PRESENTATION DEBT INVESTORS Carlsberg Group

Transcription

1 PRESENTATION DEBT INVESTORS Carlsberg Group 30 August 2017

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3 CONTENT Group overview SAIL 22 & Funding the Journey Key financial highlights Group financing & key EURO bond terms Appendix 3

4 Group overview 4

5 The Carlsberg Group markets with # 1 or 2 positions 74% volumes sold in # 1 or 2 markets No. 1 in Eastern Europe No. 2 in Western Europe No. 1-2 in seven Asian markets c. 108bn DKK market cap bn DKK net revenue 2 8.6bn DKK free cash flow bn DKK net debt x net debt/ebitda /8/17 2 FY /6/17 5

6 Three regions a more balanced portfolio WESTERN EUROPE EASTERN EUROPE ASIA Share of net revenue (2009 and 2016) 62% 60% 31% 16% 7% 24% Share of operating profit (2009 and 2016) 42% 54% 52% 18% 6% 28% 6

7 The Group has a strong portfolio of core beer brands Mainstream lager is among the alcohol categories with the highest market penetration and frequency of consumption Represents our largest volume and profit pool Share of beer volume Share of beer net revenue INTERNATIONAL BRANDS LOCAL POWER BRANDS 7

8 and attractive craft & speciality brands and alcoholic-free brews Craft & speciality and alcohol-free brews are growing rapidly in many markets Craft & speciality driven by consumer desire for premium brands with varied tastes and beer styles Alcohol-free brews driven by the rising interest in healthier choices Share of beer volume Share of beer net revenue CRAFT & SPECIALITY ALCOHOL-FREE BREWS 8

9 SAIL 22 & Funding the Journey 9

10 Our new strategy SAIL 22 was launched in March 2016, guided by our ambition to be SUCCESSFUL by driving sustainable top- and bottom-line growth KPIs Market share Gross profit after logistics % Operating profit PROFESSIONAL by excelling with our customers in insights, management and service KPIs Customer satisfaction scores ATTRACTIVE by delivering value for our shareholders, employees and society KPIs Operating profit ROIC Free cash flow 10

11 SAIL 22 defines clear priorities with a focus on core and growth opportunities to deliver shareholder value STRENGTHEN THE CORE Leverage our strongholds Excel in execution Funding the Journey POSITION FOR GROWTH Win in growing categories Target big cities Grow in Asia DELIVER VALUE FOR SHAREHOLDERS Organic growth in operating profit ROIC improvement Optimal capital allocation CREATE A WINNING CULTURE Team-based performance Contribute to a better society Compass (applying our codes and policies) 11

12 SAIL 22 sets clear targets for capital allocation 1. Organic growth in operating profit 2. ROIC improvement 3. Optimal capital allocation 1 : 1. Invest in to our business to drive long-term value creation 2. NIBD/EBITDA < 2.0x 3. Dividend pay-out ratio of 50% 4. Excess cash to be redistributed through buy-backs and/or extraordinary dividends 5. Deviating from the above only if value-enhancing acquisition opportunities arise 1 In prioritised order 12

13 SAIL 22 includes an ambitious sustainability strategy with industry-leading targets: Together Towards ZERO % carbon emissions at our breweries 30% reduction in beer-in-hand carbon footprint 50% reduction in carbon emissions at our breweries 100% electricity from renewable sources at our breweries Eliminate use of coal at our breweries 15% reduction in beer-in-hand 1 carbon footprint 100% low climate impact cooling Partner with 30 suppliers to reduce shared carbon footprint 50% reduction in water usage at our breweries Partner to safeguard shared water resources in high-risk areas 25% reduction in water usage at our breweries Explore going below 2.0hl/hl at all high risk breweries Partner to safeguard shared water resources in high-risk areas 100% of our markets improve on responsible drinking year on year 100% availability of alcohol free beer (AFB) 100% responsible drinking messaging through packaging and brand activations 100% of our markets run partnerships to support responsible consumption Zero accidents Reduction in accident rate year on year 13

