Management Presentation

Transcription

1 Management Presentation June 2012 happy moments

2 Disclaimer This presentation contains information and analysis on financial statements and is prepared for the sole purpose of providing information relating to Ülker This presentation contains forward-looking statements which are based on certain expectations and assumptions at the time of publication of this presentation and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in these materials. Many of these risks and uncertainties relate to factors that are beyond Ülker s ability to control or estimate precisely, such as future market and economic conditions, the behavior of other market participants, the ability to successfully integrate acquired businesses and achieve anticipated cost savings and productivity gains as well as the actions of government regulators Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this presentation. Ülker does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of these materials This presentation merely serves the purpose of providing information. It neither represents an offer for sale nor for subscription of securities in any country, including Turkey. This presentation does not include an official offer of shares; an offering circular will not be published This presentation is not allowed to be reproduced, distributed or published without permission or agreement of Ülker The figures in this presentation are rounded to provide a better overview. The calculation of deviations is based on figures including fractions. Therefore rounding differences may occur Neither Ülker nor any of its managers or employees nor any other person shall have any liability whatsoever for any loss arising from the use of this presentation 1

3 Ülker: Leading name in Turkish confectionery Best recognized FMCG brand in the dynamic Turkish market for 68 years Turkey s leading producer of biscuits, chocolates, chocolate covered products, crackers, wafers and cakes Spread out facilities representing the largest production capacity in the domestic market and minimizing dependency on single location Biscuits In Figures Net sales, 2011 : TL0.9 bn Market share 2011: 49% Capacity: 403 tons/year CUR: c.71% Biscuit Free Float 23% Exports, mainly to the Middle East, Northern Africa and EU, accounting for c.20% of sales volume Consolidated annual net sales of TL1.8 bn in 2011 and estimated net sales of TL bn in 2012 Shareholding Structure Other 12% Dynamic Growth Fund 21% Yıldız Holding 44% Yıldız Holding is the parent company. It is Turkey s leading food and beverages group with annual gross sales of TL11.6 bn as at the end of 2011 Yıldız Holding ranked 10 th in Global top 100 confectionery producers list by Candy Industry in 2011 Ülker Çikolata: Consolidated for the last quarter; Fresh cake: Not consolidated Revenue from others excluded Net sales, 2011 : TL0.1 bn Market share 2011: 40% Capacity: 45k tons/year CUR: c.73% Silivri: Chocolate, chocolate covered biscuit, c.35k tons/year Topkapı: Biscuits, c.62k tons/year Topkapı: Chocolate, c.203k tons/year Cake Gebze: Biscuit & cracker, c.49k tons/year Net sales, 2011 : TL0.5 bn Market share 2011: 49% Capacity: 238k tons/year CUR: c.60% Hadımköy: Cake, c.45k tons/year Chocolate Ankara: Biscuit, c.112k tons/year Karaman: Biscuit, cracker, chocolate, cake c.180k tons/year 2

4 Ülker: the Best Recognized FMCG brand Best Recognized Brands Brand One Feels Close To Consistently ranks as one of the best recognized brands in Turkey # 1 # 2 # 3 # 4 # 5 The Brand Award (International Brands Conference, 2011) The Best in the Sweet and Salty Category (Silver Effie Award, Ülker Rondo, 2011) Most Recognized Company (AC Nielsen, 2nd place, 2010) Ülker has always been the most recognized brand and closest to consumers Strength of the brand is proven by national and international awards Long lasting relationships with end users enhance brand perception Highly-popular sub-brands are in the market for many years Ülker brand essence and campaign theme: Happy moments with Ülker Source: ACNielsen, public data Arçelik is a household durable goods brand 3

5 Corporate governance Board of Directors 9 members, 3 of which are independent Encompasses 3 proactive committees, Audit, Corporate Governance and Early Detection of Risk Committees, where independent members dominate Public Disclosure and Transparency Simplified corporate structure improving transparency Diversified communication channels with investors Proactive attendance in investor meetings with participation in 7 local and international investor conferences in investor meetings were performed in 2011 New investor relations materials and enriched corporate website Expanding coverage through active communication with sector analysts. Has been covered by 12 analysts Shareholder Rights Elimination of dividend privileges completed in 1Q 2012, giving equal dividend rights to each and every shareholder Stakeholder Rights Employee rights are supported through comprehensive company-wide human resources policies Code of ethics regulating company wide relations have been reviewed Improving environmental consciousness with the launch of green building project - carbon emission measurements confirm environment friendly production operations 4

