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Capital Markets Day 2019Cloetta positioned for profitable growth
Cloetta Capital Markets Day 2018Agenda
Welcome Jacob Broberg, SVP Corporate Communications & IR
Cloetta positioned for profitable growth Henri de Sauvage-Nolting, President and CEO
From volume focus to sustainable value creation Oskari Vidman, Chief Pick & Mix Officer
Building consumer centric growth Thomas Biesterfeldt, CMO
The Perfect factory Marcel Mensink, President Operations
Financial strategy and road to 14% Frans Rydén, CFO
Q&A
Summary Henri de Sauvage-Nolting
2
Henri de Sauvage-Nolting, President and CEO
Cloetta positioned for profitable growth
This is Cloetta
6.2
4
We bring a smile to your Munchy Moments
5
Category position
Strong leading local brands
Core markets in growing North Western Europe
Strong European leader in pick & mix
Scale benefits in North Western Europe vs local competition
Route to market scale in coremarkets
Locally tailored innovation
strengthsStrong brand/category positions and pick & mix scale in North Western Europe
1
1
2
1
Based on Cloetta market share in respective category in 2018.
Market
6
Candy Pastilles ChocolateChewing
gum
Pick &
mix
-
1
1
2
1
-
-
2
4
3
3
-
-
-
1
-
-
2
-
1
1
1
1
-
1
2
Strong heritage brands liked and trusted
by our consumers
Lo
ca
l Glo
ba
l Bala
nce
GlobalLocal
7
Growth in Branded Confectionery marketValue growth: Cloetta needs to step up in premiumization
SEKbn
Index
0
20
40
60
80
100
120
140
0
10
20
30
40
50
60
70
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Total market value* Index market value growth
CAGR 1,6%
*Source: Datamonitor/ Mintel
Markets: Sweden, Denmark, Norway, Finland and Netherlands
160 gr 140 gr
8
Focus on core markets and core categoriesFrom acquiring new munchy moment categories to organic growth
CORE INTERNATIONAL
9
Core strategy: Organic growth and 14% EBITFrom acquisition growth to organic growth
2012: New company
Merger Cloetta-LEAF
Listed on Stock market
HQ in Stockholm
2014: Harmonization
One ERP system
Factory rationalization & LEAN
Smaller acquisitions
2017: Structure change
Disposal of Italy
Acquisition Candyking
Overload moulded factory network
2018: Shift to organic growth
Consumer as boss
New management
ONE Cloetta
Organic growth
Sharpened strategy on the road to 14%
10
Cloetta Core Strategy
Strengthen the equity of our
core brands
Focus on core categories and
core markets, double international
Fewer and stronger innovations
to drive valorization
Create value concepts and
penetration in pick & mix
Selective acquisitions on core
categories and markets
Dri
ve
gro
wth
Zero tolerance for accidents
Strengthen brand and category
management competence
CSR to drive consumer agenda
Create a winning culture
Develop, attract and retain
skilled leaders and employeesFa
cil
itate
gro
wth
Drive cost saving activities
in the supply chain
Insource production
Improve profitability in pick & mix
Improve marketing efficiency and
internal systems and processes
Fu
nd
gro
wth
Target: Organic Sales growth in line with market and EBIT margin, adjusted at least 14%
11
Key Business PrioritiesCloetta to organic growth and 14% EBIT margin, adjusted
Branded growth
Pick & mix
to sustainable
value
Reduce costs
and
drive efficiency
Value Improvement Program+
Factory efficiency improvements
Branded business grew +1,5% at 14%+ EBIT in 2018
Four consecutive quarters of growth in 2018
Pick & mix delivers 1-2% EBIT margin
Solve profitability issues in Sweden ~ SEK -60m EBIT
in 2018
Synergy realization and insourcing
12
Cloetta Branded Business is growingBrands are 72% of total Cloetta sales
13
-2,7%
0,0%
-2,4%
0,1%
1,3%
-3,1%
-4,0%
-0,8%
2,4%
0,6%
1,6%1,4%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018
Unique position, fitting consumer trendsCompetitive position vs global and very local players
Leading Local
Brands
Platforms across brands
International Brands
Local Multiple markets
14
Responsible growth
Consumer as boss
NAF/NAC
Increased resource efficiency
Responsible sourcing of raw material (UTZ)
Employee development and health
Plastic reduction
Offering informed choice for consumer
15
Offering consumers the choice
