full year result - ccamatil.com
TRANSCRIPT
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BARCLAYS
2017 GLOBAL CONSUMER
STAPLES CONFERENCE 5-6 September 2017, Boston
COCA-COLA AMATIL
Alison Watkins
Group Managing Director
Martyn Roberts
Group Chief Financial Officer
David Akers
Group Head of Investor Relations
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COCA-COLA AMATIL
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GROUP OVERVIEW
Publicly listed Australian company
(ASX: CCL) – market capitalisation
approximately $5.8B (5 Sep 2017)
Top 10 Coca-Cola bottler globally
FY16 Revenue $5.25B
FY16 Underlying EBIT $683.4M
FY16 Underlying NPAT $417.9M
Investment grade credit ratings (A3/
BBB+)
INDUSTRY AND MARKETS
Non-alcoholic ready to drink
beverages in Australia, New
Zealand, Fiji, Samoa, Indonesia,
Papua New Guinea
Alcohol and coffee beverages in
Australia, New Zealand and Fiji with
additional export potential
Food products through SPC,
predominantly in Australia
REPORTING SEGMENTS
Australian Beverages
New Zealand & Fiji
Indonesia & Papua New Guinea
Alcohol & Coffee
Corporate, Food & Services
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OUR PLANS REFLECT THREE STRATEGIC THEMES
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LEAD
Strengthening category
leadership position
Leading brands in each major
NARTD category in each market
Up-weighted levels of innovative
marketing to continually strengthen
brand equity
Evolving portfolio that adapts to
changing consumer preferences
EXECUTE
Step change in productivity and
in-market execution
World-class customer servicing
capability
Route to market that provides
customer diversification and real
competitive advantage
Effective leverage of our
large-scale, low-cost manufacturing,
sales and distribution capability
PARTNER
Better alignment with The Coca-
Cola Company and our other
partners
Shared vision of success and aligned
objectives
Joint plans for growing system
profitability
Balanced share of risk and rewards
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SHAREHOLDER VALUE PROPOSITION
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We are focused on generating attractive sustainable returns for shareholders
Investment case EBIT drivers EPS driversTargeting shareholder
value creation
Coca-Cola franchisee with leading brands
Route-to-market with scale and reach
Large-scale, modern, low-cost infrastructure
Steady cash flow from core Australia and New
Zealand franchises
Growth opportunities including Indonesia
and Alcohol & Coffee providing upside
Targeting low single-digit
EBIT growth
Core developed market
franchises (Australia and New Zealand)
Targetingdouble-digit EBIT growth
Developing markets
(Indonesia, Papua New
Guinea and Fiji)
Targetingdouble-digit EBIT growth
Alcohol & Coffee and SPC
Revenue growth plans and continuous cost focus
across the group
Modest capex for developed markets
Growth capex for Indonesia
funded via TCCC equity injection
Continuous working capital management
Bolt-on acquisitions
Capital management initiatives
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Mid single-digit EPS growth
Attractive dividends: above 80%payout ratio
Strong balance sheet
Strong return on capital employed
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COCA-COLA FRANCHISEE WITH LEADING BRANDS
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Our investment case is based on being a Coca-Cola franchisee with leading brands across Sparkling and Still Beverages
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Indonesia(3)New Zealand(2)Australia(1)
Approximate market volume composition Approximate market volume composition Approximate market volume composition
Ap
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CC
A s
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A s
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EnergyCola Flavours Adult
Dairy
Sparkling TeaJuice Dairy SportsCola JuiceFlavours Water
Adult
SportsSports
Energy
Water Tea Juice Tea
1. Sources: Aztec Australian Grocery Weighted and AU Convenience scan. MAT 1H162. Sources: Nielsen Total MM, YE 2015.3. Sources: Nielsen; internal estimates. Excludes water ~60% of the NARTD market. Oct 2016.
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ROUTE-TO-MARKET WITH SCALE AND REACH AND LARGE-SCALE, MODERN, LOW-COST INFRASTRUCTURE
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Our operations and route-to-market has significant scale and reach and we have large scale, modern and low cost infrastructure
Coca-Cola Amatil Barclays Global Consumer Staples Conference
Our footprint across Asia PacificOur operations
Australian Beverages
New Zealand
Fiji Indonesia Papua New
Guinea
Production facilities
12 4 1 8 2
Production lines
40 11 4 37 6
Warehouses 15 3 2 8 7
Customers* (approx.)
115,000 25,000 3,000 720,000 10,000
Coolers (approx.)
160,000 40,000 3,600 330,000 17,000
* Includes outlets served indirectly.
