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Presentation for investors at annual Rabobank Consumer Staples Conference in Milan late June. it includes slides on sustainability, supply chain and 'what is organic?!'
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Royal Wessanen nv
Q1 2012 roadshow
Q1 published: 27April 2012
www.wessanen.com
Rabobank International “Made in Benelux”
Consumer Staples Investor Conference
Starhotels Rosa Grand Friday 29 June 2012
2
Royal Wessanen in a nutshell• Leading European organic food player
• Pioneering brands | well-managed supply chain | Indulgence & Nutritional
• Bjorg | Clipper | Zonnatura | Tartex | Allos | Bonneterre | Kallo | De Rit | Whole Earth
Organic market
• Attractive part of food market | growing | low per capita consumption | €21bn sized
• Organic means no colouring/flavouring | GMO-free | no artificial fertilisers
• Unique certification system | grown and processed according to EU regulation
• Turnover €706mln (2011) | EBITE €24mln | >2,100 employees
• Mcap - ca €170mln | No of shares outstanding - 76mln
• Dividend policy: 35-45% pay-out of net result, excluding major non-recurring effects
• Two-tier board | CEO Piet Hein Merckens (1962) & CFO Ronald Merckx (1967)
3
FY2011 overviewRevenue
244
248
113
113
Grocery HFS FF ABC
EBIT before exceptionalsexcl non-allocated
18,0
5,0
2,3
9,9
Grocery HFS FF ABC
FTEs (at year end)
379
639501
416
63
Grocery HFS FF ABC HQ
Avg Capital Employed (in € mln)
63
84
51
40
11
Grocery HFS FF ABC HQ
€706mln €24mln
1,998 €248mln
4
Content
Page
5. History
7. Markets
9. What is organic?
10. Vision, mission, strategy
17. Business principles / sustainability
23. Segments
35. Q1 2012
5
A long and rich history2015 will mark 250th anniversary of Wessanen
1765 - Incorporated around river De Zaan
– Adriaan Wessanen started to trade in mustard, canary and other seeds Around 1910 first consumer products such as oatmeal and cocoa
1913 - Distinguished title Royal
1959 - Listed on Euronext Amsterdam Seventies, eighties, nineties - range of acquisitions, such as
1993 - Merger Bols and Wessanen (split 1998) 2000/01 – Acquisition of Distriborg, Zonnatura and Natudis 2010 - Divestment Tree of Life, Inc
2009 - Strategic reorientation focus on organic food in Europe
2012 - To make our organic brands most desired in Europe
6
0
400
800
1200
1600
2009 2010 2011 2011 ProForma
Clipper (March '12)
KK, LR, Righi
TOL NA
PANOS
ABC
Frozen Foods
Kalisterra
Tree of Life UK
HFS
Grocery
66
Transformation 2009-2011
712 706
1,586
694
In € mln
7
Attractiveness organic food markets
An attractive and growing segment- <3% of total European food market
Market size €21 bn in 2011 growth est. 6%
Increasing consumer appreciation
Still low per capita consumption
– European Union <€30> p.a.
Consumers increasingly convinced of benefits of organic food- Health, taste and environment
Grocery and HFS channels developing at different growth path
8
Per capita consumption (est.) (per annum)
European Union €30
Our export markets• Switzerland €150• Denmark €140• Austria €115• Sweden €85• Spain €20 Own operations• Germany €75• France €55• Netherlands €50• Belgium €40 • UK €30• Italy €25
9
What is organic?!
Strict criteria to be allowed to be labelled organicDemonstrably free from GMO, pesticides and growth hormonesStrict rules on animal welfareSevere restrictions on fertilisers, herbicides and pesticidesSevere restrictions on additives and processing aids
All about being produced and processes in line with organic principles
Organic products promote health and well-being
Holding benefits for the plane and future generations
All about nutrition and taste !
Organic food is controlled by a unique European certification system
“Sustainability is an essential and
natural part of our daily work.”
