Heineken Nv · EURONEXT:HEIA
Heineken Nv — Q4 2020 Earnings Presentation
64 slides from Heineken Nv's earnings presentation, Feb 10, 2021
Slide 1: Superior & profitable growth in a fast-changing world
Superior & profitable growth in a fast-changing world February 2021 1
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements with regard to the financial position and results of HEINEKEN’s activities. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forwar
Slide 3: Agenda
Agenda FY 2020 performance Strategic review 3
Slide 4: Agenda: FY 2020 performance
Agenda FY 2020 performance Strategic review 4
Slide 5: A year of profound impact and transition
Our People Our Consumers A year of profound Top decile employee engagement #SocialiseResponsibly campaigns impact and transition People at the heart of our response Our Customers Our Communities c. €50m rental waivers for bars >€23m donations 5
Slide 6: FY 2020 Highlights
FY 2020 Highlights Net Revenue (beia) OG Net Revenue (beia) OG per hl Top-line performance materially impacted by government restrictions to contain -11.9% -2.4% COVID-19 Consolidated Beer Volume OG Heineken® Volume Strong competitive performance and Heineken® momentum -8.1% -0.4% Operating Profit (
Slide 7: AMEE Region
AMEE Region Net Revenue (beia) OG Operating Profit (beia) OG -9.5% -33.8% Price Mix on constant geographic Beer Volume OG basis -9.2% +2.2% Strong recovery in NIGERIA in second half, growing volume FY and winning market share. Double-digit growth in premium, led by Heineken® and Tiger SOUTH AFRICA s
Slide 8: Americas Region
Americas Region Net Revenue (beia) OG Operating Profit (beia) OG -2.9% -4.8% Price Mix on constant geographic Beer Volume OG basis -7.5% +6.8% MEXICO government restrictions and dry laws eased in second half. Strong price mix c. 2x inflation. Amstel Ultra, Heineken® 0.0 and cider grew strongly BRAZI
Slide 9: APAC Region
APAC Region Net Revenue (beia) OG Operating Profit (beia) OG -11.5% -16.4% Price Mix on constant geographic Beer Volume OG basis -7.9% -2.4% VIETNAM volume was stable, significantly outperforming the market and confirming our market leadership. Mainstream grew double-digits with Larue and Bia Viet.
Slide 10: Europe Region
Europe Region Net Revenue (beia) OG Operating Profit (beia) OG -18.8% -68.6% Price Mix on constant geographic Beer Volume OG basis -8.2% -5.4% High exposure to ON-TRADE heavily impacted results, particularly in Q2 and Q4 OFF-TRADE continued to grow, driven by premium with strong performance of Despe
Slide 11: Heineken®: The most trusted international brand
Heineken®: The most trusted international brand Heineken® volume Excluding South Africa, Heineken® volume grew 2.8% -0.4% More than 40% growth in Brazil and impressive start of Heineken® 0.0, Double-digit growth markets now #3 globally 25 Heineken® Silver more than doubled its volume in Vietnam and
Slide 12: E-Commerce acceleration @ Beerwulf
E-Commerce acceleration @ Beerwulf Beerwulf Net Revenue (beia) per month 5x Nearly doubled revenue versus last year Tripled # of orders across all platforms Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2020 12
Slide 13: Financial Overview
Financial Overview Key Financials Total Organic €m unless otherwise stated FY 2020 Growth Growth Revenue 23,770 -16.7% Net revenue (beia) 19,724 -11.9% Operating profit (beia) 2,421 -35.6% Operating profit (beia) margin 12.3% -455 bps Net profit (beia) 1,154 -49.4% Net loss -204 -109.4% Diluted EPS
Slide 14: Top-line impacted by COVID-19
Top-line impacted by COVID-19 Net Revenue (beia): 11.9% organic decline Organic decline €2,853m €m -9.8% -2.4% 5.3% Volume OG1 Net rev/hl OG1 €m 23,894 0.2% 19,724 FY 2019 Total Volume Net rev/hl Currency Consolidation FY 2020 Net Revenue Translation Impact Net Revenue (beia) (beia) 14
Slide 15: Diligent action on costs to mitigate the impact