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THE COCA-COLA COMPANY’S STRATEGY TO FOCUS ON CHOICE, CONVENIENCE AND THE CONSUMER
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ACCELERATE GROWTH
OF CONSUMER CENTRIC
BRAND PORTFOLIO
TAKING MORE AND BOLDER
ACTION TO REDUCE SUGAR
Source: The Coca-Cola Company Presentation April 2017
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WE ARE ALSO DEVELOPING STRONG
RELATIONSHIPS WITH OTHER LEADING
PARTNERS
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MONSTER ENERGY ALCOHOL & COFFEE
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AUSTRALIAN BEVERAGES
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Strategic Themes
Rebalancing the portfolio
Focus on Sparkling Beverages
Accelerate Still Beverages
Targeting low single digit EBIT
growth
Lead
Execute
Partner
Shareholder Value
Proposition
Stabilise earningsCost optimisation to
support continued
rebalancing
Return to growth
Leveraging our route-to-market approach and driving strong customer engagement
Identified at least a further $100M of cost optimisation opportunities and a further ~$20M cost savings from 2020
Minimising the impact of container deposit schemes
Refreshed and strengthened category growth plan
Significant pipeline of additional new product development and activity in 2017
Incidence pricing commenced on 1 July
Embracing the “Total Beverages Company” strategy
We continue to implement initiatives to stabilise earnings, drive cost optimisation to support portfolio rebalancing and return to growth
Coca-Cola Amatil Barclays Global Consumer Staples Conference
Better alignment with The Coca-Cola Company
Monster Energy agreement
Revenue growth management
Route-to-market
Cost optimisation $100M delivered
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LEAD
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INNOVATING IN SPARKLING BEVERAGES
EXPANDING PORTFOLIO IN STILL BEVERAGES
Significant launches already in 2017 with Coca-Cola No Sugar and Keri Juice Blenders with more activity and additional new product development in the pipeline for 2H17
Coca-Cola No Sugar• ~28% of Sparkling Beverage
consumers in Australia have consumed a Coca-Cola No Sugar
• ~39% have consumed a Coca-Cola No Sugar more than once
• Already achieved penetration in state immediate consumption and HORECA of ~68%
Additional Sparkling Beverage products in 2H17• Launch of additional rotational flavours
to attract lapsed consumers and new consumers
Coca-Cola Amatil Barclays Global Consumer Staples Conference
Keri Juice Blenders• Launched on 30 June and already
above target penetration in state immediate consumption and HORECA at ~27%
• Volume per outlet already exceeding previous juice offering
• High re-order rate • Commenced supplying to major
national chain customers
Additional Still Beverage products in 2H17• Launch of additional new product
development in several Still Beverages categories in 2H17 including juice, water and energy
Launched 30 June
Launched 9 June
Packaging innovation in 2H17• Innovative packaging targeting special occasions• Opportunities targeting the HORECA channel
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LEAD
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Priority objectives utilising our leading multi-segment water portfolio
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LEADING MULTI-SEGMENT WATER PORTFOLIO
BULK VALUE MAINSTREAM
ENHANCED / PREMIUM
PRIORITIES
Targeted price investment in value and mainstream water in grocery to increase competitiveness
Additional new products in enhanced and premium water brands in 2H17
Targeted growth of water distribution in state operational accounts, including HORECA
Still Water• Grocery penetration: ~100%• State operational accounts
penetration: ~76%• HORECA penetration: ~42%
Mount Franklin Lightly Sparkling• Grocery penetration: ~100%• State operational accounts
penetration: ~39%• HORECA penetration: ~26%
1
2
3Enhanced water segment represents
• ~60% of packaged water category revenue growth and ~11% of volume growth (year to date)1
