Vina Concha Y Toro S.a. · BCS:CONCHATORO
Vina Concha Y Toro — Q4 2018 Earnings Presentation
35 slides from Vina Concha Y Toro's earnings presentation, Mar 21, 2019
Slide 1: Investor Presentation 2018 – 4Q18
Investor Presentation 2018 – 4Q18 March, 2019
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains forward-looking statements, that should be considered as good faith estimates. Such statements are subject to risks and uncertainties outside of Viña Concha y Toro’s control that could cause Viña Concha y Toro’s actual results to differ materiall
Slide 3: Agenda
Agenda I. 2022 Strategy update II. 2018 Results III. Industry trends
Slide 4: A new strategy for a changing scenario
A new strategy for a changing scenario IN 2017, THE COMPANY MADE A THROUGHOUT REVISION TO ITS BUSINESS MODEL IN RESPONSE TO THE NEW REALITY OF ITS MARKETS: • CONSOLIDATION IN DISTRIBUTION AND RETAIL INDUSTRIES • ENTRY OF NEW CONSUMERS • STRONG CONSUMPTION TRENDS FOR PREMIUM WINE SINCE 2017, THE COMP
Slide 5: 2022 Strategy Pillars
2022 Strategy Pillars 1. RESTRUCTURING PROCESS AND COST SAVINGS 2. A NEW COMMERCIAL STRATEGY • FOCUS ON PRINCIPAL AND INVEST BRANDS • FOCUS ON HIGH POTENTIAL MARKETS 5
Slide 6: 2022 Strategy Targets
2022 Strategy Targets TO DOUBLE THE OPERATING INCOME FROM $70,000 MM IN 2016/17 TO $140,000 MM IN 2022 (CH$ MILLION) 2016 2022 CAGR SALES 658,000 854,000 4.0% OPERATING INCOME 70,000 140,000 12.0% OPERATING MARGIN 10.7% 16.4% +5.7pp 6
Slide 7: Restructuring process – Estimated savings
Restructuring process – Estimated savings NET ESTIMATED SAVINGS OF CH$18,800 MILLION (Ch$ million) 2018 2019 Full Year Efficiencies and synergies 10,466 17,656 18,802 from program Severance payments, (6,141) (1,668) consultancies Net savings 4,325 15,989 18,802 7
Slide 8: New commercial strategy
New commercial strategy We seek to lead the global wine industry through a consumer-centric focus, oriented to the development of premium brands, delivering a higher value to our customers, through a simple, agile, and sustainable productive model. We have carried out significant adjustments in the
Slide 9: Premium wine leading growth in global markets
Premium wine leading growth in global markets 9
Slide 10: Brand matrix: Higher value in Principal and Invest brands
Brand matrix: Higher value in Principal and Invest brands INVEST PRINCIPAL • Don Melchor • Trivento Golden • Casillero del Diablo • MCC • Trivento Reserve • Diablo • 1,000 Stories • CdD Reserva Especial1 • Bonterra CS • CS Orgánico • CS Bicicleta • Trio WATCH • Fetzer PROTECT • Sunrise • Frontera •
Slide 11: Brand matrix - Implications
Brand matrix - Implications – Portfolio rationalization: Exit from 82 brand out of 304. – Special focus on Casillero del Diablo brand (PRINCIPAL). – Investments in brands with the highest potential from our 3 origins (INVEST). – Commercial and marketing focus on new brands development to support a h
Slide 12: Principal brand category: Casillero del Diablo
Principal brand category: Casillero del Diablo SUCCESSFUL POSITIONING OF A GLOBAL BRAND IN THE PREMIUM CATEGORY USD 207 mm +7.7% yoy 2018 12
Slide 13: Casillero del Diablo - Brand extensions
