Pernod Ricard SA · EURONEXT:RI
Pernod Ricard SA — FY2007/08 Earnings Presentation
68 slides from Pernod Ricard SA's earnings presentation, Sep 18, 2008
Slide 1: 2007/08 annual results
2007/08 annual results Outstanding 2007/08 financial year Continuing growth in 2008/09, enhanced by the integration of Vin & Sprit 18 September 2008 1
Slide 2: 2007/08 key figures
2007/08 key figures Net sales: € 6,589 million (+9%(1)) Net Profit from recurring operations*: € 1,522 million (+13%(1)) Profit Net profit from recurring operations**- Group share: Net € 897 million (+8%) Net profit - Group share: € 840 million (+1%) Net (1) Organic growth * Previously referred to a
Slide 3: 2007/08 changes in the business environment
2007/08 changes in the business environment Strong growth in emerging countries and continuing strong growth in Strong western markets Strong appreciation of the Euro against most other currencies, in Strong in particular the USD, GBP and KRW Decrease of USD interest rates but renewed inflationary p
Slide 4: 2007/08 highlights
2007/08 highlights Acquisition of Vin & Sprit Group and ABSOLUT VODKA Acquisition (Contract signed: 30 March 2008, deal closed: 23 July 2008) Outstanding sales and operating profitability growth in all regions Outstanding regions Further increase in promotion and advertising expenditure, in Further
Slide 5: Post-balance sheet events
Post- Post-balance sheet events Taking back, as of 1 October 2008, of ABSOLUT VODKA’s Taking distribution in the US(1) and in most other markets worldwide(2) Sale of the Cruzan brand to Fortune Brands(1) Sale Strong appreciation of the USD against the Euro Strong (1) See press release dated 08/28/20
Slide 6: Presentation structure
Presentation structure - Net profit from recurring operations - Group share - Profit from recurring operations - Summarised consolidated income statement - Analysis by geographic region - Financial income/(expenses) from recurring operations and debt - Other net profit from recurring operations item
Slide 7: Summarised consolidated income statement
Summarised consolidated income statement FY FY(1) FY ∆ ∆ (€ millions) 07/08 06/07 07/08 Organic Net sales 6,443 6,886 6,589 +2.3% +8.7% Gross margin after logistics costs 3,587 3,966 3,766 +5.0% +11.0% Gross margin / sales 55.7% 57.6% 57.2% Advertising and promotion expenditure (1,101) (1,235) (1,17
Slide 8: Foreign exchange/Group structure effects
Foreign exchange/Group structure effects FY Organic Forex Group FY (€ millions) 06/07 growth impact structure 07/08 Net sales 6,443 547 (297) (104) 6,589 Profit from recurring operations 1,447 192 (106) (11) 1,522 Negative foreign exchange impact on profitability: € 106 million reduction in PRO, mai
Slide 9: Net sales
Net sales FY FY(1) Organic FY (€ millions) 06/07 07/08 growth 07/08 Net sales 6,443 6,886 +8.7% 6,589 Continuing strong sales growth in all regions, with in particular particular a very strong development in emerging markets(2) (+22%(3)) Growth enhanced by that of Top 15 (+11%(3)) and premium spirit
Slide 10: Top 15 growth: 07/08 vs 06/07
Top 15 growth: 07/08 vs 06/07 VOLUME 12% +9% A dynamic Top 15 8% +5% 4% Favourable comparison basis in FY 06/07 0% FY 06/07 FY 07/08 SALES * 20% 16% +13% 12% +11% Sales growth more than double that of 8% 4% volume growth 0% FY 06/07 FY 07/08 Highly favourable mix and pricing effects for all our stra
Slide 11: 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 the decline decline 10% 11% in China (Sichuan) and the US (difficult market) Good performance in Europe and continuing mix improvement 9% 11% thanks to Asia Slight decre
Slide 12: Top 15 growth: 07/08 vs 06/07