6 Corporate governance: Elimination of dividend-privileges of shares Prior Structure Share Class Number of Shares Additional Dividend Privilege A 1, % 4 B % C 26,859,995,565 2 D 2,217 1 Total 26,860,000,000 Founder Certificates 22, % Candidates for Board Cancellation of privilege shares was done by a capital increase from internal resources after the share capital register. There was no cash outflow All C shares have the same amount of dividend right and there is no additional dividend privilege attached to any share class as of April 2012 Share Class Number of Shares Additional Dividend Privilege Candidates for Board Current Structure A 1,486-4 B 2,217-1 C 34,199,996,297-2 D Total 34,200,000,000 Founder Certificates

7 Key Investment Highlights

8 Ülker story 1 Corporate restructuring Ongoing transformation to a leaner and more sizable confectionery company by bringing all relevant companies under one umbrella and disposal of non-core assets 2 Distribution channel restructuring Simplification of distribution network to adopt to changing environment Route to a stronger but leaner distribution network The best recognized FMCG brand in Turkey 3 Unlocking brand potential by leveraging Ülker s strongest sub-brands Leading brand since establishment Star sub-brand focus SKU optimization with focus on profitability Brand building programs, i.e. 360 o marketing campaigns, social media, new ways of merchandising 4 Spread out production facilities Largest production capacity in the domestic market Minimizing dependency on single location 5 A strong parent: Yıldız Holding, Turkey s leading food and beverages group Started as a biscuit producer. Transformed into a mega FMCG group. Leveraged Ülker brand and penetration to launch several products in other segments Currently has operations in 6 sectors with TL11.6 bn gross sales in 2011 Highly sought out as a local FMCG partner 7

9 1 Corporate restructuring: Ülker previous structure: Too many layers was transformed into a leaner, more transparent structure Structure as of Current Structure Biscuit production Biscuit production 98% 99% 51% İdeal Ülker branded products (Biscuit & cracker production) Birlik Flour producer Biskot Non-Ülker branded products (Biscuit & chocolate production) 78% 69% 84% 47% Atlas Domestic sales Birleşik Exports: Non-Ülker branded products İstanbul Exports: Ülker branded products Rekor Non-Ülker branded products Fresh Cake Cake production Godiva Besler Oil and margarine production Pendik Nişasta Starch production 10% 25% 7% 24% 92% 44% Ülker Çikolata Chocolate producer Biskot Non-Ülker branded products (Biscuit & chocolate production) 98% 78% 91% 42% Atlas * Domestic sales Birleşik Exports: Non-Ülker branded products İstanbul Exports: Ülker branded products Rekor Non-Ülker branded products Godiva 19% 74% Mavi Yeşil Ülker branded diet products Hero Baby Baby food 40% 92% Atlantik * Chocolate sales Previous structure: - Multiple sales channels to promote competition amongst sales agents - Portfolio investments in various companies BIM Retail Sağlam GYO REIT Layered structure, evolved due to fast growth and add-on acquisitions, led to restructuring need 10% 11% Steps already taken: - Ülker Çikolata, Fresh Cake and Atlantik Gıda were acquired from Yıldız Holding - İdeal, Birlik and Fresh Cake merged with Ülker - Non-core operations were divested (Besler, Hero Baby, Pendik Nişasta, BIM, Sağlam GYO) - Part of Godiva shares divested Production companies * Not operational as of March 1 st, 2012 Sales companies Financial assets Will be merged with related production companies by the end of 2012 Stake owned by Ülker Indirect ownership structures 8

