Foster’s Group 2010 Interim Results16 February 2010
2OUTLOOK STATEMENT DISCLAIMER
Foster’s Group Limited (Foster’s) advises that the following presentation contains forward looking statements which may be subject to significant uncertainties outside of Foster’s control.
No representation is made as to the accuracy or reliability of forecasts or the assumptions on which they are based.
Actual future events may vary from these forecasts and you are cautioned not to place undue reliance on any forward looking statement.
3
Ian JohnstonChief Executive Officer
42010 INTERIM RESULTSUMMARY
Cash flow after dividends
Earnings per share
Earnings per share
Net profitNet profit
EBITSEBITS
Net sales revenue
Net sales revenue
Constant CurrencyReported
+ 0.3%
- 2.3%
+ 0.5%
0.0%
- 4.4%
- 14.0%
- 11.7%
- 12.1%
+ 20.1%
All figures are before SGARA
52010 INTERIM RESULTBUSINESS ENVIRONMENTStrong beer performance – international wine headwinds
Americas Wine
Oversupply in Australia and New Zealand
Pricing pressure – New Zealand sauvignon blanc
Australian dollar strength impacting exports
Declines in UK on-premise
Heavy discounting in UK grocery channel
Growth in Continental Europe and Nordics
Declines in on-premise channel
Channel shift to grocery at discounted prices
Canada return to growth
Economic downturn
Japan: below prior year
China: signs of improvement
Strength of the CUB business
Australian beer category volume growth
Headwinds in export and Pacific markets
CUB
EMEA Wine
ANZ Wine
Asia Wine
6TRANSFORMATION AGENDA
Capability Efficiency Growth
Sale of 21 of 36 vineyards
Cost savings on-track
Direct distribution in Nordics and Eastern Canada
Distributor alignment plan in the US
New organisational culture
Dedicated beer and wine sales teams in Australia
Strong operational management team
Premiumisation strategy
Integrated supply and demand
Australian tail brand rationalisation
7CUBMARKET ENVIRONMENT
Australian beer market
Strong Australian beer market
Market volume up approximately 1%1
Innovation renewing consumer interest
Positive mix and pricing trends
Market leader with 7 of the top 10 brands2:
- 2 of the 3 fastest growing brands2
- 3 of the 5 largest innovations2
Leadership team:
- Peter Cantwell, CUB Sales Director
- John Pollaers, CUB Managing Director, to commence in April
Sales transition:
- Positive customer feedback
- Increased coverage
Strong performance in supply
- Cost of sales increases below full year guidance
- Packaging capability upgrade
1. Foster’s estimate2. Nielsen packaged beer to December 2009
CUB
8CUBFIRST HALF HIGHLIGHTS
Beer
Leading Australian brand portfolio
Cider
Carlton Draught: now number 2 in regular beer1
VB: back in revenue growth
Category leading brands1: VB, Corona, Crown Lager, Pure Blonde
Strong innovation: Carlton Natural Blonde, Pure Blonde Naked Ale, VB Raw, Matilda Bay’s Fat Yak and Big Helga
Clear leader in the fastest growing alcohol category1
Key brands: Strongbow, Bulmers, Mercury
1. Nielsen to December 2009
9CUBOUTLOOK
Capability Efficiency Growth
Settled sales force with new leadership talent
Protect market leading position in key categories
Expand position in high growth categories
