Heineken. Credit investor update. March 2012

Transcription

1 Heineken Credit investor update March 2012

2 Disclaimer The material that follows is a presentation of general background information about the Heineken Group ( Heineken or the Company ) as of the date of the presentation. It is information in summary form and does not purport to be complete and is not intended to be relied upon as advice to potential investors. This presentation is strictly confidential and may not be disclosed to any other person. This presentation contains forward-looking statements with regard to the financial position and results of Heineken s activities. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Many of these risks and uncertainties relate to factors that are beyond Heineken s ability to control or estimate precisely, such as: general economic conditions, including in particular economic conditions in Western Europe, Central and Eastern Europe, the Americas, Africa and the Middle East and Asia Pacific; economic and political instability in developing countries; general risks associated with operating as a multinational enterprise; reputation of the Heineken brand and protection of our intellectual property; quality and integrity of our products; societal perceptions of alcohol; continuity in our supply chains and availability and supply of raw materials and other inputs, including water; our ability to attract, develop and retain skilled personnel; breakdowns or significant interruptions in our information systems; fluctuations in foreign currency exchange rates; our access to the capital markets; our ability to successfully integrate acquired businesses; costs and potential liabilities we may incur in connection with litigation or regulatory proceedings; changes in laws and regulations, including antitrust and competition laws and general competitive factors. These and other risk factors are detailed in Heineken s publicly filed annual reports. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Heineken does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of these materials. Market share estimates contained in this presentation are based on outside sources such as specialised research institutes in combination with management estimates. This presentation does not constitute an offer, or invitation, or solicitation of an offer, to subscribe for or purchase any securities of the Company, and neither any part of this presentation nor any information or statement contained herein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. Any decision to purchase securities in any offering of securities of the Company should be made solely on the basis of the information contained in the offering document that may be distributed in due course in connection with any offering of securities of the Company, if any. By participating in this presentation, you agree to be bound by the foregoing limitations. This presentation contains information in relation to EBIT, EBIT (beia), net profit (beia), EBITDA, EBITDA (beia) and free operating cash flow. EBIT is defined as earnings before interest and taxes and other net of finance expenses. EBIT (beia) is defined as earnings before interest and taxes and other net finance expenses, before exceptional items and amortization of brands and customer relationships. EBITDA is defined as earnings before interest and taxes and other net finance expenses before depreciation and amortization. EBITDA (beia) is defined as earnings before interest and taxes and other net finance expenses before depreciation and amortization and before exceptional items and amortization of brands and customer relationships. Net profit is defined as profit after deduction of minority non-controlling interests (profit attributable to our equity holders). Net profit (beia) is defined as profit after deduction of minority non-controlling interests before exceptional items and amortization of brands and customer relationships. Free operating cash flow represents the total of cash flow from operating activities and cash flow from operational investing activities. Cash conversion rate represents free operating cash flow divided by net profit (beia) before deduction of non-controlling interests. Exceptional items are defined as items of income and expense of such size, nature or incidence, that in the view of management their disclosure is relevant to explain our performance for the year. Such measures are not financial measures calculated in accordance with IFRS. Accordingly, they should not be considered as an alternative to results from operating activities or profit as indicators of our performance, or as an alternative to cash flow from operating activities as a measure of our liquidity. However, management believes that EBIT, EBIT (beia), net profit (beia), EBITDA, EBITDA (beia) and free operating cash flow are measures widely used in our industry as a means of evaluating performance and are therefore useful for disclosure. The presentation of these financial measures should not be considered substitutes for the information contained in our consolidated financial statements and may not be comparable to similarly titled measures reported by other companies due to differences in the ways the measures are calculated. This presentation also contains information on organic growth and organic volume growth. Organic growth is growth excluding the effect of foreign currency translational effects, consolidation changes, exceptional items and amortization of brands and customer relationships. Organic volume growth represents the increase in volume growth but excluding the effect of the first time consolidation of acquisitions. These measures are presented in more detail in Heineken s publicly filed annual reports. 2

3 Heineken at a glance Heineken NV

4 Heineken: The premium beer company Excellent growth platforms Top-2 brewer in the world by revenue, Top 3 by volume Strong family heritage: Established in 1864 Heineken, the world s leading international premium beer More than 200 international, regional, local and specialty beers and ciders Highly diversified geographic footprint in more than 170 countries with growing exposure to emerging markets Conservative financial profile rated Baa1 by Moody s and BBB+ by S&P, both with stable outlook 2011 sales of 17.1bn, EBIT (beia) 1 of 2.7bn Market capitalisation of 23.7bn ($31.4bn) (as of March 20, 2012) 4 1 Before exceptional items and amortisation of brands and customer relations.

