Slide 1: Sonae Investor Presentation, Milan, 21 October 2009
SONAE INVESTOR PRESENTATION Milan, 21 October 2009
Slide 2: Address investors' key questions and concerns
This p presentation aims to... Address investor’s key questions and concerns 02
Slide 3: What is Sonae's equity story?
What is Sonae Sonae’ss equity story? 03
Slide 4: Q1. We are a retail company
Q1. What is Sonae’s equity story? WE ARE A RETAIL COMPANY • Market leader in food and specialized retail formats • With Board control of a Shopping Centre and a Telecommunications business SONAE Turnover 5.4 billion euros (2008) ; EBITDA 617 million euros (2008) 100% % 100% % 100% % 550% % 53% ... F
Slide 5: Q1. With a stable shareholder structure
Q1. What is Sonae’s equity story? WITH A STABLE SHAREHOLDER STRUCTURE • Reference shareholder, Efanor, a family holding company Share Capital Efanor 2,000 million 53 10% 53.10% Average daily volume (YTD 1 Sept S t 09)) Others ~9 million shares 35.50% Market Capitalization (as of 1 Sept 09) 1 7 billi
Slide 6: Q1. Driven by strong management values and culture
Q1. What is Sonae’s equity story? DRIVEN BY STRONG MANAGEMENT VALUES AND CULTURE ABOVE AVERAGE SHAREHOLDER RETURN Long‐term Long term Efficiency Efficienc Restless Aiming for Ambition perspective driven innovation Leadership aimed at growth approach and cost and challenge to succeed and creating to
Slide 7: What are the growth prospects for your food retail formats?
What are the growth prospects for your food retail formats? 07
Slide 8: Q2. Modelo Continente has reinforced its leadership position
Q2. What are the growth prospects for your food retail formats? MODELO CONTINENTE HAS REINFORCED ITS LEADERSHIP POSITION • Food retail leader in Portugal • With 322 stores and sales area of 500,000 500 000 m2 Hypermarkets yp Supermarkets p Modelo Continente Continente Modelo • 39 stores • 116 stores
Slide 9: Q2. Leadership translated into turnover and profitability growth
Q2. What are the growth prospects for your food retail formats? LEADERSHIP TRANSLATED INTO TURNOVER AND PROFITABILITY GROWTH • In I a tough t h market k t environment, i t food f d retail t il iis delivering d li i on top t line li growth th • Improvements in internal operating efficiency reflected
Slide 10: Q2. Growth achieved while sustaining ROIC
Q2. What are the growth prospects for your food retail formats? GROWTH ACHIEVED WHILE SUSTAINING ROIC Notwithstanding h d h highh investment llevel,l return on invested capital has remained attractive (21%) CAPEX (M€) EBIT (LTM) / Invested capital 123 23% 21% 16% 64 53 Invested Capital= investment p
Slide 11: Q2. Private label investment
Q2. What are the growth prospects for your food retail formats? PERFORMANCE REFLECTS SUCCESS OF OPERATING INITIATIVES & INNOVATION Strong investment in private label • Reinforcement of value proposition, with new products and packaging • Investment started more heavily in mid 2007 • Adapted to macro
Slide 12: Q2. Success of loyalty card
Q2. What are the growth prospects for your food retail formats? PERFORMANCE REFLECTS SUCCESS OF OPERATING INITIATIVES & INNOVATION Success of loyalty card • Launched in January 2007 • Approximately 86% of sales made using the loyalty card • Alows for targetes and customized promotions • Enhanced dif
Slide 13: Q2. Investment in perishables
Q2. What are the growth prospects for your food retail formats? PERFORMANCE REFLECTS SUCCESS OF OPERATING INITIATIVES & INNOVATION Investement in perishables • Implementation of “Missão Frescos”: project to increase leadership in he perishables category, targeted g to improve p q qualityy of p produ
Slide 14: Q2. Benefits from integration of ex-Carrefour stores
Q2. What are the growth prospects for your food retail formats? PERFORMANCE REFLECTS SUCCESS OF OPERATING INITIATIVES & INNOVATION Benefits from integration of ex‐Carrefour stores • Successful integration of 12 stores, 95 000 m2 of sales area and 33,000 95,000 000 employees • Full completion af AdC
Slide 15: Q2. Performance also reflects strong value proposition
Q2. What are the growth prospects for your food retail formats? PERFORMANCE ALSO REFLECTS STRONG VALUE PROPOSITION M d l Continente’s Modelo C ti t ’ formats f t hhave kkey diff differentiating ti ti ffactors t STRONG WIDE BRANDS RANGE The most STRONG OF PRIVATE trusted brand PERISHABLES LABEL for t
Slide 16: What can we expect from your Specialized Retail formats?
