting brand strengths through strategic investment FY2013 Q2 FY2012 Q2 YoY change YoY change (%) Bn yen Mil BRL Bn yen Mil BRL Bn yen Mil BRL Yen basis BRL basis Sales , , Sales volumes Operating income Goodwill amortization Brand amortization Operating income after amortization EBITDA 0.1 (2.7) (1.6) (4.2) (59) (34) (91) (4.8) (1.7) (112) (41) 172 (2.9) 2.0 (1.6) (2.4) 0.5 (68) 52 (34) (49) (5) (95.2) 6.8 (95.6) (2.9) Beer: Middle single digit (%) increase YoY Soft drinks: Low single digit (%) increase YoY Consolidation period: JanuaryJune 2013 / Currency exchange rate: yen (JanuaryJune 2012: yen) Operating income (before goodwill and brand amortization): affected by Increased depreciation cost, approximately 40 million BRL, with reevaluation of assets and liabilities based on Brazil s accounting standard Expansion of customer touch points for core brands (NOVA SCHIN, DEVASSA, SCHIN NO GRAU, SCHIN, Skinka) Further optimization of supply chain Managing growing demand for canned products through establishment of new production lines 28

29 Brasil Kirin: Annual forecast Achieve the year goal of income by further reinforcement of sales and thorough cost control FY2013 Revised forecast Difference to initial forecast YoY change YoY change (%) Bn yen Mil BRL Bn yen Mil BRL Bn yen Mil BRL Yen basis BRL basis Sales , (122) Operating income Goodwill amortization (5.4) (118) (0.3) (0.5) Brand amortization (3.2) (69) (0.2) (0.3) Operating income after amortization EBITDA Consolidation period: JanuaryDecember 2013 / Currency exchange rate: yen (JanuaryDecember 2012: yen) Further boost sales activities which communicate the product value to maximize presence in peak period (December: summer) Cover decreased gross profit accompanying revision of sales targets through cost control Continue to implement mediumterm initiatives to decrease manufacturing cost, and increased effectiveness of supply chain in line with plan 29

30 Kyowa Hakko Kirin: Q2 results and annual forecast Increased sales and profits. Steady sales of pharmaceuticals domestically, and extensional growth of core products overseas. FY2013 Q2 FY2013 revised forecast Billion yen YoY change YoY change (%) Billion yen Difference to initial forecast YoY change YoY change (%) Pharmaceuticals (1.9) (1.2) (0.5) Biochemicals Sales Pharmaceuticals (4.2) (5.7) (11.3) Biochemicals Operating income (4.0) (1.5) (2.7) Favorable expansion of ProStrakan core products overseas R&D on track. New Parkinson s disease drug NOURIAST was released in May. In the second half, Onglyza, for type2 diabetes, was released in July. Sales and profits in the biochemicals business increase as weaker yen Revise annual forecast for operating income as revenue from technical licensing etc. is expected to be partially shifted to the next FY. 30

31 Kyowa Hakko Kirin: Midterm business plan Basic strategy of MTBP Further strengthen competitiveness in Japan through our categorybased strategy Implement product portfolio management in each category from R&D to S&M Realize sustainable growth while enhancing productivity Expand our business base in the USA, Europe and Asia and aim to become a global specialty pharmaceutical company Strengthen the revenue base of our BioChemicals business Quantitative targets FY 2012 Results FY 2013 Planned FY 2015 Guidance *3 Compared to FY2012 Net sales Operating Income * Operating income to sales ratio (%) Ordinary Income * Net Income * EPS ( ) * *1 Income after amortization of goodwill *2 EPS calculated using net income before amortization of goodwill *3 To be updated annually Note: In Kirin's consolidated accounts the figures for Kyowa Hakko Kirin operating income (after goodwill amortization) are: 2012 (actual): 55.5 billion; 2013 (plan): 54.0 billion. 31

32 Southeast Asia and China Kirin (China) Investment China Resources Kirin Beverages (Greater China) Company Siam Kirin Beverage (Thailand) Interfood (Vietnam) (Indonesia) Begin testmarketing of Kirin GogonoKocha Tea Break Southeast Asia (excluding the Philippines) Kirin Holdings Singapore San Miguel Brewery (Philippines) Philippines Maintain dominant domestic beer market share by ensuring optimal brand portfolio February 1, 2013: Decision made to sell stake in Fraser & Neave Aim to expand business in Southeast Asia by utilizing existing business bases in Vietnam and Thailand, centered on Kirin Holdings Singapore China Soft drinks: Construct a countrywide soft drinks platform through China Resources Kirin Beverages (Greater China), aiming for dramatic growth Beer: Stabilize revenue base and achieve continued growth in sales of Kirin brand products 32

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