Top 15 growth: 07/08 vs 06/07 Volume Organic Comments growth sales growth Confirmed dynamism in the US and sharp growth in most 9% 12% other significant markets Continuing strong growth, in line with that of previous 15% 17% years Confirmed dynamism in the US and very strong growth in 10% 14% Asia:
Slide 13: Gross margin after logistics costs
Gross margin after logistics costs FY FY(1) Organic FY (€ millions) 06/07 07/08 growth 07/08 Gross margin after logistics costs 3,587 3,966 +11.0% 3,766 Gross margin / sales 55.7% 57.6% 57.2% +190bps Further strong improvement in gross margin after logistics costs / sales ratio This increase was due
Slide 14: Advertising and promotion expenditure
Advertising and promotion expenditure FY FY(1) Organic FY (€ millions) 06/07 07/08 growth 07/08 A&P expenditure (1,101) (1,235) +12.3% (1,178) A&P expenditure / sales 17.1% 17.9% 17.9% +80bps The very strong profit margin growth and vigorous profit growth enabled us to accelerate advertising and pro
Slide 15: Contribution after A&P expenditure
Contribution after A&P expenditure FY FY(1) Organic FY (€ millions) 06/07 07/08 growth 07/08 Contribution after A&P expenditure (CAPE) 2,486 2,731 +10.4% 2,588 CAPE / sales 38.6% 39.7% 39.3% +110bps value Continuing portfolio premiumisation and implementation of the value strategy … … and cessation
Slide 16: Structure costs
Structure costs FY FY(1) Organic FY (€ millions) 06/07 07/08 growth 07/08 Structure costs* (1,039) (1,103) +6.4% (1,066) Structure costs / sales 16.1% 16.0% 16.2% * Structure costs: Selling expenses +General & administrative expenses +Other income/(expenses) -10bps 10 bps reduction in the structure
Slide 17: Profit from recurring operations
Profit from recurring operations FY FY(1) Organic FY (€ millions) 06/07 07/08 growth 07/08 Profit from recurring operations 1,447 1,628 13.4% 1,522 PRO / sales 22.5% 23.7% 23.1% +120bps Sharp improvement in PRO / sales ratio (+120bps(1)) • Value strategy / Portfolio premiumisation +110bps(1) 10bps(1
Slide 18: Profitability analysis per half-year
Profitability analysis per half- half-year Gross margin after logistics 62% 60% +200bps +170bps Strong gross margin growth throughout 58,0% 58% 56% 56,0% 55,3% 57,0% 2007/08 54% HY1 HY2 FY 06/07 FY 07/08* A&P expenditure 22% 20% 19.2% 18% 16.9% 18.4% Confirmed increase in A&P expenditure 16.0% 16% 1
Slide 19: Presentation structure
Presentation structure - Net profit from recurring operations - Group share - Profit from recurring operations - Summarised consolidated income statement - Analysis by geographic region - Financial income/(expenses) from recurring operations and debt - Other net profit from recurring operations item
Slide 20: Contribution to Growth / Region
Contribution to Growth / Region Profit from recurring operations 15 35 (€ millions) 73 8% 1,639 18% 69 38% 36% 1,447 100% PRO FY 07/08 PRO FY 06/07 Asia & RoW Americas Europe France on a like-for-like basis recurring All regions experienced strong organic growth in profit from rec urring operations
Slide 21: Asia – Rest of World
Asia – Rest of World FY FY (€ millions) 07/08 ∆ Organic growth 06/07 Net sales(1) 1,884 2,007 +7% +13% Gross margin after logistics costs 946 1,040 +10% +18% Gross margin / sales 50.2% 51.8% A&P expenditure (344) (383) +11% +18% A&P / sales 18.3% 19.1% Profit from recurring operations(2) 389 422 +8%
Slide 22: Americas
Americas FY FY (€ millions) 07/08 ∆ 06/07 Organic growth Net sales(1) 1,786 1,700 -5% +8% Gross margin after logistics costs 971 961 -1% +11% Gross margin / sales 54.4% 56.5% A&P expenditure (283) (284) - +10% A&P / sales 15.8% 16.7% Profit from recurring operations(1) 418 421 +1% +18% PRO / sales 2