Casillero del Diablo - Brand extensions 13
Slide 14: Diablo, a successful launch in 2018
Diablo, a successful launch in 2018 • Successful launch of Diablo in Europe, Central America and Chile. • 50,000 cases in 2018. • FOB price : US$ 60 per case 14
Slide 15: Focus on Principal and Invest brand categories
Focus on Principal and Invest brand categories 2018 TH. 9L-CASES 1,318 678 509 142 2018 US$MM SALES 36.2 (0%) 27.1 (+9%) 39.8 (-6%) 15.0 (+29%) 15
Slide 16: Market matrix: Specialized commercial areas
Market matrix: Specialized commercial areas Commercial offices: 14 - Distributors: 352 - Markets + 130 16
Slide 17: Fetzer-Excelsior merger in 2018
Fetzer-Excelsior merger in 2018 1. Integration of Excelsior, our marketer for Chile and Argentina exports to USA, to Fetzer’s distribution branch. The merger is a step taken after achieving a greater level of expertise by Fetzer commercial and support teams. 2. Fetzer’s commercial branch increases i
Slide 18: Agenda
Investor Day Agenda I. 2022 Strategy update II. 2018 Results III. Industry trends
Slide 19: 2018 results
2018 results 1. TOP LINE CONSISTENT WITH THE NEW COMMERCIAL STRATEGY • WINE SALES: +2.7% • AVERAGE WINE PRICE: +8.3% PRICE ADJUSTMENTS, FOCUS ON PREMIUM BRANDS • WINE VOLUME: -5.2% EXIT FROM LOWER-PROFIT BRANDS, IMPACT FROM PLANT TRANSITION AND PORT WORKERS' STRIKE. (Ch$ million) 12M18 12M17 Var
Slide 20: 2018 results
2018 results 2. OPERATING PROFIT MAINLY REFLECTING • LOWER VOLUME • HIGHER COST OF WINE • HIGHER RESTRUCTURING COSTS AND EXPENSES • HIGHER SG&A / INTEGRATION OF EXCELSIOR • ABSENCE OF REAL ESTATE INCOME (Ch$ million) 12M18 12M17 Var % Sales 614,129 613,515 0.1% EBIT 60,007 61,912 (3.1%) EBIT margin
Slide 21: 2018 results – Adjusted figures
2018 results – Adjusted figures (Ch$ million) 12M18 12M17 Var % EBIT 60,007 61,912 (3.1%) EBIT margin 9.8% 10.1% (32 bp) INR Restructuring items 8,428 5,310 Other transitory exp. 1,062 Revaluation of assets 6,218 2,485 Adj. EBIT * 63,279 64,738 (2.3%) Adj. EBIT margin* 10.3% 10.6% (25 bp) Real Estat
Slide 22: 2018 Results
2018 Results (Ch$ million) 12M18 12M17 Var % Sales 614,129 613,515 0.1% EBIT 60,007 61,912 (3.1%) EBIT margin 9.8% 10.1% (32 bp) Non-operating profit 1,488 1,798 (17.2%) Net profit 49,111 49,575 (0.9%) Net margin 8.0% 8.1% (8 bp) EBITDA 86,025 86,267 (0.3%) EBITDA margin 14.0% 14.1% (5 bp) 22
Slide 23: 2018 results – Fetzer and Trivento
2018 results – Fetzer and Trivento FETZER IMPROVED MARGINS ON A BETTER SALES MIX, PRICE INCREASES AND OPERATIONAL EFFICIENCIES Fetzer Vineyards 2018 2017 Var % EBIT margin 9.0% 5.3% 368 bp TRIVENTO IMPROVED MARGINS OF THE OPERATION, WHICH IS REFLECTED IN THE NON OPERATING PROFIT Trivento 2018 2017 V
Slide 24: 4Q18 results
4Q18 results 1. TOP LINE REFLECTS COMMERCIAL STRATEGY AND SHIPMENT DIFFICULTIES • WINE SALES: +8.2% • AVERAGE WINE PRICE: +15.3% BETTER MIX, FAVORABLE F/X IMPACT OF +3% AND THE INTEGRATION OF EXCELSIOR • WINE VOLUME: -6.1% IMPACT FROM PLANT TRANSITION AND PORT WORKERS' STRIKE. ALSO EXIT FROM LOW
Slide 25: 4Q18 results