10 1 Corporate restructuring: Ülker target structure: Leaner with focus on core businesses Target Structure Biscuit production 92% Ülker Çikolata Chocolate producer İstanbul Gıda Exports: Ülker branded products 91% Steps in progress: - Merge of domestic sales subsidiaries to related production companies - Only export operations will remain as a separate entity - All domestic traditional channel sales consolidated under single sales company Horizon 44% Biskot Non-Ülker branded products (Biscuit & chocolate production) Production companies Sales companies Stake owned by Ülker 9

11 2 Distribution channel restructuring: Previous distribution system: Multichannel and layered sales network Other Food & Beverage Products Distributors As confectionery goods remain at the top spot for impulse purchases, availability is the key factor determining strength of a brand 55% Domestic Traditional Channel Chocolates Biscuits Cakes Atlantik (Ülker brand) Atlas (Ülker brand) Atlas 235 Distributors With c.220k sales points and c.70% share in confectionery sales, traditional channel dominates the market Ülker s previous domestic traditional channel consisted of: -235 distributors -With c.90% nationwide coverage, the largest food network in Turkey Distribution channels Domestic Modern Channel 25% Biscuit, Chocolate & Cake Operations Pasifik Organized Retail Chains Changing market conditions dictate restructuring in distributorship system: -Need for scale efficient and organized distributors with decreasing distributor margins Exports Channel 20% İstanbul Biscuit, Chocolate & (Ülker brand) Cake Operations Birleşik (Non-Ülker brand) Distributors Ülker aims to increase its operational efficiency and margins through restructure of its domestic traditional distribution channel % in domestic sales Yıldız Holding subsidiary Also responsible for sales of Yıldız Holding companies product portfolio 10

12 2 Distribution channel restructuring: Target: Traditional channel simplified for optimized and efficient reach Inefficiency Complexity Execution difficulty High level distributor discounts Main Challanges Layers to be reduced Better and faster execution capability Fewer but stronger distributors Decreasing distributor discounts Result: Previous Structure: Other Food & Beverage Products Distributors Completed New Structure: Other Food & Beverage Products Biscuits Atlantik (Ülker brand) Biscuits Domestic Traditional Channel Chocolates Atlas (Ülker brand) 235 Distributors Domestic Traditional Channel Chocolates Horizon (New Sales Company) 104 Distributors Cakes Atlas # of points visited: 140k % of invoice issued by visit: 75%-80% Cakes # of points visited: 175k % of invoice issued by visit: 90% Current domestic traditional channel after restructuring: New sales company established in 2011 More efficient route to market with stronger, but fewer distributors (104 vs. c.235) - same coverage in sales points Variety of products per sales point increased by %20 Optimization process completed in March 2012 Owned by Yıldız Holding 11

13 Cake Chocolate Biscuit 3 Unlocking brand potential: Strong market share across the categories Market Share Development, Volume Based Total size of biscuit, chocolate and cake markets is 57% 54% 50% 49% 32% 35% 36% 39% 11% 12% 13% 12% Ülker Eti Other 55% 56% 51% 49% estimated to be TL4.7 bn in value and 269k tons in volume terms Loss of market share caused mainly by aggressive product launch strategy originated by the competition - In the short run highly demanded popular products shifted market shares from Ülker to competition 29% 26% 29% 29% 10% 11% 11% 11% 6% 6% 9% 11% Ülker Nestle Eti Other 47% 48% 43% 40% 42% 46% 49% 40% 9% 12% 12% 11% Ülker Eti Other Retail market, Source: ACNielsen, Euromonitor 15% 10% 5% 0% -5% -10% Biscuit, Chocolate & Cake Markets Market Volume Growth Real GDP Growth 12

14 Impacts on the market Ülker Competition 3 Unlocking brand potential: Ülker: Streamlining product portfolio Market trends: SKU attacks for market share by the competition Easing SKU wars x 2012 Future x Aggressive product launches in period New tastes, hybrid products and new packaging forms introduced to the market strategy to competition s attack: Defending the position by matching aggressive product launches new SKUs in /2011 period Launches supported through consistent marketing campaigns Short run results: - Highly demanded popular products shifted market shares Medium term results: - Decreasing margins due to increasing operational costs - Increasing sales and marketing expenses - Crowded SKU portfolios difficult to control. s changing strategy and prospects for the future: SKU management: Portfolio restructuring started in late Focus on star SKUs - Delisting of unprofitable SKUs Reduction from 502 SKUs in 2010 to c.370 SKUs in 2011 Packaging & pricing optimization: - Formulizing cost effective sizes, packaging and pricing to quickly respond to changes in consumer choices and raw material costs Brand building: - Increasing investment on star SKUs Innovation: - Introduction of new trends in snack formats to grasp market share from newly developed and unpackaged segments 13

