XXI SANTANDER IBERIAN CONFERENCE Amando Sánchez Falcón (Chief Corporate Officer, CCO)
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Summary Company introduction Final overview of DIA France’s disposal, closed on 30 November Outlook: the Spanish food retail market and DIA Spain’s performance Present the two recent corporate transactions announced in Spain and explain DIA’s rationale and strategy: o A company deal, El Arbol: 451 stores o An asset deal, Eroski/Caprabo: 160 stores Explain the integration process and the expected impact on the company’s sales and profits 3
Delivering on our goals …and, since 2011 we have… We said we would… Focus s on our core markets, s, where e we … successfully exited Turkey in 2013 deliv iver profit itab able le growth … and France in 2014 Accel celer erate te growth in Iberia and Delivered solid organic growth in Brazil Argent ntin ina & Brazi zil & Argentina (~EUR730m additional net sales) Increased sales by ~EUR600m in Spain (close to 4% CAGR 2011-14) Continu nue to enrich h and improve ove our Launched Clarel, specialist in HPC portfol olio io of proximity mity formats, ats, becomin ming g Added a new supermarket platform, more speci cialis alist a specialist in fresh products with more than 600 stores Successfully implemented the new DIA Market III version in Spain 4 4
/ Disposal of DIA France 5
Transaction highlights: DIA France DIA France: ance: 865 stores and EUR1.9 R1.9bn bn net sales in 2013 Carrefour refour acquired 100% of DIA France, transaction closed 30 Nov: o Total l debt reducti tion on EUR62 626m 6m o Net financi ncial al debt EUR33 336m 6m o Purchase hase price e EUR28 283.2m 3.2m Tax credit EUR 185m (to be captur ured ed from 2014) Price exceeded market expectations o EV/Sa Sales les 2013 : 0.3x EV/EBIT EBITDA A 2013: 10x Consensus EV of DIA France prior to the deal (EURm) 615 600 600 337 337 339 339 0 Min Max Average Median Final EV Source: Market consensus estimates (January 2014 to June 2014) 6
Transaction highlights: DIA France “A surprinsingly good price ” (JP Morgan gan) “ There is no disputing DIA has negotiated a great price with deal risks largely passed to Carrefour .” (Exane-BNP NP) “ It looks like an ideal exit for DIA” (Socié iété é Générale rale) “ Both the market and us have been frustrated with the lack of progress made by DIA for a while in France. But patience of CEO Ricardo Curras and CCO Amando Sánchez has paid off.” (Macqu quaire aire) “ We are surprised that DIA has managed to extract such a high price from Carrefour, especially given the deterioration in operating performance.” (Macqu quair aire) “DIA management has now exited Beijing, Turkey and France, is now focussed on EM growth and highly profitable Iberian business .” (Santan ander) der) “ Contrary to market expectations, Dia’s assets in France have found a buyer and at a price well in excess of the market’s worst-case scenario ” (Natix ixis is) “DIA’s management has been showing a high restructuring focus solving some problematic issues (Turkey, France) in a remarkable timeframe and surprising positively in terms of asset valuation .” (BPI) 7
DIA is today focusing on accelerating profitable growth in Iberia, Brazil and Argentina DIA gross sales under banner 1 Number of DIA stores 1 (EURbn) 10.7 5,630 9.7 5,274 8.9 4,933 8.0 4,639 2011 2012 2013 2014E 2011 2012 2013 2014E At constant currency (1) pro forma excluding divestments and acquisitions (1) pro forma excluding divestments and acquisitions Following ing the divestmen ent of DIA France, e, the company is fully focused on on its core markets (Iberia ia and LatAm) where DIA has a track record rd of profita table le organic ic growth, high return rns s and market share gains 8
/ Market context: Spanish Food Retail 9
Spanish food retail market remains very fragmented Top 5 food retailers market share per country (%) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Portugal UK France Germany Belgium Spain Source: Kantar 10
Small regional and local chains account for 42% of the market Spanish food retail market (%) Small family players 22.0% (<0,1%) 33.2% 9.0% Eroski stores Regional players: (1% - 0,1%) 8.3% 8.8% 1.6% 6.2% 1.9% 2.0% 3.1% 3.9% Source: Kantar, 12 months rolling P11 2014, including dry food and fresh After r several l years of weak consumptio ion, n, many small players rs are facing big difficult lties ies genera rati ting ng profits and staying in business 11
