Brown Forman Inc · NYSE:BF.A
Brown Forman — 1H FY2018 Earnings Presentation
19 slides from Brown Forman's earnings presentation, Dec 6, 2017
Slide 1: 1H18 Results
1H18 Results December 6, 2017
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains statements, estimates, and projections that are “forward-looking statements” as defined under U.S. federal securities laws. Words such as “aim,” “anticipate,” “aspire,” “believe,” “continue,” “could,” “envision,” “estimate,” “expect,” “expectatio
Slide 3: 1H18 Highlights
1H18 Highlights Reported Underlying Operating Fiscal 2018 Outlook Results Net Sales1 Leverage Delivered strong Increased outlook for Reported net sales +10%, Underlying net sales growth operating expense underlying net sales growth operating income +17% and of 7% (+8% in the second leverage, helped
Slide 4: 1H18 - Strong Reported and Underlying Rates of Growth
1H18 - Strong Reported and Underlying Rates of Growth Reported Acquisitions Foreign Net Change Underlying Change & Divestitures Exchange In Estimated Change (%) (+/-) Impact Distributor (%) (+/-) Inventories (+/-) Net Sales 10% 1% -1% -2% 7% Gross Profit 10% —% —% -3% 7% Advertising 5% —% -1% —% 5%
Slide 5: 1H18 Reported Growth of 10% Fueled by 7% Underlying Net Sales Growth
1H18 Reported Growth of 10% Fueled by 7% Underlying Net Sales Growth +1% -1% +10% -2% +7% Reported Acquisitions & Foreign Net Change in Underlying Divestitures Exchange Estimated Distributor Inventories 5
Slide 6: Broad-based Delivery of Net Sales Growth
Broad-based Delivery of Net Sales Growth Reported Underlying 1H18 1H18 +24% +15% +18% +11% +10% +9% 7% +5% +6% +5% US Developed - ex US Emerging Travel Retail Total US Developed - ex US Emerging Travel Retail Total * See appendix for additional details 6
Slide 7: Widespread Growth Across Our Top Markets
Widespread Growth Across Our Top Markets 1H18 Net Sales Growth - Reported/Underlying United States France +9%/+6% +8%/+6% Volume-driven Growth led JDTW growth and Honey United Kingdom Poland +15%/+7% +24%/+12% Driven by JDTW and Led by JDTW innovation Australia Japan +7%/+10% -18%/-15% Driven by JDF
Slide 8: Emerging Markets’ Trends Have Rebounded; Tougher Comparison in the Second Half
Emerging Markets’ Trends Have Rebounded; Tougher Comparison in the Second Half Underlying Net Sales Contribution 4% 3% 2% 1% 0% -1% -2% 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 8
Slide 9: Balanced Portfolio Contribution in 1H18
Balanced Portfolio Contribution in 1H18 (Underlying Net Sales Change) +7% +22% * See appendix for additional details +13% 9
Slide 10: Steady Gross Margins
Steady Gross Margins +0.5% +0.1% 67.4% 67.4% -0.6% FY17 Underlying Change/ Acquisitions & Foreign FY18 Other Divestitures Exchange 10
Slide 11: 1H18 Operating Performance Enhanced by Phasing of Operating Expenses
1H18 Operating Performance Enhanced by Phasing of Operating Expenses Three Months Six Months Ended October 31, 2017 Ended October 31, 2017 Reported Change Underlying Change Reported Change Underlying Change (%) (%) (%) (%) Net Sales 10% 8% 10% 7% Gross Profit 11% 8% 10% 7% Advertising 4% 3% 5% 5% SG
Slide 12: Revised Fiscal 2018 Outlook
Revised Fiscal 2018 Outlook Underlying Underlying Net Operating Diluted EPS Sales Income 6 - 7% (prior range of 4-5%) 8 - 9% (prior range of 6-8%) $1.90 - $1.98 Implied growth of 11 - 16% (prior range of $1.85 - $1.95) 12
Slide 13: Appendix
Appendix 13
Slide 14: Non-GAAP Reconciliation
Non-GAAP Reconciliation We use certain financial measures in this presentation that are not measures of financial performance under U.S. generally accepted accounting principles (GAAP). These non-GAAP measures, defined below, should be viewed as supplements to (not substitutes for) our results of op
Slide 15: Definitions
Definitions Geographic Aggregations. • “Developed” markets are “advanced economies” as defined by the International Monetary Fund, with the largest for Brown-Forman being the United States, the United Kingdom, and Australia. Developed international markets are developed markets excluding the United
Slide 16: Definitions
Definitions Other Metrics. • “Depletions.” When discussing volume, unless otherwise specified, we refer to “depletions,” a term commonly used in the beverage alcohol industry. Depending on the context, “depletions” means either (a) our shipments directly to retailers or wholesalers, or (b) shipments
Slide 17: Reconciliation
Reconciliation 1H18 Net Sales Growth by Geography Three Months Ending October 31, 2017 Acquisitions & Net Change in Estimated Geographic area Reported (%) Foreign Exchange (+/-) Underlying (%) Divestitures (+/-) Distributor Inventories (+/-) US 9% —% —% -3% 6% Developed – ex US 5% —% -2% 2% 5% Emerg
Slide 18: Reconciliation
Reconciliation 1H18 Net Sales Growth by Top Markets Net Change in Estimated Acquisitions & Geographic area Reported % Foreign Exchange +/- Distributor Inventories Underlying % Divestitures +/- +/- United States 9% —% —% -3% 6% United Kingdom 15% —% -8% —% 7% Germany 13% -1% -2% —% 11% France 8% —% -
Slide 19: Reconciliation
Reconciliation 1H18 Net Sales Growth for Aggregated Brands Net Change in Estimated Aggregated Brands Reported % Foreign Exchange +/- Distributor Inventories Underlying % +/- Jack Daniel's Family 10% -1% -2% 7% Old Forester & Woodford 26% —% -4% 22% Reserve el Jimador, Herradura, & 13% -1% —% 13% New