Coty Inc. · NYSE:COTY
Coty — Bank of America Merrill Lynch Consumer & Retail Conference 2014
56 slides from Coty's conference presentation, Mar 11, 2014
Slide 1: Faster. Further. Freer. March 2014
FASTER. FURTHER. FREER. MARCH 2014
Slide 2: Brand portfolio logos
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Slide 3: Cautionary Statement
CAUTIONARY STATEMENT Forward-Looking Statements This presentation includes forward-looking statements. These forward-looking statements reflect the Company’s current views with respect to, among other things, its future operations and financial performance; expected growth; its ability to support it
Slide 4: Gan ot
Gan ot pe COTY loeory® Sweety COTY > CACOTY XOTY > COTY PS Oger C, E f SCO LY cory: pS Ocory C., nEECOTY lo ee
Slide 5: Company Overview
COMPANY OVERVIEW • Founded in 1904 • 130 countries and territories • 6 state-of-the-art R&D labs • 10 manufacturing plants • 10,000 employees • $4.6 billion in net revenues • Solid margins and strong free cash flow generation • Entrepreneurial culture 2
Slide 6: . live
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Slide 7: Pure-Play Beauty Company: FY13 Net Revenues of $4.6 Billion
PURE-PLAY BEAUTY COMPANY COTY FY13 NET REVENUES OF $4.6 BILLION 54% 31% FRAGRANCES COLOR COSMETICS 15% SKIN & BODY CARE Expanded product portfolio beyond fragrances: • FY13: 54% of $4.6B total net revenues • FY07: 69% of $3.3B total net revenues 3
Slide 8: SUPER
ta SUPER . & ; => -= PLAYBOY Y¥ vo: FOR HIM & FOR HER
Slide 9: Multi-Channel Distribution Strategy: Net Revenues by Channel
PURE-PLAY BEAUTY COMPANY – MULTI-CHANNEL DISTRIBUTION STRATEGY COTY NET REVENUES BY CHANNEL (FY13) 43% PRESTIGE 50% MASS 7% OTHER1 1 Other includes professional and direct-to-consumer 4
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Slide 11: Broad Geographic Presence: Net Revenues by Region
PURE-PLAY BEAUTY COMPANY – BROAD GEOGRAPHIC PRESENCE COTY NET REVENUES BY GEOGRAPHIC REGION (FY13) 26% EMERGING 41% MARKETS AMERICAS 47% EMEA 74% DEVELOPED MARKETS 12% ASIA PACIFIC 5
Slide 12: IMME L
IMME L R LONDON
Slide 13: Investment Highlights
INVESTMENT HIGHLIGHTS • One of the most attractive industries in consumer products • Portfolio of strong, well-recognized brands • Global leader in fragrances and fast growing player in color cosmetics • Successful brand builders, with focus on superior innovation • Outstanding track record of finan
Slide 14: Slide 14
Slide 15: One of the Most Attractive Industries in Consumer Products
ONE OF THE MOST ATTRACTIVE INDUSTRIES IN CONSUMER PRODUCTS • Among the fastest growing in consumer goods, with an average 4% growth • Growth driven by expanding middle class and emerging markets 22% FRAGRANCES 59% SKIN & BODY CARE 19% COLOR COSMETICS BEAUTY INDUSTRY REVENUES OF $282BN 7
Slide 16: [ over & over a-gwen ]
SS O:P3 [ over & over a-gwen ] la teinte s INCLUDES OWAROVSK ELEMENTS STUDS CRYSTALS
Slide 17: Portfolio of Strong, Well-Recognized Brands
PORTFOLIO OF STRONG, WELL-RECOGNIZED BRANDS POWER BRANDS • Top 10 brands represent 70% of net revenues in FY13 PRESTIGE • Fragrances: Calvin Klein, Chloé, Davidoff, Marc Jacobs and Playboy • Color Cosmetics: Rimmel, Sally Hansen and OPI • Skin & Body Care: adidas and philosophy • Brands covering all
Slide 18: Slide 18
Slide 19: #1 Global Leader in Fragrances
#1 GLOBAL LEADER IN FRAGRANCES • Coty growth ahead of the market over last 3 years COTY FRAGRANCES BY CATEGORY KEY BRANDS FRAGRANCES NET REVENUES ($MM) FY13 NET REVENUES: $2.5BN % CAGR 6 $2,453 $2,491 $2,325 20% LIFESTYLE $2,113 67% 13% DESIGNER CELEBRITY FY10 FY11 FY12 FY13 1 Source: Euromonitor ca
Slide 20: Slide 20
Slide 21: Fast-Growing Player in Color Cosmetics
… AND FAST-GROWING PLAYER IN COLOR COSMETICS • #6 global ranking, #2 Europe ranking and #5 U.S. ranking • Growth ahead of the market over the last 3 years KEY BRANDS COLOR COSMETICS NET REVENUES ($MM) 8% CAGR 1 8% -LIKE CAGR LIKE-FOR $1,469 $1,431 $1,143 $891 FY10 FY11 FY12 FY13 1 Source: Euromonito
