Increase shareholder value through organic growth

Transcription

1 Increase shareholder value through organic growth IR Road show May, 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:Mid-single 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 Q1 we made a strong start in our shift to organic growth Overseas integrated beverages: Large uplift in sales and profits in Q1. Japan integrated beverages focused on increasing brand power 2

3 KV2021,, FY Medium-term Business Plan 3

4 Well-balanced, global business portfolio Emerging ~High growth~ Pharmaceuticals and Bio-chemicals 28% Others Normalized EBITDA 2013(E) 316.0bn Overseas integrated beverages 38% 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 co-create 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 co-create 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 Three-year 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 single-digit 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 single-digit 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 non-operating items to reflect actual earnings more accurately 7

8 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 8

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

10 Plan for

11 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 Mid single-digit CAGR in normalized EBITDA* 2013 Target billion yen (up 2.8% YoY) High single-digit CAGR in normalized EPS* 121 yen (up 3.4% YoY) Sales Operating Income Ordinary Income Net Income Segment 2,290.0bn 4.7% YoY 155.0bn 1.3% YoY 132.0bn (4.7% YoY) 90.0bn 60.1% YoY By segment Japan Integrated Beverages Overseas Integrated Beverages Pharmaceuticals and Bio-chemicals Sales Operating Income (Billion yen) 1,188.0 (0.2%) 60.5 (12.3%) % % % % Others 96.0 (0.1%) % *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. 11

12 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 12

13 Further enhance shareholder returns Changes in dividend per share 40 ( ) Medium-term 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 kick-start growth 3-years of implementation to increase profitability 3-years shift to organic growth 13

14 Japan integrated beverages business: Further growth through fostering strong brands New business structure (From Jan. 2013) Kirin Alcoholic beverages Kirin Brewery Mercian Soft drinks Kirin Beverage Optimize resource allocation beyond alcohol and soft drinks framework Pursue brand-centered 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 14

15 New brand communication Kirin Ichiban draft beer Communication theme is to spread the pleasure and enjoyment of beer Advertising Strengthen partnerships Sensory Beer is fun 2012 ~ Topical 2013 ~ Kirin Ichiban Two-tone beer 15

16 New brand communication Gogo-no-Kocha Communication theme is to increase the frequency of consumption Advertising Strengthen partnerships Sensory Espresso x Black tea All New! Gogo-no-kocha Topical Renewed in April Sugar free black tea x Rice ball 16

17 Active investment in core brands and growth categories Happo-shu New genre Beer Non-alcohol Active investment in core brands. Creation and establishment of new categories RTD February 20 May 14 May 22 May 8 World s first tokuho cola New offerings in growth categories 2011~ 2011~ 2012~ 17

18 Further strengthen cost competitiveness Medium-term Business Plan Medium-term Business Plan Created cross-group 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 Production and distribution 16.8 billion Procurement 14.9 billion Sales, IT, Others 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 18

19 Japan integrated beverages business: 2013 plan 2012 Started work towards resumption of growth. Success in creating new customer value Through stronger brands and cost competitiveness set ourselves on a trajectory for resuming growth Strengthening brands Activate market through co-creation of value with customers Clarify points to reinforce and concentrate resource allocation in growth categories 2013 plan to 2012 results Sales Operating income (Billion yen) Kirin Brewery* (1.2%) 51.7 (10.6%) Mercian 68.2 (2.1%) 1.8 (13.5%) Kirin Beverage % 1.6 (59.5%) Japan integrated beverages business total 1,188 (0.2%) 60.5 (12.3%) Grow sales and profits 2015 over 2012 *Kirin Beer + Kirin Beer Marketing 19

20 Lion : 2013 Plan 2012 Lion became the leading brewer in the Australian beer market Improved profitability of soft drinks business through continued earnings structure reforms 2013 Turned around sales and accelerated earnings growth by strengthening high added value, high growth categories Alcohol business Soft drinks business Further strengthened growing craft beer category Improved efficiency by optimizing manufacturing bases Increased focus on high value added products strategy Manufacturing site optimization to improve efficiency Innovation in NARTD category for future growth Sales Operating Income Alcoholic 2, % % beverages Soft drinks 2, % % Total 5, % % * (Million AUD) *After deduction of corporate expenses 20

