Pernod Ricard SA · EURONEXT:RI
Pernod Ricard SA — H1 2008/09 Earnings Presentation
65 slides from Pernod Ricard SA's earnings presentation, Feb 13, 2009
Slide 1: 2008/09 1st half-year sales and results
2008/09 1st half-year sales and results Very good first half-year 2008/09: Profit from recurring operations (PRO): +24% Group share of net PRO : +15% Confirmed guidance of double-digit growth* in Group share of net profit from recurring operations, which should exceed €1billion for the first time ov
Slide 2: 2008/09 1st half-year key figures
2008/09 1st half- half-year key figures Sales: € 4,212 million (+5%*) TOP 14: volume +1% , value + 6%* Profit from recurring operations: € 1,196 million (+24%), including a € 164 million contribution from Vin & Sprit Group share of net profit from recurring operations : € 685 million (+15%) Group sh
Slide 3: 2008/09 1st half-year highlights
2008/09 1st half- half-year highlights Strong growth in profit from recurring operations Strong and operating margin (28.4%), due to: • Sustained organic growth: dynamic sales, strong price increase / mix effect and higher advertising and promotional expenditure • The rapid and successful integratio
Slide 4: Presentation structure
Presentation structure - Group share of net profit from recurring operations - Sales analysis - Profit from recurring operations - Summarised consolidated income statement - Analysis by geographic region - Group share of net profit from recurring operations - Non-recurring items and net profit - Con
Slide 5: Sustained 1st half-year growth
Sustained 1st half-year growth (€ millions) 464 4,212 172 (137) 3,713 -4% +12% +5% +13% HY1 Organic Forex Group HY1 07/08 growth impact structure 08/09 sales sales Organic growth: +5% (Spirits +6%, Wines +1%) Forex impact primarily due to the depreciation of GBP, KRW, INR and AUD (average EUR/USD ra
Slide 6: Focus on 2nd Quarter
Focus on 2nd Quarter (€ millions) 276 2,456 71 (48) 2,157 -2% + 13% +3% +14% Q2 Organic Forex Group Q2 07/08 growth impact structure 08/09 sales sales Organic growth of +3% (Spirits +5%, Wines -3%) Forex impact: the appreciation of the USD and CNY partly offsets the depreciation of the GBP, KRW, INR
Slide 7: Focus on 2nd Quarter
Focus on 2nd Quarter Top 14 organic growth kept above 6% during Q2 Top Takeover of distribution of Absolut from 1 October* Takeover A more difficult and extremely volatile economic background: A • Economic slowdown and liquidity crisis (inventory reduction, …) • Sharp depreciation of some currencies
Slide 8: Portfolio review
Portfolio review TOP 15 Volume +1%* Sales + 6%* *Organic growth calculated based on TOP 14 brands, excluding ABSOLUT VODKA 8
Slide 9: Portfolio review
Portfolio review 6 months volume: 5.8 9Lcs Successful integration into the Pernod Ricard network: •Apparent volume trend of -2% on a non-comparable basis •Slight decline in the US, against high comparatives •Continued strong growth in other markets Nielsen (value) past 6 months: months US -3%, Spain
Slide 10: Portfolio review
Portfolio review Volume +4% Sales* +6% +16% for Chivas 18 and 25 y.o. vs +3% for Chivas 12 y.o. Asia: growth in spite of the decline in China (due to Olympics effect, with catch-up in Q2) Europe: contrasting situations in Western Europe, strong growth in Eastern Europe Americas: persistent difficult
Slide 11: Portfolio review
Portfolio review Volume +7% Sales* +14% US: continuing very strong double-digit growth, confirmed by Nielsen +29% and NABCA +24% Modest growth in Europe with contrasting situations: decline in the top two markets of Ireland and the UK, but growth in France, Eastern Europe and Germany Accelerated gro
Slide 12: Portfolio review
Portfolio review Volume -6% Sales* +21% Confirmed recovery in Q2 2008/09, driven by China (partly due to the timing of Chinese New Year 2009), Malaysia and Duty Free Very positive average unit price effect, following further improvement in quality mix and the impact of significant price increases in
Slide 13: Portfolio review
Portfolio review Volume -1% Sales* -1% France: slight decline of the brand despite off-trade growth Overall stability in other European markets Volume -1% Sales* +3% Europe: • Spain: slight growth in a declining category • Decline in the UK, France and Italy US: market remains difficult, Nielsen -2%