14 Status of Funding the Journey and SAIL 22 as at 30 June 2017 FUNDING THE JOURNEY On track to deliver the expected net benefits of DKK bn by 2018 A large proportion to be delivered in 2017 As planned, approx. 50% of the total net benefits will be reinvested in the priorities of SAIL 22 while the other approx. 50% will improve earnings Funding the Journey governance structure and processes being incorporated into daily routines and standard business operations SAIL 22 Investment in and execution of SAIL 22 priorities on-going Strengthen core business Drive future top-line growth Craft & speciality growth of +25% Alcohol-free beer growth in Western Europe of +13% Launch of Together Towards ZERO with industry-leading ambitions 14

15 Funding the Journey was launched in November 2015, targeting net benefits of DKK bn by 2018 Elements of Funding the Journey VALUE MANAGEMENT Optimise balance between market share and profits by improving the mix of brands, channels and promotional activities Embedding the right sales and pricing tools across markets Price/mix in 2016: 3% SUPPLY CHAIN EFFICIENCY OPERATING EXPENSE EFFICIENCY Efficiency improvements within procurement, production, warehousing and logistics BSP1 1 an important tool to realise efficiencies Complexity reduction Net SKU 2 reduction by end-2016: 1,200 Simplification of processes and functions Operating cost management Outsourcing of shared services Total white-collar headcount reduction by end-2016: 2, RIGHT-SIZING OF BUSINESSES 1 Business Standardisation Programme 2 Stock Keeping Units Russia: Production restructuring and brand impairment China: Impairment of Eastern Assets and local brands in addition to further network restructuring UK: Business restructuring Several disposals, such as Danish Malting Group, Carlsberg Malawi, Carlsberg Uzbekistan, United Romanian Breweries and Nordic Getränke

16 Key financial highlights 16

17 Strong H results well on track to deliver on key priorities for the year GROWING TOP-& BOTTOM-LINE Net revenue +2% (organic) Operating profit +15% (organic) Net profit +23% IMPROVING CASH FLOW Free operating cash flow +37% REDUCING LEVERAGE Net debt/ebitda 1.57x BALANCING OUR GOLDEN TRIANGLE VOLUMES organic pro rata -2% OPERATING PROFIT organic growth +15% GROSS MARGIN growth +110bp 17

18 A clear target of SAIL 22 is to reduce net debt and financial leverage H results delivered accordingly 3.0x 2.5x 2.0x 1.5x 1.0x 0.5x DKKbn Continued reduction of financial leverage In line with SAIL 22 capital allocation priorities (target: < 2.0x) NIBD reduced by DKK 3.7bn since year-end 2016 NIBD/EBITDA down to 1.57x driven by: Earnings growth Working capital improvement Disposals 0.0x H FY 2015 H FY 2016 H Net debt/ebitda Interest-bearing debt, net (rhs) 18

19 2017 outlook 2017 FINANCIAL EXPECTATIONS Mid-single-digit percentage organic operating profit growth Financial leverage reduction Other assumptions A translation impact on operating profit of around DKK +50m based on the spot rate on 14 August (previously DKK +300m) Financial expenses, excluding currency losses or gains and fair value adjustments, of around DKK 1bn (previously DKK bn) Effective tax rate just below 30%. Capital expenditures of approximately DKK 4bn 19

20 Net revenue and operating profit DKK bn Net revenue DKK bn Operating profit

21 Operating and EBITDA margins Operating margin EBITDA margin 30% 40% 25% 35% 30% 20% 25% 15% 20% 10% 15% 10% 5% 5% 0% % Carlsberg Group Western Europe Carlsberg Group Western Europe Eastern Europe Asia Eastern Europe Asia 21

22 Average trade working capital and free cash flow Av. trade working capital/net revenue Free cash flow 4.0% DKK bn % % % % -6.0% % % % -14.0% H H

