Campofrio Food Group 1Q 2015 Earnings Call. 12 th May 2015

Transcription

1 Campofrio Food Group 1Q 2015 Earnings Call 1 12 th May 2015

2 Table of Contents Highlights Business environment a) The market b) Raw materials - Meat Specific conditions and actions taken in 1Q15 Burgos plant update Top line evolution Profit and Loss Account Cash flow generation Net financial debt Refinancing Outlook

3 Highlights Sales Volume : k Tons => + 4.4% growth vs. 1Q14 Net sales Value: M => + 2.0% growth vs. 1Q14 Gross margin/kg: 21.7% in line with prior year EBITDA norm: 28.9 M => + 1M vs. 1Q14 Net Result: M impacted by refinancing transaction costs Cash position: 675 M including 500M from new bonds pending redemption Total Liquidity: 450 M at the highest level over the last years Net Financial Debt: 391M; 93M lower than a year ago Leverage ratio at 2.5x vs. 3.2x in 1Q14 A strong sales quarter, maintaining profitability despite La Bureba fire aftermath as the Company remains focused on volume recovery and insurance compensation in progress Strong cash and solid liquidity position at historically low leverage ratio levels 3

4 Business environment The market recovery in the euro area still improving Euro Area Forecast for GDP* growth of +1,5% in 2015, from the past 0,9% in 2014 Consumer Confidence Indicator* Private consumption outlook* for 2015 positive for all key markets: EU28: +1,7%, Germany:+2,0%, France: +1,0%, Italy +1,2% and Spain with a notorious growth of +3,9% Domestic demand supported by inflation in EU28 +1,2%, Germany +1,5%, Spain +3,1% and Italy slowly improving but still experimenting negative results of -0,2% April * Source: IMF World Economic Outlook, April 2015 ** Source: Eurostat. *** Bank of Spain April 2015

5 Business environment The meat market In 2014 EU28 cereals output reached a record 326 MT (+8%), with above average yields. The prices of wheat, corn, barley and soybean meal prices decreased -15%, -20%, -20% and -12% respectively Lower feeding costs led to increased farmer s profitability, encouraging higher breeding populations (Nov-Dec 2014 Survey: Pig populations +1,3%, Totals Sow +0,4% and Mated sow +1,0%) Significantly higher pork production since 2H14. 1Q15 pig production rose +1,9% Drop in EU pork meat exports -6% (mostly impacted by Russia food imports ban) As a result, EU pig carcass prices reached the lowest average price of last 3 years (YTD). The EU private storage initiative has had a very limited impact 5 US pig price also dropped significantly lower : -34% YTD 2015/2014, based on a YTD +6.5% rise in slaughter

6 Business environment The meat market The market price for pig carcass has decreased between -10,7% and -15,6% during the first 3 months of 2015, versus same period of the previous year Pig Carcass Average Price (euro/kg) /13 Jan-Mar 2014 Jan-Mar 2015 YTD 2015/14 Spain Mercolleida 1,75 1,62-7,8% 1,55 1,38-10,9% France MPB 1,61 1,48-8,2% 1,45 1,29-11,0% Netherlands Monfoort 1,66 1,48-10,8% 1,49 1,29-13,6% Belgium Danis 1,51 1,36-10,1% 1,35 1,19-11,5% Germany AIM 1,70 1,54-9,1% 1,53 1,37-10,7% Denmark DC 1,53 1,38-9,3% 1,41 1,19-15,6% Italy 1,41 1,38-2,1% 1,39 1,25-10,7% Poultry: chicken prices have peaked during 2H14 and started to decrease during 1Q15. On the other hand, turkey prices remain close to record levels due to robust internal demand, lower imports into EU from Brazil and bird flu in USA For the rest of 2015, pig price evolution will depend on the relative weight of 3 key factors: the impact of additional pig population increase on slaughter levels, the evolution of exports (Russia ban, US price competitiveness and euro/dollar exchange rate), and the size of the crop production. All combined, our expectation is quite favourable 6