15 4 Spread out production facilities Topkapı, İstanbul Facility Biscuits Established in 1944 Capacity: 62k tons/year 28 sqm closed area Hadımköy, İstanbul Facility Cake Established in 1992 Capacity: 45k tons/year 27k sqm closed area Gebze Facility Biscuit & cracker Established in 1997 Capacity: 49k tons/year 41k sqm closed area Ankara Facility Topkapı, İstanbul Facility Chocolate Established in 1991 Capacity: 203k tons/year 68k sqm closed area Biscuit Established in 1969 Capacity: 112k tons/year 86k sqm closed area The largest biscuit manufacturing facility in the Middle East Silivri, İstanbul Facility Chocolate, chocolate covered biscuit Established in 1995 Capacity: 35k tons/year 12k sqm closed area Karaman Facility Biscuit, cake, cracker & chocolate Established in 1986 Capacity: 180k tons/year 102k sqm closed area Non-Ülker branded products 44% owned by Ülker Spread out facilities representing the largest production capacity in the domestic market and minimizing dependency on single location Biscuit Chocolate Biscuit & chocolate Cake 14

16 5 A strong parent: Yıldız Holding Real Estate Retail Food & Beverages A prominent name in the Turkish food industry operating in confectionery, margarine & liquid oils, culinary products, dairy products, beverages, fruit juice and frozen foods #1 Best recognized food brand #1 in biscuits & chocolates #2 in dairy products #1 in edible oils and fats #1 in overall baby food #1 in culinary products Experience in managing international operations Premium segment chocolate producer acquired in 2008 Personal Care Packaging Finance JVs with leading international players Sole and first brand sought out for co-branding Turkey's first food company to establish a nationwide distribution network In excess of 200k sales points nationwide c.90% coverage, second best after Coca cola 15

17 Financial Snapshot

18 Stable revenue generation 12% 13% 14% 10% 8% 11% 16% 62% Sales Volume (k tons*) % 10% 7% 9% 8% 17% 81% 73% Net Sales, TL mn 26% 17% 52% 59% 5% 11% 46% 38% FY10 FY11 1H11 1H12 Biscuit Chocolate Cake Other * Excluding the Non-confectionery sales volume; and 1Q11 flour sales volume 85% 1H12 figures include chocolate and cake operations Following acquisition of Ülker Çikolata in 2011, chocolate operations has been consolidated in 14% 30% 56% FY10 FY11 1H11 1H12 Biscuit Chocolate Cake 1, , ,141.0 Consolidated sales volume increased by 37.5% to 200,872 tonnes, mainly driven by consolidation of the chocolate and cake businesses, coupled with restructuring of the sales and distribution companies Consolidated revenues for the first half of 2012 were TL 1,141 million, an increase of 55.7% when compared to revenues of TL 733 million recorded in the same period of 2011 Export sales accounted for 19.6% of total sales in 1H12 Gross profit increased by 77% to TL 254 million compared to gross profit of TL 143 million recorded in the first half of 2011 Gross margin improved to 22.3% in the first six months of 2012, from 19.6% in the same period of 2011 Consolidated adjusted EBITDA (excluding other operating income/expense) for the first half of 2012 was TL 112 million compared to TL 31 million in the same period of 2011 Adjusted EBITDA margin was 9.8% compared to 4.2% recorded in the same period of 2011 Net income for the first half of 2012 totaled TL 115 million, a significant increase compared to a net loss of TL 1.9 million recorded for the same period of 2011 (excluding the gain on the sale of a financial asset amounting to TL 610 million) Guidance In 2012, Ülker is forecast to post net sales of TL2.3-TL2.5 bn with an EBITDA margin of 8.5% EBITDA margin is expected to reach 12% levels in 2014 Gross margin is expected to improve with stabilizing commodity prices and increased control on cost base 17