23 Group financing & proposed transaction key terms 23

24 We are committed to investment grade Rated by Fitch and Moody s since January 2006 Long Term Issuer Rating: BBB Outlook: Stable Date: The affirmation reflects an improvement in Carlsberg's credit metrics to levels more commensurate with a 'BBB' rating due to successful cash preservation measures taken in leading to 25% gross debt reduction over the period. We expect rating headroom to continue improving over , allowing for some bolt-on M&A activity in a still consolidating industry. Management's focus on improving profitability and strengthening the company's balance sheet under the SAIL'22 strategy it aims to deliver by 2022 should continue to enhance the group's financial flexibility under the current rating. The rating also reflects Carlsberg's strong business profile resulting from its large scale, geographic diversification and strong portfolio of international and local brands, ensuring leading positions in most of its markets. ( ) Rating: Baa2 Outlook: Stable Date: Carlsberg's Baa2 long-term ratings are supported by the company's (1) large scale as the world's third-largest brewer, with leading positions in some of its key European and Asian markets, including Russia; (2) increasing geographic diversification; and (3) solid cash flow generation supporting gross debt reduction. The ratings also factor in Carlsberg's (1) significant exposure to Eastern Europe and Russia in particular, where trading conditions remain challenging; (2) weaker margins compared to rated global peers, reflecting a higher exposure to competitive beer markets in Western Europe as well as to different local distribution models; and (3) credit metrics that are currently weak for the rating but are expected to improve over the next 6 to 12 months (i.e. by mid late 2017). ( ) 24

25 Carlsberg Group financing Committed to maintaining investment grade credit rating Centralised funding and risk management at the level of Carlsberg Breweries A/S Diversified sources of funding and smooth maturity profile Ample capital resources available at all times EUR 1,000m Bond maturing in Oct 2017 and EUR 750m Bond maturing in 2019 EUR 750m Bond maturing in 2022 EUR 1,000m Bond maturing in 2024 EUR 2,510m credit facility committed until 2021 DKK bn 15 Time to maturity non-current borrowings DKK bn 50 Committed non-current credit facilities and net financial debt Comm. credit facilities Net financial debt* EUR 1 bn 2,5% EUR 750 m 2,625% EUR 750 m 2,625% years 2-3 years 3-4 years 4-5 years > 5 years > * FY 2016 and H reported numbers 25

26 Continued focus on cash generation and deleveraging Target net interest bearing debt (SAIL 22) Net interest bearing debt / operating profit before depreciation and amortisation < 2.0x NIBD/EBITDA at 31 December 2016: 1.96 NIBD at 31 December 2016: DKK 25,503m NIBD at 30 June 2017: DKK 21,852m Gross financial debt at 31 December 2016 of DKK 30,204m 70% of gross financial debt is long term 76% of net financial debt at fixed rates 61% of gross financial debt is non-current bonds NIBD / EBITDA Gross Financial Debt Allocation (%) 5x 4x 3x 2x 1x % 5% 1% 4% 61% Non-current issued bonds Non-current bank borrowings Non-current mortgages Current bank borrowings Other current- and noncurrent borrowings x H1'17 26

27 Funding portfolio to meet Carlsberg s strategy Committed credit facilities Committed credit facilities at 31 December 2016 of DKK 49,592m Credit resources available at 31 December 2016 of DKK 13,464m Credit resources available is defined as unutilised non-current credit facilities and cash & cash equivalent less utilised current credit facilities Utilisation of funding sources Funding portfolio requires rebalancing due to high bond ratio and little flexible debt: No immediate refinancing need Reduce bond ratio to achieve flexibility Committed credit facilities 2% Utilisation of funding sources 1% 9% 4% 45% 52% 1% 86% Bonds Mortgages Bank borrowings Other credit facilities Bonds Mortgages Bank borrowings Other credit facilities 27

28 Funding strategy DKKbn Maturity Profile Bonds Other borrowings Smoothing of maturity profile Looking for maturities in gaps Increase flexibility and ability to match liquidity Keep part of the funding portfolio short-term Will be open to PPs and reverse inquiries Looking broadly and opportunistically at markets and funding sources Smaller and more frequent issues (than previously) EUR 1bn bond maturing in Oct 2017 Refinancing with a mix of a new bond issue, cash and/or short term debt 28

29 Carlsberg Group ownership structure and proposed transaction key terms Issuer Ratings Status Use of Proceeds Tenor Size and currency Coupon type Optional Redemption Law Key Euro Bond Terms Carlsberg Breweries A/S Moody s: Baa2 (Stable) Fitch: BBB (Stable) Senior unsecured General corporate purposes incl. partial refinancing of EUR 1bn bond maturing in October 6 years EUR 500m Fixed, Annual, Act/Act 3 month Par Call Carlsberg Foundation 30% of capital 75% of votes Change of control Put option in the event of Change of Control Other activities 1 English Law Carlsberg Breweries A/S simplified ownership structure Carlsberg A/S Listed on Nasdaq Copenhagen Free float 70% of capital 25% of votes 100% ownership Carlsberg Breweries A/S EMTN listed on Luxembourg Stock Exchange Documentation Listing Joint Bookrunners EUR 5 billion EMTN programme, Prospectus dated 8 June 2017 and Prospectus Supplement dated 25 August 2017 Luxembourg Stock Exchange MUFG, Nordea, Societe Generale Operating companies 1 Other activities are primarily R&D and real estate activities. Refer to slide 31 (appendix) 29