IndulgenceFunctional &
conscious 23 % of Sales
16
Sustainable value creation in pick & mixShort term 2019 & 2020
Turn around EBIT in pick & mix in Sweden from ~SEK -60m in 2018 to average
pick & mix EBIT
Contract and price models being re-developed
Cut cost in warehousing and distribution set-up in Sweden
Continue to insource Candyking volumes
Drive merchandising efficiency
Harmonize assortment
17
Sustainable value creation in pick & mixMedium term
Drive penetration in Finland, Denmark, Norway and the UK
Develop pick & mix category and brand offering
Develop concepts to fit all markets
E-commerce:
Scale e-commerce
-
18
Well-stocked road-map to deliver targeted 14%
EBIT margin
EBIT
margin, %
10,9%
2018
14,0%
Mid-term
Branded growth
Scale and speed in
innovation
Marketing Return
on Investment
Pick & mix portfolio
Candyking synergies
Pick & mix margin
turn-around
From volume to value
creation
Perfect Factory
Cost efficiency through
Cloetta Leading
Performance Program
Continued insourcing
including Italian volumes
Reduce indirects
New program using
ZBB methodology
Other value enhancing
initiatives
New and shared best
practices, including on
revenue management,
net productivity, portfolio
and mix management
Value Improvement Program+
19
From volume focus to sustainable valuecreationOskari Vidman, Chief Pick & Mix Officer
Pick & mix this is how it works
Service concept not only selling individual products and brands
Assortment
Wide range of products
Consumer preferences
vary by market
Mainly products from
candy and chocolate
categories
Fixtures
Play an important role in
a successful pick & mix
concept:
Branding
perspective +
How products are
displayed
Merchandisers
Fill up products into
fixtures
Keep fixtures fresh and
clean
Selling services
21
Finland
17%
Denmark
10%
Norway
23%
Sweden
30%UK
1%
Pick & mix strengths
Geographical spread
Very strong position in the Nordic countries
High share of total confectionary consumption
Consumer trend: Individualization
Pick & mix concept catering to consumers
seeking to satisfy individual needs
Consumers choosing products and services
individually
Pick & mix share of confectionery market volume
22
Finland
18 %
The UK
17 %
Denmark
16 %
Norway
6 %
Sweden
38 %
5 %
Othermarkets
23
Four pick & mix business models
Full concept covers everything from branding,
assortment and fixtures to merchandising
Trade own concept is similar to full concept but with
a retailers own branding
In Hybrid models e.g. merchandising can be
handled by the customer themselves
Bulk
pick & mix solution
Full concept55%
Trade own14%
Hybrid7%
Bulk24%
Business
models
24
Candyking acquisitionSynergies from insourcing and commercial operations
Most of the synergies from commercial operations delivered during 2018
Insourcing in line with plan
ERP system integration in UK
Sweden pick & mix turn-around to profit
55
80
100
0
20
40
60
80
100
120
2018 2019* 2020*
Accumulated synergy realizationSEKm
25
*Planned
Sweden pick & mix turn-around to profit
26
Harmonize product portfolio and manage tail-end to cut
cost
Renegotiate or exit low margin contracts
Move campaigns from volume focus to profit as well
Re-develop contract and price models
Drive merchandizing efficiency through e.g. improved
route-planning
Optimize distribution model to cut cost
Need to address the ~ SEK 60m loss in 2018
Pick & mix StrategyFrom volume focus to sustainable value creation
Offer consumers the best experience in retail trade
Drive category development together with the customer
Deliver innovative products, packages and fixtures
Be the most effective supplier when it comes to
merchandising and the efficient supply of goods
27
Fix Sweden profitability
Unique know-how in the category
Competitive advantage by providing concept solutions to trade and
strengthening branding into USP
Channel strategy
Innovative fixture solutions
Efficiency from consolidated execution with branded business
28
Pick & mix StrategyFrom volume focus to sustainable value creation
Thomas Biesterfeldt, CMO
Confectionary: an attractive market with positive emotions
Marketing: leveraging capabilities to win
Building consumercentric growth
The power of true joy!