Slide 14: Portfolio review
Portfolio review Volume -1% Sales* +1% US: Malibu, in slight decline, suffered from inventory reductions by retailers and its exposure to casual on-trade Modest decline in Europe with contrasting situations: decline in the UK, Spain, Greece and Portugal, but stability in France and the Netherlands a
Slide 15: Portfolio review
Portfolio review Volume -5% Sales* -1% Continuation of the premiumisation strategy in a difficult competitive context in the UK (slight decline in volume, but market share maintained in value) Decline due to destocking in the US (Nielsen +2% ) Very strong progress in Asia and slight growth in Oceani
Slide 16: Portfolio review
Portfolio review Volume stable Sales* +8% Remarkable performance in France, with significant market share gains (volume and value) Strong growth in the UK, Russia and Switzerland but decline in Belgium Volume -14% Sales* -8% Decline in Europe, primarily due to France, with growth in Switzerland and
Slide 17: Presentation structure
Presentation structure - Group share of net profit from recurring operations - Sales analysis - Profit from recurring operations - Summarised consolidated income statement - Analysis by geographic region - Group share of net profit from recurring operations - Non-recurring items and net profit - Con
Slide 18: Summarised consolidated income statement
Summarised consolidated income statement HY1 HY1(1) HY1 ∆ (€ millions) ∆ 07/08 08/09 08/09 organic Sales 3,713 3,885 4,212 +5% +13% Gross margin after logistics costs 2,126 2,253 2,503 +6% +18% Gross margin / sales 57.3% 58.0% 59.4% Advertising and promotion expenditure (623) (668) (731) +8% +17% A&
Slide 19: Foreign exchange / Group structure effects
Foreign exchange / Group structure effects HY1 Organic Forex Group HY1 (€ millions) 07/08 growth impact structure 08/09 Net sales 3,713 172 (137) 464 4,212 Profit from recurring operations 966 72 29 129 1,196 GBP, AUD: foreign exchange impact negative on sales but positive on PRO Group structure eff
Slide 20: Gross margin after logistics costs
Gross margin after logistics costs HY1 Organic HY1 (€ millions) 07/08 growth 08/09 Gross margin after logistics costs 2,126 +6% 2,503 Gross margin / sales 57.3% 59.4% +210bps Further very strong improvement in gross margin after logistics costs / sales ratio This growth was due in particular to: • c
Slide 21: Advertising and promotion expenditure
Advertising and promotion expenditure HY1 Organic HY1 (€ millions) 07/08 growth 08/09 A&P expenditure (623) +8% (731) A&P expenditure / sales 16.8% 17.3% +50bps Dynamic sales, sharply improved profit margins and opportunities for market share gains, led us to maintain strong growth in our advertisin
Slide 22: Contribution after A&P expenditure
Contribution after A&P expenditure HY1 Organic HY1 (€ millions) 07/08 growth 08/09 Contribution after A&P expenditure 1,503 +6% 1,772 CAPE / sales 40.5% 42.1% +160bps As anticipated, the integration of Vin & Sprit resulted in a strong increase in the contribution and contributive margin of the portf
Slide 23: Structure costs
Structure costs HY1 Organic HY1 (€ millions) 07/08 growth 08/09 Structure costs* (538) +2% (576) Structure costs / sales 14.5% 13.7% * Structure costs: Selling expenses + General and administrative expenses + Other income/(expenses) -80bps 80 bps reduction in the structure costs / sales ratio In an
Slide 24: Profit from recurring operations
Profit from recurring operations HY1 Organic HY1 (€ millions) 07/08 growth 08/09 Profit from recurring operations 966 +8% 1,196 PRO / sales 26.0% 28.4% +240bps Sharply improved operating margin (+240bps) Organic growth: +8% Change in Group structure: +13% Remarkable PRO growth (+24%) Forex impact: +
Slide 25: Presentation structure
Presentation structure - Group share of net profit from recurring operations - Sales analysis - Profit from recurring operations - Summarised consolidated income statement - Analysis by geographic region - Group share of net profit from recurring operations - Non-recurring items and net profit - Con
