H1 2005 AND FULL-YEAR OUTLOOK Presentation by: CEO Mark Wilson EVP, Group CFO Iqbal Jumabhoy EVP Niels Henrik Jensen Copenhagen, 30 August 2005 1
TODAY S AGENDA EAC Group highlights H1 2005 H1 2005: the 4 strategic businesses Nutrition Foods Industrial Ingredients Moving & Relocation Services Group financial statements H1 2005 Full-Year outlook 2
GROUP HIGHLIGHTS H1 2005 Group net sales up 10% in DKK driven by Nutrition Nutrition s share of Group net sales rose by approx. 4pp Nutrition +20% Moving & Relocation 10% Others 1% Foods +5% Industrial Ingred. 16% Industrial Ingredients +2% Moving & Relocation +6% Foods 26% Nutrition 47% 0% 5% 10% 15% 20% 25% Group net sales increased 15% in local currencies Nutrition record half-year sales; 26% growth in local currencies 3
GROUP HIGHLIGHTS H1 2005 19% growth in sales in Asia due to China activities 73.5% of sales in Asia (+2.5pp) Accelerated growth in China Venezuela 25,7% Europe 0,8% Other Asia 14,2% 180 160 140 120 CAGR 18.3% +33.6% Vietnam 4,5% China/HK 22,4% 100 80 60 40 Malaysia 11,4% Thailand 21,1% 20 0 2000 2001 2002 2003 2004 H1 2004 H1 2005 Net sales by country H1 2005 (DKK) EAC net sales China/Hong Kong (USD m) 4
GROUP HIGHLIGHTS H1 2005 Group operating profit up 7% in local currency DKK million Net Sales Operating Profit H1 2005 Change H1 2005 Change Nutrition 1,111 +20% 135 +25% Foods 598 +5% 50-23% Industrial Ingredients 373 +2% 30-14% Moving & Relocation 230 +6% 11 +57% Strategic Businesses 2,312 +11% 226 +5.1% EAC Group 2,330 +10% 186 +0.5% Group operating profit in DKK in line with 2004 Nutrition s operating profit is a new record half-year high Lower operating profit in Foods due to normalisation of pig prices II: Rebound in Q2; Moving & Relocation: H1 better than expected 5
H1 2005 STRATEGIC BUSINESSES 6
CHINA: 57% SALES GROWTH FOR DUMEX Performance exceeded expectations 57% sales growth for own products, 10% reduction in industrial sales Overall: 47% growth in DKK Standard and Premium IFFO continue to outperform the market Premium is 20%+ of category sales Premium GUM products have gained a significant foothold in only 1 year Distribution to 22 new cities H1; extended TV/Nutrition rep support Nutrition net sales split, H1 2005 60% 50% 40% China 41,7% Quarterly growth in China in % Hangzhou Future: plant unable to deliver consistent quality Significant decline in net sales H1; review of plant and strategy in Q3 30% 20% 10% 0% Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 7
THAILAND: CLOSE TO 20% SALES GROWTH Dumex Thailand continues to outperform the market Double-digit growth for Premium IFFO HiQ Step1+2 products Nutrition net sales split, H1 2005 Standard IFFO products grew in high single digits Premium GUM products account for circa 40% of total GUM sales Single production batch recalled as a precautionary step early July Thai FDA tested batch positive, along with products from 5 international manufacturers All internal and external tests, however, were and are negative No material impact from incident Thailand 25,7% 8
MALAYSIA: 8% GROWTH IN MATURE MARKET Success in Premium products is driving growth Premium H1 sales increased by 45% In only 2 years, Premium IFFO products have captured the no. 3 position in Malaysia and Singapore Nutrition net sales split, H1 2005 Malaysia 23,2% 2 new Premium variants launched recently, initial sales good H2 growth is, at least, expected to be on par with H1 achievements Premium products will continue to underpin overall market dominance Dumex Malaysia 100% owned DKK 175m acquisition of outstanding 20% minority interests in August 9
