18 September 2019, Istanbul Forward-Looking Statements 2 This - - PowerPoint PPT Presentation

18 september 2019 istanbul forward looking statements
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18 September 2019, Istanbul Forward-Looking Statements 2 This - - PowerPoint PPT Presentation

Analyst Meeting 18 September 2019, Istanbul Forward-Looking Statements 2 This presentation includes forward-looking statements including, but not limited to, statements regarding Coca- Cola eceks (CCI) plans, objectives,


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Analyst Meeting 18 September 2019, Istanbul

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This presentation includes forward-looking statements including, but not limited to, statements regarding Coca- Cola İçecek’s (“CCI”) plans, objectives, expectations and intentions and other statements that are not historical facts. Forward-looking statements can generally be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “plan,” “target,” “believe” or other words of similar meaning. These forward-looking statements reflect the current views and assumptions of management and are inherently subject to significant business, economic and other risks and uncertainties. Although management believes the expectations reflected in the forward-looking statements are reasonable, at this time, you should not place undue reliance on such forward-looking statements. Important factors that could cause actual results to differ materially from CCI’s expectations include, without limitation: changes in CCI’s relationship with The Coca-Cola Company and its exercise of its rights under our bottler's agreements; CCI’s ability to maintain and improve its competitive position in its markets; CCI’s ability to obtain raw materials and packaging materials at reasonable prices; changes in CCI’s relationship with its significant shareholders; the level of demand for its products in its markets; fluctuations in the value of the Turkish Lira or the level of inflation in Turkey; other changes in the political or economic environment in Turkey or CCI’s other markets; adverse weather conditions during the summer months; changes in the level of tourism in Turkey; CCI’s ability to successfully implement its strategy; and other factors. Should any of these risks and uncertainties materialize, or should any of management’s underlying assumptions prove to be incorrect, CCI’s actual results from operations or financial conditions could differ materially from those described herein as anticipated, believed, estimated or expected. Forward-looking statements speak only as of this date and CCI has no obligation to update those statements to reflect changes that may occur after that date.

Forward-Looking Statements

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  • INTRODUCTION, LOOKING BACK & FORWARD
  • INSIGHTS ON MAJOR CCI MARKETS
  • DRIVING SHAREHOLDER VALUE

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SLIDE 4

6th largest Coke bottler by volume

10 countries 400 mn population

1.5 bn UC annual production capacity in 26 production plants

Total NARTD industry in CCI countries:

$13BN*

$2.3 bn revenue $395 mn EBITDA

*Source: Canadean and internal estimates, data as of 2018

Over 1 million coolers in 920k outlets

2nd largest Coke bottler by population served

A REGIONAL POWERHOUSE WITH SUPERIOR GROWTH PROFILE

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COMMITTED TO QUALITY GROWTH

Organic Volume Growth Expanding EBITDA Margin

3% 4% 6% 2016 2017 2018 15,5% 16,9% 18,1% 2016 2017* 2018* 5% 10% 13% 2016 2017 2018

Revenue Growth (FX-Neutral)

More diversified portfolio Channel prioritization Innovation & Premiumization Regional Pricing Optimum price/pack architecture Trade Promotion Management Effective Cost Management Disciplined OpEx Management Improving Efficiency 5

*Reflects the impact of TFRS 15 and TFRS 16 standards

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13 6 3 3 1 1 9 3 2 3 1 1 Total NARTD Sparkling Juice Water Energy Ice Tea Market Size (USD bn) (2018) Industry Growth (USD bn) (2019-2023)

OPERATING IN MARKETS WITH EXCEPTIONAL OPPORTUNITIES

Total market sizes and expected growth in CCI markets

CCI Value Share (2018) 34% 4% 10% 8% 53% 29% Incremental NARTD value opportunity in CCI markets is USD 9 bn in 2019-2023 (10% CAGR)

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*Source: Canadean and internal estimates, data as of 2018