21 Brasil Kirin 21

22 Brasil Kirin: 2013 Plan 2012 Achieved first-year targets for sales volume, sales revenue and profit, and made a good start to achieve medium-term growth 2013 Move to the next stage: Expand profits through strategic investment in facilities and brands Growth linked to the market Strategic investment to encourage innovation and increase brand value Efforts aimed at increasing efficiency Improve gross margin ratio of soft drinks business (Raise ratio to over 40% for alcohol beverages and soft drinks businesses combined) Market outlook Real GDP growth rate in 2013 about 3.3% *1 *1 Inflation rate in 5% range *1 *1 Outlook for growth in beer market is 4.9% *2 *2 Outlook for growth in soft drinks market is 5.9% *2 *2 *1 *1 Kirin estimates based on on report published by by the the Central Bank of of Brazil, etc. etc. *2: *2: Kirin estimates Sales 4, % Operating Income* % EBITDA % (Million BRL) *Prior to goodwill amortization 22

23 Southeast Asia and China Kirin (China) Investment China Resources Kirin Beverages (Greater China) Company Siam Kirin Beverage (Thailand) Interfood (Vietnam) (Indonesia) Begin test-marketing of Kirin Gogo-no-Kocha 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 23

24 Kyowa Hakko Kirin Basic strategy of MTBP Further strengthen competitiveness in Japan through our category-based 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 Bio-Chemicals business Quantitative targets (Billion yen) 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): 58.0 billion. 24

25 From CSR to CSV In support of Kirin s brand-centered 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. Co-create 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 Co-creation with employees and organization Co-create value through a brand centered management approach Achieve sustainable growth of enterprise value Shareholders, Investors Kirin Group Community Co-create 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 25

26 First quarter of FY

27 Executive Summary A steady start has been made to achieving a shift towards organic growth. Sales and profit increased significantly in the overseas integrated beverages business. A share buyback of up to 50 billion yen was commenced as a means of providing additional returns to shareholders. Progress towards target Normalized EBITDA Normalized EPS 1Q results 58.3 billion yen (6.6)% YoY 20 yen +53.8% YoY 2013 target billion yen +2.8% YoY 121 yen +3.4% YoY 27

28 First Quarter Performance Highlights Sales reached a new record high for the third consecutive year. Overseas integrated beverages business contributed substantially to earnings. FY2013 (Billion yen) FY2012 (Billion yen) YoY change (Billion yen) (%) Japan integrated beverages (2.9) (1.2) Overseas integrated beverages Pharmaceuticals and biochemicals (0.1) (0.2) Other (0.8) (3.6) Sales Japan integrated beverages (1.1) 0.8 (2.0) - Overseas integrated beverages Pharmaceuticals and biochemicals (3.5) (19.1) Other Operating income (1.1) (4.6) Equity in earnings of affiliates 1.9 (2.8) Ordinary income Special income and expenses 54.4 (1.2) Income before income taxes and minority interests Net income 54.3 (3.0) * New reporting segments were created in FY2013. Overseas, sales increased in Australia and Brazil, and soft drinks in Japan also contributed to increased sales. Lion: +19.3% Brasil Kirin: +15.1% Kirin Beverage: +5.5% Income from overseas integrated beverages increased. Lion s income increased as a result of strong sales in the alcohol beverages business (up 2.1 billion yen). Brasil Kirin s operating income before amortization of goodwill etc. increased (up 1.4 billion yen). In the pharmaceuticals and biochemicals business, sales of leading pharmaceutical products were strong and progressed in line with plans. Net income (Record high) A gain on sale of shares in Fraser and Neave was reported (special income of 46.2 billion yen). 28