Support for the on-premise channel
Improve promotional effectiveness
Innovation to drive consumer interest
Investment in continuous improvement to improve efficiency
Protect and expand our leading market position
10
Stephen BrauerManaging Director - Americas
11AMERICAS WINEMARKET ENVIRONMENTChallenging market conditions
CategoryModest growth driven by innovation and value wines
Aggressive promotional activity across all channels
Consumers trading down across all price brackets
Continued channel shift from on to off premise
Millennials embracing wine category at early stage, driving growth at higher price points
Economy stabilising, “Wall Street” ahead of “Main Street”
Unemployment, tight credit and depressed housing are main concerns
Economy
Consumer
12AMERICAS WINEBUSINESS PRIORITIESReshape business and position for growth
Leadership
Commercial acumen
Upgrading customer management skills
Focus on core brands and
core markets
Reshape and premiumise
portfolio
Accelerate innovation
Strengthen capabilities
Accelerate innovation pipeline in high growth segments
Scale emerging brands to capitalise on high growth trends
13
+2.2%
(9.8%)
(6.4%)
Q2-F10
Q1-F10
F09
AMERICAS WINEFIRST HALF HIGHLIGHTSClear signs of progress
Focus on core brands and
core markets
Reshape and premiumise
portfolio
Accelerate innovation
Strengthen capabilities
Mike Holden
Senior Vice President Sales
Francesca Schuler
Chief MarketingOfficer
Commercial Talent Growth in Key Markets1 Emerging BrandsGrowth in $10+1
Second Half Launch
Fastest growing
brand from Argentina
+1.3%
+10.6%
+5.3%
+1.4%
Massachusetts
Florida
New YorkMetro
Canada +14%
1. Depletions
14AMERICAS WINEROUTE TO MARKETRoute to market initiative progressing to plan
Completed Market
Assessment
Commencing Distributor
Engagement
Finalise Joint Goals and Objectives
Phase OneMarket
Negotiation
Complete Phase One
JuneJanuary
15AMERICAS WINEOUTLOOK
Capability Efficiency Growth
Increased consumer investment on core brands
Refined brand architecture for Beringer and Chateau St Jean
Accelerate innovation
Strengthen customer facing capabilities
Successfully implement route to market
16
David DearieManaging Director – ANZ Wine
17ANZ WINEMARKET ENVIRONMENT
Industry dynamics
Foster’s position
Well positioned in an oversupplied market
Good growth in Australia
Balanced inventories
Leading brand portfolio
Outstanding quality and cost efficiency
Oversupply
Strong Australian dollar
Industry profitability under pressure
Long term success will be built on branded wines
18ANZ WINEBUSINESS PRIORITIES
Sales execution
Be brilliant at the basics; build lasting partnerships
Portfolio execution
Exceptional brand planning
Balanced portfolio approach
Differentiated activities to win at point of purchase
Dedicated, focused and passionate team
Fact based decision making at the point of influence
Expanding distribution points
19ANZ WINEFIRST HALF HIGHLIGHTS
Brands
Transformation progress report
Dedicated sales team
Positive customer feedback
Significant improvement in sales call quality
Performance driven culture - accountability and responsibility
Timely decision making at a local level
4 of top 5 brands in volume growth
Top 10 focus brands showing growth over last year