INDIA AND VIETNAM: CONTINUED STRONG PACE 34% sales growth in emerging markets India almost doubled sales Coverage extended from 50% to circa 75% of the country New Vanilla and Diabetes variants confirm Protinex brand strength as umbrella for new products Dulac and Dupro IFFO products progress as planned, now in 4 states Organisational build-up continues Nutrition net sales split, H1 2005 India/ Philippines 3,7% Others 5,7% Philippines: Small reduction in net sales despite market share gains Vietnam: Around 40% growth following broader distribution and A&P spending 10
INCOME STATEMENT Half-year record levels in both sales and profits DKK million H1 2005 H1 2004 Change Net sales 1,111 924 +20% Operating profit (EBIT) 135 108 +25% Operating margin 12.2% 11.7% +0.5pp Overall performance exceeding expectations, mainly due to China Healthy margins despite higher milk powder prices and investments in new markets Q2 profit, as anticipated, affected by higher A&P spending compared to Q1 H1 A&P spending up 26% from 2004 in local currencies; 18% of net sales (unchanged) 11
H2: EXPANSION INTO NEW MARKETS AND SEGMENTS Market & segment entries Organic growth Brand building Supply chain Acquisitions Nation-wide coverage in India from Dec 1 (currently at around 75%) In-take of 100 new employees in H2 Ongoing expansion in China Distribution to 30 new cities in 2005 380 city coverage by end year H2: Test marketing of protein supplement in China Middle East regional office to be established in Dubai Continued growth in Vietnam 12
PRODUCT INNOVATION FUELS OVERALL GROWTH Market entries Organic growth Brand building Supply chain Acquisitions LAUNCHES & PRODUCT UPGRADES 36% of H1 sales in key markets from products launched within last 5 years Premium products account for 24% of H1 total net sales; up from 17% H2 launches to add momentum Malaysia: New Premium variants Thailand: New UHT product and new product tailored for mothers Philippines: New Premium entries India: New entry with Protinex Mama China: New entry into protein supplement segment 13
H2: EXTENSIVE BRANDING ACTIVITIES (I) Market entries Organic growth Brand building HIGHER A&P INVESTMENTS Supply chain Acquisitions Dumex umbrella Master branding to build further the trust and added value in the Dumex brand equity Dumex Master brand overarches Dulac, Dupro and Dugro product names Building Better People Brand vision of Building better people Before Before Brand personality: dynamic, straightforward, empathetic, friendly Revitalized, consistent look-and-feel range design elevating Dumex image New New 14
EXTENSIVE BRANDING ACTIVITIES IN H2 (II) Masterbrand launch in Malaysia 15
EXTENSIVE BRANDING ACTIVITIES IN H2 (III) Market entries Organic growth Brand building HIGHER A&P INVESTMENTS Supply chain Acquisitions New brand architecture allows: more efficient A&P spending and provides branding platform for entry into new market segments Extensive launch activities in H2 New designs and packaging, advertising, marketing, point of sale materials, symposiums, educational materials, scholarships, etc. Launch of new designs expected to contribute to sales growth in Q3 Supporting A&P spending in H2 well above that of H1 2005 (DKK 197m ) 20% 15% 10% A&P in % of net sales 2000 2001 2002 2003 2004 2005E 16
H2: ACQUISITION OF FAREX BUSINESS IN INDIA Market entries Organic growth Brand building Supply chain Acquisitions Farex business, acquired for DKK 37m, will add critical mass/brand platform (DKK 14m) to emerging operation Infant cereals offer strong synergies with Dulac and Dupro IFFO products Farex to increase sales by leveraging on Dumex existing medical detailing Acquisition in line with strategy to maximise growth by acquiring adjacent products and brands DKK 175m acquisition of 20% minorities in Dumex Malaysia 17
