East African Breweries Plc · NSEKE:EABL
East African Breweries — H1 F10 Earnings Presentation
40 slides from East African Breweries's earnings presentation, Feb 16, 2010
Slide 1: EABL H1 F10 Investor Group Briefing
EABL H1 F10 Investor Group Briefing Seni Adetu – Group Managing Director Peter Ndegwa – Group Finance Director Nairobi Serena 16th February 2010
Slide 2: Agenda
Agenda > Business Update Seni Adetu
Slide 3: Economic environment remained challenging in H1
Economic environment remained challenging in H1 > Significant dips in Real GDP growth 2007 2008 2009 > Continued reduction in Remittances 8.9% 8.0% and FDI’s 6.1% 6.5% 6.3% 6.2% > Knock on effects of drought 4.5% 5.0% especially in Kenya > High duty on Spirits (Ken),banning 1.8% of sachets (Ug and S
Slide 4: Off to a slow start, but recovered reasonably in Q2
Off to a slow start, but recovered reasonably in Q2 > Half of two quarters … > Due to economy and tax increase on Spirits Q1 F10 vs. F09 Total Portfolio 10% 1% Growth 0% Bottled Beer Kegged Beers Spirits -10% -20% -18% Significant -30% pressure on -40% -31% Senator Keg and -50% total Spirits -60% -5
Slide 5: Led by Premium and Mainstream beer brands
Led by Premium and Mainstream beer brands category performance vs LY 15% 8% 10% 5% 3% -10% -18% -37% 0% -5% Premium Mainstream Emerging Keg Beers Spirits Beers (bottled) Beers (bottled) Beers (bottled) -10% -15% -20% -25% -30% -35% -40%
Slide 6: But we achieved good revenue gearing as a result of pricing and mix
But we achieved good revenue gearing as a result of pricing and mix … Volume* –10% NSV** +3% PBT# –8% GLR Tanzania GLR Tanzania GLR 5% 6% 5% Uganda 9% 4% 22% Uganda Uganda 8% 21% Kenya 68% Kenya Kenya 73% 79% * includes soft drinks – all reported in equivalent units ** excludes associate company rev
Slide 7: And delivered strong operating cash flow growth
And delivered strong operating cash flow growth Operating Cash Flow - Kes. Mns 8,000 7,000 7,577 Growing 35% 6,000 year on year 5,000 5,593 5,618 4,000 3,000 3,477 2,000 1,000 0 F07 F08 F09 F10
Slide 8: Top line performance was enhanced by brand and trade initiatives
Top line performance was enhanced by brand and trade initiatives
Slide 9: With increased focus in Uganda
With increased focus in Uganda Bell new campaign Outlet branding Portfolio expansion Senator execution
Slide 10: and continued expansion into new Geographies
and continued expansion into new Geographies Retail drive – Juba, S Sudan Branding Rwanda Depot in Burundi Great Lakes market execution
Slide 11: Looking forward ...
Looking forward ...
Slide 12: H2 and F11 Outlook more positive
H2 and F11 Outlook more positive … > With upturn in real GDP growth projected source: EIU, IMF Sudan includes North Sudan > And Inflation forecast to decline …
Slide 13: Our Future: most celebrated business in Eastern Africa
Our Future … EABL is the most celebrated business in every market in Eastern Africa
Slide 14: Key Initiatives aimed at delivering this future
Key Initiatives aimed at delivering this future … > Innovations and renovations – Wines, Alvaro Passion Accelerate and new TML bottle Kenya > Cold drink expansion > Senator Keg footprint enhancement > Upgrade people capability Reposition to win > Better COGS management in Uganda > Up scale marketing
Slide 15: Key Initiatives aimed at delivering this future
Key Initiatives aimed at delivering this future … > Step change presence in Sudan Create presence > Acquisition in Tanzania and Ethiopia in GLR > Strategic alliances in Rwanda/Burundi > Assessment of various possibilities in other markets > Cost leadership focusing on OEE Supply > Logistics improvem
Slide 16: Whilst setting platform for H2 and Beyond
Whilst setting platform for H2 and Beyond … Spirits performance rebound
Slide 17: Slide 17
Slide 18: Continuing investment in key brands
Continuing investment in key brands … Up weighted Marketing Renovation
Slide 19: And increased support for our ANADs portfolio
And increased support for our ANADs portfolio … > Flavour extensions, innovation, RTC improvements
Slide 20: With concerted supply optimisation initiatives
With concerted supply optimisation initiatives Cereals innovation Operational excellence
Slide 21: Supported by increasing CAPEX investments
Supported by increasing CAPEX investments CAPEX - Kes. Mns Key initiatives … > New Keg line 2,628 > New CO2 plant 2,148 > Upgrading power supply 1,472 > Expanding water storage tanks 1,134 > Increasing warehouse space > Turner strippers (Maltings) F07 F08 F09 F10
Slide 22: All anchored on our people
All anchored on our people … through driving super engagement via … > Attraction, retention and reward > Continued talent pool pipeline management - Pan African early career program - Mid career recruits program > Capability development
Slide 23: ...and an enhanced community engagement agenda
...and an enhanced community engagement agenda Sorghum agenda Water of life Green Goals Partnerships with farmers ECOTAT projects Saving the Mau Most Respected Company Skills for life - 12 sponsorships in H1 RD Campaign - “Designated driver” in EA