Slide 23: Europe (excluding France)
Europe (excluding France) FY FY (€ millions) 07/08 ∆ 06/07 Organic growth Net sales(1) 2,091 2,171 +4% +7% Gross margin after logistics costs 1,202 1,269 +6% +7% Gross margin / sales 57.5% 58.4% A&P expenditure (312) (340) +9% +11% A&P / sales 14.9% 15.7% Profit from recurring operations(1) 506 530
Slide 24: France
France FY FY (€ millions) 07/08 ∆ 06/07 Organic growth Net sales(1) 682 711 +4% +5% Gross margin after logistics costs 467 496 +6% +6% Gross margin / sales 68.6% 69.7% A&P expenditure (162) (170) +6% +6% A&P / sales 23.7% 24.0% Profit from recurring operations(1) 134 149 +12% +11% PRO / sales 19.6%
Slide 25: Analysis by geographic region
Analysis by geographic region Balanced sales distribution and profitability levels between regions FY 07/08 FY 07/08 Sales Profit from recurring operations France 11% Europe 10% 30% 28% Americas 33% Asia and 35% RoW 26% 27% 25
Slide 26: Presentation structure
Presentation structure - Net profit from recurring operations - Group share - Profit from recurring operations - Summarised consolidated income statement - Analysis by geographic region - Financial income/(expenses) from recurring operations and debt - Other net profit from recurring operations item
Slide 27: Financial income/(expense) from recurring operations
Financial income/(expense) from recurring operations (€ millions) Net financing costs (316) Other financial income/(expense) from recurring operations (17) Financial income/(expense) from recurring operations (333) The average cost of borrowing* was 4.9%, a slight decline compared compared to the pr
Slide 28: Changes in net debt
Changes in net debt 315 (277) (71) 405 (€ millions) (6,515) (6,143) t w + s e en t Flo t n nd as tm b ta sh a sse it io f u rch d jus e ld 7 Ca ial uis sio n +pu res a ta t t ia .0 ee n c l/a c q n ds y sh a ion b Ini .06 Fr Fin a sa pe n e r ls at e t d .08 o an 3 0 po t t ivid easu Tr e N .06 dis
Slide 29: Free Cash Flow
Free Cash Flow (€ millions) FY 06/07 FY 07/08 Profit from recurring operations 1,447 1,522 Asset depreciation, provision movements and other 162 181 Self financing capacity from recurring operations 1,609 1,703 Non-current items (119) (166) Self-financing capacity 1,490 1,537 Decrease (increase) in
Slide 30: Pro forma net debt at June 2008
Pro forma net debt* at 30 June 2008 (5,732) (11,875) € millions (6,143) t at ct ta ebt pa eb ald 8 im ad t i .0 S rm Ini .06 V& o fo 08 30 . Pr .06 30 Debt at 30 June 2008 increased by cost and impact of the V&S acquisition acquisition * Net debt after impact of V&S acquisition 30
Slide 31: Pro forma net debt at 30 June 2008 1/2
Pro forma net debt* at 30 June 2008 1/2 Analysis of debt by nature: Syndicated loan 77% Bonds 20% Miscellaneous 3% 100% Aged analysis (€ (€ millions) taking account of syndicated loan maturity 2 to 5 years (5,442) 44% > 5 years (6,833) 56% (12,275) 100% Cash and marketable securities 400 Net debt (1
Slide 32: Pro forma net debt at 30 June 2008 2/2
Pro forma net debt* at 30 June 2008 2/2 Analysis of net debt by currency: % Euro 42% % USD 57% % Other currencies 1% Total 100% Variable, capped variable and fixed interest rate hedging: Variable rates Variable rates Fixed Fixed rates within collars Euro 43% 28% 29% USD 27% 31% 42% Other currencies
Slide 33: Changes in pro forma net debt
Changes in pro forma net debt* Based on a USD/€ rate of 1.42, pro forma debt* at 30 June 2008 would have approximated € 12.6 billion (compared to € 11.9 billion at USD/€ rate of 1.58) In HY1 2008/09, net debt will be adversely affected by the payment payment of the dividend, the payment of compensat
