Strategy and Performance Overview Ana lyst Pre se nta tion F e brua ry 2015 Richard Rushton – Managing Director
Stro ng pe rfo rm a nc e in the c o re b usine ss Despite economic headwinds and a challenging competitor environment, Distell continues to grow its position as South Africa’s leading producer of ciders, wines and spirits with a strong increase in volumes and revenue in our domestic market and in several international markets We are investing at an accelerated pace in our core brands, organisation capability, building Route To Market in Africa, and in owning the ‘last mile’ in Southern Africa To this end we have appointed a number of senior leaders who contribute greatly to the depth of global experience in our leadership team 2
Ag e nda • Market Review 1 • Salient features of our performance 2 • Strategy Review & Close 3 3
• Macro Environment 1 Ma rke t • Key Industry Trends 2 Re vie w • Competitor Performance 3
T he Ma c ro - Enviro nm e nt South Afric a : Slight GDP recovery as oil RSA % Re a l Growth price feeds through Consumer spend Real income • Consumer spending recovering 4.0 • Lower inflation outlook 3.0 % Growth • US$ strength 2.0 • Rand volatility set to continue 1.0 • SA’s electricity supply challenge 0.0 • Investment ratings due in June Q1 Q2 Q3 Q4 Q1 Q2 2014 2014 2014 2014 f 2015 f 2015 f Source: BER 5
T he Ma c ro - Enviro nm e nt Afric a : GDP growth outlook favourable , but slowing • Nigeria - oil price drop, Boko Haram, election driving uncertainty • Angola - lower oil prices, Kwanza weakening, import restrictions • East Africa growing - led by Kenya • West Africa affected by Ebola – recovery later in 2015 • Kenya, Tanzania set to benefit as net oil importers Inte rna tiona l: Global projections revised downward • Increased global geo-political risk – Russia, Middle East • Slower China growth – at or below 7% • Russia and Brazil face challenges • Continued Euro Zone weakness – QE announced 6
Industry T re nds C id e r re m a ins the hig he st g ro wing c a te g o ry L e a ding Cide r Ma rke ts - 80% of Globa l Cider % of Consumption Total RTD Volumes Growth in global cider Growth in global cider • • consumption x4 times faster consumption x4 times faster Global (2177 mn litres) 1% than global alcoholic than global alcoholic beverages; and x8 times beverages; and x8 times United Kingdom (981 mn litres) more than global RTD more than global RTD 18% growth growth South Africa (299 mn litres) 8% SA cider growth SA cider growth • • Australia (105 mn litres) moderating, still fa voura ble moderating, still fa voura ble 6% ma rke t funda me nta ls for ma rke t funda me nta ls for future growth future growth United States (241 mn litres) 1% 0% 10% 20% 30% 40% 50% 60% 70% % Volume Gr owth - 2014 Sources: Euromonitor (2014) 7
Industry T re nds Wine b e c o m e s a n e m e rg ing m a rke t p la y Global wine consumption trends in line with total alcoholic beverages growth Global wine consumption trends in line with total alcoholic beverages growth • • Variable performance geographically: Emerging markets growing faster Variable performance geographically: Emerging markets growing faster • • Eurozone widely impacted Eurozone widely impacted • • SA wine growth ahead of total alcohol market SA wine growth ahead of total alcohol market • • Africa’s wine market remains largely untapped Africa’s wine market remains largely untapped • • SA Wine Consumption 2014 Globa l Wine Consumption Volume Growth % 2014 % Value Growth % Vol Growth Global % Share of Global Wine Consumption 40% Western Europe Total (Ave R/litre:R28) Asia Pacific 23% Standard Price North America 13% (Ave R/litre: R15) Eastern Europe 11% Premium 7% Latin America (Ave R/litre: R24) 3% Middle East & Africa Super Premium 2% Australasia (Ave R/litre: R62) -2% 0% 2% 4% 6% 8% -5% 5% 15% Sources: Wine intelligence; SAWIS (2014) 8
Industry T re nds He a d wind s fo r C o g na c & Sc o tc h Whisky Exp o rts • Volumes of Scotch Whisky shipments declined by 1.2% • Volumes of Scotch Whisky shipments declined by 1.2% • Cognac exports (shipment volumes) declined by 1.2% • Cognac exports (shipment volumes) declined by 1.2% • Significant slump in sales to Eastern Europe led by Russia • Significant slump in sales to Eastern Europe led by Russia • Austerity measures affect cognac in China • Austerity measures affect cognac in China Sc otc h Whisky: Volume Growth of E xports Cog na c E xport Volume Growth: Ke y Bisquit June -Nove mbe r 2014 vs. Histor y Ma rke ts July-De c e mbe r 2014 vs. Histor y Middle East 15% USA 16% Asia 5% 4% France -3% Africa 3% -41% North America 3% Taïwan 32% Other Europe -2% -9% Australasia -4% South Africa 65% Central & South… -11% -12% Belgium Eastern Europe -76% -1% -100% -70% -40% -10% 20% -80% -30% 20% 70% Source: BNIC, HM Revenue & Customs 9