10
Our Vision
“To make our organic brands most desired in Europe”
GROCERY HEALTH FOOD STORES
11
Wessanen’s Strategy
ECONOMIC LOGIC Preferred brands that can
command a premium European scale (COGS,
innovation, expertise)
VEHICLES Own/build organic
pioneering brands in all relevant food channels
Focus on sizeable, growing markets and categories where organic creates value
Acquire businesses with strong brands and European potential
DIFFERENTIATORS Preferred brands and impactful innovation Superior product quality Orchestration of a fast, flexible and efficient value chain We are Europe’s No 1 and committed to Organic: our people have
credibility and expertise (OEC) and we provide the most comprehensive thought leadership, service, consumer insight, product range
ARENAS Healthy & sustainable nutrition through organic food in Europe
STAGING Boost growth of current
business and resolve ‘big bets’ (OGSM!)
At least one major acquisition p.a.
Divest non-core businesses at sensible speed
12
Strategic objectives 2012-14
Strategic focus Activities
Topline growth • Grow core brands• Grow core categories• Build strongholds in new markets• Country specific growth strategies• Launch fewer, bigger, better innovations• Execute acquisitions shortlist
Profitabilityimprovement
• Central sourcing savings• Pricing strategies towards customers• Improve operational excellence with SAP• Filling own factories
Enablers • Improve talent performance management / building connected leadership
• Simplify how we are conducting business• Activate Organic Expertise Centre (OEC), integrate Quality
13
Financial Holding
A more integrated, centrally steered business
Strategic Architect
Strategic Orchestrator
Operator
Financial
Strategic guidelines
Strategic development
Operational
Stand-alone business
Shared skillsShared
business systems
Same business systems
Degree of Business Integration
Natu
re o
f C
orp
ora
te G
uid
an
ce
Wessanen in
transit
ion
Maximise value creation by
adapting governance model, decision rules and
effciency and effectiveness HQ support functions
14
Link to Performance Management
Corporate OGSM
County and Functional OGSM
Align to individual objectives and development plans
Strategies & Goals
(Top-Down)
Performance Feedback
(Bottom-Up)
Linking corporate level goals to country and functional goals, and ultimately to the individual
Downwards providing clear and definitive direction to supporting functions and employees
Bottom-up providing feedback on the resources and timing required to accomplish the strategies
OGSM to align plans and objectives
15
Brands in
Grocery
Roadmap focused on 3 business models
DescriptionDescription
Sourcing/developing, marketing and selling of own brands to grocery
• Including distribution to distribution centers and/or stores
Countries, Brands & EntitiesCountries, Brands & Entities
France: BjorgBenelux: Zonnatura, Biorganic, MerzaUK: Kallo, Whole Earth, ClipperGermany: Whole Earth, Culinessa, BjorgItaly: Bjorg
Sourcing/developing, marketing and selling of own brands to HFS
• Via wholesaler in Germany• Direct to stores (France, NL)
France: Bonneterre, EvernatNL: Ekoland, De Rit,Germany: Allos, Tartex, De RitBrands
in HFS
Sourcing, category management, sales and distribution to HFS stores
• Focus on full range (ambient and fresh) of products and high share of products per store
France: Bonneterre, BiodistrifraisNL: Natudis, KroonBelgium: Hagor
NL: GooodyFooods, Natuurwinkelstore franchise concepts
Whole-sale
in HFS
BusinessBusiness
16
Driving our brands in 2 channels
Profile
Developmen
Opportunity
WessanenFocus
Health Food Specialty Stores Grocery Retail
Small, independent, large exclusively organic assortment
Concentration, modern formats
Attract & activate mainstream consumers, innovative concepts
Professional chains, organic core assortment
Dedicated shelf results in strong growth
Build credibility and profile through strong organic ranges
Building powerful brands, large ranges,moving from push to pull marketing
Wholesale (NL, BEL, FR)
Retail formulas (NL)
Aggressive growth, powerful in-store marketingFocus on fewer, bigger brands
All countries
Profile
Development
Opportunity
WessanenFocus
17
Wessanen Business principles
Compliance with laws: being a responsible partner in society, acting with integrity towards all stakeholders and others who can be affected by our activities