Slide 34: Presentation structure
Presentation structure - Net profit from recurring operations - Group share - Profit from recurring operations - Summarised consolidated income statement - Analysis by geographic region - Financial income/(expenses) from recurring operations and debt - Other net profit from recurring operations item
Slide 35: Corporate income tax
Corporate income tax Corporate income tax: € (224) million Rate: 20.5% Corporate income tax on items from Tax recovery on non- non-recurring items: recurring operations: € (263) million € 39 million Rate: 22.2% The improvement in the effective taxation rate on recurring operations operations was due
Slide 36: Minority interests
Minority interests FY 06/07 FY 07/08 Minority interests (25) (29) Minority interests notably include: • Havana Club • Corby (Canada) 36
Slide 37: Presentation structure
Presentation structure - Net profit from recurring operations - Group share - Profit from recurring operations - Summarised consolidated income statement - Analysis by geographic region - Financial income/(expenses) from recurring operations and debt - Other net profit from recurring operations item
Slide 38: Net profit from recurring operations - Group share
Net profit from recurring operations - Group share (€ millions) FY FY(1) FY ∆ (1) ∆ 06/07 07/08 07/08 Profit from recurring operations 1,447 1,628 +12.5% 1 522 +5.2% Financial income/(expense) from recurring (341) (346) +1.5% (333) -2.3% operations Corporate income tax on recurring operations (249)
Slide 39: Net earnings per share from recurring operations - Group share
Net earnings per share from recurring operations - Group share FY (1) FY (€ millions) and €/share 06/07 07/08 Diluted number of shares (thousands) 214,983 217,234 +1.0% Net profit from recurring operations 833 897 +7.7% Diluted net earnings per share from recurring 3.87 4.13 +6.6% operations 7% grow
Slide 40: Dividend: 5% growth
Dividend: 5% growth € 2003(1) ∆ 04/05(1) ∆ 05/06(1) ∆ 06/07(1) ∆ 07/08 Proposed 0.81 +10% 0.90(2) +17% 1.05 +20% 1.26 +5% 1.32 dividend Dividends submitted for approval to the AGM of 5 November 2008 5% dividend increase, which reflects: Growth in financial year net profit from recurring operations T
Slide 41: Presentation structure
Presentation structure - Net profit from recurring operations - Group share - Profit from recurring operations - Summarised consolidated income statement - Analysis by geographic region - Financial income/(expenses) from recurring operations and debt - Other net profit from recurring operations item
Slide 42: Non-recurring items
Non- Non-recurring items Restructuring costs and costs related to the V&S acquisition were were partly offset by actuarial gains recognised on a UK pension fund (€ millions) FY 07/08 Restructuring costs (26) • Implementation of industrial restructuring and structure optimisation Other non-recurring
Slide 43: Net profit - Group share
Net profit - Group share FY FY (€ millions) 06/07 07/08 Profit from recurring operations 1,447 1,522 +5.2% Other operating income/(expenses) 20 (81) N/A Operating profit 1,467 1,441 -1.7% Financial income/(expense) from recurring operations (341) (333) -2.3% Non-recurring financial items (10) (16) N
Slide 44: Conclusion and outlook
S% “> Pernod Ricard Conclusion and outlook SS OS
Slide 45: Conclusion 2007/08
Conclusion 2007/08 An outstanding year for Pernod Ricard Strong sales growth in all regions Further growth in profitability and profit margins Continued improvement of debt ratios Successful acquisition of Vin & Sprit, owner of ABSOLUT VODKA 45
