Vina Concha Y Toro S.a. · BCS:CONCHATORO
Vina Concha Y Toro — Investor Day (November 2017)
75 slides from Vina Concha Y Toro's investor day presentation, Nov 7, 2017
Slide 1: Investor Day Corporate Strategy Update
I N V E S T O R D AY C O R P O R AT E S T R AT E G Y U P D AT E November 7, 2017
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: Contents
Contents I. Company strategy II. Industry outlook III. Real Estate business IV. 3Q17 results
Slide 4: Consolidated sales volume
Consolidated sales volume Wine sales - million 9 liter cases 36.2 33.2 34.3 30.6 30.7 2012 2013 2014 2015 2016 4
Slide 5: Consolidated sales
Consolidated sales (Ch$ million) 658,448 636,194 583,313 475,622 448,250 2012 2013 2014 2015 2016 5
Slide 6: Operating Result and margin
Operating Result and margin (Ch$ million) 10.8% 11.2% 12% 10.7% 120,000 10% 100,000 8.1% 7.6% 8% 80,000 71,022 70,185 63,010 6% 60,000 40,000 36,164 36,213 4% 20,000 2% 0 0% 2012 2013 2014 2015 2016 R. Oper. Operating margin 6
Slide 7: EBITDA and EBITDA margin
EBITDA and EBITDA margin (Ch$ million) 14.3% 14.7% 16% 120,000 14.1% 14% 12.0% 11.6% 100,000 93,432 92,701 12% 83,425 80,000 10% 8% 60,000 53,852 54,973 6% 40,000 4% 20,000 2% 0 0% 2012 2013 2014 2015 2016 EBITDA EBITDA margin 7
Slide 8: Net Income
Net Income (Ch$ million) 120,000 10% 100,000 7.8% 7.4% 7.3% 8% 6.7% 7.0% 80,000 6% 60,000 49,797 47,931 43,051 4% 40,000 30,022 33,174 2% 20,000 0 0% 2012 2013 2014 2015 2016 8
Slide 9: Financial Results - 2016
Financial Results - 2016 12M 2016 12M 2015 Change MM Ch$ MM Ch$ % Total volume (MM cases) 38.6 36.8 4.9% Sales 658,448 636,194 3.5% Cost of sales (412,382) (391,505) 5.3% Gross Profit 246,066 244,689 0.6% Gross margin 37.4% 38.5% SG&A (182,475) (172,453) 5.8% SG&A / sales -27.7% -27.1% Operating Inc
Slide 10: Operating margin by origin - 2016
Operating margin by origin - 2016 Sales Operating Country MM 9L Cases MM Ch$ margin Chile 33.4 470,712 12.5% Trivento 2.6 45,628 8.6% Fetzer 2.6 77,366 1.6% Total Holding 38.6 593,706 10.7% 10
Slide 11: Operating margin: Exports and domestic market
Operating margin: Exports and domestic market Country Exports Domestic market CHILE: Operating margin 16.0% 1.6% % of total sales 61.7% 19.4% ARGENTINA: Operating margin 13.6% -20.1% % of total sales 6.0% 1.0% 11
Slide 12: A Project to achieve new operational objectives
A Project to achieve new operational objectives • As a consequence of the deep changes seen in the global wine industry in the past five years, the company initiated a process of reviewing its entire business model, in order to adjust it to the new reality of the markets in which we participate. • T
Slide 13: 2022 Target
2022 TARGET TO DOUBLE THE OPERATING INCOME FROM $70,000 MM IN 2016/17 TO $140,000 MM IN 2022. Ch$ million 2016-2017 2022 CAGR Sales 653,000 854,000 5.5% Operating Income 70,000 140,000 14.9% Operating margin 10.7% 16.4% +5.7 pps 13
Slide 14: Strategy to achieve our 2022 targets
Strategy to achieve our 2022 targets 1. Restructuring process and cost savings 2. Recovery of profitability in domestic markets 3. New commercial strategy 4. Special focus on Casillero del Diablo brand 5. Focus on other high performing brands 6. Segment innovations in non wine category 14
Slide 15: 1. Restructuring process in place
1. Restructuring process in place • Expected to be finished in 1H18 • Cost Savings • Operational Efficiency • Commercial strategy - focus on core brands • Estimated full year savings: Ch$18,000 million 15
Slide 16: 1. Restructuring process - Net estimated savings