Diligent action on costs to mitigate the impact Operating Profit (beia): 35.6% organic decline Organic decline €1,430m >90% - EUR, MX, SA & ID €m c. 2,055 c. 175 €m 129 40 c. 800 4,020 2,421 FY 2019 Net Revenue Cost Others3 Currency Consolidation FY 2020 Operating less Variable Mitigation2 Translati
Slide 16: Balanced reduction of discretionary expenses c. €800m
Balanced reduction of discretionary expenses Cost mitigation represented net 38% 57% reduction of c. 9% of addressable Personnel Marketing & fixed cost base1 costs Sales spend Sharp resource allocation towards c. €800m growth brands, D&T foundational platforms and selected routes to market Most cost
Slide 17: Total EIAs €1,643m
Exceptional items and amortisation of acquisition- related intangible assets on operating profit €331m Amortisation comparable to €963m Restructuring previous years Impairment Total EIAs Impairments driven by COVID €1,643m €273m Amortisation Restructuring charges mainly associated with organisationa
Slide 18: FOCF impact mitigated by reduction of non-committed CAPEX
FOCF impact mitigated by reduction of non-committed CAPEX Free Operating Cash Flow: €1,513 million €m €m 1,663 123 2,228 486 339 1,513 FY 2019 Cash flow from Working Capital Capex2 Interest, dividend FY 2020 FOCF operations1 & income tax FOCF 1. Cash flow from operations before changes in working ca
Slide 19: Committed to long term target <2.5x
Committed to long term target <2.5x Net Debt/EBITDA (beia) Long term target 3.3 3.4 2.8 2.6 2.6 2.5 2.5 2.6 2.4 2.3 2.3 2.2 2.2 2008 09 10 11 12 13 14 15 16 17 18 19 2020 19
Slide 20: Closing a decade of Brewing a Better World
Closing a decade of Brewing a Better World “If you’re driving, don’t drink this.” responsible consumption campaign launched in New Zealand >100% water balanced at 10 sites in Mexico, Spain and Egypt1 100% green energy used to brew Heineken® in the Netherlands and Brazil2 1. Ten sites replenish more
Slide 21: For 2021, we expect
For 2021, we expect Pandemic to continue to impact first half of 2021 Conditions to gradually improve in second half 2021 Product & channel mix to continue to adversely impact results A higher negative transactional currency impact on input costs Revenue, operating profits and margin to stay below 2
Slide 22: A year of profound impact and transition
A year of profound impact and transition Impact of COVID-19, amplified by on-trade and geography Strong competitive performance and Heineken® momentum Sharp mitigating actions while continuing to invest for the future Solid results of Brewing a Better World 2020 Strong balance sheet and dividend in
Slide 23: Agenda: Strategic review
Agenda FY 2020 performance Strategic review 23
Slide 24: Navigate the crisis, while building the future
Navigate the crisis, while BUILDING THE FUTURE 24
Slide 25: Future proof HEINEKEN journey
Future proof HEINEKEN SUPERIOR & NURTURING OUR PROFITABLE BUILDING ON CULTURE WHILE GROWTH BOOSTING A MULTI-YEAR, IN A FAST- STRENGTHS, MULTI-DIMENSIONAL CHANGING WORLD ADDRESSING ADAPTABILITY VULNERABILITIES JOURNEY Invest in new sources of growth & restore operating leverage 25
Slide 26: Framing our way forward: HEINEKEN growth algorithm
Framing our way forward: HEINEKEN growth algorithm Superior growth Our unique strengths Raise the bar on Long-term value creation & opportunities Accelerated Sustainability & Continuous investments Responsibility and productivity & sharper People strategy improvements resource allocation 26
Slide 27: HEINEKEN growth algorithm
HEINEKEN growth algorithm SUPERIOR GROWTH company Superior growth Significant VALUE CREATION POTENTIAL going forward Our unique strengths Raise the bar on Long-term value creation & opportunities Accelerated Sustainability & Continuous investments Responsibility and productivity & sharper People str
Slide 28: Building on a strong foundation
Building on a strong foundation A growth company, innovating and pioneering in the beer industry Heineken® brand present in over 190 markets OpCo centric, entrepreneurial model driven by 80+ OpCos HEINEKEN values, quality and people centric culture Our long-term focus rooted in our 156-year history