Slide 46: 2008/09 Outlook
2008/09 Outlook: In a more difficult general environment In Continuing strong growth in emerging markets Continuing Moderate growth overall in other markets with contrasting and Moderate more difficult situations in particular in Spain, in the UK Context of reduction in advertising and promotion spe
Slide 47: 2008/09 Outlook: Foreign exchange and group structure effects
2008/09 Outlook: Foreign exchange and group structure effects Based on current exchange rates(1) : Based • The positive foreign exchange effect on Pernod Ricard's original group structure is estimated at between € 30 and € 40 million on the 2008/09 profit from recurring operations • V&S’ V&S’ 2007 P
Slide 48: 2008/09 Outlook: Integration of Vin & Sprit
2008/09 Outlook: Integration of Vin & Sprit The taking back, as of 1October 2008, of ABSOLUT’s distribution by The the Pernod Ricard network will enable accelerated realisation of synergies, revalued at € 150 million in a full- full-year, of which: • at least 50% will be implemented in the 2008/09 f
Slide 49: 2008/09 Outlook: 1st quarter 2008/09
2008/09 Outlook: 1st quarter 2008/09 Q1 2008/09 sales growth will be affected by several unfavourable Q1 items: • Very strong comparison basis (up 12% in Q1 2007/08) • Low growth expected in North America: continuing difficult environment, environment, tighter credit terms (pressure from trade and w
Slide 50: 2008/09 Outlook: Full-year guidance
2008/09 Outlook: Full- Full-year guidance except for a severe deterioration in the global business environment environment Original Pernod Ricard group structure: organic growth guidance for 2008/09 profit from recurring operations of about 8% Integration of Vin & Sprit: strong growth by ABSOLUT VOD
Slide 51: Pernod Ricard
% “> Pernod Ricard
Slide 52: Appendices
S% “> Pernod Ricard Appendices SS OS
Slide 53: Strategic brands sales volume and organic growth
Strategic brands sales volume and organic growth Volumes Net sales Volume 12 months 2007/08 organic growth (Millions 9 litre change cases) Chivas Regal 4,5 10% 11% Ballantine's 6,4 9% 11% Ricard 5,6 -3% -1% Martell 1,6 2% 24% Malibu 3,7 6% 10% Kahlua 2,1 -4% -5% Jameson 2,6 15% 21% Beefeater 2,4 1%
Slide 54: Portfolio review
Portfolio review Volume +10% Sales* +11% Chivas 18 and 25 year old grew by +42% vs +9% for Chivas 12 year old Asia: • Growth due in particular to Thailand, Duty Free, Vietnam and the Persian Gulf • Decline in China, due to the repercussions of the Sichuan earthquake Europe: • Strong growth in Wester
Slide 55: Portfolio review
Portfolio review Volume +9% Sales* +11% Ballantine’s Finest: • Western Europe: Growth in France, Switzerland, Portugal and Greece, stability in Spain, decline in Italy and Germany Good performance by Duty Free • Rapid expansion in numerous Central and Eastern European countries: Poland, Russia, Hung
Slide 56: Portfolio review
Portfolio review Volume +15% Sales* +21% Continuing outstanding development in the US with 12-month depletions +24% (Nielsen +29%, NABCA +20%) Very strong growth in South Africa Double-digit growth in Europe, due in particular to Ireland, Eastern Europe, Portugal and Duty Free Volume +10% Sales* +14
Slide 57: Portfolio review
Portfolio review Volume +2% Sales* +24% Value Strategy stepped up Superior qualities: volume +21% • Rapid development in Asia: China, Malaysia, Singapore, Taiwan, Vietnam, … • Top premium qualities posted the most outstanding growth rates: VSOP (+5%), Noblige (+76%), Cordon Bleu (+18%), XO (+29%) Ma
Slide 58: Portfolio review
