Pernod Ricard SA · EURONEXT:RI
Pernod Ricard SA — H1 2007/08 Earnings Presentation
59 slides from Pernod Ricard SA's earnings presentation, Feb 28, 2008
Slide 1: 2007/08 1st half-year results
2007/08 1st half-year results 28 February 2008 1
Slide 2: Historic sales growth, accelerated profitability growth
1st half-year results Historic sales growth Accelerated profitability growth 2
Slide 3: 2007/08 1st half-year key figures
2007/08 1st half-year key figures Î Sales: € 3,713 million (+10.1%(1)) • Remarkably dynamic sales, in particular from Top 15 (+13%(1)) • Acceleration in emerging countries(2) (+25 %(1)) and in premium(3) spirits (+17%(1)) Î Operating profit from ordinary activities: € 966 million (+15.3%(1)) • Impro
Slide 4: Presentation structure
Presentation structure - Net profit from ordinary activities (Group share) - Operating profit from ordinary activities - Summarised consolidated income statement - Analysis by geographic region - Financial income/(expense) from ordinary activities and debt - Other net profit from ordinary activities
Slide 5: Summarised consolidated income statement
Summarised consolidated income statement: organic growth HY1 HY1(1) HY1 ∆ ∆ (€ millions) 07/08 06/07 07/08 organic Net sales 3,507 3,801 3,713 +5.9% +10.1% Gross margin after logistics costs 1,963 2,206 2,126 +8.3% +12.8% Gross margin / sales 56.0% 58.0% 57.3% Advertising and promotion expenditure (
Slide 6: Foreign exchange / Group structure impact
Foreign exchange / Group structure impact HY1 Organic Forex Group HY1 (€ millions) 06/07 growth impact structure 07/08 Net sales 3,507 348 (88) (54) 3,713 Operating profit from ordinary 886 135 (49) (6) 966 activities Î Negative foreign exchange impact of € 49 million on OPOA, mainly related to USD
Slide 7: Net sales
Net sales HY1 HY1(1) Organic HY1 (€ millions) 06/07 07/08 growth 07/08 Net sales 3,507 3,801 +10.1% 3,713 Î Top 15 sales increased +13%(2) and generated more than 70% HY1 07/08 organic growth Î Premium brands(3), which accounted for a little more than one third of HY1 07/08 sales, were responsible f
Slide 8: Top 15 growth: 07/08 vs 06/07
Top 15 growth: 07/08 vs 06/07 VOLUME 12% +9% A very dynamic Top 15 8% +7% 4% Favourable comparison basis in FY 06/07 0% HY1 06/07 HY1 07/08 SALES * 20% 15% +14% +13% Sales growth 6% higher than volume 10% growth due to enhanced mix and 5% 0% price increases HY1 06/07 HY1 07/08 Sales of every single
Slide 9: Top 15 growth: 07/08 vs 06/07
Top 15 growth: 07/08 vs 06/07 Volume Organic Comments growth sales growth Strong growth, driven by emerging countries in spite of 13% 16% Q2 decline in the US Good performance in Europe and improved mix due 8% 12% to Asia Sharp Q2 recovery and market share gains in France 2% 3% Implementation of the
Slide 10: Top 15 growth: 07/08 vs 06/07
Top 15 growth: 07/08 vs 06/07 Volume Organic Comments growth sales growth Growth in the US with price increases and doubling of 7% 11% Stolichnaya Elit sales 14% 16% Double-digit growth in all regions Confirmed dynamism in the US and very strong growth 15% 18% in Asia: Taiwan, Duty Free The brand re
Slide 11: Gross margin after logistics costs
Gross margin after logistics costs HY1 HY1(1) Organic HY1 (€ millions) 06/07 07/08 growth 07/08 Gross margin after logistics costs 1,963 2,206 +12.8% 2,126 Gross margin / sales 56.0% 58.0% 57.3% +200bp Î Very sharp improvement in Gross margin after logistics costs / sales ratio Î 70 % of which was g
Slide 12: Advertising and promotion expenditure
Advertising and promotion expenditure HY1 HY1(1) Organic HY1 (€ millions) 06/07 07/08 growth 07/08 A&P expenditure (561) (643) +14.8% (623) A&P expenditure / sales 16.0% 16.9% 16.8% +90bp Î Very strong profit margin growth and dynamic profitability growth enabled us to increase advertising and promo