5 No. 2 global brewer by revenue and No. 3 by volume 2010 Revenue by brewer* in billions of EURO 2010 Beer volume by brewer * in millions of hectolitres 1 Anheuser-Busch InBev (ABI) 27.3 Anheuser-Busch InBev (ABI)** Heineken 16.1 SABMiller*** SABMiller 12.6 Heineken** Carlsberg 8.1 Carlsberg KIRIN 7.7 Tsingtao (Group) 63 6 ASAHI 6.9 Molson Coors Brewing Company 54 7 Modelo 5.0 KIRIN**** 52 8 Molson Coors Brewing Company 2.5 Beijing Yanjing 50 9 Tsingtao (Group) 2.2 Modelo Beijing Yanjing 1.0 ASAHI 30 Source: 5 Plato Logic World Datasheets (November 2011), Heineken FY Results 2010, Company information. *Revenues exclude contribution from JV and associates, and are after excise taxes. *Volumes exclude contribution from JV and associates, except SABMiller and Molson Coors. **ABI volume and Heineken volume based on reported FY 2010 volume. Volume including 100% of JVs and associates would be 400mhl and 192mhl, respectively. ***SABMiller volume excludes contribution from CRE Snow but includes proportional volume from Miller Coors, and is also adjusted for Foster s (10mhl) and SAB Ukraine and Russia (7mhl). ****Kirin pro-forma for acquisition of Schincariol.

6 A truly global footprint Group beer volume by region Africa & ME 14% Asia Pacific 12% W Europe 21% Americas 28% C&E Europe 25% EBIT (beia)* by region Heineken OpCo JV Export Licences Africa & ME 21% Asia Pacific 6% Americas 24% W Europe 36% C&E Europe 13% 6 Note: 2011 figures; Percentages exclude Head Office. *EBIT (beia) includes share of the net profit of joint ventures and associates. Beia is defined as before exceptional items and amortisation of brands and customer relationships.

7 Heineken Budweiser Corona Carlsberg Stella Artois Guinness Amstel Foster's Tuborg Brahma Beck's Heineken brand - Leadership in International Premium Segment Heineken outperforms IPS (Volume Growth, CAGR ) +3.0% Beer Market 26,0 +4.3% IPS 13,4 12,4 +5.3% Heineken 11,9 19.4% Heineken share of IPS 19.8% 20.0% 20.2% 20.2% 20.5% Heineken - leading international brand in millions of hectolitres 8,8 8,7 8,7 8,1 6.1* 2,0 7,6 7,0 4,3 Approximately 19% of global beer market premium of which 7% is international premium Growth of premium segment outperforms the overall beer market Heineken has the highest exposure to premium markets/segments Heineken is the leading brand in IPS Heineken brand represented 13% of Group beer volume for Source: Plato, November Plato estimate (IPS: volume sold outside home market). * Heineken s part of Foster s.

8 Market leading positions reinforced by strong local brands UK # 1 Portugal # 2 Spain # 2 Poland # 2 Italy # 1 Mexico # 2 Nigeria # 1 India # 1 8 Source: Brewer Associations, Nielsen and Canadian. Market positions based on volumes.

9 Strong financial track record Value growth strategy yielding results EBIT (beia ** ) m Net profit (beia ** ) m CAGR - Organic growth 8% CAGR - Organic growth 9% * * *2010 restated. ** Before exceptional items and amortisation of brands and customer relations.

10 and strong cash flow generation Focus on cash generation embedded in the company Continued strong cash flow generation Deleveraging quickly Free operating cash flow ( m) Net debt/ebitda (beia) (Heineken) 3.3x Hunt for Cash 2 programme 1,993 2, x Target: <2.5x 2.2x 2.2x 1, x * 2011** * Including FEMSA Cerveza on a 12-month basis net debt / EBITDA (beia) including full acquisition debt for FEMSA Cerveza but only 8 months of EBITDA is 2.3x. ** Including Galaxy Pubs on a 12-month basis net debt / EBITDA (beia) including full acquisition debt for Galaxy Pubs but only 1 month of EBITDA is 2.3x. 10

11 Strategy Heineken NV

12 Shaping our future Strategic business priorities Grow Heineken brand Consumerinspired, customeroriented, brand-led Capture the opportunities in emerging markets Leverage the benefits of Heineken s global scale Drive personal leadership

13 1) Heineken global activation Strong global activation programmes London Olympics official supplier Global campaigns Sponsorships Serenade Activation Film Global digital media Music 13