Slide 29: HEINEKEN is a superior growth company
HEINEKEN is a superior growth company Revenue OG avg 2015-20191 HEINEKEN 5.0% +3.1% Beer Volume OG (avg 2015-2019) Other brewers 3.9% Spirits 3.9% +5.5% Heineken® Volume OG (avg 2015-2019) Food 3.3% +5.0% Soft Drinks 2.6% Net Revenue OG (avg 2015-2019) 1. Other brewers (ABI, CARLB, STZ & TAP); Spiri
Slide 30: Diversified global footprint geared for growth
Diversified global footprint geared for growth… …with known challenges to address Reduced inorganic headroom Operating Companies Joint Ventures / Associates Licences Export Exposure to FX volatility Value dilutive operations Significant deals 30
Slide 31: Winning premium brand portfolio to capture growing premium opportunity
Winning premium brand portfolio… …to capture the growing opportunity in premium Heineken® International brands Local premium champions People entering the >100m middle class each year Expected volume Tiger growth of HEINEKEN 5.5% 20.8% +60bps premium vs. 3.6% 18.2% overall premium beer Volume OG (av
Slide 32: Global market leader in 0.0 and substantial market opportunity
Global market leader …and substantial market opportunity to expand in 0.0… beer and move beyond ~1.4x Total market share 0.0 versus fair share 0.0 flourishing Blurring beverage landscape New consumer segments & occasions 84 57 replace 38 Women, affluent, older and 16 young generation 2017 18 19 2020
Slide 33: Our OpCo-centric model is a competitive advantage
Our OpCo-centric model is a ...with value creation opportunity by competitive advantage… leveraging our scale High PROXIMITY resulting in deep UNDERSTANDING More focused PORTFOLIO STRATEGY of local customers and consumers LOCAL accountability, entrepreneurship, adaptability Faster COMMON PLATFORMS a
Slide 34: Pre-COVID margin stagnation with slipping Marketing & Sales spend
Pre-COVID margin stagnation… …with slipping Marketing & Sales spend Gross profit margin1 Operating profit margin Marketing & Sales spend % of revenue2 % of revenue2 % of revenue2 65 20 20 50 16 10 0 0 0 2015 16 17 18 2019 2015 16 17 18 2019 2015 16 17 18 2019 1. GP Margin is calculated as Net Revenu
Slide 35: Deep COVID impact stretching beyond 2020
Deep COVID impact… …stretching beyond 2020 Operating profit margin development % of revenues Steep DROP IN REVENUE with VARIABLE RECOVERY 16.8% 12.3% OPERATIONAL DELEVERAGE amplified by impact in Europe on-trade, which will take time to fully recover Continued COST PRESSURE from inflation, commoditi
Slide 36: A foundation in Digital & Technology and opportunity to unify IT
A foundation in Digital & …and opportunity to further unify IT Technology… & capture full eCommerce potential Kick-started standardisation Remaining IT backlog 27% ERP standardisation completed since 2017 35 ERP systems 8 BASE go-lives in 2020, all done remotely Limited re-use of applications across
Slide 37: Solid results on Brewing a Better World 2020 targets
Solid results on Brewing a Better …ready to raise our ambition towards World1 2020 targets… 2030 33% REDUCTION VERSUS 2008 of average water consumption to 3.4 hl/hl in all breweries, and to 3.1 hl/hl in water-stressed areas 51% REDUCTION IN CO2 EMISSIONS in our breweries since 2008, down to 5.1 kg C
Slide 38: Strong culture and healthy organisation climate
Strong culture and healthy …with opportunities to boost external organisation climate… orientation and capability building Strong values built on TRANSPARENCY, SPEED, AGILITY & TRUST and RESPECT EXTERNAL orientation NO-NONSENSE ‘Deliver TALENT and the Goods’ MENTALITY CAPABILITY management OUTSTANDI
Slide 39: In a nutshell: HEINEKEN is a superior growth company
Enhance our PORTFOLIO and strengthen our DIGITAL ROUTE TO CONSUMER, with CONSUMERS and CUSTOMERS at the core Complement GROWTH with increased PRODUCTIVITY FOCUS IN A NUTSHELL: HEINEKEN is a superior growth company, with Accelerate IT SIMPLIFICATION and capture full E-COMMERCE potential significant v