Balanced channel and portfolio approach
Ongoing portfolio refinement
20ANZ WINEOUTLOOK
Capability Efficiency Growth
Execution and partnering
Excellence in supply and production
Focus on core brands
Integrated channel plans
Delivery of profitable volume growth
21
Peter JacksonManaging Director - EMEA
22EMEA WINECONTINENTAL EUROPEBuild on direct distribution in Nordics
First half highlights
Business priorities
Increased marketing investment
Build premium brands
Leverage sales and marketing capability
Drive growth in duty free and on-premise
Category leadership
Successful transition to direct distribution
Improved profitability
Strong brand performance
23EMEA WINECONTINENTAL EUROPEGrow grocery in other Continental European markets
First half highlights
Business priorities
Partnerships with key retailers
Core portfolio distribution
Leverage category leadership
Improve marketing and sales execution
Under-developed Australian category
Category leadership in grocery
Strong premium business in Central Europe
Declining sales in Eastern Europe
24EMEA WINEUNITED KINGDOM & IRELANDProfitability under pressure
Market Environment
Business priorities
Re-energise the Australian category
Premiumise portfolio
Prioritise investment
Manage cost base
Highly competitive market
Foreign exchange impact
Deep discounting
Economic uncertainty
Retailers focus on price
25
Angus McKayChief Financial Officer
26
1H 10
$m
ReportedCurrency Change
%
ConstantCurrencyChange
%
Volume (million 9L cases)
Net sales revenue
EBITS
Net interest expense
Tax expense
Net profit after tax
80.1
2,302.2
570.1
(64.3)
(139.0)
363.0
-2.2
-4.4
-14.0
-23.6
-15.9
-11.7
-2.2
+0.3
-2.3
-13.5
-4.4
+0.5
Earnings per share
Weighted average number of shares
18.8 ¢
1,929.5m
-12.1
+0.3
0.0
+0.3
KEY FINANCIALS
All figures are before SGARA
27COST SAVING INITIATIVES
Cost savings on-track for $100m to be realised in FY 11
FY 09 1H 10
Beer Wine Corporate
$21m
$35m
FY 11: $100 million
of cost savings
FY 10: $70 to $80 million of cost savings
28CUBKEY FINANCIALS
Australia beer net sales revenue per case up 6.9% Australia beer:
– Volume down 1.1%
– Net sales revenue up 5.7%
– Net sales revenue per case up 6.9%
Cider volume up 9.3% and net sales revenue up 13.8%
Spirits & RTD volume and net sales revenue below the prior year
EBITS up 6.6%:– Increased brand investment
– 1H 10 mix adjusted unit cost of sales up 3.1%
– $10.3m benefit from cost reduction initiatives
Fiscal 2010 constant currency mix adjusted unit cost of sales increases expected to be 3 to 4%
-1.1%
+4.7%
+6.6%
Volume
NSR
EBITS
-1.1%
+5.1%
+6.2%
Reported Constant
CUB Net Sales Revenue
1.0
1.1
1.2
1.3
1H 09 BeerVolume
BeerPrice /
Mix
Cider /Spirits /RTDs
1H 10
$bn
29AMERICAS WINEKEY FINANCIALS
Recessionary economic conditions impacted Americas business
Shipments down 0.2%:– US shipments down 0.4%– Canadian shipments up 1.5%
Recessionary economic conditions: – Consumer trade down– On-premise and independent retail declines
Depletions in line with shipments
Constant currency net sales revenue per case down 6.8%:
– Unfavourable mix– Increased pricing activity