7 Specific conditions and actions taken in 1Q15 Pricing strategy and volumes: Volume recovery and branded market share keep being corporate priorities Cost cutting measures: Employee benefits expenses at -4,4% and consumption of goods and other external charges at -0,9%, had led to a cost reduction of 5,3% in 1Q15 Slight decrease on Gross Margin per Kg but still quite favourable comparison in absolute values vs LY (+ 3,7M) Gross margin /kg Net sales /kg 4,32 4,22 Gross margin /kg Meat costs /kg Non-meat costs /kg 1,90 1,88 1Q14 1Q15-0,40-0,46-1,96-1,94 7

8 Burgos plant update As already reported, on November 16, 2014, a fire destroyed our main meat processing plant in Burgos (Spain) with approximately 61,700 tons of production capacity (mainly cooked ham and poultry) and 894 employees Comprehensive recovery plan from day 1: 40% of displaced production to other CFG facilities and 60% to third-party processors Temporary Suspension of Employment Regulatory Programme ( ERTE ) currently for 556 employees, while 181 relocated and 37 have terminated their labour contracts by term of contract, legal retirement or employment with other companies Practically all the production capacity recovered by the end of March Commercial actions and strategy in place to ensure keeping market share Aim to recover shelf-space undergoing Centralized supply chain bearing fruit The police enquiry has been completed and the judicial proceedings started ex oficio have been concluded by means of a decision to close the file The company has recently communicated its intention to start building a new plant, to be ready by end of

9 Burgos plant update Insurance We believe that we have an adequate insurance coverage out of our property damages and business interruption policy As a result, the associated impacts shall be substantially mitigated in terms of recovery plan and rebuilding of a new equivalent factory To this extent, 73.8M indemnity down-payments have already been received by end of 1Q15 and we expect additional ones to follow Accounting The main accounting impact was reported in the 2014 financial results: Total Loss of 76.7M, including a non-cash 13.5M inventory write-off and a non-cash 52.9M fixed assets loss 102.0M recognized income, including 99.1M considered as virtually certain compensation for the assets loss, resulting in 25.2M net income During 1Q15, additionally 5.0M have been booked as business interruption insurance compensation 9

10 Top line evolution Sales Volume 1Q15: k Tons, +4.4% Net Sales Value 1Q15: 446,4 million,+2.0% Branded sales 272 million have increased by 0.7% thanks to the dry ham and dry sausage performance and to strong communication and promotional activities in support of brands Solid performance in France on the dry segments which are growing at double digit level Lower sales in cooked categories due to La Bureba fire incident in Campofrio Spain; however, recovery space and market share process underway 10

11 Top line evolution Strength of strategic brands: undisputed leadership in their respective segments Market Share, 1Q15 Dry Ham Dry Sausages Cooked ham Poultry Hot Dogs 12.4% # 1 # 1 # 1 # 1 7.2% 11.2% 19.4% 33.6% 22.3% 27.0% # 1 # 1 # 1 # % 28.0% 27.0% Market shares of our strategic brands remained strong, with growth in Spain in Dry ham and France in Dry Ham and Dry Sausages Source: Nielsen/IRI Brand Concentration in Value, MAT P02 11

12 Top Categories Dry sausages 30% of 2015 Revenues Growth drivers: Very good performance in France. Our branded business drives the growth category in Q1 (+2%) Promotional plans: +2 offer rebuying of Campofrio and Revilla. Multibrands Point of Sales activation in France Advertising campaigns: Justin Bridou and Cochonou have been on TV during Q1 Dry Ham 21% of 2015 Revenues Growth drivers: High growing: France +14.4%, Spain +7.5% and Italy +7.7% Promotional plans: Aoste: Massive promotional actions in stores around Raclette and Navidul: Father s day Event (web and PR) and promotion Innovation: Fiorucci growing through Health, Premium Tradi and Affordability Advertising campaigns: Aoste: New campaign in January with strong digital support Cooked Ham 16% of 2015 Revenues Growth drivers: Very good performance in Italy (+2.7%), Holland (+3.4%) and France (+24%) and recovering volumes and distribution in Spain underway Innovation: New launches in Italy with Amarsi di+ and Portugal with Forno de Lenha Advertising campaigns: Very strong in Portugal, Spain and Holland 12