19 ,05 0, ,54 0,29 1, , Financial Summary Net Sales (TL mn) Gross Profit (TL mn) Operating Profit (TL mn) H11 1H H11 1H H11 1H12 EBITDA (TL mn)* Net Profit (TL mn) EPS H11 1H H11 1H H11 1H12 * EBITDA, excluding Net other operating income/expense 1h12 figures include chocolate and cake operations 2011 figures include 4Q chocolate results All figures in TL MM, except per share 18

20 WC & Net Debt Position in 1H12 Working Capital (in TL mn) H12 Average Trade Receivable Days Average Inventory Days Average Trade Payable Days Average Working Capital Cycle Net Debt Position (in TL mn) H12 - Short-Term Long-Term Total Financial Liabilities Inter-Company Receivables Inter-Company Payables 4 2 Inter-Company Net Cash and Cash Equivalents Net Debt

21 Ülker Strategy and Expectations

22 Ülker strategy and expectations Corporate Strategy PROFITABLE GROWTH Restructuring Perspective Corporate structure: Capitalizing on its strong corporate execution, Ülker is going through a managerial and operational transformation to form a leaner structure through acquisitions and disposal of non-core assets Distribution channel: Existing system is being streamlined by mergers and decreasing number of sales companies. The same number of end points will be reached more effectively with fewer distributors Brand Perspective Fixing the basics: Through an ongoing brand execution, the number of SKUs are being reduced and focus is shifted to profitability across the brands Brand activation: Brand recognition and position are being enhanced through new SKU management strategies, innovation, marketing strategies and marketing spending on star SKUs rather than new launches Financial Perspective Effects of restructuring: Ongoing restructuring and simplification processes will generate financial benefits such as decrease in discounts and operational costs As a result, in mid to long-term: - Sales are forecast to increase 3% in biscuit and cake operations and 5% in chocolate operations per annum in volume terms. Growth in value terms are forecast around 200bps higher than volume growth. - Selective international growth in MENA and Eastern Europe may be possible - The best practice in corporate governance is aimed to be achieved 21

23 Appendices

24 A. Financial Statements

25 Income statements Income Statement (in TL mn) * 1H11 1H12 Sales Revenue 1,412 1,506 1,524 1, Cost of Sales (1,106) (1,128) (1,197) (1,435) (589) (887) Gross Profit Gross Profit Margin 22% 25% 21% 20% 20% 22% OPEX (235) (266) (286) (319) (127) (165) Marketing, Sales and Distribution Expenses (182) (200) (228) (252) (100) (110) General Administration Expenses (52) (65) (57) (65) (26) (51) Research and Development Expenses (1) (1) (1) (3) (1) (4) Other Operating Income /Expense Operating Profit Operating Profit Margin 7% 10% 4% 6% 4% 9% Share in net profit of inv. accounted for equity method (15) (3) (14) (13) (8) - Finance Income/Expenses (58) Profit Before Taxation Tax Charge from Continued Operations (4) (25) (32) (51) (40) (30) Net Profit EBITDA** EBITDA Margin** 6.7% 9.5% 4.4% 4.2% 4,2% 9,8% * 2011 Income Statement does not include Fresh Cake figures, whereas chocolate operations has been consolidated solely for the last quarter ** EBITDA, excluding Net other operating income/expense 24

26 Balance sheets and highlights Balance Sheet (in TL mn) H12 Current Assets 1,121 1,486 1,512 1, Non-current Assets 913 1,243 1, Total Assets 2,034 2,729 2,886 2, Current Liabilities 901 1, , Non-current Liabilities Shareholders Equity 756 1,186 1,527 1, Total Liabilities & SHR Equity 2,034 2,729 2,886 2, Other Highlights (in TL mn) H12 Short-Term Long-Term Total Financial Liabilities , Net Debt 203 (36) EPS (TL) 0,05 0,30 0,54 1,92 0,29 25