Portfolio review Volume -3% Sales* -1% France: slight decrease of the brand in a declining market, adversely affected by bad weather and the smoking ban Slight decrease also in all other European markets Volume +15% Sales* +17% Double-digit growth in all regions In Europe: double-digit growth in all
Slide 59: Portfolio review
Portfolio review Volume +6% Sales* +10% Growth in Europe: UK, Spain, Belgium, Italy, Russia, Poland and Duty Free Dynamic sales in the US: 12-month depletions +5% (Nielsen +5%, NABCA +7%) Volume -4% Sales* -5% US: Situation remains difficult, 12-month depletions -7% (Nielsen +2%, NABCA -3%) Overall
Slide 60: Portfolio review
Portfolio review Volume +1% Sales* +4% Europe: • Spain: slight volume growth in a declining category • Strong growth in other key markets: UK, Russia, Czech Republic US: market that remains difficult, 12-month depletions -3% (Nielsen -0.5%, NABCA -3%) Volume +9% Sales* +12% US: sales growth enhanced
Slide 61: Portfolio review
Portfolio review Volume +2% Sales* +6% Progression and premiumisation Volume growth in the UK, its top market, with a Q4 in decline, impacted by the increase in duties Strong growth in Asia and Canada 17% growth in superior qualities (3 Vines, Reserve, Heritage, Sparkling), which account for nearly
Slide 62: Portfolio review
Portfolio review Volume +11% Sales* +18% Confirmed strong growth in the French market with market share gains in off-trade and on- trade (growth would have been even higher without stock limitation) Decline in the UK, but strong growth in Italy, Spain, Switzerland and Russia Volume +3% Sales* +14% S
Slide 63: Summarised Consolidated Income Statement (1/2)
Summarised Consolidated Income Statement (1/2) (€ millions) FY 06/07 FY 07/08 ∆ Net sales (excluding tax and duties) 6,443 6,589 +2.3% Gross margin* 3,827 3,998 +4.5% Logistics costs (240) (232) -3.3% Gross margin after logistics costs 3,587 3,766 +5.0% A&P expenditure (1,101) (1,178) +7.0% Contribu
Slide 64: Summarised Consolidated Income Statement (2/2)
Summarised Consolidated Income Statement (2/2) (€ millions) FY 06/07 FY 07/08 ∆ Profit from recurring operations 1,447 1,522 +5.2% Other operating income and expenses 20 (81) N/A Operating profit 1,467 1,441 -1.7% Financial income/(expense) from (341) (333) -2.3% recurring operations Non-recurring f
Slide 65: Foreign exchange / Group structure effects
Foreign exchange / Group structure effects FY Organic Forex Group (€ millions) FY 07/08 06/07 growth impact structure Sales 6,443 547 (297) (104) 6,589 Gross margin after logistics costs 3,587 394 (199) (15) 3,766 Gross margin / sales 55.7% 57.2% A&P expenditure (1,101) (136) 57 2 (1,178) A&P / sale
Slide 66: Consolidated Balance Sheet 1/2
Consolidated Balance Sheet 1/2 (€ millions) 30.06.07 30.06.08 Intangible assets and goodwill 11,313 10,341 Property, plant and equipment and investments 1,858 1,822 Deferred tax assets 839 722 Total non- non-current assets 14,010 12,885 Inventories and receivables 5,079 5,125 Cash and cash equivalen
Slide 67: Consolidated Balance Sheet 2/2
Consolidated Balance Sheet 2/2 (€ millions) 30.06.07 30.06.08 Shareholders’ equity 6,290 6,420 Minority interests 168 177 of which profit attributable to minority interests 25 29 Shareholders’ Shareholders equity – attributable to equity holders 6,458 6,597 of the parent Non-current provisions and d
Slide 68: Number of shares included in EPS calculation
Number of shares included in EPS calculation (in thousands) FY FY FY 06/07 06/07 07/08 Number of shares in issue at end of period 109,612 219,224 219,683 Weighted number of shares in issue (prorata temporis) 109,308 218,615 219,460 Number of treasury shares (3,649) (7,298) (5,413) Dilutive impact of