Environment: in line with commitment to sustainable development, we will do all that is reasonable and practicable to minimise adverse effects on the environment
Product safety: we aim at all times to supply safe products and services
Free market competition: we support free market competition as basis of conducting business; we observe applicable competition laws and regulations
Child, bonded and forced labour: under no circumstances we are making use of forced or bonded labour; we do not employ children in violation of relevant conventions of ILO
Human rights: we support and respect human rights and strive to ensure that our activities do not make it an accessory to infringements of human rights
We expect suppliers and business partners to comply with the above principles
18
Wessanen’s supply chain
19
Palm oil - member RSPO
• Palm oil is important, versatile raw material for food
– Only be cultivated in tropical areas of Asia, Africa and South America
– Concerns that demand causing expansion of plantations into eco-sensitive areas
• Since March 2011 Member of Roundtable on Sustainable Palm Oil (RSPO)
– Global multi-stakeholder initiative
– Encouraging sustainable production/use palm oil
– Wessanen commits to organisation’s objectives
• In 2011, we developed policy to govern palm oil sourcing and guidelines for
implementation in partnership with our suppliers
• Committed to switching palm oil to RSPO certified sustainable palm oil during 2012-13
– RSPO certified segregated palm oil for organic
– GREEN PALM certificates for conventional
20
Commitment to minimise environmental impact
Committed to minimising impact on environment by measuring and monitoring the effects of our operations
All our organic products are free of GMO
We are working on reducing our CO2 footprint and usage of water
Additionally, organic products do not use pesticides, therefore contributing to a decrease
ISO 14001 is an internationally recognised standard for embedding processes to analyse and reduce our impact on the environment
Additional information at www.wessanen.com for
sustainability, such as
GRI G3 table | Performance fact sheet
21
Organic Expertise Centre (OEC)
We established our internal expertise - named OEC - in 2010 To stimulate exchange of knowledge / experience that is widely available
within Wessanen To educate and inspire our internal / external stakeholders in organic
values
Specialists join forces and work on pan-European issues
To legitimise our position in organic world by championing the organic case
Focal areas will be: Training (incl. training package for newcomers) and founding Organic
Academy Knowledge building by teaming up with external researchers and
experts Lobbying to promote organic food Communication for more general awareness / knowledge of organic food
22
Employee engagement 2012 Leadership development programme
Top-70 Focus on strategy execution, connected leadership
Employee turnover is key focus area
Competency model deployed Defines behaviour expectations for all employees Translates ambitions/values into behaviour
conventions and skills
0
40
80
120
2009 2010 2011
Injury severity rate
0%
25%
50%
75%
100%
Executives Managers Associates
Men Women
0
2
4
6
8
2009 2010 2011
Injury frequency rate
23
Segments
24
24,722,3
Revenue breakdown per segment
53,9
70,6(5.1)%
HFS
Autonomous third party revenue growth
66,4
61,8
5.8%
Grocery
Autonomous third party revenue growth
27,827,0
3.0%
Frozen Foods
Autonomous third party revenue growth
6.5%
ABC
Autonomous third party revenue growth
25
• Improve talent performance management / building connected
leadership
• Simplify how we are conducting business
• Activate Organic Expertise Centre, integrate Quality
Enablers
• Central sourcing savings
• Pricing strategies towards customers
• Improve operational excellence with SAP
• Filling own factories
Profitability
improvement
• Grow core brands
• Grow core categories
• Build strongholds in new markets
• Country specific growth strategies
• Launch fewer, bigger, better innovations
• Execute acquisitions shortlist
Topline growth
ActivitiesStrategic focus
• Improve talent performance management / building connected
leadership
• Simplify how we are conducting business
• Activate Organic Expertise Centre, integrate Quality
Enablers
• Central sourcing savings
• Pricing strategies towards customers