Constant currency EBITS impacted by:– Unfavourable mix– Increased promotional activity– Higher cost of sales from 2007 and 2008
Californian vintages
Volume
NSR
EBITS
Reported Constant
-0.2%
-16.3%
-62.0%
-0.2%
-7.0%
-45.3%
Americas shipments by source region
7.0
7.5
8.0
8.5
9.0
9.5
10.0
1H 09 California Australia OtherImports
1H 10
9L cases (m)
30ANZ WINEKEY FINANCIALS
EBITS growth in Australia offset by New Zealand
Core bottled wine growth in Australia:– Volume up 0.5% – Net sales revenue down 0.9%– Growth above $11 per bottle– Increased pricing activity
In Australia constant currency EBITS up 10.1%:– Overheads cost reduction initiatives – Continuous improvement programs– Procurement benefits
Difficult market conditions in New Zealand:– Recessionary market conditions– New Zealand oversupply– Exchange rates have reduced Australian
sourced wine profitability
ANZ Wine Volume
4.0
4.5
5.0
5.5
1H 09 AustraliaCask &
Vok
AustraliaCoreWine
NZ 1H 10
9L cases (m)
Volume
NSR
EBITS
Reported Constant
-13.1%
-6.9%
-1.1%
-13.1%
-6.5%
-0.8%
31EMEA WINEKEY FINANCIALS
Strong growth in Continental Europe
EMEA Wine Volume
4.2
4.7
5.2
1H 09 Nordics ContinentalEurope
UK &Ireland
1H 10
9L cases (m)
Volume
NSR
EBITS
Reported Constant
+2.0%
-16.2%
-76.2%
+2.0%
+4.8%
+114.3%
Constant currency net sales revenue per case up 2.7%
Continental Europe volume up 25.7%:– Direct distribution in the Nordics– Strong growth in the Netherlands– Declines in Eastern Europe; duty free and
on-premise
UK & Ireland volume down 7.5%:– Recessionary environment– Increasingly competitive UK grocery
channel
Constant currency EBITS benefiting:– Distributor margin capture in the Nordics– In-market bottling cost benefits– Overhead reductions
32ASIA WINEKEY FINANCIALS
Increased investment and focus on Asia
Asia Wine Volume
0.0
0.5
1H 09 GreaterChina
SouthEast Asia
Japan 1H 10
9L cases (m)
Volume
NSR
EBITS
Reported Constant
-11.4%
-7.4%
-25.6%
-11.4%
-7.4%
-28.1%Volume declined 11.4%
– Good volume growth in China, Hong Kong, Taiwan, Singapore and Malaysia
– Lower sales in on-premise and duty free
Constant currency EBITS down $2.5 million impacted by lower volume
Increasing focus in the region:– Management team relocated to Singapore– In-market sales and marketing investment– Brand and channel mapping underway– Route to market opportunities– Innovation pipeline
33
1H 10 constant currency mix adjusted cost of sales:
– Australian sourced wine marginally below the prior year
– Californian sourced wine up approximately 5%
Fiscal 2010 constant currency mix adjusted unit cost of sales expected to be similar to fiscal 2009 and in line with guidance
2009 Californian vintage approximately 20% higher than previous vintage1
– Grape production for Foster’s owned vineyards above the prior year
– Foster’s intake in line with demand requirements
2010 Australian industry vintage currently underway:
– Vineyard yields currently expected to be in line with longer term averages
– Grape prices likely to come under further pressure
GLOBAL WINECOST OF SALES
1H 10 cost of sales increases in line with guidance
1. California Department of Food and Agriculture
Wine Cost of Sales
Vintage Update
34
SelectedCurrency
WineEBITS
$m
Group ProfitBefore Tax
$m
Average
AUD/USD