13 Top Categories Poultry 10% of 2015 Revenues Growth drivers: The health platform is delivering excellent results in the South cluster. Also good performance in Holland and Spain in a recovery process Promotional plans: Outstanding promo in Spain for recovering facings and presence of Cuidate+ in Portugal and promo range in Belgium Innovation: Launches of Cuidate+ in Portugal, Chicken Curry in Belgium Advertising campaigns: TV waves in Portugal and Spain focused in Finissimas and Health Hot Dogs 8% of 2015 Revenues Growth drivers: Campofrio outstanding recovery in March, thanks to promotional activity and multipacks strategy. Nobre shows positive evolution driven by Affordable range, and becomes leader of glass segment Promotional plans: Intense promotional activity and new Affordable multipacks in Spain (2 ) Innovation: Italy and Portugal: Cuidate+ and Affordable range at listing stage; Spain: Oscar Mayer new tastes to be listed in Q2 in strategic customers Advertising campaigns: Campofrio Spain on air communicating nutritional benefits 13

14 Growth Platforms Heritage Growth drivers: Strong innovation in Germany through French heritage towards German consumer preferences. Good Performance of our heritage products in the modern trade Promotional plans: Promotional activities with Multipack snacks Health Growth drivers: Good performance of Amarsidi+ range in Italy Promotional plans: Cuidate+ in Portugal and strong push with Forno de Lenha Innovation: Poultry: Launch of Cuidate+ in Portugal and Rework of Amarsidi+ in Italy Snacking Growth drivers: Double digit growth in Belgium, Germany and USA (+114%). Dry Sausage Sticks performing extremely well in every market. Belgium: Goal to expand cooked business to self service channel in 2015 Promotional plans: Germany and Belgium: Multipacks Sticks: Couponing + sampling Innovation: Goal to grow on innovation 2014 ( Salami, Noix de Jambon, Trio Big Sticks and Family Packs) 14

15 Profit and Loss Account Profit & Loss Account CFG M 1Q14 1Q15 Var. % Sales Volume, in tns ,4% Net sales and services ,0% Other operating revenue ,7% Total operating revenues ,1% Consumption of goods ( ) ( ) 1,3% Other operating expenses ( ) ( ) 6,1% EBITDA reported (0,6%) Depreciation and amortisation (17.595) (16.626) (5,5%) Operating profit EBIT ,8% Financial results (13.139) (27.710) 110,9% Other results (4.307) (2.673) (37,9%) Profit before tax (7.100) (19.234) 170,9% Income Tax (67,5%) Profit from continuing operations (5.321) (18.656) 250,6% Profit from discontinued operations (85,0%) Profit for the period (4.499) (18.533) 311,9% Outstanding growth in sales volume: +4.4% up to K tns on strong performance in both segments processed (except for Spain) and fresh business Remarkable progress on sales value up more than 2% Continuous focus on driving the costs lines down, despite temporary change of supply chain model in Spain EBITDA normalized includes related Business Interruption insurance compensation 15 One-off charges (23) (1.119) 4765,2% EBITDA (Normalised) ,3% EBITDA normalized / Net Sales 6,4% 6,5% EBITDA reported / Net Sales 6,4% 6,2% Net Result mostly impacted by refinancing costs related to the remaining former bonds capitalization and the make-whole amount prior to redemption

16 Profit and Loss Account Sales by segments YTD Tons (Thousand) 1Q14 1Q15 % Var. Remarkable volume performance in Southern Europe, despite the fire impact, supported by fresh meat evolution and steady growth in Northern Europe Net sales in Southern Europe impacted by La Bureba aftermath, while outstanding progress in Northern Europe and USA Southern Europe ,7% Northern Europe ,5% Other ,1% Eliminations ,5% Total Sales (Tns) ,4% YTD Net Sales ( Million) 1Q14 1Q15 % Var. Southern Europe ,0% Northern Europe ,3% Other ,2% Eliminations ,0% Total Net Sales ,0% Note: Southern Europe includes Campofrio processed meats, Carnes Selectas, Portugal and Italy. Northern Europe includes France, Belgium, Holland and Germany. Other is mostly US Business. Intra-segment intercompany sales are eliminated from each segment 16