• ~35% of packaged water category revenue and ~16% of volume (year to date)1
ENHANCED WATER
1. Category value and volume of packaged water in grocery to 6 August.
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EXECUTE
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Leveraging our route-to-market advantage and driving strong customer engagement
LEVERAGING OUR ROUTE-TO-MARKET STRONG CUSTOMER ENGAGEMENT
Expanding customer base• By the end of 1H17, increased high
value customers by ~10%
Targeted approach to HORECA channel• Dedicated sales team for HORECA
channel• By the end of 1H17, increased high
value customers by ~30%
Online ordering and expansion• Online ordering at ~50% of orders• Exploring additional e-commence
opportunities
In Grocery we have worked closely with our customers to become #1 supplier
Recipient of several recent industry awards• Supplier of the Year – Romeo’s, Cornetts Supermarkets,
Ritchies, AACS, 7-Eleven• Grocery Supplier of the year – Spar • Trade partner of the Year – UCB • Best new product launch – 7-Eleven (Powerade Silvercharge)• Promotional support of the year – Campbells
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EXECUTE
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Targets
1st
$100M
2014 2015 2016 2017 2018 2019 2020
2nd
$100M
~$20M
Announced Oct14
Announced Oct16
Announced Feb17
At least a further $100 million cost optimisation
~$20 million cost
optimisation
$100 million delivered ahead of schedule
Indicative timeline of cost optimisation and reinvestment programs
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PARTNER
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Continuing to improve alignment with The Coca-Cola Company and embracing the “Total Beverages Company” strategy
SUCCESSFUL IMPLEMENTATION OF INCIDENCE PRICING
THE COCA-COLA COMPANY’S “TOTAL BEVERAGES COMPANY” STRATEGY
Coca-Cola Amatil Barclays Global Consumer Staples Conference
“Total Beverages Company” strategy
• In early 2017, The Coca-Cola Company unveiled its “Total Beverages Company” strategy
• Consumer-centric approach
• Category-cluster beverage segmentation
• Importance of growing beyond the flagship brand
Coca-Cola Amatil
• Embracing “Total Beverages Company” strategy in the markets in which we operate
Overview
• Successful implementation of incidence pricing in Australia on 1 July 2017
• More aligned pricing model that links the concentrate price per unit to revenue
Key benefits
• Greater alignment resulting in greater focus on the market and consumers
• Joint focus on growing transactions and value
• Faster day-to-day decision making
• Simplification of funding arrangements and greater certainty with promotional plans
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INDONESIA
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1. Improve product availability
2. Increase affordability
3. Build brand strength
4. Build channel relevance
Investing in capacity to sustain
growth
Driving effective and efficient route
to market execution
Driving cost competitiveness
A more agile and responsive system
Focus – how we’ve changed our strategy since 2014
Indonesian population
Indonesian population
Niche
Mass market
Targeting double digit EBIT growth
Shareholder Value
PropositionStrategic priorities
Supported by a number of enablers
Since 2014, we have made solid progress across all our strategic priorities
and are accelerating to transform the business
2013
2014 onwards
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INDONESIA
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We are highly leveraged to significant profit improvements when the market returns to growth
MACROECONOMIC FACTORS CURRENTLY CHALLENGING
OPERATIONAL LEVERAGE OPPORTUNITY WHEN GROWTH RETURNS
Coca-Cola Amatil Barclays Global Consumer Staples Conference
1. Revenue Growth
2. Cost Leverage
and Efficiencies
3. Cost savings
4. Capability
Investment and DME
Economic ReturnsROCE above WACC by 2020EBIT margin of 10% by 2023
Cost growth to be less than inflation
6.0 5.6
5.0 4.9 5.0 5.0 5.2 5.3 5.5
2012 2013 2014 2015 2016 2017 2018 2019 2020
5.5 5.5 5.3 4.8 5.0 5.0 5.2 5.3 5.3
2012 2013 2014 2015 2016 2017 2018 2019 2020
4.3
6.4 6.4 6.4
3.5 4.4 4.5
5.8 5.7
2012 2013 2014 2015 2016 2017 2018 2019 2020
9.3 10.5
11.9 13.4 13.3 13.4 14.0 13.5 13.3
2012 2013 2014 2015 2016 2017 2018 2019 2020
Gross domestic product 2012-2020
Personal consumption expenditures2012-2020
Inflation2012-2020
Currency: Indonesian Rupiah to US dollar
2012-2020
Source: Information Handling Sources
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NEW ZEALAND
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Build for growth
Recession & Earthquake
Price and cost out led resultsGrowth plans based predominantly on
volume growth
Recovery Phase
2009-2012 2013-2014 2015 2016
Volume Net Sales Revenue
Targeting low single digit
EBIT growth
Shareholder Value
Proposition
Since 2014, we have delivered on our strategy of volume based growth
Coca-Cola Amatil Barclays Global Consumer Staples Conference
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ALCOHOL & COFFEE
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Spirits & RTDsBeer, Cider &
BittersCoffee
Paradise Beverages
Since 2014, we have developed a larger and stronger portfolio with our
brand partners across alcohol and coffee categories
Shareholder Value
Proposition
Targeting double digit EBIT growth
Coca-Cola Amatil Barclays Global Consumer Staples Conference
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SPC
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Update
• Good progress modernising manufacturing capabilities and improving operational performance
• Good progress bringing new innovative products to market, such as ‘ProVital’, ‘Perfect Fruit’ and several snacking-fruit products
• Further opportunities to expand the range of products and expand into new markets
Innovative products
Continue transformation into a profitable modern food business
Since 2014, we have made significant progress on our investment plans,
and remain committed to securing SPC’s long term future
Coca-Cola Amatil Barclays Global Consumer Staples Conference
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FINANCIAL TARGETS
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FINANCIAL TARGETS
UNDERLYING NPAT & EPS
Expecting FY17 underlying NPAT to be broadly in line with FY16
Medium term target continues to be mid single-digit EPS growth
This will depend on the success of revenue initiatives in Australia, Indonesian economic factors and regulatory conditions in each of our markets
We do acknowledge that the roll-out of container deposit schemes in Australia will challenge us over the next couple of years given the inherent uncertainty of their impact across the industry
CAPITAL EXPENDITURE
2017 Group capex expected to be around $365M
2018 Group capex expected to be at a similar level to 2017
This reflects initiatives to rebalance Australian Beverages’ portfolio and remodel its supply chain and continued investment in Indonesia
DIVIDEND OUTLOOK
Continue to target medium term dividend payout ratio of over 80%
It is anticipated that franking will continue to be at a lower level than prior years
BALANCE SHEET
Balance Sheet to remain conservative with flexibility to fund future growth opportunities
Expecting to maintain strong return on capital employed
We will also continue to explore opportunities to extract value from our property portfolio.