Slide 13: Contribution after A&P expenditure
Contribution after A&P expenditure HY1 HY1(1) Organic HY1 (€ millions) 06/07 07/08 growth 07/08 Contribution after A&P expenditure 1,402 1,563 +12.0% 1,503 CAPE / sales 40.0% 41.1% 40.5% +110bp Î Strong increase in contribution from brands after A&P expenditure Î Continuing premiumisation of portfol
Slide 14: Structure costs
Structure costs HY1 HY1(1) Organic HY1 (€ millions) 06/07 07/08 growth 07/08 Structure costs* (516) (549) +6.5% (538) Structure costs / sales 14.7% 14.4% 14.5% * Structure costs: Selling expenses + General & administrative expenses + Other income/(expenses) -30bp Î The strong sales growth enabled a
Slide 15: Operating profit from ordinary activities
Operating profit from ordinary activities HY1 HY1(1) Organic HY1 (€ millions) 06/07 07/08 growth 07/08 Operating profit from ordinary 886 1,014 15.3% 966 activities OPOA / sales 25.3% 26.7% 26.0% +140bp Remarkably dynamic sales Sales +10.1%(2) Portfolio premiumisation and focus on Top 15 CAPE / sale
Slide 16: Presentation structure
Presentation structure - Net profit from ordinary activities (Group share) - Operating profit from ordinary activities - Summarised consolidated income statement - Analysis by geographic region - Financial income/(expense) from ordinary activities and debt - Other net profit from ordinary activities
Slide 17: Contribution to growth / region
Contribution to growth / region Operating profit from ordinary activities 10 (€ millions) 48 8% 1,014 22 48 37.5% 17% 37.5% 886 100% OPOA HY1 07/08 OPOA HY1 Asia & RoW Americas Europe France @ constant foreign exchange basis 06/07 Î All regions reported double-digit organic growth in operating profi
Slide 18: Asia – Rest of World
Asia – Rest of World HY1 HY1 (€ millions) 07/08 ∆ Organic growth 06/07 Net sales(1) 980 1,085 +11% +13% Gross margin after logistics costs 473 557 +18% +22% Gross margin / sales 48.2% 51.4% A&P expenditure (177) (205) +16% +20% A&P / sales 18.1% 18.9% Operating profit from ord. act.(2) 194 233 +20%
Slide 19: Americas
Americas HY1 HY1 (€ millions) 06/07 07/08 ∆ Organic growth Net sales 984 970 -1% +10% Gross margin after logistics costs 563 552 -2% +9% Gross margin / sales 57.2% 56.9% A&P expenditure (150) (159) +6% +14% A&P / sales 15.2% 16.4% Operating profit from ord. act.(1) 277 265 -5% +10% OPOA / sales 28.2
Slide 20: Europe (excluding France)
Europe (excluding France) HY1 HY1 (€ millions) 06/07 07/08 ∆ Organic growth Net sales 1,175 1,262 +7% +9% Gross margin after logistics costs 674 747 + 11% +12% Gross margin / sales 57.4% 59.2% A&P expenditure (151) (172) +14% +15% A&P / sales 12.8% 13.7% Operating profit from ord. act.(1) 330 372 +1
Slide 21: France
France HY1 HY1 (€ millions) 06/07 07/08 ∆ Organic growth Net sales 368 396 +8% +8% Gross margin after logistics costs 253 270 + 7% +7% Gross margin / sales 68.8% 68.1% A&P expenditure (83) (87) +5% +5% A&P / sales 22.5% 21.8% Operating profit from ord. act.(1) 86 96 +12% +12% OPOA / sales 23.2% 24.2
Slide 22: Analysis by geographic region
Analysis by geographic region Sales Operating profit from ordinary HY1 07/08 activities HY1 07/08 11% France 10% 29% 24% Europe 34% Americas 39% Asia and RoW 26% 27% Î Balanced regional sales distribution and similar profitability levels Î Restated for customs duties, Asia and RoW profitability was
Slide 23: Presentation structure
Presentation structure - Net profit from ordinary activities (Group share) - Operating profit from ordinary activities - Summarised consolidated income statement - Analysis by geographic region - Financial income/(expense) from ordinary activities and debt - Other net profit from ordinary activities