Slide 40: HEINEKEN growth algorithm
HEINEKEN growth algorithm Recover TOP-LINE post pandemic Drive SUPERIOR GROWTH with CONSUMERS & CUSTOMERS at the core Superior growth Our unique strengths Raise the bar on Long-term value creation & opportunities Accelerated Sustainability & Continuous investments Responsibility and productivity & s
Slide 41: HEINEKEN is first and foremost a growth company
HEINEKEN is first and foremost a growth company Our 5 pillar growth strategy has consumers and customers at its core Footprint Portfolio Route to consumer Commercial execution Resource allocation Strengthen and Focus and expand Shape and Scale execution Drive intentional optimise our our portfolio t
Slide 42: Strengthen and optimise our global footprint
Strengthen and optimise our global footprint to maintain our growth advantage Strengthen our #1 and #2 positions 2019 Colombia 2016 Philippines Greenfield expansion into new growth markets 2019 Ecuador 2014 Ethiopia 2015 Myanmar Resolve value dilutive 2020 Peru operations 2016 Ivory Coast 2017 Mozam
Slide 43: Amplify our strong premium position
Amplify our strong premium position Heineken® International brands Local premium champions Win value share, everywhere Scale and replicate success Fewer, bigger bets 43
Slide 44: Expand our portfolio and innovate to better serve consumers
Expand our portfolio and innovate to better serve consumers Make 0.0% beer available Expand beer to new consumer Move beyond beer to serve everywhere, always needs & occasions consumers better Scale Heineken® 0.0 leadership Step-up to meet the growing Expand leadership in Cider Extend 0.0 options ac
Slide 45: Become the best-connected brewer
Become the best-connected brewer Strengthening our Route to Consumer, digitally enabled Distributors / Wholesalers Channels Consumers 1 Digitally connect all our customers via B2B, with €10Bn revenue in 2025 1 2 2 Full sales force digitally empowered by 2023 Digitally Modern Trade eRetail B2B Empowe
Slide 46: HEINEKEN growth algorithm
HEINEKEN growth algorithm Superior growth Our unique strengths Raise the bar on Long-term value creation & opportunities Accelerated Sustainability & Continuous investments Responsibility and productivity & sharper People strategy improvements resource allocation Launch ambitious PRODUCTIVITY PROGRA
Slide 47: We see a path to continuous productivity improvements
We see a path to continuous productivity Starting with €2bn in improvements gross savings initiatives Building one company-wide productivity management system Mitigating cumulative inflation and transactional FX Digitalisation Organisational Re-investing in growth: Process redesign standardisation P
Slide 48: Three key productivity areas to deliver the €2bn gross savings
Three key productivity areas to deliver the €2bn gross savings Three year programme: implemented over 2021-2023 Organisational redesign COGS efficiency Commercial effectiveness ~8,000 FTE impacted Complexity reduction (SKUs) Digital-enabled sales excellence direct personnel €350m cost savings1 Conve
Slide 49: Recover operating margin by 2023 and gear for operating leverage
Recover operating margin by 2023 and gear for operating leverage beyond INDICATIVE Commercial productivity Commercial productivity savings reinvestments Margin 16.8% recovery to +/-17% 12.3% Operating Margin Operating Topline Growth Cumulative Productivity Reinvestments Operating Margin 2019 Margin
Slide 50: HEINEKEN growth algorithm
HEINEKEN growth algorithm Superior growth Our unique strengths Raise the bar on Long-term value creation & opportunities Accelerated Sustainability & Continuous investments Responsibility and productivity & sharper People strategy improvements resource allocation Restore and sharpen CONSUMER & CUSTO
Slide 51: Accelerate our investments and make them work harder