AUD/GBP
Other
1H 09
78.64
44.88
1H 10
86.99
53.10
(31.5)
(31.5)
(19.9)
(22.2)
(31.1)
(19.8)
Total (82.9) (73.1)
AUD/USD
AUD/GBP
1H 10
86.99
53.10
Sensitivity
1¢ change
1p change
1.9
2.3
0.8
2.2
CURRENCY SENSITIVITIES
Impact of FX on 1H 10
2H 10Indicative
Sensitivities
35CASH FLOW AND NET DEBT
2,611.4 694.5
68.9127.2 17.2
293.9 5.6 30.3 1.6 243.9
2,217.7
500
1,000
1,500
2,000
2,500
3,000
FY 08 NetDebt
OCFPIT Net Interest Tax Net Capex NetDividends
NetAcquisitions
& Loans
SignificantItems
SharePurchases
Non-cashItems
FY 09 NetDebt
$m
Operating cash flow after dividends $187.3m
36CAPITAL STRUCTUREAND DEBT PROFILE
Robust and stable balance sheet
0
500
1,000
1,500
2,000
FY 10 FY 11 FY 12 BeyondFY 12
$m
6.1
7.8 7.9
8.9
4
5
6
7
8
1H 07 1H 08 1H 09 1H 10
times
1. Pre significant items
• Interest cover 8.9x, gearing 58.8%
• Debt portfolio 58% fixed, 42% floating rates
• Gross debt weighted average maturity 6.8 years
• $302.0 million debt repayable within 12 months
• $1.8 billion of committed undrawn bank facilities
• $352.3 million of cash
Interest Cover1 Debt Maturity
37
Ian JohnstonChief Executive Officer
38FOSTER’S GROUPOVERVIEW
Capability Efficiency Growth
Business structure transition completed in Australia
Completed route to market changes delivering improved performance
Capability build in each region
Focus on improving execution and effectiveness
$100 million of cost savings on target
New sense of energy and urgency
Supplementary Information
40
1H 09 2H 09 FY 09 1H 10
Volume(1)
NSR ($m)
EBITDAS ($m)
EBITAS ($m)
EBITS ($m)
EBIT ($m)
Net Profit ($m) (before significant items and SGARA)
81.9
2,407.6
748.4
664.7
663.2
663.5
411.1
71.1
2,083.5
596.6
502.4
501.8
479.6
330.4
153.0
4,491.1
1,345.2
1,167.1
1,165.0
1,143.1
741.5
80.1
2,302.2
647.2
570.5
570.1
560.0
363.0
(1) 9L cases millions
RESULT SUMMARY
41
1H 09$m
EPS¢s
1H 10$m
EPS¢s
Net profit after tax(before significant items and SGARA)
411.1 21.4 363.0 18.8
SGARA after tax 0.2 (7.3)
Net profit after tax 411.3 21.4 355.7 18.4
Diluted Weighted Average Shares (m) 1,924.2 1,929.5
EPSRECONCILIATION
42
1H 09 1H 10 Change
OCFPIT before Significant Items ($m)
Less: Significant Items ($m)
Reported OCFPIT ($m) (1)
691.9
7.8
684.1
694.5
30.3
664.2
EBITDAS ($m)
OCFPIT ($m)
Cash Conversion (%)
748.4
691.9
92.5
647.2
694.5
107.3
(13.5)%
0.4%
14.8 pts
(1) Statutory Operating Cash Flow pre Interest, Tax & Dividends
CASH FLOWCONTINUING BUSINESS
43
1H 09$m
1H 10$m
EBITDAS
Working Capital
Other Items
748.4
(31.0)
(25.5)
647.2
52.4
(5.1)
OCFPIT before Significant Items
Net Interest Paid
Tax Paid
691.9
(81.9)
(128.4)
694.5
(68.9)
(127.2)
Net Operating Cash Flows before Significant Items
Net Capex
Dividends Paid
Free Cash Flow after Dividends
481.6
(51.9)
(273.8)
155.9
498.4
(17.2)
(293.9)
187.3
CONTINUING BUSINESS FREE CASHFLOW PRE SIGNIFICANT ITEMS
44
1H 09 2H 09 FY 09 1H 10
CUB Volume (1)
CUB NSR ($m)
CUB EBITS ($m)
58.0
1,207.2
456.2
50.8
1,072.0
404.5
108.8
2,279.2
860.7
57.4
1,264.0
486.4
Other Volume (1)
Other NSR ($m)
Other EBITS ($m)
4.0
36.5
11.8
3.7
30.6
12.8
7.7
67.1
24.6
3.5
31.0
7.2
Total Volume (1)
Total NSR ($m)
Total EBITDAS ($m)
Total EBITAS ($m)
Total EBITS ($m)
Total EBIT ($m)
62.0
1,243.7