The consumer value
30
Positive & fun category92% of consumers have positive associations with candy
Tastycheer me up
celebrate
achievement
enjoyment
Hygge
togetherness,
family
Together-time
fun
all the colors
makes me
happier
forward
Sweet
brings happiness
enjoy life
Source: Insite Consulting, 2018.
Needs-relatedTaste-related Social-related Positive emotional
31
Conscious consumers
Individualization
Local relevancy
Best agers 50+
High tech high touch
Digitalization want it now
32
Pick & mix
Local brand heritage
#Socialization
#Fredagsmys
#Hygge
Catering to a wide
audience
E-com focus
Leading
33
Strong brands liked and trusted by consumers
Lo
ca
l Glo
ba
l Ba
lan
ce
GlobalLocal
34
Gaining share in stable market environmentFull year 2018
Cloetta
share of
market
15%
+0,4ppts
22%
+1,6ppts
33%
-0,4ppts
6%
+0,2ppts
41%
-0,1ppts
*In main markets, Nielsen/IRI data
**Approx. 65% of Cloettas business is covered
Total
market
growth
+0,4% +0,3% +0,2% +0,7% -3,4%
Total
branded
Candy Pastilles Chocolate Chewing Gum
35
Candy58%
Chocolate18%
Pastilles12%
Gum6%
Nuts4%
Other2%
Portfolio: enriching joyful consumer occasions
kicking off
dinner
mountain top
adventure
the
36
Attracting new consumers
Successfully recruiting new
consumers to the brand
and category
1/4 of shoppers new to
candy bag segment
Original -30% sugar Sugar free Veggie
Red Band Range
37
Accelerate Marketing Return On Investment
Step 1: make 70% of marketing
spend visible to consumer
* Ambition for 2019
40%
55%
60%60%
45%
40%
2017 2018 2019*
Working Media % Non-Working Media % Linear (Working Media %)
Step 2: Maximize effective pure media
70% (boost hard, measure fast)
*Nielsen 2018, Sweden
38
Venco Typical Dutch,
Netherlands
full media campaign
+16% Sell-out
Sisu, Finland
full media campaign
9% MS
Glo
bal
ren
ovati
on
& a
cti
vati
on
To come soon
Exa
mp
le:
Ven
co
Exam
ple
: S
isu
Accelerate Marketing ROIInvest 70% of pure media on largest brands
39
Building scale and speed to marketEnsure cross market growth
Navigate focus
Category Strategies
Identifying future growth drivers
(aggregated)
Re-shape Innovation
New structure & capabilities to
Deliver incremental growth opportunities
Be consumer driven & cross market relevant
Bring more speed to market
40
Recipe to winMarketing: be consumer obsessed
Do we really need to be younger and more digital? Be curious, observant & think
entrepreneurial
41
Marcel Mensink, President Operations
The Perfect Factory
The Cloetta Production network
A network of factories to deliver the highest
serves and delivering the highest value.
43
New installation in Ljungsbro, 2018
New line in Turnhout
44
Creating Centers of ExcellenceVolume and technologies in 2018, tonnes
Nuts
Moulding, Extrusion, Hard boiled pastilles
Moulding
Moulded Foam, Chocolate
Moulding & enrobing Moulding
Toffees, Fudge, Nougat
Gum, Lozenges & Hard boiled
The Jelly Bean Factory
45
Consolidated procurementContract coverage to handle volatility
100 % of raw material, packaging, energy and third party (including pick & mix) is covered
3rd party suppliers, including pick & mix managed centrally creates synergies and aiming
to develop limited strategic partners excluding branded products
Contract coverage differ by commodity and market
46
Insourcing progressing Significant Candyking and Italian volumes still to be insourced
Candyking insourcing progressing well
Estimated 4,8 ktons left to be insourced 2019-2020
Investing to be able to accelerate in 2020 and 2021
Opportunity to insource further Candyking volumes
Opportunity to insource part of 6,0 ktons of Italian
volumes
Estimated 1,3 ktons 2020-2021
Italian Insourcing expected to speed up in 2021
From 70 to 30
47
kTons Candyking insourcing
*Opportunity to insource further Candyking volumes to generate
synergies beyond SEK 100m. Not confirmed.
