British American Tobacco P.l.c. · LSE:BATS
British American Tobacco P.l.c — Evolution Consumer Conference 2011
18 slides from British American Tobacco P.l.c's conference presentation, Mar 10, 2011
Slide 1: Evolution Consumer Conference 2011
Evolution Consumer Conference 2011 10th March 2011 Ralph Edmondson, Head of Investor Relations, & Brian Fleming, Tobacco Utilization Manager Evolution Consumer Conference, Edinburgh March 2011
Slide 2: Delivering growth in challenging times
Delivering growth in challenging times Volume -2% GDBs 7% Revenue 5% Adjusted Profit 12% Operating margin ppts +2.1 Adj EPS 15% DPS 15% -5% 0% 5% 10% 15% Evolution Consumer Conference, Edinburgh March 2011
Slide 3: Delivering growth in challenging times
Delivering growth in challenging times CAGR 2004 to 2010: Adjusted EPS 15% 175.7 Dividends per share 18% 153.0 128.8 114.2 108.5 98.1 99.5 89.3 83.7 76.6 66.2 55.9 47 41.9 2004 2005 2006 2007 2008 2009 2010 Adj EPS (pence) Div per share (pence) Evolution Consumer Conference, Edinburgh March 2011
Slide 4: Contents
Contents Leaf Supply Chain Scope Leaf Industry Dynamics Leaf Supply Chain Capabilities Sustainability Agenda Innovation Agenda Brian Fleming, Tobacco Utilization Manager
Slide 5: Leaf supply chain scope
Leaf supply chain scope Research Grow Purchase Pack Deploy + 200,000 farmers + 50 source markets 450,000 tons sourced Leaf + 50 ports going + 300 different grades to 45 factories 1000 containers at sea + £1.0bn annual spend at any one time Evolution Consumer Conference, Edinburgh March 2011
Slide 6: BAT leaf operations
BAT leaf operations Uzbekistan USA China Mexico Vietnam Pakistan Venezuela Bangladesh Malaysia India Kenya Cambodia Nigeria Uganda Sri Lanka Peru Congo Brazil Indonesia Fiji Chile Zimbabwe BAT Subsidiaries Associates 17 BAT & 3 Associates Leaf Operation accounting for circa 80% of the Group requirem
Slide 7: Leaf: Vertical integration
Leaf: Vertical integration Vertical integration (% Volume) BAT has a higher percentage of vertical integration amongst industry competitors BAT PMI JTI Competitors have changed position from 2008 with vertical 2008 2010 2008 2010 2008 2010 integration in countries such as Brazil Purchase by Type
Slide 8: Flue Cured Virginia – Supply Trend
Flue Cured Virginia – Supply Trend Excluding -China Unsold Stocks Supply Est. Demand 10 yr Av. Supply. 2,300 200 2,250 180 Supply - Millions of Kilos green 2,200 WUS - Millions of Kilos strip 160 2,150 2,100 140 2,050 120 2,000 100 1,950 80 1,900 60 1,850 1,800 40 1,750 20 1,700 0 2004 2005 2006 200
Slide 9: Burley – Supply Trend
Burley – Supply Trend Excluding -China Unsold Stocks Supply Est. Demand 10 yr Av. Supply. WUS - Millions of Kilos strip Supply - Millions of Kilos green 900 100 90 850 80 800 70 750 60 50 700 40 650 30 20 600 10 550 0 2004 2005 2006 2007 2008 2009 2010LE 2011LE Crop Year Source: Universal Leaf Tobac
Slide 10: Industry dynamics – Food & Tobacco
Industry dynamics – Food & Tobacco Price Index - Food and Tobacco 10 yr Av. Supply. 160 Supply - Millions of Kilos green 150 WUS - Millions of Kilos strip 140 130 120 110 100 90 80 70 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Food Price Index 100 90 82 78 78 78 78 79
Slide 11: Leaf Research and Technology
Leaf Research and Technology Established in 1974 for agronomy Recognised Centre of Excellence for research in tobacco, for Souza the BAT Group and established as a Cruz's (Brazil) to develop global capability in 2010. technology packages. Linked to Global Research & Development and Blending In
Slide 12: Leaf growing
Leaf growing Global Leaf Research & Technology provide technology platform and seed breeding capability. Good Agricultural Practices cascaded to farmers utilising dedicated leaf technical staff Research and Technology Seedlings Inputs Seed Breeding Growing Harvesting Curing Grading Farmer base
Slide 13: Leaf purchasing
Leaf purchasing Management of suppliers Leaf purchasing capability embedded in Global Leaf Pooling organisation (internal and external) is essential to ensure effectiveness UK USA Turkey Malaysia Geographically spread All purchase plans team with experience and optimised through specific tobacco exp
Slide 14: Global Leaf Pooling
Global Leaf Pooling Capabilities Delivering End to End Planning Improved speed to market Stock Management Lower durations Cost Optimisation Complexity reduction Leaf Quality & Integrity Optimal leaf & blend cost. Deployment Guaranteed product quality Master Global Crop Plans Tran
Slide 15: Leaf sustainability
Leaf sustainability Regulation Agricultural Landscape Article 9: Regulation of contents Socio-economic: Social of tobacco products Responsibility in Tobacco Production Article 10: Regulation of tobacco product disclosures Soil & water: Degradation of soil structure and water management- Article
Slide 16: Leaf innovation
Leaf innovation Leaf a consumer differentiation opportunity? - 4 different major types of tobacco - 300 different grades of tobacco - +50 different sourcing locations - Decades of experience. Evolution Consumer Conference, Edinburgh March 2011
Slide 17: Summary
Summary Vertical integration is still a point of difference even though major competitors are adopting a similar model Core capabilities through the leaf supply chain provide competitive advantage Decades of operating in the leaf business provides experience and knowledge Major future challe
Slide 18: Evolution Consumer Conference 2011
Evolution Consumer Conference 2011 10th March 2011 Ralph Edmondson, Head of Investor Relations, & Brian Fleming, Tobacco Utilization Manager Evolution Consumer Conference, Edinburgh March 2011
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