What can we expect from your Specialized Retail formats? 16
Slide 17: Q3. Specialized retail unit with market leader formats
Q3. What can we expect from your Specialized Retail formats? SPECIALIZED RETAIL UNIT WITH MARKET LEADER FORMATS Exploitation of business opportunities that leverage on Sonae Sonae’ss exceptional asset base in Portugal... Portugal a way to expand growth options Home o e Apliances p a ces Sports & Ele
Slide 18: Q3. Clear growth during the last 12 months
Q3. What can we expect from your Specialized Retail formats? CLEAR GROWTH DURING THE LAST 12 MONTHS Consolidation of position in Portugal and first steps taken towards internationalization Success in i ddefending f di market k Entrance into i Spanish i h market k leadership in: with positive first s
Slide 19: Q3. Turnover growth in specialized retail
Q3. What can we expect from your Specialized Retail formats? CLEAR GROWTH DURING THE LAST 12 MONTHS • Strong turnover growth in the semester, mainly driven by strong expansion of the last 12 months • Like‐for‐like sales down only 3% (strong 2% growth in 2Q09) • Growth in the textile and sports forma
Slide 20: Q3. EBITDA and international investment impact
Q3. What can we expect from your Specialized Retail formats? CLEAR GROWTH DURING THE LAST 12 MONTHS • EBITDA reflects the strong investment in organic growth both in Portugal and in Spain • Portuguese operation posting an increase in EBITDA and margin, driven by scale benefits mainly at the textile
Slide 21: Q3. Investment impacting short term returns
Q3. What can we expect from your Specialized Retail formats? INVESTMENT IMPACTING SHORT TERM RETURNS Commitment C i to grow international retailing activities has short term impact on returns CAPEX (M€) EBIT (LTM) / Invested capital 87 16% 14% 56 30 Invested Capital= 4% investment properties + techn
Slide 22: Can we expect further negative impacts from devaluation of properties?
Can we expect further negative impacts from devaluation of properties? 22
Slide 23: Q4. Yields across Europe continue to increase
Q4. Can we expect further negative impacts from devaluation of properties? YIELDS ACROSS EUROPE CONTINUE TO INCREASE... BUT AT A LOWER RATE Negative non‐cash effect from the devaluation of assets YIELD EVOLUTION 2008 1H09 Portugal +56bp +39bp Spain +95bp +51bp Italy +78bp +28bp Germany +42bp +8bp Ro
Slide 24: Q4. Shopping centres improving direct results
Q4. Can we expect further negative impacts from devaluation of properties? SHOPPING CENTRES IMPROVING DIRECT RESULTS Reflecting the cost control initiatives implemented and... • Occupancy rates kept at high levels (94%) • Flat total rents collected (variable + fixed) on a like like‐for‐like for like
Slide 25: What should we expect from your Shopping Centres pipeline?
What should we expect from your Shopping Centres pipeline? 25
Slide 26: Q5. The pace of launch will be slowed down
Q5. What should we expect from your Shopping Centres pipeline? THE PACE OF LAUNCH WILL BE SLOWED DOWN A total of 14 projects disclosed in the pipeline • Projects under analysis regarding their opening • Adapted to current constraints in financial markets (only projects committed with financing will
Slide 27: What are your strategic options for the telecommunications business?