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SLIDE 7

TURKEY: DELIVERING QUALITY GROWTH

Quality growth algorithm maintained…

3,3% 4,8%

  • 0,5%

12% 19% 22% 19% 32% 55% 2017 2018 1H19 Volume Revenue EBITDA (Excluding other) 1,7% 5,7% 4,7% 2017 2018 1H19 22% 23% 24% 2017 2018 1H19

…with Sparkling growth

  • 10% Special Consumption Tax (Jan’18)
  • Higher commodity prices
  • Depreciation of Turkish Lira
  • Declining consumer confidence

…and increasing IC share

Significant headwinds… …managed succesfully

Smart Pricing Full Portfolio Power Effective Trade Promotion Management Segmented Execution & Channel Prioritization

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Reflects the impact of TFRS 15 and TFRS 16 standards

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TURKEY: LEVERAGING OUR PORTFOLIO TO CAPTURE VALUE

Optimum price/pack architecture for margin accretion: OBPPC

P C

Occasion

the right

Brands

with the

  • ptimal

Packs

in the appropriate

Price

at the right

Channel

in the target

Excellence in execution

Trade Promotion Management

*2017+2018+YTD2019

  • ROI based decision
  • Channel dynamics
  • Regional approach

TRY 100 mn* savings in cost-to- serve

Be Available Be Cold Be Visible

40K Door net cooler placement in 2019 8

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TURKEY: INCREASING FOCUS ON DISCOUNTER AND ON-PREMISE CHANNELS

Traditional Discounter On-premise

48% 44% 36%

2010 2015 1H19

Modern

27% 27% 23%

2010 2015 1H19

Volume growth through portfolio presence and availability Full glass portfolio availability Investing in value share & profitability Driving profitable growth with full portfolio play Highest Number of SKU Listings Increasing Value Share in both Sparkling & NARTD

New Listings in 2019

5% 7% 12%

2010 2015 1H19

14% 17% 22%

2010 2015 1H19

Activation of special occasions Premiumization in modern

  • n-premise

Increasing basket penetration through occasions Investing in digital platforms Competitive Cooler Strategy Increasing returnable bottle & No Sugar availability

Channel’s share in total CCI volume

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SLIDE 10

PAKISTAN: CHALLENGING OPERATING ENVIRONMENT

Macroeconomic Backdrop

Slowdown in total NARTD market in 2019

Regulatory Environment

  • Federal Excise Tax rate up by 1.5 pps to 13% (Jul’19)
  • Water tax (PKR 1/Liter on production) partially implemented

Leveraging market execution to unlock potential growth…

  • Expanding outlet coverage: +13.6K (1H19)
  • Increasing cold drink equipment: +18K (1H19)
  • Higher penetration of top SKUs at 71% (+18pp yoy)
  • Improving route-to-market
  • Continued optimization of discounts & promotions

Source: IMF World Economic Outlook Database, April 2019 for GDP growth, Bloomberg for exchange rate, Economist Intelligence Unit Country Report for unemployment rate, IHS Market data for private consumption growth 5,4% 5,2% 2,9% 2017 2018 2019E

GDP Growth

110 139 156 2017 2018 Sep'19

Exchange Rate (USD/PKR)

5,3% 5,7% 7,5% 2017 2018 2019E

Unemployment Rate

8,7% 6,3% 4,5% 2017 2018 2019E

Private Consumption Growth

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PAKISTAN: FUNDAMENTALS REMAIN INTACT WITH SIGNIFICANT GROWTH OPPORTUNITIES

NARTD Market in Pakistan*

62% 25% 7% 6%

$3.5 bn

Sparkling Juice Water Energy 28% 43% 7% 1% NARTD Sparkling Water Juice Energy CCI Value Share Market Opportunity CCI Value Share Opportunity*

Building competitive portfolio in flavored sparkling Leveraging high brand love score of Coca-Cola Launching new products for incremental volume

CCI Nearest Competitor

Cola

CCI Nearest Competitor

Flavoured Sparkling

Great opportunity in flavoured sparkling

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*Source:Canadean and internal estimates, data as of 2018

