East African Breweries Plc · NSEKE:EABL
East African Breweries — H1 FY2018 Earnings Presentation
34 slides from East African Breweries's earnings presentation, 2018
Slide 1: Half Year Results FY2018
CELEBRATING LIFE, EVERY DAY, EVERYWHERE HALF YEAR RESULTS FY2018 YEAR ENDED DECEMBER 2016 1
Slide 2: Half Year Results Briefing
F18 H1 Commercial Review HALF YEAR Andrew Cowan RESULTS F18 H1 Financial Performance BRIEFING Gyuri Geiszl F18 H2 Priorities Andrew Cowan Q&A 2
Slide 3: F18 Half Year Review
F18 HALF YEAR REVIEW Andrew Cowan Group Managing Director 3
Slide 4: We are clear on our ambition
We are clear on To create the best our ambition performing, most trusted and respected consumer products company in Africa Strengthen and accelerate our premium core brands Win in reserve in every market Innovate at scale to meet new consumer needs Build and then constantly extend our advant
Slide 5: EABL Strategy
EABL STRATEGY Purpose East African Breweries Celebrating Life, Every Day, Everywhere Ambition To create the best performing, most trusted and respected consumer products company in Africa Strategic Explode Mainstream Vibrant Mainstream Beer Win in Premium TBA Value Recruitment imperatives Spirits Re
Slide 6: Volume growth driven by bottled beer recovery, innovation and mainstream spirits
Volume growth driven by bottled beer recovery, Innovation and mainstream spirits growth vs LY Volume +4% Net Sales -0.3% Gross Profit -4% Operating Profit -3% Operating Cash Conversion 126% Interim Dividend KES 2.00/Share 6
Slide 7: Softness in Kenya drives flat net sales despite turnaround in Tanzania
Softness in Kenya drives flat net sales despite turnaround in Tanzania Contribution Net Sales Net Sales to overall growth growth (local Key Brands EABL (KES) currency) KENYA 72% -4% -4% UGANDA 17% -0.3% +4% TANZANIA 11% +28% +28% Total EABL 100% -0.3% n/a 7
Slide 8: Recovery of mainstream beer and strong growth in mainstream spirits
Recovery of mainstream beer and strong growth in mainstream spirits offset by decline of Senator keg Premium Mainstream Value RTD’s Total Beer +3% +8% -10% -18% -0.4% Beer Total Reserve Premium Mainstream Value Spirits -21% -11% +14% +4% +0.1% Spirits & RTD’s 8
Slide 9: Increased innovations bringing vibrancy to the market
Increased innovations bringing vibrancy to the market and recruiting new customers KENYA UGANDA TANZANIA NSV Contribution 18% Kes 5.4bn 16% Kes 0.9bn 33% Kes 1.3bn BEER SPIRITS 9
Slide 10: Kenya: bottled beer recovery and spirits
Kenya Bottled beer recovery and spirits -4% does not fully offset Senator decline Bottled beer grew by +5% driven by Tusker Cider, Tusker Lite, Guinness, White Cap and Balozi South Sudan up +39% but still very small Mainstream spirits in double digit growth Reserve and premium spirits declin
Slide 11: Uganda: volume growth offset by excise
Uganda Volume growth offset by excise -0.3% increase on imports and down-trading -3% decline in beer is driven by Mainstream, while Premium and Value segment are in growth Drivers of beer growth are Tusker Lite, Pilsner and Senator, Bell is still in decline Spirits grew +6% driven by Uganda Wa
Slide 12: Tanzania: strong performance driven by Serengeti Lite
Tanzania Strong performance driven by +28% Serengeti Lite Successful Serengeti Lite launch and recovery of Serengeti Premium Lager delivers +130% net sales growth of Serengeti family despite price reduction in F17 Sachet ban and modest excise increase drives overall recovery of beer market Bet
Slide 13: People
People Robust Talent Assurance approach focus on planning and forecasting talent moves Improved succession plan coverage for critical senior roles with short and medium term focus Continued with our Organizational effectiveness agenda leading to removal of one leadership layer at EABL and broa
Slide 14: Social Responsibility
Social Responsibility KRA Summit: Working closely with stakeholders to drive conversations on how domestic revenue can be harnessed for sustainable county development Kijani Programme: Ongoing staff driven initiative launched to restore 250 acres of Mt. Kenya Forest in partnership with Nature Ke
Slide 15: Thank You
Thank You Please hold the questions to the end 15
Slide 16: F18 H1 Financial Performance
F18 H1 FINANCIAL PERFORMANCE Gyuri Geiszl Group Finance and Strategy Director 16
Slide 17: Financial Highlights
Financial Highlights H1 F18 vs LY Volume +4% Net sales (like for like) KES 36.8bn -0.3% Operating profit KES 9.2bn -3% Profit after tax KES 5.0bn -11% Operating cash conversion 126% +32ppt Net debt KES 25.9bn +4% Interim dividend KES 2.0/Share 17
Slide 18: Volume growth diluted by higher excise
