SEB Nordic Seminar
Copenhagen, 8 January 2014
Cloetta attendees
Bengt Baron

Danko Maras

Jacob Broberg

President and CEO

CFO

SVP Corporate
Communications &
Investor...
Cloetta – the leading Nordic confectionery player
•  Leading market positions in key markets and complete

Complete offeri...
Iconic brands

1909	
  

1836	
  

1878	
  

1927	
  

1913	
  

1934	
  

1928	
  

1938	
  

1937	
  

1949	
  

1941	
 ...
Solid positions in key markets

Top-selling brands:

Market size (EUR million):

Norway2)

Fazer
6%

Malaco, Kexchoklad, L...
Best in class route to market
•  Customer relations
–  Large and efficient sales
organisation in place on all main
markets...
Attractive non-cyclical market
Market development in Cloetta’s main markets1)
6 000

Key trends
•  Market driven by increa...
2012 – 2013: Focus on margin expansion
Status
Integration process completed

•  Only finalising of Tupla insourcing remain...
Clear strategy to deliver profitable growth
Every day great execution

Strategic initiatives

New territory

•  Broaden di...
Clear strategy to deliver profitable growth cont’d
Examples of initiatives

Launch of Viva Licorice – Dutch
products in Ma...
Stable revenues and visible earnings recovery
LTM net sales Q4 2011 – Q3 2013

LTM EBIT Q4 2011 – Q3 2013

6 000

600

5 0...
Financial development and targets
Quarterly underlying EBIT1)

Quarterly net sales
1 600

Financial leverage

250

5 000

...
Attractive cash conversion
Cash conversion1) development
100%

Temporarily decreased levels
•  Historically strong cash fl...
Cost structure
Total cost split 2012

Distribution
and
Warehousing
6%

Administrative
expenses
15%

Raw material
and
Packa...
Cloetta towards the future
PURPOSE	
  /	
  MISSION	
  

To bring a smile to your

15
We do not serve the main meals

16
Munchy Moments is our territory!

17
Title
red

btitle
grey

1-5
grey

Acquisition of Nutisal
•  A significant step in to a new category in Cloetta home market...
Title
red

Nuts is a new territory for Cloetta

btitle
grey

1-5
grey

19	
  
Title
red

The nuts market

btitle
grey

1-5
grey

•  The nuts category is growing in Western Europe by 5-8% depending
on ...
Title
red

Unique dry roasting competence
Retail Range

btitle
grey

Dry roasting

1-5
grey

•  Unique	
  knowledge	
  and...
Cloetta towards the future
PURPOSE	
  /	
  MISSION	
  

To bring a smile to your

22
Title
hite
Disclaimer
• 

This presentation has been prepared by Cloetta AB (publ) (the “Company”) solely for use at this presentatio...
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SEB Nordic Seminar, January 8, 2014

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SEB Nordic Seminar, January 8, 2014