Slide 22: A new fragrance: Endless Euphoria
a new fragrance endless euphoria Calvin Klein
Slide 23: Successful Brand Builders
SUCCESSFUL BRAND BUILDERS PROVEN ABILITY TO BUILD BRANDS NEW BRANDS / LICENSES TOTAL GROWTH CAGR RATE 50% 5% 53% 8% 869% 46% 1273% 55% 2000%+ 68% PRE-COTY FY13 NET REVENUES Note: Growth is measured from the date of acquisition for Calvin Klein and Sally Hansen and from the date of first Coty-launche
Slide 24: Slide 24
Slide 25: Outstanding Track Record of Financial Performance
OUTSTANDING TRACK RECORD OF FINANCIAL PERFORMANCE ORGANIC GROWTH & EXPANDING PROFITABILITY COTY HISTORICAL NET REVENUES (FY03 – FY13, $BN) COTY ADJUSTED OPERATING INCOME, $MM 12.3% 11.6% 10.6% $4.6 8.2% $573 $536 $1.6 $432 $284 FY03 FY13 FY10 FY11 FY12 FY13 Adjusted Operating Income Adjusted Operati
Slide 26: Recent Growth Slow-Down Impacted by Weak Market Dynamics
RECENT GROWTH SLOW-DOWN IMPACTED BY WEAK MARKET DYNAMICS • Market slow-down in the U.S. + Europe • Downturn in Nail and Fragrances in the U.S. mass channel COTY NET REVENUES LFL 2% -3% 2H FY13 1H FY14 13
Slide 27: Slowdown in the Nail Category
SLOWDOWN IN THE NAIL CATEGORY • Nail market decline impacted by fading of “special effects” wow phenomenon • 1H FY14, net of nail, Coty’s Color Cosmetics segment grew low single digits, driven by Rimmel U.S. Nail Color (4-Week Trend YoY) 50.0% 43.3% 40.0% 30.0% 20.0% 8.1% 10.0% -1.2% 0.0% -6.0% -10.
Slide 28: Slide 28
Slide 29: Recent Positives in 1H FY14
RECENT POSITIVES IN 1H FY14 • 7 of the 10 Power Brands remained flat or grew • Emerging markets grew 7% LFL • philosophy reported positive growth for 3rd consecutive quarter • Strong free cash flow generation of $331 million, driven by working capital improvement initiatives 15
Slide 30: Slide 30
Slide 31: Targeting Revenue Growth in 2H FY14
TARGETING REVENUE GROWTH IN 2H FY14 • Key Drivers • Innovation pipeline, fueled by strong marketing investment • New emerging markets structures • Expanded distribution, particularly in Color Cosmetics brands • Sally Hansen brand modernization, including new advertising, increased marketing spend, a
Slide 32: DRENCHED
DRENCHED IN COLOR CHARGED WITH SHINE
Slide 33: Strong Long Term Growth Potential
STRONG LONG TERM GROWTH POTENTIAL • Long term growth strategy remains intact, including: • Maximize growth potential of power brands • Capture emerging market opportunity • Expand Skin & Body Care • Leverage multi-channel distribution • Seek accretive acquisitions with strategic fit 17
Slide 34: Short Term and Long Term Growth Strategy
SHORT TERM LONG TERM GROWTH STRATEGY GROWTH STRATEGY Launch of Endless Euphoria, CK Capture significant share of one Red, and 25th Anniversary fragrances growth in edition of Eternity emerging markets 18
Slide 35: Short Term and Long Term Growth Strategy
SHORT TERM LONG TERM GROWTH STRATEGY GROWTH STRATEGY New innovative collections, expanded Keep innovation leadership to remain distribution in the U.S. through Sally the Color trend-setter and develop Beauty, prestige retail in Europe, outside the U.S. with and Travel Retail multi-channel strategy 1
Slide 36: Short Term and Long Term Growth Strategy
SHORT TERM LONG TERM GROWTH STRATEGY GROWTH STRATEGY Launch of World Cup inspired Leverage strong brand “Get Ready” line, male recognition to ramp up business shampoo in China in Emerging Markets 20
Slide 37: Capture Emerging Market Opportunity
GROWTH POTENTIAL CAPTURE EMERGING MARKET OPPORTUNITY • We aim to have more than one third of our net revenues in emerging markets from 28% LFL in 1H FY14 • Acquisitions, JV’s and partnerships are building capabilities Southeast Asia: StarAsia (FY14) UAE: New Brazil: JV (FY14) JV with Frajo (Boticari
Slide 38: plilosophy: purity is
plilosophy: purity is thisworld with all imocent, and theref P inajar philosophy: where there is hope there cam be faith. where there is faith miracles cam ocr high-performance moisturizer for all skin «rime byatente baute-performance tous types de} —, br a deep | Philosophy: environmental factors s