Slide 24: Financial income/(expense) from ordinary activities
Financial income/(expense) from ordinary activities (€ millions) Net financing costs (168) Other financial income/(expense) from ordinary activities (8) Financial Income/(expense) from Ordinary Activities (176) Î The average cost of borrowing was 5%, stable compared to the previous financial year Î
Slide 25: Net debt analysis
Net debt analysis Î Analysis of net debt by currency at 31 December 2007: Î% Euro 53% Î% USD 43% Î% Other currencies 4% ÎTotal 100% Î Variable, capped variable and fixed interest rate hedging at 31 December 2007: Variable rate Capped variable Fixed rate rate ÎEuro 36% 26% 38% ÎUSD 38% 17% 45% ÎOther
Slide 26: Changes in debt
Changes in debt (€ millions) (273) 217 (169) 109 (6,631) (6,515) t w rs en t Flo + nd s he stm b ta sh s se t i on fu ot ju e ld 7 Ca a uis it ion an d ad ta t i a e c ial q s s ion b t .0 re ac n d ls at de Ini .06 F an al/ pe en et 2.07 0 Fi n s o i d an 3 po tt Di v Tr N .1 dis men 31 y pa Î Furt
Slide 27: Cash flow statement, free cash flow analysis
Cash flow statement Free cash flow analysis (€ millions) 31.12.06 31.12.07 Operating profit from ordinary activities 886 966 Non-current asset depreciation, provision movements and other 76 83 Self-financing capacity 962 1,049 Non-current items (65) (43) Decrease (increase) in WCR (284) (550) Financ
Slide 28: Presentation structure
Presentation structure - Net profit from ordinary activities (Group share) - Operating profit from ordinary activities - Summarised consolidated income statement - Analysis by geographic region - Financial income/(expense) from ordinary activities and debt - Other net profit from ordinary activities
Slide 29: Income tax
Income tax Income tax: € (184)million Rate: 23.4% Income tax on items from Income tax effect on other ordinary activities: € (183)million items: Rate: 23.1% € (2)million Î Income tax on items from ordinary activities in line with forecasts Î Other items: certain other charges and provisions were not
Slide 30: Minority interests
Minority interests HY1 06/07 HY1 07/08 Minority interests (14) (13) Î Stable Minority Interests, which include: • Havana Club • Corby (Canada) 30
Slide 31: Presentation structure
Presentation structure - Net profit from ordinary activities (Group share) - Operating profit from ordinary activities - Summarised consolidated income statement - Analysis by geographic region - Financial income/(expense) from ordinary activities and debt - Other net profit from ordinary activities
Slide 32: Net profit from ordinary activities (Group share)
Net profit from ordinary activities (Group share) HY1 HY1(1) HY1 (€ millions) ∆ (1) ∆ 06/07 07/08 07/08 Operating profit from ordinary activities 886 1,014 +14.5% 966 +9.0% Financial income/(expense) from ordinary activities (173) (181) +4.5% (176) +1.6% Income tax on items from ordinary activities
Slide 33: Presentation structure
Presentation structure - Net profit from ordinary activities (Group share) - Operating profit from ordinary activities - Summarised consolidated income statement - Analysis by geographic region - Financial income/(expense) from ordinary activities and debt - Other net profit from ordinary activities
Slide 34: Other items
Other items Î Restructuring charges offset by the benefit of improved funding of pension commitments by plan assets, which increased in value (€ millions) Net capital gains/(losses) on asset disposals and valuation 2 • Canei, Wyborowa head office, Spanish Brandies… Restructuring charges (17) • Indus
Slide 35: Net Profit - Group share