  1. 1. SEB Nordic Seminar Copenhagen, 8 January 2014
  2. 2. Cloetta attendees Bengt Baron Danko Maras Jacob Broberg President and CEO CFO SVP Corporate Communications & Investor relations •  Joined LEAF as CEO in 2009 •  Joined LEAF as CFO in 2010 •  Previously held various senior •  Previously held various senior management positions within FMCG sector, including CEO of V&S •  B.Sc. and MBA, University of California at Berkeley management positions within Unilever, including CFO/COO Unilever Nordic and VP Finance Supply Chain North America •  B.Sc. in Business Administration and Economics, University of Uppsala 2 •  Joined LEAF as SVP Corporate Communications in 2010 •  Previously held various senior management positions, including VP Corporate Communications in TeliaSonera, V&S and Electrolux •  B.A. in Political Science and Economics, University of Lund
  3. 3. Cloetta – the leading Nordic confectionery player •  Leading market positions in key markets and complete Complete offering product offering •  A portfolio of iconic local brands – top 10 brands account for CHOCOLATE about 60% of net sales •  Sales in 50 countries – 80% of total sales generated from markets with own sales force •  Approx. 2,600 employees in 12 countries •  Production at 10 factories in 5 countries – 97,000 tonnes PASTILLES CHEWING GUM CANDY & LIQUORICE produced in 2012 Net Sales split 2012 7 000 By product area Pastilles 17% Sugar confectionery 49% 5 000 10% 9% 10% 4 000 6% 4 859 3 452 1 000 Norway  6%   Italy  15%   Finland  18%   Denmark  4%   0% 2012 Others  12%   Jan–Sep 2012 Jan-Sep 2013 Netherlands  13%   Net sales Underlying EBIT margin 1)  Underlying  EBIT  based  on  constant  exchange  rates  and  the  current  company  structure  (excluding  distribu=on  business  in  Belgium  and  third-­‐party  distribu=on  agreement  in  Italy)  and  excluding  items  affec=ng  comparability   3   4% 2% 3 455 0 Chocolate 18% Sweden  32%   8% 6% 3 000 2 000 12% Underlying EBIT margin Chewing gum 8% 14% 6 000 Others 8% Net Sales (SEKm) By region Sales and underlying EBIT margin1)
  4. 4. Iconic brands 1909   1836   1878   1927   1913   1934   1928   1938   1937   1949   1941   1953   1951   4   1965   1960   1976   1970   1981   1979  
  5. 5. Solid positions in key markets Top-selling brands: Market size (EUR million): Norway2) Fazer 6% Malaco, Kexchoklad, Läkerol, Ahlgrens bilar, Polly, Center, Juleskum, Plopp, Sportlunch Population (million): Market position: Mars/ Wrigley 12% 900 Market position : Top-selling brands: Malaco, Lakrisal, Läkerol, Center, Juleskum Others 24% Cloetta 27% Brynhild 13% Galleberg 16% 5.5 1,000 900 Market position: Others 21% Nidar 20% Market position: Haribo 32% Toms 19% 16.6 Cloetta 17% 1,500 #1 Top-selling brands: Sperlari, Dietor, Saila, Dietorelle Perfetti 17% Others 51% Haribo 9% Sportlife, XyliFresh, King, Red Band, Venco Market position : Cloetta 25% Mondelez (fka Kraft) 5% Fazer 44% Top-selling brands: Market size (EUR million): #3 Valora 13% Market size (EUR million) : Others 21% Panda 5% Malaco, Jenkki, Mynthon, Läkerol, Sisu, Tupla Population (million): Cloetta 15% #2 Top-selling brands: Population (million): #1 Malaco, Läkerol, Pops, Ahlgrens bilar Market size (EUR million): Mondelez (fka Kraft) 30% 4.9 Top-selling brands: Population (million): Denmark2) #2 5.4 Market size (EUR million): Cloetta 24% Finland1) Market position: 1,400 Population (million): Other 28% Netherlands3) Market size (EUR million): 9.4 Italy2) Sweden1) Population (million): Mondelez (fka Kraft) 6% 60.7 Cloetta 15% 3,600 #2 Others 44% Perfetti 22% Haribo 9% Ferrero 10% Source: Datamonitor, Nielsen Note: 1) Confectionary market, 2) Sugar confectionary and pastilles market, 3) Sugar confectionery market. All numbers for market sizes represent entire confectionary market (to consumer) 5
  6. 6. Best in class route to market •  Customer relations –  Large and efficient sales organisation in place on all main markets –  80% of total sales generated from markets with own sales force Convenience stores / gas stations Supermarkets Other •  Execution –  Ensure that negotiated listing and distribution agreements are followed –  Ensure good visibility on shelves and checkout lines –  Implement campaigns efficiently Consumers 6 Consumers