17 Profit and Loss Account EBITDA normalized by segments Southern Europe EBITDA impacted by margins deterioration in Spain following La Bureba, while fair progress in Portugal and Italy Northern Europe overall positive performance being France the major contributor USA continues to excel delivering extraordinarily positive results YTD EBITDA Normalized ( Million) 1Q14 1Q15 % Var. Southern Europe ,0% Northern Europe ,7% Other ,3% Eliminations 0 0 n.a. Total EBITDA normalized ,3% EBITDA Margin (%/Net Sales) 1Q14 1Q15 Var bp. Southern Europe 5,6% 3,8% -188 Northern Europe 7,2% 8,2% 99 Other 2,2% 16,8% Total EBITDA normalized 6,4% 6,5% 8 Note: Southern Europe includes Campofrio processed meats, Carnes Selectas, Portugal and Italy. Northern Europe includes France, Belgium, Holland and Germany. Other is mostly US Business. Intra-segment intercompany sales are eliminated from each segment 17

18 Cash Flow Generation 18 Cash Flow Statement CFG million 1Q14 1Q15 Cash Flows from Operating Activities Gross Operating Cash Flow Change in Working Capital (28.457) (24.239) Cash flows from operating activities (312) Interest payments (1.805) (1.573) Provision and pensions payment (15.745) (1.680) Payments for income tax Other receipts and payments Net cash flows from operating activities (16.554) Cash Flows from Investing Activities Investments in property, plant and equipment (8.063) (6.695) Other investment and proceeds Net cash flows from investing activities (7.901) (6.563) Cash Flows from Financing Activities Changes in current financial asset and liabilities (69) Changes in non-current financial asset and liabilities Cash Flow from Financing Net increase/(decrease) in cash and cash equivalents (21.805) Cash at the beginning of the period Cash at the end of the period Cash and cash equivalents variation (21.805) Gross operating cash flow generation in line with prior year Working capital variation negative due to seasonality but better than last year Much lower cash-outs provisions as restructuring related to strategic plan substantially implemented until the end of 2014 Relatively less CAPEX Cash Flow from Financing affected by refinancing closed on March 13, while redemption on April 2 nd Nonetheless, cash position and cash flow generation better than prior year once refinancing netted out

19 Liquidity / NFD / Leverage The 1Q15 positive cash position amounts to 675M, (including 500M pertaining to the new bonds issuance closed on March 13 th, while the former bonds redemption has taken place on April 2 nd ) 285M fully available committed bank lines (with 14 different banks), plus 15M of other uncommitted bank lines (with another 3 banks) having extended maturity up to three years on 4 new RCFs amounting to 120M on aggregate All these bank lines are covenant-free and the only bank financing that comprises financial covenants is the club deal facility maturing in October, whereas headroom is significant though Consequently, our overall liquidity position (cash + available bank lines) stands at more than 450M after having deducted the completion of the refinancing process, which is considered to be more than sufficient over time given the present debt structure and, therefore, we may consider cancelling some of the existing lines going forward to reduce financing costs Net Financial Debt amounts to 391M and the resulting leverage ratio (NFD /EBITDA LTM) stands at 2.5x As indicated, the Company has just completed the refinancing process of the 8.25% 500M bonds maturing in October 2016 by means of a new bonds issuance (NC3 7Y 500M at 3.375%) bringing about not only 25M circa annual interest savings but also an overall clean debt maturity profile over the next years Debt Maturity Profile Bond Fiourucci Loan 491,