• Improve operational excellence with SAP
• Filling own factories
Profitability
improvement
• Grow core brands
• Grow core categories
• Build strongholds in new markets
• Country specific growth strategies
• Launch fewer, bigger, better innovations
• Execute acquisitions shortlist
Topline growth
ActivitiesStrategic focus
Grocery
• Autonomous revenue growth 5.8%– Volume 3.6%, price/mix 2.2%
• Grow core brands and categories– Bjorg gaining market share– Whole Earth spreads (UK) performing well– Kallo soy milk (UK) reversing downward trend– Whole Earth, Bjorg and Culinessa growing in Germany– Gayelord Hauser strong performance (promotion driven)– Dutch Biobest shelf progressing well
• Increased marketing spending – Bjorg TV commercial– Zonnatura follow-up campaign (radio, billboards)
• EBIT decreased due to:- Increased marketing, warehouse, transportation and ICT costs
- Partly phasing, partly temporarily, partly structural - Despite higher volumes and gross margin up
Topline growth
Profitabilityimprovement
26
Grocery examples of activation
Yearly award magazine „Lebensmittel Praxis“Whole Earth Inka Taler (4 varieties)Criteria based on:Quality/Design/Distribution/Communication/Sustainability
Kallo soy launch activityDairy alternatives key categoryKallo core brand, phased out So Good
Bjorg commercialBased on success of Q2 airing, repeated in SeptemberResults: increased awareness, higher sales
27
Clipper
• UK based tea and coffee company
– Founded in 1984
• 100% branded business
– Tea, coffee, hot chocolate
– Grocery, HFS, food service, export
• Leading position in UK organic & fair trade tea
– Everyday, green, white, infusion, specialties
• Revenue £16mln, ca 90 employees
• Manufacturing plant (incl. blending) in Dorset (UK)
• Tea is one of our core categories
• Clear potential in UK as well as other European markets
28
29
HFS
• Autonomous revenue growth (5.1)%– Volume (5.9)%, price/mix 0.8%
• Bonneterre (Fr) declined at wholesale and branded, while Bio-Distrifrais reported stable sales
– SAP implementation at Bonneterre early 2012 went well
• German sales stable – Allos slightly declining, Tartex and Export both growing– Tartex continues to gain traction within HFS channel
• Benelux operations showed mixed performance– Continued impact of previously lost customers – Benefitted from previously opened GooodyFooods stores, newly
gained customers– Fresh wholesaler Kroon increasing volumes, moved to premises
Vroegop-Windig– New managing director and finance director
• Operating result lower than last year– Lower volumes and increased operating expenses both contributed
• Improve talent performance management / building connected
leadership
• Simplify how we are conducting business
• Activate Organic Expertise Centre, integrate Quality
Enablers
• Central sourcing savings
• Pricing strategies towards customers
• Improve operational excellence with SAP
• Filling own factories
Profitability
improvement
• Grow core brands
• Grow core categories
• Build strongholds in new markets
• Country specific growth strategies
• Launch fewer, bigger, better innovations
• Execute acquisitions shortlist
Topline growth
ActivitiesStrategic focus
• Improve talent performance management / building connected
leadership
• Simplify how we are conducting business
• Activate Organic Expertise Centre, integrate Quality
Enablers
• Central sourcing savings
• Pricing strategies towards customers
• Improve operational excellence with SAP
• Filling own factories
Profitability
improvement
• Grow core brands
• Grow core categories
• Build strongholds in new markets
• Country specific growth strategies
• Launch fewer, bigger, better innovations
• Execute acquisitions shortlist
Topline growth
ActivitiesStrategic focus
Topline growth
Profitabilityimprovement
30
HFS examples of activation
New GooodyFooods storeOpened early October in Zaandam5 stores open, new ones in the pipeline
Allos cookiesNew range of cookies launchedAvailable in German HFS stores
31
Frozen Foods
• Autonomous revenue 3.0%
– Volume 1.0%, price/mix 2.0%
– Private label, out-of-home and foodservice sales increased,
whereas retail sales were about stable
• Customers continue to focus on price in Dutch retail and out-of-home
food markets, resulting in a competitive environment and difficulties in
passing on commodity cost prices, especially for private label