  7. 7. Attractive non-cyclical market Market development in Cloetta’s main markets1) 6 000 Key trends •  Market driven by increase in population, higher prices and to CAGR 2000–2012: 1.2% some extent also increased per capita consumption 5 000 EURm •  Demand for differentiated and innovative products CAGR 2000–2012: 2.0% 4 000 3 000 2 000 •  Strong brands gain market share CAGR 2000–2012: 2.6% 1 000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Chocolate Sugar confectionery Chewing gum EURm Market size by region 2012 Consumer behavior •  Purchases highly impulse driven 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 0 •  High brand loyalty •  Availability is an important factor for impulse driven purchases •  Appreciation of innovation – taste, quality and novelties is important IT Chocolate NE SE Sugar confectionery DK FI NO Chewing gum Source: Datamonitor. Note: 1) Includes Sweden, Finland, Norway, Denmark, Italy and Netherlands 7  
  8. 8. 2012 – 2013: Focus on margin expansion Status Integration process completed •  Only finalising of Tupla insourcing remains GÄVLE LJUNGSBRO Factory restructurings proceeding according to plan SNEEK ROOSENDAAL •  Matching of products from the factory in Gävle TURNHOUT essentially completed in Levice and Ljungsbro LEVICE •  Test run of matched products ongoing •  Factory in Gävle to be closed during Q1, 2014 •  Savings will be fully realised towards the end of 2014 GORDONA CREMONA SAN PIETRO IN CASALE SILVI MARINA 8
  9. 9. Clear strategy to deliver profitable growth Every day great execution Strategic initiatives New territory •  Broaden distribution •  Sizing and pricing •  Acquisitions •  Promotion planning and execution •  Brand extensions •  New geographies •  Advertising campaigns •  Fill white spots •  Seasonal products •  Enter new categories with existing brands •  Packaging updates and upgrades •  Geographical roll-out •  Brand re-launch •  Innovations Asset-light growth with low risk combined with potential upside from acquisitions 9  
  10. 10. Clear strategy to deliver profitable growth cont’d Examples of initiatives Launch of Viva Licorice – Dutch products in Malaco bags Sportlife Mint – Chewing gum brand stretches into pastilles Re-launch of Dietorelle – new products, new packaging and heavy marketing investment Launch of Polly bilar Launch of Chewits in Italy – Cloetta’s UK candy Acquisition of Goody Good Stuff Tupla minibites – Tupla chocolate bar stretches into minibites and biscuits Sisu chewing gum – pastille stretches into gum in a unique packaging format Hopea Toffee – Old brand is relaunched 10
  11. 11. Stable revenues and visible earnings recovery LTM net sales Q4 2011 – Q3 2013 LTM EBIT Q4 2011 – Q3 2013 6 000 600 5 000 4 658 4 699 4 791 4 826 4 859 4 902 4 821 4 856 500 4 000 400 525 499 11% 11% 364 467 444 SEKm SEKm 300 325 284 127 3% 125 4% 3% 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 0% 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q3 2013 Q1 2013 Q2 2013 Q3 Underlying EBIT LTM Reported EBIT LTM Underlying EBIT % LTM 11 4% 2% 0 2011 Q4 6% 177 166 100 0 8% 7% 6% 3% 1 000 10% 9% 293 6% 200 2 000 12% 11% 10% 9% 8% 12% 423 416 9% 3 000 14% 561 522 Reported EBIT % LTM
  12. 12. Financial development and targets Quarterly underlying EBIT1) Quarterly net sales 1 600 Financial leverage 250 5 000 200 4 000 Q4 2012 Q4 2013 Q1 in line with market growth long term –  Historical aggregate value growth of 2013 Q2 2013 Q3 0 Q1 Q2 2012 2013 Q3 Q4 x   •  Target organic sales growth: At least 3 248 2013 Q3 2 000 3 244 Q2 2012 4.4x   1 000 0 Q1 4.7x   3 000 3 019 201 47 0 4.7x   51 91 50 200 160 100 5.1x   3 056 400 150 124 1 194 1 159 1 131 1 212 1 084 600 1 127 800 1 404 1 000 109 Underlying EBIT (SEKm) Net sales (SEKm) 1 200 Net debt (SEKm) 1 400 •  Target EBIT margin: At least 14% •  Cost synergies, growth and focus on profitability approx. 2% in Cloetta’s markets Net debt / Underlying EBITDA LTM •  Target long-term net debt/EBITDA of around 2.5x •  Objective to reach target in three years •  Payout ratio 40-60% of net income over time when financial target is reached 1) Underlying EBIT based on constant exchange rates and the current company structure (excluding distribution business in Belgium and third-party distribution agreement in Italy) and excluding items affecting comparability 12  
  13. 13. Attractive cash conversion Cash conversion1) development 100% Temporarily decreased levels •  Historically strong cash flow generation from the underlying business 84% 74% 80% 69% 55% 60% •  Cash flow generation temporarily decreased during 2011 and 2012 due to increased CapEx in connection with the restructuring program 40% 20% 0% 2009 2010 2011 2012 Cash conversion 100% 80% 80% 60% 64% 54% 61% 63% Q1 2013 Q2 2013 52% 48% 40% 20% 0% Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q3 2013 Cash conversion 1) Cash conversion defined as (Underlying EBITDA less capex)/Underlying EBITDA Note: 2009 and 2010 represent combined figures for Cloetta and Leaf. LEAF 2009-2010 exchanged at SEK/EUR 9.0. Cloetta 2009 refers to the period September 1, 2008 to August 31, 2009. For 2011 the combined figures for Cloetta and Leaf have been adjusted in order to be comparable with the numbers for Cloetta in 2012 13