30 Appendix 30

31 Other activities bridge between Carlsberg Group and Carlsberg Breweries Group Other activities in Carlsberg A/S (not consolidated in Carlsberg Breweries Group) are primarily: R&D activities Real estate activities Carlsberg A/S holds 25% ownership in Carlsberg Byen, the city development project on the former brewery site in Valby Bridge between Carlsberg Group and Carlsberg Breweries Group 1 DKKm CAG Other activities CBG Comments Net revenue 62,614-62,614 Operating profit 8, ,301 CAS admin. expense: DKK -100m. Profit from associate after tax: DKK +44m, of which the main part is real estate (Carlsberg Byen) Special items Net financial items -1, ,237 Profit before tax 7, ,327 Tax -2, ,402 Profit after tax 4, ,925 Free cash flow 8, ,805 Decrease in other payables in CAS Dividends excl. minorities -1, ,373 Net financial debt 26, ,833 Intercompany loans from CAS to CBG 1 Abbreviations: CAG: Carlsberg Group; CBG: Carlsberg Breweries Group; CAS: CAG excl. CBG 31

32 Western Europe SWEDEN Carlsberg Sverige No. 1 Market share: 35% Breweries: 1 NORWAY Ringnes No. 1 Market share: 55% Breweries: 2 FINLAND Sinebrychoff No. 2 Market share: 31% Breweries: 1 UK Carlsberg UK No. 4 Market share: 12% Breweries: 1 DENMARK Carlsberg Danmark No. 1 Market share: 54% Breweries: 1 BALTIC STATES Saku Aldaris Svyturys-Utenos Alus No. 1-2 Market share: 26-41% Breweries: 3 SWITZERLAND Feldschlösschen No. 1 Market share: 41% Breweries: 1 POLAND Carlsberg Polska No. 3 Market share: 17% Breweries: 3 FRANCE Kronenbourg No. 2 Market share: 28% Breweries: 1 GERMANY (Northern) Carlsberg Deutschland No. 1 Market share: 17% Breweries: 2 32 PORTUGAL Unicer No. 1 Market share: 47% Breweries: 1 ITALY Carlsberg Italia No. 4 Market share: 7% Breweries: 1 SOUTH EAST EUROPE Carlsberg Serbia Carlsberg Croatia Carlsberg Bulgaria Carlsberg Greece No. 2-3 Market share: 16-27% Breweries: 5

33 Western Europe key figures Pro rata beer volumes (2016) DKK bn Organic growth Beer volumes (m hl) % Others, incl. Export & Licence Nordic countries Other beverages (m hl) % Poland Total volumes (m hl) % Net revenue % Operating profit % Operating margin 14.2% 13.7% France Germany South East Europe UK 33

34 Western Europe H results highlights Organic growth in net revenue of 2% Price/mix +1% Volume +1% Operating profit up organically 14% Price/mix improvements from value management Funding the Journey benefits, including OCM, reducing operating expenses +160bp improvement in operating margin H1 m.hl / DKKbn 2016 Org. Acq. Net FX 2017 Beer volume % 0% 24.1 Other bev. volume % -5% 7.8 Total bev. volume % -2% 31.9 Net revenue % -2% -1% 18.5 Operating profit % 0% 0% 2.3 Operating margin 10.9% 12.5% 34

35 Eastern Europe RUSSIA Baltika No. 1 Market share: 35% Breweries: 8 KAZAKHSTAN Derbes No. 2 Market share: 37% Breweries: 1 UKRAINE Carlsberg Ukraine No. 2 Market share: 31% Breweries: 3 BELARUS Olivaria No. 1 Market share: 29% Breweries: 1 AZERBAIJAN Baltika-Baku No. 1 Market share: 75% Breweries: 1 35

36 Eastern Europe 2016 key figures Pro rata beer volumes (2016) DKK bn Organic growth Others Beer volumes (m hl) % Russia Other beverages (m hl) % Ukraine Total volumes (m hl) % Net revenue % Operating profit % Operating margin 18.0% 17.5% 36