1. Restructuring process - Net estimated savings • Net estimated savings 2.5% of sales in 2019. 2019 (million Ch$) 2017 2018 onwards Efficiencies and synergies 4,300 16,500 18,000 from program Severance payments and -4,000 -2,800 - consultancy fees Net savings 300 13,700 18,000 16
Slide 17: 2. Recovery of profitability in domestic markets
2. Recovery of profitability in domestic markets Operating margin By origin: Operating mg 2016 2022 3Q 2017* Chile 1.6% 8.0% 3.2% USA 1.0% 20.0% 5.5% Argentina -20.1% 3.0% -1.6% * Excludes non-recurring income and expenses 17
Slide 18: 3. New commercial strategy – Premiumization trend
3. New commercial strategy – Premiumization trend • Taking opportunities where industry is growing. • Premium wine segment is driving the growth. GROWTH RATE BY PRICE SEGMENT USA (2016) UK (52 w/e July 2017) GBP 8+ 17% US$ 20+ 11% GBP 7-8 29% US$ 15-19.99 12% GBP 6-7 21% US$ 11-14.99 11% US$ 8-10.99
Slide 19: 3. New commercial strategy – Premiumization trend
3. New commercial strategy – Premiumization trend SWEDEN - RED WINE FINLAND - RED & WHITE WINE 150+ 33% 20+ 37% 120-149 77% 15-19.99 86% 100-119 130% 10-14.99 63% 80-99 26% 8-9.99 11% 80< -37% 8< -33% -60% -10% 40% 90% 140% -60% -10% 40% 90% 140% NORWAY - RED & WHITE WINE NOK 300+ 91% NOK 200-300 85
Slide 20: 3. New commercial strategy – Premiumization trend
3. New commercial strategy -– Premiumization trend • Premium wines: Seek strong growth in sales, focused in price segments >US$10 • Non-Premium wines: Low single digit growth for categories of price <US$10 Current mix Chile Argentina USA Total Premium 37.1% 44.8% 78.0% 42.5% Non-Premium 62.9% 55.2%
Slide 21: 4. Special focus on Casillero del Diablo brand
4. Special focus on Casillero del Diablo brand 21
Slide 22: 4. Special focus on Casillero del Diablo brand
4. Special focus on Casillero del Diablo brand CURRENT PORTFOLIO UTRA LEYENDA PREMIUM FOB 200 USD SUPER RESERVA PREMIUM PRIVADA FOB 60 USD ULTRA DEVIL’S PLUS COLLECTION FOB 45 USD RESERVA PREMIUM FOB 35 USD PREMIUM:93%US$ PP,SP,UP: 7% US$ 22
Slide 23: Strong sales growth +USD 200 mm
4. Special focus on Casillero del Diablo brand STRONG SALES GROWTH +USD 200 mm 2017 23
Slide 24: Strong sales growth 2016 vs 2015
4. Special focus on Casillero del Diablo brand STRONG SALES GROWTH 2016 v/s 2015 160% 22% 29% 8% 24
Slide 25: Volume and Value
4. Special focus on Casillero del Diablo brand As a key Brand for the Company, Casillero del Diablo must be the driver for VOLUME and VALUE 25
Slide 26: Innovation = Growth
4. Special focus on Casillero del Diablo brand INNOVATION = GROWTH Highly competitive and complementary product portfolio, adding innovation to the brand 26
Slide 27: 4. Special focus on Casillero del Diablo brand
4. Special focus on Casillero del Diablo brand CURRENT PORTFOLIO UTRA LEYENDA PREMIUM FOB 200 USD SUPER RESERVA PREMIUM PRIVADA FOB 60 USD ULTRA DEVIL’S PLUS COLLECTION FOB 45 USD RESERVA PREMIUM FOB 35 USD 27
Slide 28: Largest premium wine range in the world
4. Special focus on Casillero del Diablo brand LARGEST PREMIUM WINE RANGE IN THE WORLD 28
Slide 29: New addition to the Global Range in Reserva Line
4. Special focus on Casillero del Diablo brand New addition to the Global Range in Reserva Line 29
Slide 30: Packaging
4. Special focus on Casillero del Diablo brand PA C K A G I N G • Different from Reserva • Modern look and more into the “Red Blend” mood 30
Slide 31: 4. Special focus on Casillero del Diablo brand
4. Special focus on Casillero del Diablo brand CURRENT PORTFOLIO UTRA LEYENDA PREMIUM FOB 200 USD SUPER RESERVA PREMIUM PRIVADA FOB 60 USD ULTRA DEVIL’S PLUS COLLECTION FOB 45 USD RESERVA PREMIUM FOB 35 USD 31
Slide 32: Red White Brut
4. Special focus on Casillero del Diablo brand RED WHITE BRUT 32
Slide 33: Price segment opportunity