29 Japan Integrated Beverages Improved sale volumes for key brands. Ichiban Shibori +0.6% YoY Gogo-no-Kocha +9.0% YoY Carbonated soft drinks +93.0% YoY RTD +2.5% YoY Deployed a new brand communication and a marketing plan aimed at expansion of consumption scenarios Achieved sales targets for beer, happo-shu (low-malt beer), RTD and soft drinks Continue to cut expenses, including production costs. Selling expenses were as planned. Sales volume increased for Kirin Nodogoshi Nama in March, and with the addition of the new product Sumikiri in May, we aim to reach the annual sales target for the new genre category Renewed + May 14 29

30 Overseas Integrated Beverages (1): Lion Good progress in Australian alcohol business for the peak period, with premiumisation improving product mix and boosting earnings Alcohol beverages Shift to high-value products and strengthening growing categories (international premium and craft) Total sales volume +10.3% (vs last year) and improvement of sales mix Soft drinks beverages Growth from value-added brands such as Dare A$1,483 MM Leading brands for our growth +11.1% A$225 MM +10.4% *LION TOTAL Sales* Operating income prior to amortization of goodwill etc.* Performed well Largest brand in AU Volume growth in AU beer category Strengthened value-added brands 30

31 Reference: Breakdown of Lion Performance at 1Q FY2013 1Q FY2012 1Q YoY change YoY change (%) Billion yen Million AUD Billion yen Million AUD Billion yen Million AUD Yen basis AUD basis Alcohol beverages Soft drinks beverages (44) 0.3 (6.6) Sales , , Alcohol beverages Soft drinks beverages (1.9) (25) (54.5) (57.7) Corporate expense (2.2) (25) (1.7) (21) (0.5) (4) Operating income Goodwill amortization (7.0) (82) (6.1) (77) (0. 9) (5) Brand amortization (0. 9) (11) (0. 9) (11) (0.0) 0 Operating income after amortization of goodwill etc Consolidated results period: October December 2012 / Currency exchange rate: yen ( Oct-Dec 2011: yen) Alcohol beverages Change in operating income (million AUD) Soft drinks beverages Change in sales volume (12) 21 Other (13) Alcohol beverages Soft drinks beverages Sales volumes YoY change: +10.3% YoY change: (7.0)%

32 Overseas Integrated Beverages (2): Brasil Kirin Sales are increasing in line with market growth, and profitability is steadily rising. Steady top-line growth Increased customer contact through continuation of sales measures to convey product value Reinforcement of leading brands such as Nova Schin Further improvements in profitability and efficiency Improvements in manufacturing efficiency as well as effective and efficient brand investment Improvement to EBITDA margin: 10.3% (5.8% in Q ) R$948 MM +12.5% R$98 MM % Sales EBITDA Heightened presence 32

33 Reference: Breakdown of Brasil Kirin Performance at 1Q FY2013 FY2012 YoY change YoY change (%) Billion yen Million BRL Billion yen Million BRL Billion yen Million BRL Yen basis BRL basis Alcohol beverages* Soft drinks beverages* Sales Operating income (0.0) (1) Goodwill amortization (1.3) (29) (2.5) (56) Brand amortization (0.8) (17) - - (0.8) (17) Operating income after amortization of goodwill etc. (0.8) (17) (2.6) (57) EBITDA Consolidated results period: January March 2013 / Currency exchange rate: 46.47yen ( Jan-Mar 2012: yen) * Calculated on a management accounting basis which excludes taxes etc. that are included in institutional accounting Sales volume trends Beer: Middle single digit increase YoY Soft drinks beverages: High single digit increase YoY 33

34 Reference: Details of indices etc. (Normalized EBITDA) (Normalized EPS) (Billion yen) FY2013 1Q (Billion yen) FY2013 1Q Operating income 24.1 Depreciation 22.6 Amortization of goodwill 11.5 Dividends received from entities accounted for by the equity method Normalized EBITDA Net income 54.3 Amortization of goodwill etc Special income or expenses after income taxes and minority interests (50.9) Normalized net income (A) 19.0 Average number of shares outstanding during period (B) Normalized EPS = A/B 961,121, yen 34

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