The Perfect FactoryFrom Lean 2020 to Cloetta Leading Performance Program
The Lean 2020 program launched in 2015
The Perfect Factory programme aims to build
Repeatable, Measurable and Capable lines and
competent Employees.
In 2019 Cloetta will change the way we operate
in Cloetta manufacturing with the start of
Leading Performance Program
48
Perfect FactoryCloetta Leading Performance Program
Result
Standardized
tools
Real time data
Statistical Process
Control
Maintenance
basics
1 2
53
4
Perfect factory
Sustainable
effectTRACC
Higher OEE
Capacity increase
Quality improvement
Reduction of LTIR
Predictability
Higher engagement
49
Invest to growCapacity investments needed
10% capacity increase in moulding technology
Additional capacity will support
Growth in branded packaged products
Realization of additional Candyking synergies (insourcing)
Insourcing of volumes produced in previously Cloetta-owned Italian plants
Investment approximately SEK 100m will debottleneck current lines in Turnhout and Levice
New capacity will gradually be available from 2020
50
Financial strategy and road to 14%Frans Rydén, CFO
51
Pivot to profitable organic growth and
targeted EBIT margin, adjusted
Background
Change
Outlook
Historic sales growth driven by acquisitions
Record of margin gains from synergy and factory restructuring
Solid cash flow and healthy leverage
Attractive dividend doubled in 3 years
Shift to organic growth with good fit acquisitions on top
Sustainable margin gains through cost control and addressing pick & mix
Organic growth in line with market
Purposeful climb to targeted 14% EBIT margin, adjusted
Continued strong cash flow, leverage and dividends
52
Leverage and dividend on targetGrowth and margin trailing
Organic Growth*
EBIT Margin, Adj
Net Debt /
EBITDA
Dividend Policy
(share of profit)
Targets
40-60%
-1.2%
10.4%
2.4
54%
-2.8%
10.9%
2.3
60%
2017 2018
*Growth at constant exchange rates
1-2%
(In line with
market)
53
Sales growth historically driven by acquisitionsShift to organic growth with selective acquisitions on top
0,20,1 0,3 1,1
0,5
Candyking
acquisition
6,2
Nutisal acquisition2012
4,9
Jelly Bean
acquisition
Lonka acquisition
-0,7
Italy Disposal Forex, Other 2018
2014 2014 2015 2017 2017 2012-2018
SEKbn
54
Good progress on branded growth in 2018Offset by lost contract for pick & mix
55
-2,7
0,0
-2,4
0,1 1,3
-3,1 -4,0-0,8
2,4 0,6 1,6 1,4
-15%
-10%
-5%
0%
5%
10%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018
7,7
12,9
6,9 6,8
-18,1
10,5
1,5
7,8
-3,3
-19,4-15,6
-13,5
-20%
-10%
0%
10%
20%
72%
28%
Branded business, % of total sales
Pick & mix business, % of total sales
Growth,%
Scale
Core categories
Core markets
Sizeable targets that will generate scale and have impact on existing business
Turnover ~ 200m
Product portfolio in at least one or more of our core categories
Branded business with low level of private label sales
Footprint in existing core markets of Cloetta
Targets in adjacent markets is assessed based on relevance
Synergy realization and solid financial returns
Updated acquisition criterias set for good fit
structural growth
56
432
585632
690 695
604
677
8,9%
12,0% 11,9% 12,2%
13,6%
10,4%10,9%
5,0%
9,0%
13,0%
17,0%
0
100
200
300
400
500
600
700
800
2012 2013 2014 2015 2016 2017 2018
Operating profit, adjusted Operating profit margin, adjusted
Target
Track record of margin gains through
restructuring and synergies
57
SEKm
Margin
14,0%
Synergies and factory
restructuring from Cloetta
LEAF merger
Candyking margin
dilution, unfavorable
FX, production cost
*
*From 2016 and onwards, Italy is discontinued operations and excluded from result
Well-stocked road-map to deliver targeted 14%