MARKET DEVELOPMENT 11.5% DKK sales growth in Q2 H1 sales volume up 2.2%, Q2 fully compensated minor decline in Q1 Shortfall in economic products more than offset by sales of higher margin branded products Lower sales of mortadellas to government-backed chain Mercal Market shares for key branded products developed positively Strong performance by food service unit servicing hotels, restaurants etc. Higher standard of pig feed through acquisition of feed-mill Market share trends, audited categories H1 2005 vs H1 2004 Hams Chicken Turkey Wiener Sausages Devilled Hams 25,7 22,2 21,5 18,9 26 39 41,2 41,5 78,5 81 0 10 20 30 40 50 60 70 80 90 H1-2005 H1-2004 18
INCOME STATEMENT Earnings affected by normalisation of pig prices DKK million H1 2005 H1 2004 Change Net sales 598 571 +5% Operating profit (EBIT) 50 65-23% Operating margin 8.4% 11.4% -3.0pp 10% growth in USD despite 10.7% devaluation of VEB in March H1 2004: Unusually high pig prices yielded very high margins in pig farms H1 2005: Lower profitability in pig farms Meat processing activities, on the other hand, benefit from lower raw material costs 19
MARKET DEVELOPMENT Tougher markets affecting sales growth Q1 affected by high inventory levels among customers; renewed growth in Q2 Thailand: +11% in local currency, growth within low-margin products Region: +1% growth in local currencies Slow start to the year in Vietnam, strong recovery, however, in June Better than expected performance in both Indonesia and the Philippines Overall: Pressure on margins due to high oil prices causing fears of weaker end product demand Thailand 53,6% Philippines 6,4% Net sales H1 2005 Others 4,6% Vietnam 22,5% Indonesia 12,9% 20
INCOME STATEMENT Margin pressure, as anticipated DKK million H1 2005 H1 2004 Change Net sales 373 367 +2% Operating profit (EBIT) 30 35-14% Operating margin 8.0% 9.5% -1.5pp 6% growth in local currencies, thanks to Q2 Operating profit decreased by 11% in local s 16% Thai decline from low-margin commodities 1% decline in the Region caused by Vietnam Earnings growth in Thai industrial jointventures; on par in DKK and local currencies 21
MARKET DEVELOPMENT Continued strong flow of inbound relocations to China +20% growth in inbound relocations to Asia, driven by FDI s into China Growth above 30% in value added high-margin relocation services Continued growth in both records management and general freight forwarding activities Close to 9% growth in DKK in main markets of Hong Kong/China Equals 14% in local currencies Other Asia 33,5% Net sales H1 2005 HK/- China 66,5% 22
INCOME STATEMENT Overall strong performance ahead of expectations DKK million H1 2005 H1 2004 Change Net sales 230 216 +6% Operating profit (EBIT) 11 7 +57% Operating margin 4.8% 3.2% +1.6pp Net sales up 11% in local currencies Q2 growth up 9.8% in DKK Operating profit better than expected, good off-seasonal performance 23
GROUP FINANCIAL STATEMENTS H1 2005 24
GROUP INCOME STATEMENT Higher taxes only partly offset by lower minorities DKK million H1 2005 H1 2004 Change Net sales 2,330 2,118 +10% Operating profit (EBIT) 186 185 - Net financials 10 12-17% Revaluation of fixed assets 2 - - Share of profit in associates 17 17 - Tax 60 39 +54% Net profit 155 175-11% Minority interests 16 32-50% EAC s share of profit 139 143-3% ROE of 11.4% vs. 11.6% in H1-2004 and 10.9% full-year 2004 25
GROUP INCOME STATEMENT 450Net sales from H1 2004 to H1 2005 (DKK million) 400 350 300 250 200 150 100 50 0 2,118 22 22 59-22 239 2,330-109 H1 2004 C urrency Nutrition Foods II MRS Others H1 2005 26