14 2) Consumer-inspired, customer-oriented, brand-led Local brands enable us to win and provide the platform for global brand growth Desperados Launched in 10 countries in 2011 Unique proposition Superpremium positioning Global brands Sol Mexican heritage European roll-out from 2012 Supported by new brand campaign USA: Dos Equis Local brands (examples) France: Pelforth Strongbow Gold global Amstel Brand extension Nigeria: Gulder Italy: Birra Moretti cider brand New Amstel Premium Global campaign in Italy Pilsener brand extension and Netherlands in 2011 Introduced in Greece and Further launches in 2012 Russia in

15 3) Capture the opportunities in emerging markets Growing emerging markets exposure W Europe Size Share Volume* (mhl) % EBIT (beia)** 962m 36% C&E Europe Size Share Volume* (mhl) % EBIT (beia)** 346m 13% Heineken Group Beer Volume Developed Emerging 44% 65% Americas Size Share Volume* (mhl) % EBIT (beia)** 655m 24% Asia Pacific Size Share Volume* (mhl) % EBIT (beia)** 176m 6% 56% 35% Heineken EBIT (beia) Developed 2.7bn Africa & ME Size Share Volume* (mhl) % EBIT (beia)** 570m 21% Emerging 1.6bn 36% 50% 64% 50% Note: 2011 figures. *Group beer volumes include 100% volume of associates and joint ventures; Percentages exclude Head Office. ** EBIT (beia) includes share of the net profit of joint ventures and associates. Beia is defined as before exceptional items and amortisation of brands and customer 15 relationships.

16 4) Leverage the benefits of Heineken s global scale Global brand building 5.8m* Global Business Services Key enabler of new 500m Total Cost Management 2 cost saving programme Heineken Global Shared Services (HGSS) in Krakow, Poland Heineken Global Procurement Company (HGP) in the Netherlands Supply chain optimisation Global Procurement Company GBS Global Shared Services Enabling Infrastructure 16 *As at 20 February, 2012.

17 5) Drive personal leadership 71 Operating Companies ~70,000 Employees ~635 Senior Leaders One Heineken Diversity Increase in senior management diversity Broad geographic footprint calls for diversity Acquisitions key contributor to net inflow of talent Capability Global Commerce University, Finance Academy, Supply Chain knowledge transfer Tailored Heineken development programmes Culture Drive a culture of personal accountability and interdependence 17

18 Financial performance Heineken NV

19 2011: A year of significant progress Solid top-line performance Revenue grew (+3.6%) 1 ahead of volume 2 (+2.1%) 1 Group beer volume +3.6% 1 ; growth in all regions Higher marketing drove global market share gains Accelerated growth of Heineken Strongest volume performance since 2007 More consistent approach to global brand management Leveraging global scale Launched new 500m TCM2 3 programme Formation of Global Business Services organisation Investment in commercial capability building Expanded emerging market footprint Operational programmes delivering results TCM 3 completed: Cumulative 3-year savings of 614m Cost synergies in Mexico and Brazil on track in 2011 Hunt4Cash2 completed: Cumulative FOCF of 5.8bn 19 1 Organic growth. 2 Total Consolidated Volume. 3 Total Cost Management.

20 FY 2011 key highlights Strong results in challenging conditions (mhl/ m) 2011 (restated) 2010 Change Organic change Group beer volume % 3.6% Heineken premium volume % 5.4% Revenue 17,123 16, % 3.6% EBIT (beia) 2,697 2, % 1.4% EBIT (beia) margin 15.8% 16.3% -50 bp Net profit (beia) 1,584 1, % 9.2% Net profit 1,430 1, % Free operating cash flow 2,093 1, % Net Debt/EBITDA (beia) ratio* 2.2x 2.2x 20 * 2011 includes the Galaxy Pub Estate on a 12 month pro-forma basis; 2010 includes the beer operations of FEMSA on a 12 month pro-forma basis.

21 Regional performance review Continued strong performances in Africa and Asia % change 2011 vs. 2010* Western Europe Central & Eastern Europe The Americas Africa & Middle East Asia Pacific Total Group beer volume Heineken ** Revenue EBIT (beia) *Reported numbers including currency effect and consolidation impact. **Volume in the international premium segment.