Slide 26: Contribution to Growth / Region
Contribution to Growth / Region Profit from recurring operations (€ millions) 7 1,038 6 17 9% 9% 42 23% 966 59% 100% PRO HY1 Asia & RoW Americas Europe France PRO HY1 08/09 07/08 on a like-for-like basis All regions contributed to growth* in profit from recurring operations Slowdown in Europe (Spain
Slide 27: Asia – Rest of World
Asia – Rest of World (€ millions) HY1 HY1 ∆ Organic growth 07/08 08/09 Sales(1) 1,085 1,130 +4% +9% Gross margin after logistics costs 557 641 + 15% +14% Gross margin / sales 51.4% 56.7% A&P expenditure (205) (229) +12% +11% A&P / sales 18.9% 20.3% Profit from recurring operations(2) 233 288 +23% +1
Slide 28: Americas
Americas HY1 HY1 (€ millions) ∆ Organic growth 07/08 08/09 Sales 970 1,181 +22% +4% Gross margin after logistics costs 552 736 +33% +5% Gross margin / sales 56.9% 62.3% A&P expenditure (159) (199) +3% +25% A&P / sales 16.4% 16.8% Profit from recurring operations(1) 265 387 +46% +7% PRO / sales 27.3%
Slide 29: Europe (excluding France)
Europe (excluding France) HY1 HY1 (€ millions) ∆ Organic growth 07/08 08/09 Sales 1,262 1,497 +19% +3% Gross margin after logistics costs 747 837 +12% +2% Gross margin / sales 59.2% 55.9% A&P expenditure (172) (209) +8% +21% A&P / sales 13.7% 14.0% Profit from recurring operations(1) 372 411 +11% +2
Slide 30: France
France HY1 HY1 (€ millions) ∆ Organic growth 07/08 08/09 Sales 396 404 +2% +1% Gross margin after logistics costs 270 288 +7% +4% Gross margin / sales 68.1% 71.3% A&P expenditure (87) (94) +6% +8% A&P / sales 21.8% 23.1% Profit from recurring operations(1) 96 111 +15% +7% PRO / sales 24.2% 27.4% con
Slide 31: Analysis by geographic region
Analysis by geographic region Sales Profit from recurring operations HY1 07/08 HY1 07/08 11% 29% 24% 10 % France 34% Europe 39% 26% 27% HY1 08/09 Americas HY1 08/09 10 % Asia and 9% 27% 24% RoW 35% 35% 28% 32% Substantial increase in the relative weight of the Americas, due to the integration of Vin
Slide 32: Presentation structure
Presentation structure - Group share of net profit from recurring operations - Sales analysis - Profit from recurring operations - Summarised consolidated income statement - Analysis by geographic region - Group share of net profit from recurring operations - Non-recurring items and net profit - Con
Slide 33: Financial income/(expense) from recurring operations
Financial income/(expense) from recurring operations HY1 HY1 (€ millions) 07/08 08/09 Net financing costs (168) (320) Other financial income/(expense) from recurring operations (8) (19) Financial income/(expense) from recurring operations (176) (339) The average cost* of borrowing was 5.2% in spite
Slide 34: Free Cash Flow
Free Cash Flow (€ millions) 31 Dec. 07 31 Dec. 08 Profit from recurring operations 966 1,196 Depreciation, amortisation, provision movements and other 83 117 Self financing capacity (SFC) from recurring operations 1,049 1,313 Decrease (increase) in WCR (550) (166) Financial income/(expense) and taxe
Slide 35: Changes in net debt
Changes in net debt (1,030) (12,956) (5,994) (12,137) 530 (295) (€ millions) (24) (6,143) t on a ns s at 8 ta iti o rm ow iti o e nd n t b ui s f Fl s d tio t b .0 de .08 q ro t sh qui i vi a n sl me De .12 l a 6 ac ct l p eb a ac r d n t 31 iti .0 i t iti a d C s/ the s h a Tr jus In 3 0 r a In ee
Slide 36: Net debt aged analysis at 31 December 2008
Net debt aged analysis at 31 December 2008 At 31 December 2008, Pernod Ricard held about € 500 million in cash, € 1.5 billion in available undrawn credit lines and availed of very long maturity terms on its debt FY € billions No uncovered maturities 2008/09 - 2009/10 - Maturities fully financed 2010
Slide 37: Net debt hedging at 31 December 2008
Net debt hedging at 31 December 2008 Analysis of net debt: variable, capped variable and fixed rates Variable rates Capped Fixed rates variable rates Euro 45% 9% 46% USD 19% 29% 52% Total 29% 21% 50% 2009/10 financial year: excluding potential additional hedging, about 50% of average net debt should
Slide 38: Average cost of borrowing