Volume growth diluted by higher excise Volume growth driven by H1 F18 H1 F17 vs LY bottled beer recovery in Kenya, KES bn KES bn Innovation across the markets and growth in mainstream spirits Volume (mEU) 6.3 6.1 +4% Excise increase in Uganda on imported beer – no price Gross sales 68.3 65.7 +4%
Slide 19: Movements in net sales (KES bn)
Movements in net sales (KES bn) • Recovery of bottled beer in Kenya in a stable excise environment • Tanzania recovery driven by Serengeti brand family • Shut down and elections pulling Senator keg performance down 19
Slide 20: CoGS savings only partially offset mix impact
CoGS savings only partially offset mix impact H1 F18 H1 F17 Cost of sales increase +2% vs LY behind volume growth +4% KES bn KES bn Volume (mEU) 6.3 6.1 +4% Negative mix: decline in Senator keg, our cheapest Gross sales 68.3 65.7 +4% brand to produce Excise duties (31.5) (28.8) +9% Additional
Slide 21: Productivity savings reinvested in advertising, promotions and sales force
Productivity savings reinvested in advertising, promotions and sales force H1 F18 H1 F17 Selling and distribution grew vs LY KES bn KES bn by +18% from investing behind our brands in line with Gross profit 16.0 16.6 -4% strategy Selling & distribution (3.1) (2.7) +18% Staff costs (2.9) (3.0) -3%
Slide 22: Net borrowings and interest costs up due to spend on new brewery
Net borrowings and interest costs up due to spend on new brewery H1 F18 FY F17 Strong cash delivery reduces vs LY KES bn KES bn impact of higher capex – net borrowings up only +4% Net finance charges increased by +29%, new funding secured at Net borrowings (25.9) (25.1) +4% competitive rates F
Slide 23: Profit after tax down on softness in Kenya
Profit after tax down on softness in Kenya H1 F18 H1 F17 vs LY KES bn KES bn Profit before tax declined due to lower operating profit and Operating profit 9.2 9.5 -3% higher interest charge Finance costs, net (1.9) (1.5) +29% Effective tax rate largely Profit before tax 7.3 8.0 -9% unchanged Inc
Slide 24: Consistently strong cash performance
Consistently strong cash performance H1 F18 H1 F17 vs LY Seasonality of KES bn KES bn business cycle same as Operating profit 9.2 9.5 (0.3) last year – increase in Depreciation and Inventory and Debtors amortization 1.8 1.7 0.1 due to peak Gain on land sale (0.7) - (0.7) Working capital Higher i
Slide 25: Significant increase in capital expenditure
Significant increase in capital expenditure F18 H1 investment of KES 5.0bn (F17 H1 KES 1.8bn) Construction of new brewery in Kisumu started – KES 2.0bn New spirits line with capacity of 2.5m Eus in Kenya – KES 243m 4 new keg rackers and additional barrels in Kenya to boost Senator keg packagin
Slide 26: New Senator keg brewery in Kisumu
New Senator keg brewery in Kisumu 15bn to be spent on new 1mHL brewery to produce Senator keg Building 100,000 livelihoods directly and indirectly, including 15,000 new farmers Construction started, project underway 26
Slide 27: New spirits line in Tusker brewery
New spirits line in Tusker brewery New KES 900m Spirits line expansion went live in November 2017 To create capacity headroom and supporting new format capability to allow local manufacturing of formerly imported brands 27
Slide 28: New Senator keg rackers and Dual Purpose Vessels
New Senator keg rackers and Dual Purpose Vessels (DPVs) Senator keg rackers – KES 800m Increased keg capacity: 4 rackers and 30k keg barrels to meet Senator keg demand Project completed in August 2017 Dual Purpose Vessels (DPVs) – KES 1,400m KBL brewing and cooling expansion with quality impro
Slide 29: Significant increase in capital expenditure
Significant increase in capital expenditure F18 H1 investment of KES 5.0bn (F17 H1 KES 1.8bn) Construction of new brewery in Kisumu started – KES 2.0bn New spirits line with capacity of 2.5m Eus in Kenya – KES 243m 4 new keg rackers and additional barrels in Kenya to boost Senator keg packagin
Slide 30: Thank You
Thank You Please hold the questions to the end 30
Slide 31: F18 H2 Priorities
F18 H2 PRIORITIES Andrew Cowan Group Managing Director 31
Slide 32: Priorities going forward
Priorities going forward Opportunities for further growth Senator volume ramp up Continued bottled beer momentum Win in premium leading with Scotch Deliver productivity initiatives Accelerate mainstream spirits Establish key innovation projects Deliver Talent goals 32
Slide 33: Q & A Session
. eabl Q &A Session ] | ( oI ‘ ° : 3 ff ciskl KY 33
Slide 34: Cautionary Statement concerning forward-looking statements
Cautionary Statement concerning forward-looking statements: This document contains ‘forward-looking’ statements. These statements can be identified by the fact that they do not relate only to historical or current facts. In particular, forward-looking statements include all statements that express f
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