C o m pe tito r Pe rfo rm a nc e Diste ll a he a d o f c o m p e tito rs Distell performed well, outpacing leading competitors’ revenue growth • − Emerging market footprint − Diverse brand portfolio (product and category mix) − Capability investment showing early benefits Competitors impacted by slowdown in Europe, China, Brazil and Russia. • Be e r Spirits Wine Cide r, Wine & Spirits Treasury Vina Diste ll L td Pernod Diste ll L td SABMiller Heineken Diageo Wine Concha Y Compa ny (Infla tion Ricard (Norma lise d) Estates Toro a djuste d) Re porte d NSV 1.5% 0.1% 1.0% -0.1% 3.6% 10.0% 5.2% 10.5% Growth Source: Companies’ latest published trading results Data note: Net sales revenue excludes excise duties 10
Sa lie nt • Corporate 1 • RSA fe a ture s of 2 • Africa 3 our • International 4 pe rforma nc e
Ke y De c e m b e r 2014 YT D m e tric s reported revenue – up 10.5% on history R10.997 bn sold - up 3.7 % on prior ye a r 369m litre s normalised operating profit – an increase of 7.0% on history R1.473 bn normalised headline earnings - up 9.5% on prior ye a r R1 bn Inve stme nts in c a pa bility a c c e le ra te d for: Expanding African structures, Revenue Management, SA Sales Force Effectiveness , Supply Chain Excellence, Brand innovation, Strengthening People Capability 12
Stro ng re sults fro m o ur c o re So uth Afric a n o pe ra tio ns! % Diste ll R evenue 12.9% 72.3% RSA Volume growth of 6% • Ciders continue to grow – innovation underway • Wine -strong double digit volume/value growth • 4 th Street volume up 166% • Brandy bottoming out-premiums growing • SA whisky story emerging – Bains revenue +61% • Rev growth against history 13
SA Bra ndy showe d e a rly sig ns of sta bilising Brandy grew 1.7% - first growth period in many years 14
T he c ide rs g ro wth sto ry Cide r Re ve nue Total Cider 2000 1800 1600 Re ve nue Inde x 1400 1200 1000 800 600 400 200 0 2,000 2,002 2,004 2,006 2,008 2,010 2,012 2,014 15
Afric a g ro wing b ut Ang o la im pa c te d b y shipm e nts… . Ang ola : Timing of shipments, PY sell-in ahead Re ve nue % Diste ll of duty increases. 4.1% 15.4% Afric a * In- market sales up 18% 7.2% Afric a * (e xc l Ang o la ) Ke nya : KHEAL 26% stake - � growth % Afr ic a 10.4% 53.6% BNL S Gha na : In-market sales � 11%, -4.5% 21.1% Ang ola In country bottling facility 76.2% 5.5% Za mbia 70.7% 5.0% a nza nia : Strong in-market Moza mbique Zimba bwe & T performances via SABMiller JV’s 12.5% 2.7% Kenya Equity income up > 30% 21.3% 2.0% G ha na 18.9% 1.9% Nig e ria : Currently seeding brands, Zimba bwe normalising stocks and building RTM -69.7% 1.9% Nig eria * Incl. BNLS, all reported against history 16
Slug g ish inte rna tio na l g ro wth – ke y m a rke ts und e r p re ssure %Cont Distell R e ve nue 9.3% 12.2% Inte rna tiona l European weakness : • − Russia (spirits), UK (cider) and Sweden (wine) Latin America buoyant-Amarula growth • North America revenue +12% without IBC RTM transaction • Taiwan value +69% - favorable product mix • BSD & Bisquit face headwinds despite lift in December • − Scottish Leader re-launched November − Black Bottle launched in France, Germany and South Africa 17
• Our Aspirations Stra te g y 1 • Strategy and Initiatives 2 Re vie w 18
A Re m inde r o f o ur Aspira tio ns A dominant re g iona l alcoholic beverage bra nd and RT • M owne r − #1 Cide r company g loba lly − #2 Alcoholic beverages company in SA − e a ding player in core markets of Afric a L − Presence in at least one ma jor inte r na tiona l ma r ke t/ g e og r a phy − Sc a le positions established in c ore ma rke ts • Inte g ra te BSD a c quisition A diffe re ntia te d pla ye r • − Core ciders, wines and spirits resonating across different consumer occasions Enhance ope ra ting ma rg ins , c ost and working c a pita l e ffic ie nc y • Unloc k va lue from our wine assets • 19
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