4Q18 results 2. OPERATING PROFIT MAINLY REFLECTING • LOWER VOLUME • HIGHER COST OF WINE • HIGHER RESTRUCTURING COSTS AND EXPENSES • HIGHER SG&A / INTEGRATION OF EXCELSIOR • ABSENCE OF REAL ESTATE INCOME (Ch$ million) 4Q18 4Q17 Var % Sales 183,375 179,391 2.2% EBIT 18,203 22,371 (18.6%) EBIT margin 9
Slide 26: 4Q18 results – Adjusted figures
4Q18 results – Adjusted figures (Ch$ million) 4Q18 4Q17 Var % EBIT 18,203 22,371 (18.6%) EBIT margin 9.9% 12.5% (254 bp) INR Restructuring items 3,417 1,722 Other transitory exp. 101 Revaluation of assets 2,485 EBIT * 21,721 21,608 0.5% EBIT margin* 11.8% 12.0% (20 bp) Real Estate Income 1,961 EBIT
Slide 27: 4Q18 Results
4Q18 Results (Ch$ million) 4Q18 4Q17 Var % Sales 183,375 179,391 2.2% EBIT 18,203 22,371 (18.6%) EBIT margin 9.9% 12.5% (254 bp) Non-operating profit (2,569) 1,464 Net profit 11,531 19,592 (41.1%) Net margin 6.3% 10.9% (463 bp) EBITDA 25,916 29,801 (13.0%) EBITDA margin 14.1% 16.6% (248 bp) 27
Slide 28: Agenda
Investor Day Agenda I. 2022 Strategy update II. 2018 Results III. Industry trends
Slide 29: 2018 harvest - Chile
2018 harvest - Chile Following two low-volume vintages, 2018 harvested volume increased 36% in Chile. Chile Harvest - (MM liters) 1.400 1,282 1,287 1,290 1,255 1.200 1,046 1,014 990 949 1.000 915 800 600 400 200 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: SAG 29
Slide 30: Global wine production
Global wine production • Estimates for global wine production are at 279 Mhl, an increase of 13% YoY. • Strong rebound of main producers: Italy (+14%), France (+27%), and Spain (+26%). 320 300 300 281 282 292 280 280 284 275 279 272 266 268 Millions of HL 267 269 269 260 267 268 264 270 262 258 258
Slide 31: Conclusions
Conclusions • Premium inventory stocks have recovered strongly. • A decline in the price of wine during 2018 was forseen. • 2018 harvest: One of the best if not the greatest in terms of quality, in Chile and Argentina. “I can’t remember such a good year in “It was a typical harvest in Mendoza, terms
Slide 32: Conclusions
Conclusions • Wine prices in 2018 year-to-date, in equivalent terms to grape prices:: • Generic Cabernet Sauvignon: -31% • Sauvignon Blanc: -34% • 2019 vintage outlook : Normal conditions up to date, downward trend for grape prices. 32
Slide 33: Currency mix
Currency mix 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 CLP 20.9% 19.5% 21.5% 19.3% 23.5% 20.6% 21.1% 15.6% USD 34.9% 34.2% 35.0% 40.2% 30.3% 33.6% 36.0% 40.1% GBP 18.1% 18.9% 18.4% 15.5% 19.4% 21.0% 20.5% 19.9% EUR 10.7% 9.6% 9.6% 8.7% 11.7% 8.2% 8.1% 7.9% CAD 4.1% 3.4% 3.2% 3.1% 4.1% 3.1% 3.4% 3.2% B
Slide 34: 2018 harvest - Argentina
2018 harvest - Argentina In Argentina, the harvested volume increased 31% in 2018. Argentina Harvest – (th. tons) 3.000 2,807 2,786 2,539 2,587 2,516 2.500 2,338 2,174 1,922 2.000 1,704 1.500 1.000 500 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: INV 34
Slide 35: 2018 harvest - USA
2018 harvest - USA Estimates for California vintage point to a 5% increase in the harvested volume (4.2 millions of tons) USA vintage – thousand tons. 4.500 4.246 4.200 4.018 3.894 4.031 4.014 4.000 3.705 3.589 3.500 3.347 3.000 2.500 2.000 1.500 1.000 500 0 2010 2011 2012 2013 2014 2015 2016 2017 2