20 Refinancing Offer Terms and Conditions Transaction Overview On March 13 th, CFG issued 500M NC3 7Y new bonds maturing in 2022 at 3.375% to refinance the outstanding bonds issued in 2009 As scheduled, redemption has taken place on April 2 nd, completing the refinancing process The resulting interest rate differential is more than halving the Company s cost of debt bringing about 25M/year interest savings going forward Issuer: Issue: Principal Amount: Use of Proceeds: Ranking / Guarantors: Campofrío Food Group, S.A. Senior Unsecured Notes 500 M Redemption of Existing Notes and related costs and expenses Pari passu with all existing and future senior unsecured Indebtedness / Imperial Meat Products VOF, Aoste SNC, SEC SNC, Nobre Alimentação, Lda. and Campofrio Food Groupe France Holding SAS Maturity: 7 years (2022) Debt Maturity Profile, M Existing Notes New Issue Currency: Optional Redemption : Equity Clawback: Change of Control: Covenants: Distribution : Governing Law: EUR NC3, 10% annual optional repayment during the first three years at 103% 35% 101% of the principal plus accrued and unpaid interest Customary for transactions of this type 144A / RegS New York 20

21 Outlook 2015 Top line, particularly the volumes, should continue benefiting from: - the outstanding performance of the growth platforms - the continuous focus on the volume recovery plan initiated last year, built on a more aggressive promotion and communication support to the top brands - the re-launch and renewed product portfolios (Italy, USA, Export, etc), as well as - The innovative concepts in the product development pipeline Improvements in the supply chain should continue bringing efficiency gains Meat costs expected to remain at a lower level than 2014, on strong harvest, the Russian food imports ban and higher production levels from the European farmers Cost control measures will continue having a positive impact on margins along the year CFG maintains its strategic priority of having a strong cash and liquidity position Interest expenses savings associated to the refinancing starting to bear fruit, whilst 2015 partially offset by transaction costs and make whole premium 21

22 Disclaimer This document has been prepared by Campofrio Food Group exclusively for use during this presentation. As a consequence thereof, this document may not be disclosed or published, nor used by any other person or entity, for any other reason without the express and prior written consent of Campofrio Food Group. The information and any opinions or statements made in this document have not been verified by independent third parties. In particular, the financial information included in this document regarding Campofrio Food Group, S.A. and its subsidiaries are unaudited. No express or implied warranty is made as to the impartiality, accuracy, completeness or correctness of the information or the opinions or statements expressed herein, which should be read in conjunction with other publicly available information. Neither Campofrio Food Group nor its subsidiaries or its affiliates assume liability of any kind, whether for negligence or any other reason, for any damage or loss arising from any use of this document or its contents. Neither this document nor any part of it constitutes a contract, nor may it be used for incorporation into or construction of any contract or agreement. This presentation may contain forward-looking statements about Campofrio Food Group. The forward-looking statements may include statements concerning Campofrio Food Group s prospects for the future, as well as other statements of beliefs, future plans, and strategies on anticipated events, financial projections and estimates and similar statements or expectations concerning matters that are not historical facts. The forward-looking statements are subject to the risks and uncertainties that could cause the actual results to differ materially from those expressed in, or implied by the statements. These risks and uncertainties include availability and prices of livestock, raw materials and supplies, livestock costs, livestock disease, food safety, product pricing, growth, the competitive environment and related market conditions, ability to make and successfully integrate acquisitions, operating efficiencies, access to capital, the cost of compliance with environmental and health standards, adverse results from ongoing litigation and action of domestic and foreign governments. Analysts and investors should not place undue reliance on those forward-looking statements. Campofrio Food Group undertakes no obligation to publicly correct those forward-looking statements to reflect events occurred after the date of this presentation. IMPORTANT INFORMATION Neither this document nor any of the information contained herein constitutes an offer of purchase, sale or exchange, nor a request for an offer of purchase, sale or exchange of securities, or a request for any vote or approval in any other jurisdiction or any advice or recommendation with respect to such securities. The Spanish language translation of the consolidated financial statements originally issued in English has been prepared solely for the convenience of Spanish speaking readers. Despite all the efforts devoted to this translation, certain omissions or approximations may subsist. Campofrio Food Group, its representatives and employees decline all responsibility in this regard. In the event of a discrepancy, the English-language version prevails. 22

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