Slide 24: In conclusion, despite challenges, we are focused on delivering F10
In conclusion, despite challenges, we are focused on delivering F10 > Strategic imperatives - clear and actionable > New markets footprint on track > Delivery of Total Adult Beverage (TAB) portfolio > Supply and Sales capability focus > Talent and resourcing > Strategy into Execution, at pace
Slide 25: Agenda
Agenda > Financial Update Peter Ndegwa
Slide 26: Drivers of financial performance remained largely unchanged from F09 H2
Drivers of financial performance remained largely unchanged from F09 H2 Tough macros leading to soft demand esp. on the lower end of the market (Senator/emerging segments) Change in competitive and regulatory landscape (Uganda, Great Lakes, Spirits) Inflationary pressure (higher input costs), cu
Slide 27: Tough operating conditions, cost escalation & Forex impact led to lower profits
Tough operating conditions, cost escalation & Forex impact led to lower profits … > But we delivered underlying value & cash growth 3,997 18,096 Volumes -10% NSV +3% 3,580 18,617 - 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 - 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 Build
Slide 28: Reflecting in regional contribution
Reflecting in regional contribution: strong Kenya performance offsetting soft Uganda & GLR Kenya TP + 6% GLR & Exports COGS + 4% TP -55% NSV + 6% COGS -25% Volume -13% NSV - 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 -24% F10 F09 Volume -6% Uganda - 200 400 600 800 1,000 1,200 F10 F09 TP -3
Slide 29: Strong Kenya beer performance offsetting soft GLR, Uganda & spirits
Strong Kenya beer performance offsetting soft GLR, Uganda & spirits results Volume NSV -6% GLR/Exports -24% GLR/Exports -53% Kenya -Spirits -36% Kenya -Spirits -2% Uganda Uganda +7% -2% Kenya - Beer Kenya - Beer +12% -60% -50% -40% -30% -20% -10% 0% -40% -30% -20% -10% 0% 10% 20% COGS PBT -25% GLR/E
Slide 30: Adverse Other operating income / expenditure driven by Forex hit
But faced adverse Other operating income / expenditure driven by Forex hit > Which saw a massive Kes. 410Mn adverse turn … GROUP OIE F10 F09 Mgmt Fees (45) (71) Rental Income/Expense (9) (6) Bad Debts (29) (108) Stock Provision (133) (59) Misc 3 (25) FX Effect (194) 216 Total (408) (53) FX Impact by
Slide 31: In Kenya we delivered a good mix but reflected growth challenge
In Kenya we delivered a good mix but reflected growth challenge on the emerging end … to deliver the NSV gearing Beer Mix - Eus Spirits Mix - Eus ANAD Value Senator Value Mainstream Mainstream Premium Premium 0% 10% 20% 30% 40% 50% 60% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% % Mix H1 F10 % Mi
Slide 32: Delivering strong underlying value and profit in Kenya
Delivering strong underlying value and profit Kenya performance ... Kenya H1 focus: Good mix, price takes Volume declined -13% Net sales growth 6% > Beer up by 2%, Tusker, Guinness and White Cap Marketing spend 25% had impressive growth (>15%), Senator down (-19%) due to price, eroded purchasing pow
Slide 33: Uganda inflationary pressure and currency depreciation
Uganda inflationary pressure and currency depreciation diluting its strong top line delivery Uganda H1 focus: Deliver Volume decline -2% performance through flagship 7% Net sales growth brands Marketing spend -5% ¾ Beer volumes were affected by increased competition. Operating profit -39% ¾ Spirits
Slide 34: We continued to set up our business in GLR
We continued to set up our business in GLR but GLR andisExports there increased competitive & regulatory pressure H1 - Initial hurdles already overcome - Volume decline -6% tax and cross border challenges Marketing spend 120% > Volumes suffered from ban of Waragi in SoSS, border closure & duty incre
Slide 35: Tanzania will be delivered through a new RTM
Tanzania will be delivered through a new RTM – flat Tanzania SOA but headline results reflect translation losses H1: Legal impasse with TBL affected Volumes declined -14% availability SOA -5% > Constrained beer distribution > Slight growth in SOA, but eroded by currency translation H2: Up weighting
Slide 36: In H2 we have a number of priorities to ensure we deliver F10
In H2 we have a number of priorities to ensure we deliver our F10 Top line – Significant focus on Uganda & Great Lakes Spirits – Drive new price upside Cash - continued focus on cash, consignment stocking & supplier financing COGS – prioritized COGS (input cost esp sugar, process efficiency)
Slide 37: In summary
In summary … East African Breweries Limited Interim Financial Report for six months period ended 31 December 2009 (UNAUDITED) Consolidated Profit and Loss Account Six months to Six months to 31-Dec-09 31-Dec-08 Kshs M Kshs M Change % Net Revenue 18,617 18,096 3% Cost of Sales (9,158) (8,948) 2% Gros
Slide 38: And we have sustained our dividend payout
And we have sustained our dividend payout … > Interim dividend proposal of Kes 2.50 / share > Total interim dividend payment of Kes. 2Bn > LY dividends Kes 2.50 / share
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Slide 40: End
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