4. Special focus on Casillero del Diablo brand PRICE SEGMENT OPPORTUNITY 35 USD 45 USD 60 USD 33
Slide 34: 4. Special focus on Casillero del Diablo brand
4. Special focus on Casillero del Diablo brand CURRENT PORTFOLIO UTRA LEYENDA PREMIUM FOB 200 USD SUPER RESERVA PREMIUM PRIVADA FOB 60 USD ULTRA DEVIL’S PLUS COLLECTION FOB 45 USD RESERVA PREMIUM FOB 35 USD 34
Slide 35: New Reserva Privada Portfolio
4. Special focus on Casillero del Diablo brand NEW RESERVA PRIVADA PORTFOLIO CABERNET SAUVIGNON CARMENERE CHARDONNAY SAUVIGNON BLANC 35
Slide 36: New Brand Portfolio
4. Special focus on Casillero del Diablo brand NEW BRAND PORTFOLIO UTRA LEYENDA PREMIUM FOB 200 USD SUPER RESERVA PREMIUM PRIVADA FOB 60 USD ULTRA DEVIL’S PLUS COLLECTION NEW RESERVA ESPECIAL FOB 45 USD RESERVA PREMIUM FOB 35 USD 36
Slide 37: Innovations
4. Special focus on Casillero del Diablo brand NEW BRAND PORTFOLIO INNOVATIONS UTRA PREMIUM SUPER PREMIUM ULTRA PLUS PREMIUM 37
Slide 38: Innovations role
4. Special focus on Casillero del Diablo brand INNOVATIONS ROLE • Incremental volume • Show a fresh and modern brand • Stand out from the competition 38
Slide 39: 4. Special focus on Casillero del Diablo brand
4. Special focus on Casillero del Diablo brand 39
Slide 40: 5. Focus on high-performing brands - Cono Sur Bicicleta
5. Focus on high-performing brands - Cono Sur Bicicleta (Volume in Th. 9 liter cases) 160 0.0 CAGR: + 13% 140 0.0 1,334 1,263 120 0.0 1,116 1,008 986 100 0.0 938 804 800 .0 600 .0 400 .0 200 .0 - 2012 2013 2014 2015 2016 9M16 9M17 40 40
Slide 41: 5. Focus on high-performing brands - Cono Sur Bicicleta
5. Focus on high-performing brands - Cono Sur Bicicleta • Target: Price increase from US$26 to US$30 in 3 years. 41 41
Slide 42: 5. Focus on high-performing brands - Trivento Reserve
5. Focus on high-performing brands - Trivento Reserve (Volume in Th. 9 liter cases) CAGR +64% 700 .0 636 600 .0 556 CAGR: + 64% 500 .0 464 447 400 .0 300 .0 261 199 200 .0 100 .0 88 - 2012 2013 2014 2015 2016 9M16 9M17 42
Slide 43: 5. Focus on high-performing brands - Trivento Reserve
5. Focus on high-performing brands - Trivento Reserve KEY MARKETS UK: USA: #1 Malbec Hot brand Growing at 32% 43
Slide 44: 5. Focus on high-performing brands - Bonterra
5. Focus on high-performing brands - Bonterra GLOBAL LEADER IN ORGANIC WINE Volume (Th 9L cases) 600 .0 534 CAGR: + 18% 500 .0 462 377 368 353 400 .0 336 310 300 .0 230 200 .0 100 .0 - 2011 2012 2013 2014 2015 2016 9M16 9M17 44
Slide 45: 5. Focus on high-performing brands - 1000 Stories
5. Focus on high-performing brands - 1000 Stories SUCCESSFUL INNOVATION IN THE AMERICAN MARKET (Volume 9L cases) 900 00.0 CAGR: + 549% 83,602 800 00.0 73,976 700 00.0 600 00.0 57,781 500 00.0 400 00.0 300 00.0 200 00.0 15,957 1,983 100 00.0 - 2014 2015 2016 9M16 9M17 45
Slide 46: 5. Focus on high-performing brands – Don Melchor
5. Focus on high-performing brands – Don Melchor ONE OF THE WORLD’S GREATEST CABERNET SAUVIGNONSPRICE GROWTH EVOLUTION FOB Price increase 2018E vs 2007: 1 40% PRICE GROWTH EVOLUTION 600 465 550 500 456 493 400 449 446 407 370 396 300 334 282 200 228 100 0 46
Slide 47: 5. Focus on high-performing brands – Almaviva
5. Focus on high-performing brands – Almaviva ALMAVIVA 2015 2017 WINE OF THE YEAR GROWTH EVOLUTION • Profitable business: Operating margin of 50% • 2017 sales: US$14 million 47
Slide 48: Key markets to develop high performing brands
Key markets to develop high performing brands NORDICS CANADA UK USA CHINA JAPAN UAE MEXICO (Arab Emirates) BRAZIL CHILE 48
Slide 49: 6. Segment innovations
6. Segment innovations Looking for oportunities in non-wine categories TARGET: 5% of sales; operating margin of Ch$ 3,500 million. 49