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RECAP
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QUESTIONS & ANSWERS
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APPENDIX
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ADDITIONAL DEVELOPMENTS
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• Entered into agreements for the sale and leaseback of the Richlands manufacturing and warehousing facility in Queensland
• Proceeds of ~$156 million will result in a one-off gain of ~$100 million before tax in 2H17
• Expected that this will be substantially realised as profit after tax due to the utilisation of capital losses
• Sale due to settle on 1 December 2017
• One-off gain in the second half to offset one-off costs from Australian Beverages cost optimisation initiatives for the year, treated as non-trading items
• Significant progress on NSW container deposit scheme
• Coca-Cola Amatil is a partner in Exchange for Change, an industry joint venture, which has been appointed as Scheme Coordinator
• The Scheme Coordinator has published the fees it expects to charge suppliers in the first three months of the scheme
• The Scheme Coordinator will charge all suppliers based on its estimate of the supplier’s proportionate share of eligible containers by material type
• The fees will be adjusted for the actual costs of the CDS over time
Board Renewal
• Appointment of Ilana Atlas as Chairman
• Appointment of Paul O’Sullivan as a Non-Executive Director
Group Leadership Team
• Search progressing for appointment of Australian Beverages’ Managing Director – expect to make an announcement in the coming months
• Augmented the Group Leadership Team with the appointment of Chris Sullivan as Group Director, Partners and Growth
RICHLANDS SALE & LEASEBACK
NSW CONTAINER DEPOSIT SCHEME
LEADERSHIP CHANGES
Coca-Cola Amatil Barclays Global Consumer Staples Conference
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COST OPTIMISATION & REINVESTMENT
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At least a further $100 millionTo be delivered over the three years to 2019
• ~$80 million (Richlands warehouse automation project)• Spend predominantly in 2H17 and 1H18
• ~$90 million (spend predominantly in 2018)• Richlands: new glass production line, additional juice
and dairy capacity
A further $20 million per annumTo be delivered from 2020
• ~$25 million of restructuring costs recognised in 1H17• ~$25 million expected to be recognised in 2H17
• One-off costs to be offset by profit from sale of Thebarton and surplus profit from Richlands sale
• Remodel supply chain• Richlands warehouse automation project • ‘Business Excellence’ program
• Outsource merchandising and sales force restructure • Procurement optimisation• Support services optimisation• Good progress on delivering in 1H17
• Remodel supply chain• Closure of South Australian manufacturing facilities• Other manufacturing activities to move to Kewdale
(WA), Moorabbin (Vic) and Northmead (NSW)• New glass production line at Richlands• Expand dairy and juice capacity at Richlands
• Salesforce of the future• Rebalancing of the portfolio through innovation
• Additional marketing• Price investment
Initiatives
Reinvestment
Capex
One-off costs
Cost optimisation
targets
• One-off costs to be offset by one-off gain from sale of Richlands
• ~$100 million before tax to be recognised in 2H17 following settlement of sale (1-Dec)
• Expected that this will be substantially realised as profit after tax due to the utilisation of capital losses
One-off gains
• ~$40 million restructuring costs recognised in 1H17 • ~$5 million expected to be recognised in 2H17 • ~$5 million expected to be recognised following closure
of Thebarton
Coca-Cola Amatil Barclays Global Consumer Staples Conference
Continued focus on cost optimisation and reinvestment to rebalance our portfolio and remodel our supply chain
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DISCLAIMER
Coca-Cola Amatil advises that these presentation slides and any related materials and cross referenced information, contain forward looking statements which may be subject to significant uncertainties outside of Coca-Cola Amatil’s control.
No representation is made as to the accuracy or reliability of forward looking statements or the assumptions on which they are based.
Actual future events may vary from these forward looking statements and you are cautioned not to place reliance on any forward looking statement.
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