• EBIT decreased to €0.1 million mainly due to increased
raw material prices
• Marketing spending in line with last year
• We successfully launched a new concept ‘Broketje’,
thereby also creating entries at new customers
32
Frozen Food examples of activation
Bicky Double Chicken burgerIntroduced in October in Belgian out-of-homeFurther extension Bicky rangeNewly designed carton boxSupported by TV commercials and online campaign
Online campaign in Flanders (Dutch) and Wallonia (French)
33
ABC
• Revenue +6.5% (price/mix 7.7% and volume (1.2)%)
• Cocktail business about stable
– Further expanding distribution, increase Daily’s marketing
spending, grow in-store displays and introducing new products
– Competition increasing: new players entering RTD pouches
market, which we consider a normal pattern given its growth
• Juices up driven by Little Hug and single serves
– Despite impact pruning low-margin products
• EBIT up as mixture increased marketing spending, increased
gross contribution (more favourable product mix) and
beneficial impact of low-margin product pruning
34
ABC examples of activation
35
Q1 2012
36
16%
14%
39%
31%
GroceryRevenue €66.4 mlnEBIT €4.8 mln
Revenue Q1 - €171 mln
Frozen FoodsRevenue €27.8 mlnEBIT €0.1 mln
HFS (Health Food Stores)Revenue €53.9 mlnEBIT €0.6 mln
Non-allocated & eliminationsRevenue € (2.2)mlnEBIT € (3.4)mln
ABCRevenue €24.7 mlnEBIT €0.9 mln
37
Q1 2012 key figures
In € mln Q1 2012 Q1 2011
Revenue ¹ 170.6 178.8
Autonomous growth 1.3%
Gross contribution 65.8 65.8
As % of revenue 38.6% 36.8%
Normalised EBIT ¹ 3.0 7.0
As % of revenue 1.8% 3.9%
EBIT ¹ 3.0 8.1
Net result ² 1.5 4.5
Earnings per share (EPS) ² 0.02 0.06
Operating cash flow ¹ (5.8) (5.2)
¹ Continuing operations; ² Attributable to Wessanen equity holders
38
Q1 highlights
• Continued to set further steps on our transformational journey to build our European organic business
• Witnessed comparable trends as seen last year– European consumer confidence remains low– The economy subdued– Organic food market developed relatively
favourably
• Gross margin up– Due to Grocery, ABC and HFS– Central sourcing initiatives and pricing discipline
• EBIT declining, due to step up in costs
• Increased marketing investments
• Acquisition Clipper, UK market leader in organic and fair trade tea
8,1
3,0
7,0
3,0
Q1 11 Q1 12
170,6
178,8
1.3%
EBIT (in € mln)
Revenue (in € mln)
Reported, Normalised
Autonomous third party revenue growth
39
Q1 figures per segment
Revenue Normalised EBIT
Q1 12 Q1 11 Q1 12 Q1 11
Grocery 66.4 61.8 4.8 5.9
HFS (Health Food Stores) 53.9 70.6 0.6 2.3
Frozen Foods 27.8 27.0 0.1 0.8
ABC 24.7 22.3 0.9 0.7
Non-allocated (2.2)* (2.9)* (3.4) (2.7)
Wessanen 170.6 178.8 3.0 7.0
* Eliminations for inter-segment revenue (between Grocery and HFS)
40
160
165
170
175
180
185
190
Q1 11 Volume Price/ mix Currency Clipper Divestments Q1 12
Bridge - revenue growth
(4.6)%
In € mln
(1.0)% 2.3% 0.7% (7.6)%
1.3%
Autonomous revenue growth
1.0%
€178.8 €4.1€(1.8) €1.3 €(13.8)€1.8 €170.6
41
160
165
170
175
180
185
190
Bridge - segment revenue growth
€170.6
In € mln
€(16.7)€4.6 €0.7€0.8€178.8 €2.4
42
Bridge - EBIT development y-on-y
0
5
10
Q1 11 Grocery HFS Frozen Foods ABC Corporate Q1 12
In € mln
€7.0 €3.0€(1.1) €(1.7) €(0.7)€0.2€(0.7)
43
Cash flow Q1
In € mln2.4 (27.5)
Sources
Uses
2.4
(19.3)
I ncrease of net debt
Net I nvestments
25.1
(8.2)
Cash flow from
earnings
I ncrease working capital
4444
Working capital
0
20
40
60
80
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
Q112
-40
-20
0
20
40
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
Q112
4 quarter average working capital
Q-on-q movement working capital
45
0
50
100
150
200
Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12
0
1
2
3
4
5
Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12
Net debt
Leverage ratio
€57.3 mln
1.6x
Net debt and leverage ratio
In € mln
46
Financials Q1 / guidance 2012
Financials Q1
Net financing costs €(0.9) mln (Q1 2011: €(0.6) mln)
Income tax expenses €(0.8) mln (Q1 2011: €(3.0) mln)
Capex €(2.0) mln (Q1 2011: €(2.5) mln)
Guidance FY2012
Net financing costs €(3-4) mln
Effective tax rate around 30-40%
Capex about €12-14 mln
Depreciation and amortisation about €15 mln
Non-allocated expenses (incl. corporate) around €12-13 mln
Royal Wessanen nv
www.wessanen.com
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