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IRAQ: DELIVERING PERFORMANCE WITH BETTER SECURITY CONDITIONS

NARTD Market in Iraq*

40% 43% 14% 2%

$2.3 bn

Sparkling Juice Water Energy 16% 38% 8% NARTD Sparkling Water Juice Energy CCI Value Share Market Opportunity CCI Value Share Opportunity*

Spearheading growth with Coca-Cola Maintaining base

  • f Crystal

Re-engineering water business

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*Source:Canadean and internal estimates, data as of 2018

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KAZAKHSTAN: INCREASING VALUE SHARE WITH IMPROVING EXECUTION SCORES

45% 18% 14% 9% 13%

NARTD Market in Kazakhstan* Sparkling Juice Water Energy Ice Tea

$1.3 bn

CCI Value Share Opportunity* 37% 62% 48% 18% 11% 2% NARTD Sparkling Ice Tea Juice Water Energy CCI Value Share Market Opportunity

Increasing userbase and frequency Capturing regional differences Expanding Stills portfolio

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*Source:Canadean and internal estimates, data as of 2018

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SLIDE 14

SUMMARY FINANCIALS

Numbers include TFRS 15 and IFRS 16 adjustments *EPS in TL per 100 shares

Net Sales 10,623 26.6% 6,117 23.6% 3,888 24.7% Gross Profit 3,527 27.2% 2,078 22.4% 1,380 23.6% EBIT 1,269 43.8% 751 12.7% 610 18.3% EBITDA 1,919 35.5% 1,141 20.6% 820 25.5% Profit/(Loss) Before Tax 546 31.4% 473 88.7% 449 57.6% Net Income/(Loss) 321 36.1% 409 200.5% 411 122.1% GP Margin 33.2% 0.2pp 34.0% (0.3pp) 35.5% (0.3pp) EBIT Margin 11.9% 1.4pp 12.3% (1.2pp) 15.7% (0.9pp) EBITDA Margin 18.1% 1.2pp 18.7% (0.5pp) 21.1% 0.1pp EPS* 1.26 36.1% 1.61 200.5% 1.62 122.1% Consolidated (million TL) 2018 Change 1H19 Change 2Q19 Change

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EFFECTIVE COST MANAGEMENT

c.85% of COGS is comprised of raw materials

CONCENTRATE SUGAR & SWEETENER PACKAGING Local currency terms in majority

  • f operations,

negligable FX exposure ~ 85% of volume is derived from countries where sugar market is regulated PET Resin and Aluminium are two main inputs to create FX exposure Fixed-price contracts with suppliers, pre-buying Financial contracts for Aluminium, pre-buying for PET Resin

Hedging tool Cash designation to manage Turkey’s raw material FX exposure

Gross margin of Turkey operation* remained intact despite high FX volatility

5,5% 8,1% 13,3% 22,9% 37,4% 37,3% 38,4% 42,6% 3,02 3,64 4,83 5,62 2,50 3,00 3,50 4,00 4,50 5,00 5,50 6,00 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 40,0% 45,0% 2016 2017 2018 1H19 NSR/UC Growth Gross Margin (Turkey) Average USD/TRY

2020 2019

USD 150 million @ USD/TL3.95 designated for 2019 raw material procurement

  • No cash designation planned
  • Smart pricing, mix management and cost savings

to mitigate margin impact 15

*Reflects the impact of TFRS 15 “Revenue from Contracts with Customers” and TFRS 16 “Leases” standards, excluding 2016

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Arca Femsa Andina Hellenic Amatil CCEP CCI 14% 15% 16% 17% 18% 19% 20% 20% 22% 24% 26% 28% 30% 32% 34% 36%

EFFECTIVE COST MANAGEMENT

25% 23% 22% 20% 2016 2017 2018 1H19

Continous focus on improving efficiency Lowest OpEx/Sales amongst major bottlers

OpEx/Sales (FY18) EBITDA Margin (FY18) OpEx as % of NSR*

Sales force efficiency Route-to-market rationalization Warehouse

  • ptimization

Source: Bloomberg

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*Reflects the impact of TFRS 15 “Revenue from Contracts with Customers” and TFRS 16 “Leases” standards, excluding 2016