Average cost of borrowing Average cost* of borrowing over HY1: 5.2% Decline in spreads due to the reduction of the net debt / EBITDA ratio at 31 December 2008 Lower € and USD short-term interest rates Variable portion of debt gradually increased over HY2 We now aim for an average cost* of borrowing
Slide 39: Income tax
Income tax Income tax: € (59) million Income tax on items from Income tax on non- non-recurring recurring operations: € (169) million items: Rate: 19.7% € 109 million Income tax on items from recurring operations in line with forecasts Non-recurring items: savings related to non-recurring charges an
Slide 40: Minority interests and other
Minority interests and other HY1 07/08 HY1 08/09 Minority interests and other (13) (3) Minority interests include in particular: • Havana Club • Corby (Canada) In 2008/09, other items included: • Profits and losses of disposed brands: Cruzan, Grönstedts, Dry Anis, … • The share of profit/(loss) of F
Slide 41: Group share of net profit from recurring operations
Group share of net profit from recurring operations (€ millions) HY1 HY1 ∆ 07/08 08/09 Profit from recurring operations 966 1,196 +24% Financial income/(expense) from recurring operations (176) (339) +92% Income tax on items from recurring operations (183) (169) -8% Minority interests and other (13)
Slide 42: Presentation structure
Presentation structure - Group share of net profit from recurring operations - Sales analysis - Profit from recurring operations - Summarised consolidated income statement - Analysis by geographic region - Group share of net profit from recurring operations - Non-recurring items and net profit - Con
Slide 43: Non-recurring items
Non- Non-recurring items Restructuring costs and expenses primarily attributable to the aacquisition cquisition of Vin & Sprit (€ millions) HY1 08/09 Non-recurring income and expenses related to the acquisition of V&S • Costs associated with early exit from distribution contracts (47) • Vin & Sprit
Slide 44: Group share of net profit
Group share of net profit HY1 HY1 (€ millions) 07/08 08/09 Profit from recurring operations 966 1,196 +24% Other operating income and expenses 5 (133) N/A Operating profit 970 1 063 +10% Financial income/(expense) from recurring operations (176) (339) +92% Other financial items (9) (46) N/A Income t
Slide 45: Conclusion and outlook
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Slide 46: Conclusion for 2008/09 HY1
Conclusion for 2008/09 HY1 Remarkable 2008/09 first half- Remarkable half-year: • Sustained organic sales growth, which confirms Pernod Ricard’ Ricard’s strength and staying power in a difficult environment • Rapid and successful integration of Vin & Sprit and Absolut Vodka Vodka • Remarkable increa
Slide 47: Outlook for 2008/09 HY2
Outlook for 2008/09 HY2 Although visibility is limited for the second half of the year… Although year… • Some markets should continue to perform well: China, India, Latin Latin America, France, … • Others could be more difficult: Russia, Ukraine, … … We anticipate that the wines & spirits sector, wi
Slide 48: Outlook for 2008/09 HY2
Outlook for 2008/09 HY2 Moreover, our leadership positions should, thanks to the combined Moreover, combined strength of our distribution network and our strong brands, enable enable us to gain market share in many countries, just as we did during the the first half- half-year The third quarter grow
Slide 49: Outlook for 2008/09 HY2
Outlook for 2008/09 HY2 We have powerful levers at our disposal to ensure continuing PRO We growth: • Continuing implementation of the € 150 million synergies related to Vin & Sprit integration • Improvement in the efficiency of our A&P expenditures and lower costs for media space leading to a reduc
Slide 50: Outlook for 2008/09 HY2
Outlook for 2008/09 HY2 2008/09 HY2 should see the continuing reduction of our debt and 2008/09 improved debt ratios, which remains our priority objective The numerous leveraging tools at our disposal in fact provide us with The strong visibility on our capacity to meet this target: • Strong free ca
Slide 51: Conclusion & Outlook