Slide 50: 6. Segment innovations - Increase in ownership of Kross
6. Segment innovations - Increase in ownership of Kross • Increasing ownership from 49% to 77% in a high-growth, high-margin craft beer business. • 5-year growth rate: 25% value 22% volume • Sales 2017E: Ch$ 4,400 million • EBITDA margin 2017E: 25% 50
Slide 51: Contents
Contents I. Company strategy II. Industry outlook III. Real Estate business IV. 3Q17 results 51
Slide 52: Global wine production – Chile
Global wine production – Chile • Two low volume harvests: 2016: -21,2% & 2017: -6,4% Chile Wine Harvest (mm liters) 1,400 1,255 1,282 1,287 1,200 1,046 990 1,014 949 1,000 915 800 600 400 200 0 2010 2011 2012 2013 2014 2015 2016 2017 52
Slide 53: Global wine production – Argentina
Global wine production – Argentina • Two low volume harvests: 2016: -27,1% and 2017 increased 12,7% but 24% lower than the 2010-15 average Argentina Wine Harvest (mm lts) 3,000 2,807 2,786 2,800 2,587 2,539 2,600 2,400 2,338 2,200 2,174 2,000 1,920 1,800 1,704 1,600 1,400 1,200 1,000 800 600 400 200
Slide 54: Global wine production – Europe
Global wine production – Europe • Significant decreases in Europe due to unfavorable climate conditions (-14%). • Italy: -23%, France: -19%, Spain: -15%, Germany: -10% Europe wine production (million liters) 20,000 18,230 18,000 16,710 17,390 17,290 16,000 14,930 14,000 12,000 10,000 8,000 6,000 4,0
Slide 55: Global wine production 2017
Global wine production 2017 • Historical low global production: -8.2% vs. 2016. 320 300 300 292 281 280 282 280 284 272 275 266 267 268 269 267 268 269 270 Million HL 260 262 264 258 258 247 240 220 55
Slide 56: Company position in a tighter global supply scenario
Company position in a tighter global supply scenario Concha y Toro has a competitive advantage to face this current scenario due to: • High self sufficiency of grape production • Powerful brands • Distribution network 56
Slide 57: Company position in a tighter global supply scenario
Company position in a tighter global supply scenario Outlook for Concha y Toro’s own production in 2018 • Expected increase of 20% vs. 2017. 57
Slide 58: Contents
Contents I. Company strategy II. Industry outlook III. Real Estate business IV. 3Q17 results 58
Slide 59: II. Real Estate business
II. Real Estate business In addition, the company is entering in the Real Estate business, in order to maximize the profitability of its non-core properties. 59
Slide 60: Real Estate business
Real Estate business We have identified 400 hectares of non-core properties with high potential for real estate projects. In a first stage, we have targeted 74 hectares to develop in the next 10 to 15 years. 60
Slide 61: Real Estate business: Fundo Tocornal
Real Estate business: Fundo Tocornal Location: Puente Alto, RM Land area: 43.57 Ha. N Current state: feasibility study (18 months) Real Estate project: houses Project timing: 11 years TOCORNAL Book value: UF 0.8/m2 Est. land market value w/feasibility: UF 1.8/m2 Estimated project market value*: UF 4
Slide 62: Real Estate business: Pirque
Real Estate business: Pirque Location: Pirque, RM Land area: 30 Ha. N Current state: sanitary feasibility (24 months) Real Estate project: houses Project timing: 7 years Book value: UF 0.05/m2 URBANO Est. land market value w/feasibility: UF 1.8/m2 Estimated project market value*: UF 4.0 /m2 62
Slide 63: Real Estate business: Industria Corchera (50% owned)
Real Estate business: Industria Corchera (50% owned) Location: La Cisterna, RM Land area: 10,070 m2 Current state: project draft approval (6 months) Real Estate project: apartments Project timing: 9 years Book value: 0.52 Est. land market value w/feasibility: UF 19/m2 Estimated project market value*