497.3
468.1
468.0
468.0
54.5
1,102.6
456.0
417.5
417.3
417.3
116.5
2,346.3
953.3
885.6
885.3
885.3
60.9
1,295.0
519.5
493.7
493.6
493.6
Capex ($m) 20.2 37.1 57.3 15.6
(1) 9L cases millions
GLOBAL BCS
45
1H 09 2H 09 FY 09 1H 10
Americas Volume (1)
Americas NSR ($m)
Americas EBITS ($m)
9.5
583.9
115.2
8.4
509.3
44.1
17.9
1,093.2
159.3
9.4
488.6
43.8
ANZ Volume (1)
ANZ NSR ($m)
ANZ EBITS ($m)
5.2
326.7
37.4
3.7
272.1
34.2
8.9
598.8
71.6
4.5
304.0
37.0
EMEA Volume (1)
EMEA NSR ($m)
EMEA EBITS ($m)
4.7
226.2
50.4
4.1
155.4
(5.0)
8.8
381.6
45.4
4.8
189.5
12.0
Asia Volume (1)
Asia NSR ($m)
Asia EBITS ($m)
0.4
27.1
8.6
0.5
44.1
19.2
0.9
71.2
27.8
0.5
25.1
6.4
(1) 9L cases millions
GLOBAL WINE
46
1H 09 2H 09 FY 09 1H 10
Total Volume (1)
Total NSR ($m)
Total EBITDAS ($m)
Total EBITAS ($m)
Total EBITS ($m)
Total EBIT ($m)
19.8
1,163.9
264.1
213.0
211.6
211.9
16.7
980.9
145.2
92.9
92.5
70.3
36.5
2,144.8
409.3
305.9
304.1
282.2
19.2
1,007.2
146.0
99.2
99.2
89.1
Capex ($m) 25.4 68.8 94.2 (11.2)
(1) 9L cases millions
GLOBAL WINE
47
1H 09$m
FY 09$m
1H 10$m
Gross Debt Gross Borrowings
Debt Issuance Costs
Fair Value Adjustment to Fixed Debt
Borrowings per Balance Sheet
3,367.5
(20.7)
220.6
3,567.4
2,764.6
(19.7)
128.6
2,873.5
2,598.6
(27.3)
104.9
2,676.2
Net Debt Cash
Fair Value of Fixed Rate Debt Hedges
Net Debt
(296.2)
(220.9)
3,050.3
(133.0)
(129.1)
2,611.4
(352.3)
(106.2)
2,217.7
Debt Portfolio AUD (A$)
USD (US$)
GBP (GBP)
Other (A$)
% Fixed – Gross Borrowings
Weighted average maturity of gross debt
301.1
1,991.8
80.0
20.4
54%
8.0yrs
305.0
1,934.8
35.0
-
60%
7.4 yrs
304.5
1,980.5
42.5
-
58%
6.8 yrs
DEBT SUMMARY
48
Gearing Group Interest Cover (1)
(1) EBITS Interest cover, before significant items
4.6 4.66.0 6.2
7.8 7.9 7.9 7.98.9
0123456789
10
1H06
FY06
1H07
FY07
1H08
FY08
1H09
FY09
1H10
X117
7864
5563 62
76 7059
0
20
40
60
80
100
120
140
1H06
FY06
1H07
FY07
1H08
FY08
1H09
FY09
1H10
%
CAPITALSTRUCTURE
49
Exchange rateAverage exchange rates used for profit and loss purposes in the 6 months ended 31 December 2009 are: $A1 = $US 0.8699 (2008: $A1 = $US 0.7864), $A1 = GBP 0.5310 (2008: $A1 = GBP 0.4488). Period end exchange rates used for balance sheet items are: $A1 = $US 0.8938 (2008: $A1 = $US 0.6917), $A1 = GBP 0.5559 (2008: $A1 = GBP 0.4800). Constant CurrencyThroughout this presentation constant currency assumes current and prior period earnings of self-sustaining foreign operations are translated and cross border transactions are transacted at current year exchange rates. BCSBeer, Cider, Spirits / Ready To Drink (RTD) category.CUBCarlton & United Breweries.Significant ItemsSignificant Items include continuing material items, discontinued material items and gains or losses on sale of discontinued operations.EBITEarnings before interest, tax and significant items.EBITSEarnings before interest, tax, significant items and SGARA.EBITDAS Earnings before interest, tax, depreciation, amortisation, significant items & SGARA.OCFPITOperating cash flow before cash receipts and payments associated with significant items and other one-off transactions and prior tointerest and tax.SGARAAustralian accounting standard AASB141 “Agriculture”.
DEFINITIONS