22 Marketing spend driving top-line growth 2011 Marketing & Selling (beia) ratio of 12.8% Marketing & Selling: Organic growth of 4.1% m % Consumer-facing spend +9% Effective and efficient resource allocation % 13.0% 11.7% 12.4% 12.8% 13% 12% Marketing & selling expense (beia) as % of revenues: Up 40 bp in expected to remain broadly in line with % 11% 10% Investment and strong activation driving market share gains in key markets including France, UK, Russia, Brazil, Nigeria and South Africa Marketing & Selling expense Marketing & Selling expense (beia) (in % of revenues) 22

23 Input costs: expected headwinds in 2012 Input costs/hectolitre to increase by 6% Input cost/hectolitre change (%) 15% 10% 5% 0% 2011 Input costs/hl + 2.5%, in line with guidance 2012 Input costs/hl expected to increase by 6% Higher malted barley prices expected from: Unfavorable weather Northern and Eastern Europe Low first crop yield in Mexico Comparison base Higher energy costs, impacting glass costs Heineken has already secured vast majority of its expected 2012 input needs -5% F 2012-onwards Managing future price volatility through HGP* Improved Price Risk Management capabilities 23 * Heineken Global Procurement Company.

24 TCM 2: New global cost efficiency programme Expected to generate 500m savings TCM2 3 years: Across all functions Focus on fixed and variable costs Supply Chain Commerce TCM2 Wholesale Other GBS as a key enabler Leverage global scale Set-up costs of HGSS* and HGP** approx. 200m ( 32m already incurred) GBS represents a strong pay-back on investment Savings will be reported at functional/opco level 24 *Heineken Global Shared Services Centre. **Heineken Global Procurement Company.

25 Hunt for Cash Average 3-year cash conversion rate above 130% Cumulative FOCF of 5.8bn in 3 years m cumulative FOCF of 5.8bn: Effective Net Working Capital management Targeted capex investment 160% % 126% 122% 140% 120% 100% 2011 Strong FOCF generation of 2.1bn: Capex (PPE) of 800m Working capital improved Net debt of 8.4bn: Business development activity Completion of ASDI* share repurchase Net debt/ebitda unchanged at 2.2x FOCF ( m) Cash conversion ratio (%) 80% 2012F Maintain strong focus on cash generation Increased capex investment to 1,250m Cash conversion ratio < 100% 25 *Allotted Share Delivery Instrument (used in connection with FEMSA Cervezea acquisition).

26 A solid credit profile Net debt/ebitda ratio of 2.2x* Maturity profile** In m 3,000 2,500 2,000 1,500 1, Debt as at 31 December 2011 Euro bonds issued in March 2012 Bank 44% Others 7% USPP*** 21% Bonds**** 28% 26 General policy of issuing new debt at parent level (Heineken N.V.) Gross debt of 9.2bn as at 31 December 2011 Cash & cash equivalents at 813mm as of 31 December bn 5-year revolving credit facility with two 1-year extension options, no financial covenants or Material Adverse Change clause New 1.35bn bonds (2019 & 2024) issued in March 2012 provide additional financing headroom to repay upcoming maturities * Including Galaxy Pubs on a 12-month basis net debt / EBITDA (beia) including full acquisition debt for Galaxy Pubs but only 1 month of EBITDA is 2.3x. **Maturity profile excludes bank overdraft, employee loans, bilateral lines. ***US Private Placement. ****Debt breakup as at 31 December 2011.

27 Financial Policy Heineken has an established set of conservative financial policies, which are monitored and form an integral part of investment decisions Conservative leverage and liquidity targets, amongst others: Net debt/ebitda (beia) < 2.5x Policy of maintaining sufficient committed financial headroom for at least next 12 months Stable dividend policy with a 30-35% pay-out of Net profit BEIA Heineken repurchased 29m shares in as part of consideration for FEMSA transaction Heineken does not have a history of large share repurchases Focused and deliberate acquisition policy Thorough private due diligence exercise and internal analysis conducted Return on invested capital (ROIC) compared to weighted average cost of capital (WACC) EPS impact Financial leverage impact Capital Expenditure projects are evaluated on the basis of DCF and appropriate hurdle rates 2012 capex plan of 1.25bn 27

28 Ratings considerations Baa1 Stable BBB+ Stable Heineken benefits from economies of scale in a Strong positions in the world beer market consolidating industry Geographic diversification Geographic diversification Weaker operating margins than its rated Weaker profitability compared to other global peers peers Free cash flow generation is strong and Stable financial policy sustainable The attributed rating provides some leeway for Strong recognition of the Heineken brand debt-financed acquisitions Heineken has less flexibility than peers to Strong product portfolio spearheaded by absorb a margin squeeze if raw material Heineken brand prices rise Complexity in group s distribution A proven ability to tap the financial markets infrastructure due to its wide presence as a regular issuer 28