Conclusion & Outlook For the full 2008/09 financial year, we thus aim for: +5% to +8% organic PRO growth* Average cost of borrowing below 5% Successful integration of Absolut and accelerated implementation of Vin & Sprit integration synergies We therefore confirm our guidance** for double- double-di
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Slide 53: Appendices
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Slide 54: Strategic brand growth
Strategic brand growth Net Sales Volume HY1 2008/09 organic growth growth Chivas Regal 4% 6% Ballantine's 3% 5% Ricard -1% -1% Martell -6% 21% Malibu -1% 1% Kahlua -7% -7% Jameson 7% 14% Beefeater -1% 3% Havana Club 12% 11% The Glenlivet 7% 12% Jacob's Creek -5% -1% Mumm 0% 8% Perrier Jouet -14% -8%
Slide 55: 2008/09 HY1 Sales
2008/09 HY1 Sales € million HY1 2007/08 HY1 2008/09 Variation Organic Growth Group Structure Forex impact Wines & Spirits France 396 11% 404 10% 8 2% 5 1% 3 1% (0) 0% Wines & Spirits Europe excl. France 1 262 34% 1 497 36% 236 19% 31 3% 242 19% (38) -3% Wines & Spirits Americas 970 26% 1 181 28% 210
Slide 56: Summarised Consolidated Income Statement
Summarised Consolidated Income Statement (€ millions) 31/12/2007 31/12/2008 Change Net sales 3 713 4 212 13% Gross Margin after logistics costs 2 126 2 503 18% A&P expenditure (623) (731) 17% Contribution after A&P expenditure 1 503 1 772 18% Structure costs (537) (576) 7% Profit from recurring oper
Slide 57: Forex impact
Forex impact On Profit Forex impact HY1 from On Net Sales (€ million) Recurring Operations US Dollar USD 0.0 0.0 British Pound GBP (46.6) 7.7 Korean Won KRW (35.0) (9.9) Indian Roupie INR (18.1) (4.8) Australian Dollar AUD (16.0) 1.9 New Zealand Dollar NZD (11.6) (0.5) Canadian Dollar CAD (10.7) (3.
Slide 58: Group structure effect
Group structure effect On Profit from Group structure HY1 On Net Sales Recurring (€ millions) Operations V&S acquisition 507.2 164.0 Other (43.0) (34.6) Total Group Structure 464.1 129.4 58
Slide 59: Consolidated Balance Sheet 1/2
Consolidated Balance Sheet 1/2 Assets (Net book value) 30/06/2008 31/12/2008 (€ millions) Non-current assets Intangible assets and goodwill 10 341 16 462 Property, plant and equipment and investments 1 822 1 889 Deferred tax assets 722 1 107 Total non-current assets 12 885 19 458 Current assets Inve
Slide 60: Consolidated Balance Sheet 2/2
Consolidated Balance Sheet 2/2 Liabilities and shareholders’ equity 30/06/2008 31/12/2008 (€ millions) Shareholders’ equity 6 420 5 847 Minority interests 177 183 Shareholders’ equity – attributable to equity holders of the 6 597 6 030 parent Non-current provisions and deferred tax liabilities 3 073
Slide 61: Movements in Net Debt
Movements in Net Debt € millions 31/12/2007 31/12/2008 6 months 6 months Self-financing capacity 1 006 1 185 Decrease (increase) in working capital requirements (550) (166) Financial income/(expense) and taxes (281) (397) Acquisition of PPE, intangible assets and other (66) (92) Free Cash Flow 109 5
Slide 62: Segment reporting
Segment reporting Total: 31/12/2007 31/12/2008 Organic Change in Change Forex impact (€ millions) 6 months 6 months growth Group Net sales (Excl. T&D) 3 713 100% 4 212 100% 499 13% 172 5% (137) -4% 464 12% Gross margin after logistics costs 2 126 57% 2 503 59% 376 18% 126 6% (2) 0% 252 12% Advertisi
Slide 63: Net Debt at 31 December 2008
Net Debt at 31 December 2008 Analysis of net debt by nature Syndicated Loan 80% Bonds 18% Miscellaneous (including cash) 2% Total 100% Analysis of net debt by currency % Euro 42% % USD 58% Total 100% 63
Slide 64: Number of shares included in EPS calculation
Number of shares included in EPS calculation (x1000) HY1 HY1 07/08 08/09 Weighted number of shares in issue 219,331 219,716 Number of treasury shares (7,372) (1,460) Dilutive impact of stock options 3,356 1,784 Diluted number of outstanding shares for EPS calculation 215,315 220,039 The increase in
Slide 65: Diluted EPS from recurring operations
Diluted EPS from recurring operations HY1 HY1 (€ millions and €/share 07/08 08/09 Diluted number of shares (thousands) 215,315 220,039 +2% Group share of net profit from recurring operations 594 685 +15% Diluted net EPS from recurring operations 2.76 3.11 +13% Very strong growth in net EPS from recu