Net Profit - Group share HY1 HY1 U 06/07 07/08 Operating profit from ordinary activities 886 966 +9.0% Other operating income and expenses (21) 5 N/A Operating profit 865 970 +12.2% Financial Income/(expense) from ordinary activities (173) (176) +1.6% Other financial items 5 (9) N/A Income tax (183)
Slide 36: Conclusion and outlook
My — Pernod Ricard Conclusion and outlook SO
Slide 37: Conclusion and outlook
Conclusion and outlook Î Historic sales growth and strong increase in profitability in HY1 Î Strong profit growth allowed the Group to opt for accelerating the increase in advertising and promotion expenditure, thereby further consolidating growth prospects Further revision of 2007/08 full-year grow
Slide 38: Pernod Ricard
83 Pernod Ricard
Slide 39: Appendices
My — Pernod Ricard Appendices SO
Slide 40: Portfolio review
Portfolio review Volume +13% Sales* +16% Î Asia: Accelerated growth in Q2 and stabilised sales in China Î Europe: Very strong growth, especially in Eastern Europe Î Americas: US: HY1 depletions = -7% vs Nielsen = -8% (in a 12 y.o. Scotch market down 3%) and strong growth in Latin America Chivas 18 a
Slide 41: Portfolio review
Portfolio review Volume +6% Sales* +27% Implementation of Value Strategy Î Focus on superior qualities: volume +27% • Rapid development of superior qualities in Asia, primarily: top premium qualities posted outstanding growth rates: Noblige (+90%), Cordon Bleu (+ 32%) and XO (+42%) Î Martell VS: vol
Slide 42: Portfolio review
Portfolio review Volume +14% Sales* +16% Î Double-digit growth in all regions Î France, Greece, Czech Republic, Russia, Canada and Chile achieved very strong growth Volume +16% Sales* +23% Î Continued outstanding growth in the US with HY1 depletions up 23% (Nielsen +32%) Î Strong double-digit growth
Slide 43: Portfolio review
Portfolio review Volume +2% Sales* +3% Î Strong Q2 recovery in France and market share gains Î Overall good performance in other European markets Volume +15% Sales* +18% Î Continued strength in the US: HY1 depletions = +5% (Nielsen +1% and NABCA +4%) Î Very strong growth in Asia due to Taiwan and Du
Slide 44: Portfolio review
Portfolio review Volume +6% Sales* +13% Î Growth in all regions, emphasized by the development of flavours Î Growth in Europe: UK, France, Spain, Belgium and Duty Free Î Dynamic sales in the US: HY1 depletions = +4% (Nielsen +13% and NABCA + 9%) Volume -3% Sales* -1% Î US: • Situation remains diffic
Slide 45: Portfolio review
Portfolio review Volume +2% Sales* +4% Î Europe: • Spain: Stable volume in a declining category • Strong growth in most markets: UK, Russia, Greece, etc… Î US: Market that remains difficult, HY1 depletions = -5% (Nielsen -4%) Volume +7% Sales* +11% Î US: Continuing volume growth, in spite of price i
Slide 46: Portfolio review
Portfolio review Volume +9% Sales* +10% The brand recovered strongly and continues its premiumisation strategy Î Acceleration in Q2 (+10%) and 17% growth in premium ranges throughout HY1 Î US: stable depletions (Nielsen +5%) with improved mix Volume -5% Sales* +6% Î Decline in the two major markets
Slide 47: Portfolio review
Portfolio review Volume +11% Sales* +17% Î Strong growth in the French market with market share gains in Mass Market and on-trade Î Positive impact of price increases and quality mix (Rosé +109% in France) Volume +2% Sales* +7% Î Good growth in the US and France confirmed in Q2 Î Decline in the UK r
Slide 48: 2007/08 Interim Summarised Consolidated Income Statement (1/2)
2007/08 Interim Summarised Consolidated Income Statement (1/2) HY1 HY1 (€ millions) ∆ 06/07 07/08 Net sales (excluding tax and duties) 3,507 3,713 +5.9% Gross margin* 2,088 2,249 +7.7% Logistics costs (125) (123) -1.9% Gross margin after logistics costs 1,963 2,126 +8.3% A&P expenditure (561) (623)
Slide 49: 2007/08 Interim Summarised Consolidated Income Statement (2/2)