29 Summary Heineken NV

30 Summary Top 3 global brewer with broad international footprint and strong family heritage Heineken, the world s leading international premium beer continues to outperform Track record of strong cash flow generation Further capability building investments in 2012 to leverage global scale Focus on working capital management and cost control (Total Cost Management 2) Solid credit profile and conservative financial policy 30

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32 Heineken s shareholder structure Heineken N.V. shares held by Heineken Holding N.V. equals the number of shares issued by Heineken Holding N.V Heineken family Greenfee B.V % 11.45% L Arche Green N.V % Heineken Holding N.V. (listed on Amsterdam stock exchange since 1962) % Heineken N.V. (listed on Amsterdam stock exchange since 1939) FEMSA % FEMSA % Free float % Free float % 32 As at December 2011

33 Western Europe Solid performance in a challenging environment (mhl/ m) FY 2011 (restated) FY 2010 Total Change Group beer volume % Total consolidated volume % Of which: Consolidated beer volume % Heineken premium volume % Revenue 7,752 7, % EBIT (beia) % Operating profit (beia) margin 12.4% 11.7% 70 bp EBIT (beia) organic growth driven by positive price and sales mix and cost cutting 88m of cost savings in 2011, representing half of total TCM savings Heineken brand growth across the whole region Desperados launched in 6 countries France and UK delivering strong performances Acquisition of 918 Galaxy pubs in UK 33

34 Central & Eastern Europe Increase in revenues led by strong volume gains (mhl/ m) FY 2011 (restated) FY 2010 Total change Group beer volume % Total consolidated volume % Of which: Consolidated beer volume % Heineken premium volume % Revenue 3,229 3, % EBIT (beia) % Operating profit (beia) margin 10.2% 11.4% -120 bp Volume gains in Russia, Poland, Austria, Belarus and Romania Russia accounts for 70% of the organic volume increase Excluding Greece, Heineken brand growth would have been slightly positive Desperados performing strongly in Germany and Poland Operating performances in Poland and Russia affected by unfavourable channel and brand mix 34

35 Americas Solid top-line growth offset by higher marketing spend (mhl/ m) FY 2011 (restated) FY 2010 Total Change Volume gains in Latin America offset by USA Group beer volume % Total consolidated volume % Of which: Consolidated beer volume % Heineken premium volume % Revenue 4,029 3,296 22% EBIT (beia) % Operating profit (beia) margin 14.3% 15.9% -160 bp Heineken delivered improved growth momentum in H Heineken growth led by strong performance in Brazil Significant organic EBIT growth in Mexico Heineken acquired a majority interest in Brasserie Nationale d Haiti, the leading brewer in Haiti 35

36 Upscale beer potential in USA remains attractive Upscale expected to continue taking share from mainstream and economy USA Upscale* Beer Market Volume (in mhl) CAGR ( ) +5.1% Upscale beer has grown at a CAGR of 5.1% since 2000 Imports drove ~50% of that growth Upscale expected to continue to grow in the coming years *Upscale = Import + craft beer 36 Source: Beer Institute

37 Africa & Middle East Continued growth momentum (mhl/ m) FY 2011 (restated) FY 2010 Total Change Volume and EBIT growth led by Nigeria Group beer volume % Total consolidated volume % Of which: Consolidated beer volume % Heineken premium volume % Revenue 2,223 1,988 12% EBIT (beia) % Operating profit (beia) margin 24.0% 26.8% -280 bp Share gains and capacity expansion in South Africa Social unrest in Egypt adversely impacted performance Heineken brand reached a milestone of 3mhl Acquisitions in Nigeria and Ethiopia New East African regional office established in Kenya 37

38 Asia Pacific A star performance (mhl/ m) FY 2011 (restated) FY 2010 Total change Group beer volume % Total consolidated volume % Of which: Consolidated beer volume % Heineken premium volume % Revenue % EBIT (beia) % Operating profit (beia) margin 29.9% 22.1% +780 bp Volume growth led by Indochina and export markets Heineken brand: Vietnam became the second largest market Brand roll-out across key cities in India +28% in China 19m capital gain following divestment of 21% stake in Kingway (China) 38

39 Outlook 2012 Continue focus on top line and market share growth Positive growth momentum in emerging economies together with a focus on revenue enhancing initiatives in developed markets Capacity expansion in emerging markets to maintain positive growth momentum Increased capital expenditure to 1,250m; cash conversion ratio expected to be below 100% Continued investment in commercial and global capability building across the company Marketing and selling (beia) expense as a percentage of revenue to remain broadly stable Launched 500m cost saving programme (TCM2) from 2012 to