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DISCIPLINED FINANCIAL MANAGEMENT

8,8 10,2 1H18 1H19

Continued deleveraging FX-Neutral Net Debt/EBITDA: ~1.59x Increasing EBIT

Covenant < 3.25x

1,91 1,61 1H18 1H19 691 577 1H18 1H19

Net Debt (USD mn) Net Debt / EBITDA Net Interest Coverage

Covenant >4x

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MANAGING BALANCE SHEET FX EXPOSURE

USD 75% USD 33% 34% EUR 23% EUR 21% EUR 20% 41% 43% 2017 2018 1H19 8% 18% 2% 2% 16% 53% 2019 2020 2021 2022 2023 2024

Participating cross- currency swap & Net Investment Hedging USD 120 mn USPP USD 500 mn Eurobond USD 80 mn USPP

Local Currency; 2% Local Currency; 5% Local Currency; 3%

Breakdown of Consolidated Debt Maturity Profile

Participating cross-currency swap transaction for USD 150 mn Net investment hedging for USD 281 mn Repayment of USD 100 mn USPP (May 2018) Repayment of USD 500 mn Eurobond (October 2018) 18

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CONTINOUS IMPROVEMENT IN WORKING CAPITAL EFFICIENCY

7,4% 5,7% 4,5% 2016 2017 2018 10,2% 6,4% 1H18 1H19 2017 15 Days Cash Conversion Cycle 2016 26 Days

26 Days 2018 47 Days 62 Days 30 Days 2016 47 Days 51 Days 29 Days 2017 43 Days 57 Days

2018 12 Days

*Net Sales Revenue

Full Year Half-Year (Annualized)

Net Working Capital/NSR* DSO DSI DPO

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PRUDENT CAPITAL EXPENDITURE

CapEx / NSR*

7,3% 5,9% 8,1% 2016 2017 2018

7.1%

  • n

average

*Net Sales Revenue

4,7% 3,9% 1H18 1H19 Full Year Half-Year (Annualized)

Maintenance

1.022 1.030 1.088 End-2017 End-2018 1H19 Number of Cooler Doors (000) Continous cooler investment to drive volume…

Coolers Capacity

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FOCUS ON FREE CASH FLOW AND RETURN METRICS

Free Cash Flow and Yield*

  • 44

10 46 642 729 730

  • 0,3%

0,1% 0,5% 7,6% 8,2% 9,4%

  • 2%

0% 2% 4% 6% 8% 10%

  • 100

100 200 300 400 500 600 700 800

2013 2014 2015 2016 2017 2018

FCF (TLmn) FCF Yield

ROIC

2,4% 5,5% 6,7% 2016 2017 2018

*Free cash flow yield based on year-end market capitalization

Driving long term shareholder value

Sole metric in management’s long term incentive plan

Source: Bloomberg

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MONITORING EXPANSION OPPORTUNITIES

  • Management control & full consolidation rights
  • Reasonable proximity
  • Complementary market dynamics
  • ROIC > WACC

Volume Breakdown Guiding principles for geographical expansion

Turkey 49% Pakistan 26% Kazakhstan 10% Iraq 8% Others 7% Turkey 81% International 19% 2006 2018

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2019 GUIDANCE

Sales Volume 3%-5% growth on a consolidated basis 1%-3% growth on a consolidated basis Flat volume in Turkey Flat to slightly positive in Turkey 6%-8% growth in international operations 2%-4% growth in international operations Net Revenue 16%-18% on a consolidated basis (FX-neutral1) maintained EBITDA Slight improvement on a consolidated basis maintained Capex/Sales 7%-8% (on a comparable basis) maintained Net Debt/EBITDA Lower than 1.5x (on an FX-neutral1 and organic basis) maintained

2019 Guidance - Old 2019 Guidance - New

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Q&A

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Thank you