37 Eastern Europe H results highlights Organic decline in net revenue of 1% Price/mix +8% Volume -9%, impacted by PET 1 downsizing in Russia Operating profit up organically 17% GPaL growth Funding the Journey benefits +320bp improvement in operating margin H1 m.hl / DKKbn 2016 Org. Acq. Net FX 2017 Beer volume % 0% 14.5 Other bev. volume 1.0-4% 0% 1.0 Total bev. volume % 0% 15.5 Net revenue 4.7-1% 0% +17% 5.5 Operating profit % -1% +23% 1.0 Operating margin 15.9% 19.1% 1 Polyethylene terephthalate (plastic bottles) 37

38 Asia CHINA (Western) No. 1 Market share: 58% Breweries: 27 HONG KONG Carlsberg Hong Kong Ltd No. 2 Market share: 27% VIETNAM SEAB Hue Brewery Habeco No. 4 Market share: 10% Breweries 1 : 2 LAOS Lao Brewery Co. No. 1 Market share: 96% Breweries: 2 NEPAL Gorkha Brewery No. 1 Market share: 70% Breweries: 1 CAMBODIA Cambrew No. 1 Market share: 45% Breweries: 1 INDIA Carlsberg India No. 3 Market share: 17% Breweries: 7 SINGAPORE Carlsberg Singapore No. 2 Market share: 21% 38 SRI LANKA Lion Brewery Ceylon No. 1 Breweries: 1 1 Excl. Habeco MYANMAR Carlsberg Myanmar No. 4 Market share: 3% Breweries: 1 MALAYSIA Carlsberg Brewery Malaysia Berhad No. 2 Market share: 37% Breweries: 1

39 Asia 2016 key figures Pro rata beer volumes (2016) DKK bn Organic growth Others China Beer volumes (m hl) % Laos Other beverages (m hl) % Total volumes (m hl) % Net revenue % India Operating profit % Operating margin 19.1% 18.2% Vietnam 39

40 Asia H results highlights Organic growth in net revenue of 6% Price/mix +5% Volumes flat Operating profit up organically 12% Gross margin improvement from value price/mix and supply chain savings Good operating cost management +200bp improvement in operating margin H1 m.hl / DKKbn 2016 Org. Acq. Net FX 2017 Beer volume % -4% 18.1 Other bev. volume % -16% 1.9 Total bev. volume % -5% 20.0 Net revenue % -5% 0% 7.7 Operating profit % 0% +1% 1.5 Operating margin 17.4% 19.4% 40

41 Dividend per share and pay-out ratio DKK 12 Dividend/share and pay-out ratio 42% % % % % 2 7% % Dividend/share Pay-out ratio (rhs) 41

42 Disclaimer Forward-looking statements This presentation contains forward-looking statements, including statements about the Group s sales, revenues, earnings, spending, margins, cash flow, inventory, products, actions, plans, strategies, objectives and guidance with respect to the Group's future operating results. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words "believe", "anticipate", "expect", "estimate", "intend", "plan", "project", "will be", "will continue", "will result", "could", "may", "might", or any variations of such words or other words with similar meanings. Any such statements are subject to risks and uncertainties that could cause the Group's actual results to differ materially from the results discussed in such forward-looking statements. Prospective information is based on management s then current expectations or forecasts. Such information is subject to the risk that such expectations or forecasts, or the assumptions underlying such expectations or forecasts, may change. The Group assumes no obligation to update any such forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements. Some important risk factors that could cause the Group's actual results to differ materially from those expressed in its forwardlooking statements include, but are not limited to: economic and political uncertainty (including interest rates and exchange rates), financial and regulatory developments, demand for the Group's products, increasing industry consolidation, competition from other breweries, the availability and pricing of raw materials and packaging materials, cost of energy, production and distribution related issues, information technology failures, breach or unexpected termination of contracts, price reductions resulting from market driven price reductions, market acceptance of new products, changes in consumer preferences, launches of rival products, stipulation of market value in the opening balance sheet of acquired entities, litigation, environmental issues and other unforeseen factors. New risk factors can arise, and it may not be possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on the Group's business or the extent to which any individual risk factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Accordingly, forward-looking statements should not be relied on as a prediction of actual results. 42