Slide 64: Divestment of facilities in Chile
Divestment of facilities in Chile • In line with our restructuring program, regarding logistics optimization, we expect to divest certain distribution facilities in the next 12 to 24 months. • Divestments located in Punta Arenas, Curicó, Coquimbo, Antofagasta, Osorno, Concepción and San Antonio. • A
Slide 65: Real Estate business and divestments - Summary
Real Estate business and divestments - Summary Estimated Land area Total Estimated market value (hectares) value UF/m2 Tocornal: 43.5 4.5 UF 1,957,500 Pirque: 30.0 4.0 UF 1,200,000 Corchera (50% CyT) 0.5085 48.5 UF 247,000 Divestments UF 200,000 Estimated total value UF 3,604,500 USD equivalent (USD
Slide 66: Contents
Contents I. Company strategy II. Industry outlook III. Real Estate business IV. 3Q17 results 66
Slide 67: III. Third Quarter 2017 Results
III. Third Quarter 2017 Results (million Ch$) 3Q17 3Q16 Change Change% Sales 160,532 169,800 -9,268 -5.5% Costs of sales 102,535 105,870 -3,335 -3.2% Gross profit 57,997 63,930 -5,933 -9.3% SG&A 43,265 48,128 -4,863 -10.1% Operating profit 14,891 17,667 -2,776 -15.7% 67
Slide 68: Adjusted SG&A - 3Q17
Adjusted* SG&A - 3Q17 (million Ch$) 3Q17 3Q16 Change Change% SG&A 43,265 48,128 -4,863 -10.1% SG&A / Sales 27.0% 28.3% -1.39 pp Extraordinary expenses from restructuring program 737 0 737 Adjusted*SG&A 42,528 48,128 -5,600 -11.6% Adjusted* SG&A / Sales 26.5% 28.3% -1.85 pp *For analysis purposes, th
Slide 69: Adjusted Operating Profit - 3Q17
Adjusted* Operating Profit - 3Q17 (million Ch$) 3Q17 3Q16 Change Change % Operating profit 14,891 17,667 -2,776 -15.7% Non-recurring income** 0 -2,150 2,150 Extraordinary expenses from 1,131 0 1,131 restructuring program Adjusted Operating Profit 16,022 15,517 505 3.3% *For analysis purposes, the fi
Slide 70: Operating Profit - Quarterly trend
Operating Profit - Quarterly trend Operating profit / Sales 1Q 2Q 3Q 2016 9.2% 12.4% 10.4% Adjusted* 2016 9.2% 12.4% 9.1% 2017 6.1% 10.2% 9.3% Adjusted* 2017 6.7% 11.0% 10.0% *2016 adjusted by compensation payments in 3Q16. *2017 adjusted by expenses from restructuring program and consultancy fees.
Slide 71: Non-operating profit - 3Q17
Non-operating profit - 3Q17 (million Ch$) 3Q17 3Q16 Change Net financial expenses -2,600 -2,579 -21 Exchange-rate differences 3,791 -266 4,057 Income/expenses by adjustment 16 10 6 units Profit from affiliated companies 2,905 2,378 527 Non-operating profit 4,112 -456 4,568 71
Slide 72: Profit from Affiliated companies - 3Q17
Profit from Affiliated companies - 3Q17 (million Ch$) 3Q17 3Q16 Change Industria Corchera 169 -54 223 Viña Almaviva S.A. 2,128 1,901 227 Excelsior Wine Company* 546 524 22 Others 63 7 56 Profit from Associated companies 2,905 2,378 527 * EBT 72
Slide 73: Consolidated results - 3Q17
Consolidated results - 3Q17 3Q17 3Q16 3Q17 3Q16 (million Ch$) Change % Change % Reported Reported Adjusted Adjusted Sales 160.532 169.800 -5,5% 160.532 169.800 -5,5% Gross profit 57.997 63.930 -9,3% 58.391 63.930 -8,7% Gross margin 36,1% 37,7% -150 bp 36,4% 37,7% -130 bp Operating income 14.891 17.6
Slide 74: Consolidated results – 9-Months 2017
Consolidated results – 9-Months 2017 9M17 9M16 9M17 9M16 (million Ch$) Change % Change % Reported Reported Adjusted Adjusted Sales 453.948 475.247 -4,5% 453.948 475.247 -4,5% Gross profit 162.815 181.406 -10,2% 163.521 181.406 -9,9% Gross margin 35,9% 38,2% -230 bp 36,0% 38,2% -210 bp Operating inco
Slide 75: Investor Day Corporate Strategy Update
I N V E S T O R D AY C O R P O R AT E S T R AT E G Y U P D AT E November 7, 2017