EBIT margin, adjusted
EBIT margin,
adjusted, %
10,9%
2018
14,0%
Mid-term
Branded growth
Scale and speed in
innovation
Marketing Return
on Investment
Pick & mix portfolio
Candyking synergies
Pick & mix margin turn-
around
From volume to value
creation
Perfect Factory
Cost efficiency through
Cloetta Leading
Performance Program
Continued insourcing
including Italian volumes
Reduce indirects
New program using
ZBB methodology
Other value enhancing
initiatives
New and shared best
practices, including on
revenue management,
net productivity, portfolio
and mix management
Value Improvement Program+
58
Value Improvement Program Plus: New holistic and company-wide program to safeguard delivery of the roadmap
One program for value-creating initiatives, using industry-leading practices and
grounded in Zero Based Budgeting principles
Transparency to confirm effort and money is spent where it matters the most to deliver
profitable growth and targeted EBIT
Accountability for building blocks, with overlaps managed and no drill-sites missed
Rigor in tracking of actuals and fulfillment of commitments
To reduce indirect spend in SG&A and Operations, Cloetta has engaged Accenture for spend
analysis and value targeting including benchmarking and best practices
59
4,9
4,24,0
3,0
2,4 2,4 2,3
0
1
2
3
4
5
6
2012 2013 2014 2015 2016 2017 2018
Cash flow Net debt/EBITDA ratio, x
Target 2,5
SEKm
Solid cash flow and healthy leverage
157
408
492
697
813
532
792
330
131
500
927889
712
628
0
100
200
300
400
500
600
700
800
900
1 000
2012 2013 2014 2015 2016 2017 2018
Cashflow from Operating activities, before changes in WC Cashflow from Operating activities
60
Capital allocation principlesSupports growth and continues to prioritize dividends
Invest for growth
Targeted M&A
Dividends
Repayment of debt
Increased investments in working media to fuel branded growth
Investment in production capabilities for growth and future insourcing
Footprint in existing core geographies and categories of Cloetta
Clear objective of synergy realization and solid financial returns
Maintaining attractive dividend target of 40-60% of profit for the period
Keep stable debt ratio in line with target to maintain flexibility for M&A
DividendsMaintaining attractive dividend target of 40-60% of profit for the period
61
Cash Flow supports temporary step-up in CAPEX
in 2019-2020 including Candyking insourcing
269
211
186
161170
157
184
5,5%
4,3%
3,5%
2,8%
3,3%
2,7%3,0%
~5,0%
0,0%
1,0%
2,0%
3,0%
4,0%
5,0%
6,0%
0
50
100
150
200
250
300
350
2012 2013 2014 2015 2016 2017 2018 2019
CAPEX CAPEX/Sales
CAPEX/
Deprecation ratio 1,6 1,2 0,9 0,7 0,8 0,7 0,8
2019-2020
3,5%
Temporary step-up, including
announced Candyking
integration CAPEX*
*Part of the previously announced Candyking integration cost of SEK 175m
62
Target
Dividend payout
of 40 60 per
cent of profit for
the period
* 2017 excluding special dividend
Attractive dividend doubled in 3 years
0 0 0
37%
53% 54%
60%
0%
10%
20%
30%
40%
50%
60%
70%
2012 2013 2014 2015 2016 2017* 2018
Dividend
per share, SEK
0,0 0,0 0,0 0,50 0,75 0,75 1,00
63
Pivot to profitable organic growth and
targeted EBIT margin
Background
Change
Outlook
Historic sales growth driven by acquisitions
Record of margin gains from synergy and factory restructuring
Solid cash flow and healthy leverage
Attractive dividend doubled in 3 years
Shift to organic growth with good fit acquisitions on top
Sustainable margin gains through cost control and addressing pick & mix
Organic growth in line with market
Purposeful climb to targeted 14% EBIT margin, adjusted
Continued strong cash flow, leverage and dividends
64
Q&A