Accelerate our investments and make them work harder Marketing & Sales Digital & Technology Restore 2019 spend % by 2023 Front-load investments to accelerate Fully reinvest commercial productivity gains transformation & build a future-proof HEINEKEN New consumer propositions & occasions Digital core
Slide 52: Sharper and more deliberate marketing and sales spend allocation
Sharper and more deliberate marketing and sales spend allocation Optimise spend within OpCos Focus spend between OpCos Europe example APAC example1 ~25 BRANDS SELECTED +90bps focusing on premium QUICK RECOVERY markets, 2021 vs 2020 Up to 4x INCREMENTAL marketing spend in each -110bps DELAYED RECOVER
Slide 53: Disciplined use of capital
Disciplined use of capital 1 Improve operating capital efficiency and cash flow conversion 2 Rigorous financial discipline towards investments 3 Committed to Net Debt to EBITDA ratio <2.5 4 Sustain healthy dividend pay-out of 30-40% of Net Profit (beia) 53
Slide 54: HEINEKEN growth algorithm
HEINEKEN growth algorithm LAUNCH OF S&R 2030 ambition later in 2021 LEVERAGE OUR PEOPLE STRENGTHS to evolve our CULTURE, CAPABILITIES and Superior growth OPERATING MODEL Raise the bar on Our unique strengths Sustainability & Long-term value creation & opportunities Accelerated Responsibility and Con
Slide 55: Sustainability & Responsibility focus areas in the next decade
Sustainability & Responsibility focus areas in the next decade Launch of S&R 2030 ambition and programme later in 2021 Environmental sustainability Social sustainability Responsible consumption Carbon Inclusion & Diversity Always a Choice Water Fairness & Safety Moderation Circularity Community Tran
Slide 56: Raise the bar on our people strategy
Raise the bar on our people strategy Strengthen culture Boost capability building Enhance OpCo centric model High speed and agility Inclusion & diversity Disciplined entrepreneurship Consumer & external orientation Strong local talent pipeline Common ways of working Cost conscious culture Foundation
Slide 57: Disciplined entrepreneurship: getting the balance right
“Disciplined entrepreneurship”: getting the balance right Framework Freedom Alignment Empowerment Focus Explore Common process Local relevance Internally collaborative Externally competitive 57
Slide 58: Renewed Executive Team
Renewed Executive Team Dolf van den Brink Laurence Debroux Chief Executive Officer & Chief Financial Officer & Chairman of the Executive Board Member of the Executive Board ET member since: April 2018 ET member since: April 2015 Years in company: 23 Years in company: 6 Marc Busain Roland Pirmez Jame
Slide 59: HEINEKEN growth algorithm
HEINEKEN growth algorithm Superior growth Our unique strengths Raise the bar on Long-term value creation & opportunities Accelerated Sustainability & Continuous investments Responsibility and productivity & sharper People strategy improvements resource allocation Deliver SUPERIOR top-line growth REC
Slide 60: Phasing
Phasing 2020-2021H1 2021H2 - 2023 2024 and beyond Mitigate Recover & Build Grow & Expand Growth Pandemic revenue impact Post pandemic top-line recovery Superior growth Productivity Short-term mitigation €2bn productivity programme Operating leverage Cost-conscious culture Investments Reduce all disc
Slide 61: Expand our aspiration: Green diamond
Expand our aspiration Green diamond Revenue & Market Growth Share Growth Capital Profitability efficiency HEINEKEN Golden Triangle Sustainability & Responsibility Return RONA on Sales 61
Slide 62: Our renewed approach to long-term value creation and goals
Our renewed approach to long-term value creation and goals Deliver SUPERIOR TOP-LINE GROWTH ACCELERATED INVESTMENT to meet fast-changing consumer and customer needs Growth STEP UP capital efficiency Net debt / EBITDA ratio <2.5 30-40% dividend pay-out ratio Capital Profitability efficiency Deliver €
Slide 63: Q&A
Q&A “HEINEKEN ©
Slide 64: HEINEKEN
HEINEKEN