What are your strategic options for the telecommunications business? 27
Slide 28: Q6. Sonaecom is a significant player and valuable asset
Q6. What are your strategic options for the telecommunications business? SONAECOM IS A SIGNIFICANT PLAYER AND A VALUABLE ASSET IN THE TELCO MARKET An integrated operator • Sonaecom is present in all Telco segments ‐ residential, corporate, SME and SOHOs and Wholesale ‐ with mobile, wireline and conv
Slide 29: Q6. Showing resilience in the face of weak economic market
Q6. What are your strategic options for the telecommunications business? SHOWING RESILENCE IN THE FACE OF WEAK ECONOMIC MARKET To date, no material impact from economic recession continue to deliver a good set of operating and financial results in 1H09 However, we are cautious for 2H09, due to: • Lo
Slide 30: Q6. Sustainable stand alone business
Q6. What are your strategic options for the telecommunications business? SUSTAINABLE STAND ALONE BUSINESS • Stable/growing mobile business: growing market share; sustaining good margins • Good performing wholesale: Corporate & Wireline business • Fully integrated telecom’s structure and convergent m
Slide 31: Q6. Mature Portuguese telecommunications market
Q6. What are your strategic options for the telecommunications business? MATURE PORTUGUESE TELECOMMUNICATIONS MARKET Sonaecom h S has b been able bl to strengthen h its market position, in a market that is not growing in revenues SHARE OF TOTAL REVENUES 6,879M€ 6,784M€ 6,760M€ 6,830M€ 6,999M€ Others
Slide 32: Q6. Competitive Portuguese telecommunications market
Q6. What are your strategic options for the telecommunications business? COMPETITIVE PORTUGUESE TELECOMMUNICATIONS MARKET Four main players offering/planning to offer Voice, Broadband and Pay TV over different Fixed and Mobile access technologies VOICE BROADBAND PAY TV Fixed Mobile Fixed Mobile Fixe
Slide 33: Isn't Sonae a highly leveraged company?
Isn’t Sonae a highly leveraged company? 33
Slide 34: Q7. Adequate structure at each business with long average maturities
Q7. Isn’t Sonae a highly leveraged company? ADEQUATE STRUCTURE AT EACH BUSINESS WITH LONG AVERAGE MATURITIES (end 1H09) NET DEBT/EBITDA (end 1H09) •Sonae’s weighted average maturity standing at approximately 5.3 years • No major debt repayments in the short term RETAIL: 4.3x • Retail R t il formats
Slide 35: What are your value triggers for the next years?
What are your value triggers for the next years? 35
Slide 36: Q8. Corporate strategic guidelines for future growth were disclosed
Q8. What are your value triggers for the next years? CORPORATE STRATEGIC GUIDELINES FOR FUTURE GROWTH WERE DISCLOSED Main goal is to transform Sonae into a large multinational corporation Go international • Top strategic objective • Target growth geographies and mature markets • Use concepts believe
Slide 37: Q8. Important organizational changes were implemented
Q8. What are your value triggers for the next years? IMPORTANT ORGANIZATIONAL CHANGES WERE IMPLEMENTED Changes designed to provide the necessary focus as well as to further develop internal competencies and management abilities Reorganize g Retail into 3 separate p Businesses • 2 core businesses: Fo
Slide 38: Q8. Newly created retail real estate business unit
Q8. What are your value triggers for the next years? NEWLY CREATED RETAIL REAL ESTATE BUSINESS UNIT Expected to be an important source of capital RATIONALE HYPERMARKETS • Manage Assets more proactively CONTINENTE • Build Retail Real Estate • 33 stores owned competencies • 88% total sales area • Part
Slide 39: What is your dividend policy?
What is your dividend policy? 39
Slide 40: Q8. Gradually increase the dividend per share
Q8. What is your dividend policy? GRADUALLY INCREASE THE DIVIDEND PER SHARE The resilence of the cash flows generated at almost all businesses gives confidence on the ability to maintain shareholder remuneration policy DIVIDEND PER SHARE 2008: 3 Cents DIVIDEND YIELD: 6.9% 9 Considering 2008.12.31 Sh
Slide 41: Conclusion: Sonae an attractive investment opportunity
Conclusion SONAE AN ATTRACTIVE INVESTMENT OPPORTUNITY • Confirmed growth in Turnover and Profitability • Showing resilence in the face of macroeconomic conditions • A clear l and d ambitious bi i strategy, with i h high hi h growth th potential i l • Strong culture and values • High quality manageme