  14. 14. Cost structure Total cost split 2012 Distribution and Warehousing 6% Administrative expenses 15% Raw material and Packaging 57% Selling expenses 19% COGS 66% Raw material split 2012 COGS split 2012 Conversion cost 37% Packaging 23% Other 30% Dairy 6% Sugar 20% Polyoles 6% Cocoa 7% Glucose/ fructose 8% Sugar price development •  The company purchases sugar in relation to the EU sugar price 6–9 months in advance 800 EUR/t 700 719 €/t 600 476 €/t 500 400 July 2006 July 2007 July 2008 July 2009 July 2010 July 2011 July 2012 July 2013 Source:  European  Commission   14  
  15. 15. Cloetta towards the future PURPOSE  /  MISSION   To bring a smile to your 15
  16. 16. We do not serve the main meals 16
  17. 17. Munchy Moments is our territory! 17
  18. 18. Title red btitle grey 1-5 grey Acquisition of Nutisal •  A significant step in to a new category in Cloetta home markets •  Cloetta will be able to satisfy consumers in a new Munchy Moment with an established brand in the growing nuts segment •  The growth can be further fuelled utilising Cloetta’s strong route to markets in core geographies •  Nutisal will contribute with approximately 1 percentage point of growth per year in the next 3-5 years •  The Nutisal acquisition is expected to be EPS accretive in 2015. 18  
  19. 19. Title red Nuts is a new territory for Cloetta btitle grey 1-5 grey 19  
  20. 20. Title red The nuts market btitle grey 1-5 grey •  The nuts category is growing in Western Europe by 5-8% depending on market •  The total market value, including private label, is approximately SEK 5 billion in the Nordic markets with Sweden and Norway as the largest markets •  Private label accounts for approximately 1/3 of the total market. 20  
  21. 21. Title red Unique dry roasting competence Retail Range btitle grey Dry roasting 1-5 grey •  Unique  knowledge  and  technology  developed   over  decades   •  No  nuts  supplier  in  Northern/Western  Europe   owns  the  technology  at  this  scale   •  Preserves  the  ‘real’  taste  of  nuts   OOH Range •  All  ingredients  dry  roasted  whichs  gives    a   unique  ‘crisp’  to  the  products       •  Variety  of  mixes  and  flavours  –  all  without  taste   enhancers     21  
  22. 22. Cloetta towards the future PURPOSE  /  MISSION   To bring a smile to your 22
  23. 23. Title hite
  24. 24. Disclaimer •  This presentation has been prepared by Cloetta AB (publ) (the “Company”) solely for use at this presentation and is furnished to you solely for your information and may not be reproduced or redistributed, in whole or in part, to any other person. The presentation does not constitute an invitation or offer to acquire, purchase or subscribe for securities. By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations. •  This presentation is not for presentation or transmission into the United States or to any U.S. person, as that term is defined under Regulation S promulgated under the Securities Act of 1933, as amended. •  This presentation contains various forward-looking statements that reflect management’s current views with respect to future events and financial and operational performance. The words “believe,” “expect,” “anticipate,” “intend,” “may,” “plan,” “estimate,” “should,” “could,” “aim,” “target,” “might,” or, in each case, their negative, or similar expressions identify certain of these forwardlooking statements. Others can be identified from the context in which the statements are made. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which are in some cases beyond the Company’s control and may cause actual results or performance to differ materially from those expressed or implied from such forwardlooking statements. These risks include but are not limited to the Company’s ability to operate profitably, maintain its competitive position, to promote and improve its reputation and the awareness of the brands in its portfolio, to successfully operate its growth strategy and the impact of changes in pricing policies, political and regulatory developments in the markets in which the Company operates, and other risks. •  The information and opinions contained in this document are provided as at the date of this presentation and are subject to change without notice. •  No representation or warranty (expressed or implied) is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information contained herein. Accordingly, none of the Company, or any of its principal shareholders or subsidiary undertakings or any of such person’s officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this document. 24

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