2015 should be a better year in Spain after a perfect storm in 2014: food CPI is expected to rebound and the population decline is set to ease Spain - population Spain CPI 47 1.5% 3.6% 3.1% 3.1% 1.0% 2.4% 2.3% 0.5% 1.4% 1.0% 46 0.8% 0.0% 0.4% -0.2% 2012 2013 2014A 2015E -0.5% -1.2% CPI -1.2% 45 -1.0% PROCESSED FOOD prices UNPROCESSED FOOD prices CHANGE YoY (%) POPULATION (millions) Source: INE, October 2014 Source: Funcas, November 2014 In 2015, the decline e in populatio tion n is due to ease and inflation ion should return rn to food products to 12
There are signs that the market should improve in 2015 Spain’s GDP growth should be above 2% next year 1 (versus 1.4% in 2014), positioning Spain among the fastest-growing economies in the eurozone in 2015. In recent months, Spain n has increased eased flexi xibil ilit ity y in various areas (labour, real estate, energy) creating a favor orabl able e economi omic c enviro ronmen nment. The consu sumer mer confi fide dence nce index has improved significantly, now reaching over 80% versus less than 40% two years ago. A series es of fisc scal al measu sures es will come into effect in 2015 (reduction of income tax rates, increase in minimum social income, etc...), which, together with the strong ng decli line ne in oil prices, es, should contribute to the increase of Spanish consumers’ available income. The labour ur market in Spain in has been clearly ly improvi oving ng sinc nce the end of 2013. In 2014, around d half f a millio ion n of people le found nd new jobs s in Spain. n. 1 Consensus (Spanish Central Bank, Government, BBVA, Santander, etc.) at 2.0% as of Dec 2014; IMF estimate at 1.7% as of Dec 2014 13
DIA Spain overview Photo from DIA Spain 14
DIA has continuously gained market share in Spain DIA Spain - market share performance 10.0% 9.5% 9.00% 9.0% 8.5% 7.83% 7.61% 8.0% 7.53% 7.14% 7.08% 7.5% 6.80% 7.0% 6.5% 6.0% Source: Kantar, Spain, market share in value (*) Accumulated up to P12 2014 15
DIA maintains its undisputed price leadership in the Spanish market… Clear leader in price image in 2014 Increasing price gap in 2014 by circa 100bps 7.9% 7.4% 7.2% 6.2% Price gap vs Price gap vs Price gap vs Price gap vs Comp 1 Comp 1 Comp 2 Comp 2 (2013) (2014) (2013) (2014) #1 Supermarket #2 Discounter Source: DIA Source: Kantar, Spain 16
…while maintaining healthy operational margins DIA Iberia - adjusted EBITDA Improvement levers – not exhaustive % over net sales 9.6% o -30bps in energy costs 9.6% Costs o -20bps in real estate costs savings gs o -50bps in logistic costs since 2011 1 o Around 500 franchised stores 8.9% added in Iberia between 2011 Franchise chise and 2014 (+35%) o Franchises lead to significant margin uplift versus integrated model FY 2012 FY 2013 FY 2014E 1 estimated impact over Spain net sales 2011-2014 Source: DIA Source: DIA DIA has proven n its ability to reduce costs and sustain margins ns even in a a context of declinin ing g sales. It benefit its from its distinctive ive operati tiona onal l expertis ise e and higher r flexibility ility in the labour and real estate markets 17
Despite negative LFLs DIA gained market share in Spain in 2014 DIA Spain Market share gain (% YoY) (bps) 6.5% 2 24 22 -3.6% -5.3% 1 -5.9% 1 FY 2014 Q4 2014 Q3 2014 Q4 2014 LFL Total sales growth Source: DIA Source: Kantar (1) Calendar-adjusted Accumulate up to P12 2014 (excluding El Arbol) (2) Includes two months’ contribution of EL Arbol LFL were negative ve in 2014 as a result t of populat atio ion n decline, ne, price deflation, on, price investmen ment, t, and profita tabl ble e expansio ion. n. However, DIA Spain continued ed to gain market share during g 2014 18
DIA is the undisputed food retail franchise platform in Spain DIA Spain 2014 - franchised sales DIA Spain franchised stores (%) (#) Q1 Q2 Q3 Q4 14.0% 13.2% 1,646 10.7% 11.3% 1,457 1,310 1,187 -0.2% -2.2% -2.3% 2011 -4.1% 2012 2013 2014 LFL Total sales growth Source: DIA Source: DIA DIA franch chis isees ees have clearly ly outperfor rformed med the market t (-2.2% 2% LFL FY 2014) DIA strongly gly believ eves es the franch chis ised ed model l is the best operatin ing format at for proxi ximity mity food d retail l stores, es, as it brings s flexi xibi bili lity ty and operatio ional al effi fici cienc ency y as well as a a unique ue customer tomer exper erie ienc nce e Satisf sfact actio ion Survey ey shows ws in 2014 no change ge in franch chis isee ee satisf sfact actio ion: n: 56% of DIA franch chis isees ees would recommen mmend d the franch chis ise e to others, s, and up to 37% see themsel selves ves openin ing new franch chis ises es in the near future 19
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