2007/08 Interim Summarised Consolidated Income Statement (2/2) HY1 HY1 (€ millions) ∆ 06/07 07/08 Operating profit from ordinary activities 886 966 +9.0% Other operating income and expenses (21) 5 N/A Operating profit 865 970 +12.2% Financial Income/(expense) from (173) (176) +1.6% ordinary activiti
Slide 50: Asia – Rest of World
Asia – Rest of World HY1 HY1 Organic Group (€ millions) 06/07 07/08 ∆ growth structure Net sales* 980 1,085 +11% +13% - Gross margin after logistics costs 473 557 + 18% +22% - Gross margin / sales 48.2% 51.4% A&P expenditure (177) (205) +16% +20% - A&P / sales 18.1% 18.9% Contribution after A&P expe
Slide 51: Americas
Americas HY1 HY1 Organic Group (€ millions) ∆ 06/07 07/08 growth structure Net sales 984 970 -1% +10% (45) Gross margin after logistics costs 563 552 -2% +9% (7) Gross margin / sales 57.2% 56.9% A&P expenditure (150) (159) +6% +14% - A&P / sales 15.2% 16.4% Contribution after A&P expenditure 413 393
Slide 52: Europe (excluding France)
Europe (excluding France) HY1 HY1 Organic Group (€ millions) 06/07 07/08 ∆ growth structure Net sales 1,175 1,262 +7% +9% (9) Gross margin after logistics costs 674 747 + 11% +12% (1) Gross margin / sales 57.4% 59.2% A&P expenditure (151) (172) +14% +15% - A&P / sales 12.8% 13.7% Contribution after
Slide 53: France
France HY1 HY1 Organic Group (€ millions) 06/07 07/08 ∆ growth structure Net sales 368 396 +8% +8% - Gross margin after logistics costs 253 270 + 7% +7% - Gross margin / sales 68.8% 68.1% A&P expenditure (83) (87) +5% +5% - A&P / sales 22.5% 21.8% Contribution after A&P expenditure 170 183 +8% +8% -
Slide 54: Foreign exchange / Group structure effects
Foreign exchange / Group structure effects HY1 Organic Forex Group HY1 (€ millions) 06/07 growth impact structure 07/08 Net sales 3,507 348 (88) (54) 3,713 Gross margin after logistics costs 1,963 251 (80) (7) 2,126 Gross margin / sales 56.0% 57.3% Advertising and promotion (561) (83) 20 0 (623) exp
Slide 55: Consolidated Balance Sheet 1/2 - Assets
Consolidated Balance Sheet 1/2 - Assets (€ millions) 30.06.2007 31.12.2007 Intangible assets and goodwill 11,313 10,844 Property, plant and equipment and investments 1,858 1,759 Deferred tax assets 839 701 Total non-current assets 14,010 13,304 Inventories and receivables 5,079 5,551 Cash and cash e
Slide 56: Balance Sheet 2/2 – Equity and liabilities
Balance Sheet 2/2 – Equity and liabilities (€ millions) 30.06.2007 31.12.2007 Shareholders’ equity 6,290 6,381 Minority interests 168 169 of which profit attributable to minority interests 25 13 Shareholders’ equity – attributable to equity holders 6,458 6,550 of the parent Non-current provisions an
Slide 57: Net Debt at 31 December 2007
Net Debt at 31 December 2007 Î Analysis of net debt: Î Syndicated loan 60% Î Bonds 37% Î Other 3% 100% Î Analysis of debt by maturity (€ millions): Î< 1 year (1,229) 17% Î1 year < < 5 years (4,868) 69% Î> 5 years (970) 14% (7,067) 100% ÎCash and marketable securities 435 ÎNet debt (6,631) 57
Slide 58: Number of shares to be included in EPS calculation
Number of shares to be included in EPS calculation (in thousands) HY1 HY1 06/07 07/08 Number of shares at end of period, including free share 109,264 109,736 allocation of 16 January 2007 Average number of shares in issue (prorata temporis) 109,115 109,666 Average number of shares in issue x 2 218,2
Slide 59: Earnings per share from ordinary activities (Group share)
Earnings per share from ordinary activities (Group share) HY1 HY1 (€ millions and €/share) U 06/07 07/08 Diluted number of outstanding shares 214,397 215,315 +0.4% (in thousands) Net Profit from Ordinary Activities 529 594 +12.4% Diluted Earnings per Share from Ordinary 2.47 2.76 +11.9% Activities Î