Slide 39: Seek Accretive Acquisitions with Strategic Fit
GROWTH POTENTIAL SEEK ACCRETIVE ACQUISITIONS WITH STRATEGIC FIT ACQUISITIONS ACQUISITIONSSINCE SINCE2003 2003 RATIONALE FOR ACQUISITION TARGETS TOTAL CAGR GROWTH RATE • Strengthens competitive position LVMH American Brands 1 2003 387% 18% • Balances portfolio across 59% 6% Cosmetic 2005 segments (Fr
Slide 40: Tf oll
‘a Tf oll Wl i va i NEW FRAGRANCE FOR HER AND HIM
Slide 41: Experienced Management Team Committed to Creating Shareholder Value
EXPERIENCED MANAGEMENT TEAM COMMITTED TO CREATING SHAREHOLDER VALUE COTY'S EXECUTIVE MANAGEMENT TEAM NAME POSITION PREVIOUS EMPLOYERS MICHELE SCANNAVINI CEO FILA, FERRARI, PROCTER & GAMBLE PATRICE de TALHOUËT CFO MARS, ALCATEL-LUCENT, SOCIETE GENERALE RENATO SEMERARI PRESIDENT OF COTY BEAUTY SEPHORA
Slide 42: BOTTEGA VENETA
BOTTEGA VENETA
Slide 43: Continued Focus on Margin Expansion Opportunities
CONTINUED FOCUS ON MARGIN EXPANSION OPPORTUNITIES GROSS MARGIN STRONG AND PROFITABLE GROWTH +230 bps • Focused on topline growth, driving more 60.0% efficiencies in the business 57.7% • Productivity Program increasing savings from $45 million to $60 million by FY16 • Continued fixed cost control in
Slide 44: the new fragrance for men
the new fragrance for men Calvin Klein
Slide 45: Cash Taxes Lower Than GAAP Tax Expense
CASH TAXES LOWER THAN GAAP TAX EXPENSE FY13 ADJUSTED TAX RATE • Cash taxes lower due to the effect of goodwill amortization, net operating losses and other 28% non-cash tax charges 5% 23% • Amortization of goodwill associated with the 3% 2011 Acquisitions reduces cash taxes only 20% • This tax shiel
Slide 46: s LANCASTER
s LANCASTER
Slide 47: Strong Cash Flow with Further Potential for Improvement
STRONG CASH FLOW WITH FURTHER POTENTIAL FOR IMPROVEMENT • Strong free cash flow driven by focused working capital management and fixed cost control COTY ADJUSTED FREE CASH FLOW ($MM) CUMULATIVE FREE CASH FLOW OF $1.1B (FY11-FY13) • Cash flow to be used for: $386 $395 • Investment in emerging markets
Slide 48: Slide 48
Slide 49: Summary Guidance – Long Term Goals
SUMMARY GUIDANCE – LONG TERM GOALS Net Revenues Aim to grow net revenues in line with or faster than markets and segments where we compete Adjusted Operating Aim to grow faster than net revenues, Income targeting mid to high single digit growth Adjusted Net Target high single digit to low double dig
Slide 50: das
\ a das adi new adidas bodycare line
Slide 51: Summary
SUMMARY • One of the most attractive industries in consumer products • Portfolio of strong, well-recognized brands • Global leader in fragrances and fast growing player in color cosmetics • Successful brand builders, with focus on superior innovation • Outstanding track record of financial performan
Slide 52: Appendix
APPENDIX 29
Slide 53: Company History
COMPANY HISTORY 1904 Coty Inc. founded by Francois Coty 1992 Sold by Pfizer to Joh. A. Benckiser GmbH, an affiliate of the current majority shareholder with an 83% stake 1996 Coty acquires Rimmel 2001 Transformation of the Company behind a New Vision, Strategy & Culture 2002 Launch of the 1st Celebr
Slide 54: Historical Adjusted Operating Income Bridge; Like-for-Like Reconciliation
HISTORICAL ADJUSTED OPERATING INCOME BRIDGE LIKE-FOR-LIKE NET REVENUES RECONCILIATION Note: Like-for-like excludes the effects of foreign exchange and excludes net revenues of 2013 Ceased Activities. Note: Like-for-like excludes the effects of foreign exchange and excludes net revenues of brands acq
Slide 55: Like-for-Like, Free Cash Flow and Operating Margin Reconciliation
LIKE-FOR-LIKE NET REVENUES RECONCILIATION FREE CASH FLOW AND OPERATING MARGIN RECONCILIATION 32
Slide 56: Faster. Further. Freer.
FASTER. FURTHER. FREER.
Coty — Bank of America Merrill Lynch Consumer & Retail Conference 2014 on 6ix