GROUP INCOME STATEMENT Operating profit from H1 2004 to H1 2005 (DKK million) 60 50 35 40 30 185-13 -4 4-9 186 20 10-12 0 H1 2004 Currency Nutrition Foods II MRS Others H1 2005 27
GROUP BALANCE SHEET H1 2005 Cash position and currency gains increase total assets DKK million H1 2005 H1 2004 2004 Total assets 4,103 3,874 3,792 Working capital employed 817 759 671 Net-interest bearing debt -933-699 -908 Net-interest bearing debt, average -921-842 -948 Invested capital 1,662 1,687 1,499 Minority interests 198 218 202 Equity 2,520 2,331 2,332 Cash and cash equivalents 1,324 1,132 1,278 DKK 110m investments, mainly in Indian factory Working capital temporarily higher prior to product launches in H2 28
CONTINUED VALUE CREATION DKK 1.25bn returned to shareholders since 2001 DKK m 2005 2004 2003 2002 2001 Buy-back of shares pending Buy-back of shares Dividends 0 100 200 300 400 500 600 EAC aims for average double-digit sales growth in local currencies ROIC of more than 25% in 2009 23.5% in H1 2005, up from 22.2% If capital resources exceed acquisition requirements, EAC will return excess capital to shareholders Share price development 29.07.2005 650 600 EAC 550 500 Index 01.01.2000 = 100 450 400 350 300 250 200 KFX 150 100 50 1999 2000 2001 2002 2003 2004 29
EAC s STRATEGIC INITIATIVE UPDATE Investments in acquisitions exceeding 1bn DKK Thailand (18.1%) AFI Privatisation EAC Thailand INC Shanghai (20%) Malaysia (20%) Ecuadasa (46.5%) India acquisition Procer CA (51%) globally AFI additional shares Hangzhou Future Feed mill Farex India acquisition Malaysia (20%) 1999 2000 2001 2002 2003 2004 2005 2006 30
OUTLOOK 2005 31
OUTLOOK 2005 GDP growth in EAC s main markets 2004/2005 20 18 16 14 12 10 8 6 2004 2005 4 2 0 China Hong Kong India Malaysia Philippines Singapore Thailand Vietnam Venezuela Real GDP, % Source: Consensus Forecasts Global Outlook, June 2005 / Vietnam, World Bank 32
OUTLOOK 2005 EAC s BUSINESSES Adjustment of segment outlook DKK million H1 2005 actual 2005 Outlook Nutrition Net sales EBIT Foods Net sales EBIT Industrial Ingredients Net sales EBIT Moving & Relocation Net sales EBIT 1,111m 135m (12.2%) 598m 50m (8.4%) 373m 30m (8.0%) 230m 11m (4.8%) Upgraded to above 20% in local currencies Operating margin similar to 2004 (9.7%) Growth reduced to 10% in USD Operating margin maintained around 10% Approx. 5% growth in local currencies Around 8.5% operating margin More than 6% growth in local currencies Operating margin upgraded to about 6.3% 33
OUTLOOK 2005 EAC GROUP EAC upgrades full-year outlook Strategic businesses net sales in DKK 2004 actuals 4,364m (+9%) Outlook 2005 Previous: Slightly higher net sales New guidance: Double-digit growth Local currency growth +18% Double-digit growth Group operating profit, excl. one-off s DKK 361m Previous: Similar to 2004 (DKK 361m) New guidance: Result of DKK 385m Profit from associates DKK 34m Similar result H2 outlook is based on average exchange rate of DKK/USD 6.00 34
DISCLAIMER The outlook for 2005 reflects management s expectations of future events and must be viewed in the context of the business environments and currency markets, which may cause actual results to deviate materially from those projected by EAC. The outlook for the Group in 2005 assume the current composition of businesses. They are based on the exchange rates applicable at the end of December 2004, while the actual results for 2005 will be consolidated using the average exchange rates for the year. This could potentially cause significant variances, depending on movements in exchange rates. 35
H1 2005 AND FULL-YEAR OUTLOOK Q & A session Copenhagen, 30 August 2005 36