2006 Half Year Results Presentation 6 months to 30 June 2006 10 - - PDF document

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2006 Half Year Results Presentation

6 months to 30 June 2006

10 August 2006

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Major impacts on HY06 result

1. Beverage revenue 8.3% per unit case

• Full recovery of $ COGS increases in all countries except Indonesia –

though not sufficient to maintain EBIT margins

2. Beverage COGS up $83 million

• Record commodity prices with major inputs – aluminium, sugar and PET

resin – trading 30% to 90% above 10 year averages

3. Deteriorating economic conditions in Indonesia

• $23.4 million EBIT reduction in Indonesia & PNG versus HY05

4. Success of Coca-Cola Zero

• Material market share gains made by Coca-Cola Zero
• Success has been met with increased price competition

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$29.9m to $94.6m

Free cash flow

1.5 pts to 16.0%

ROCE

0.1% to $145.4m

NPAT

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39.3% to $197.7m

Food revenue

6.3% to $1.9bn

Beverages revenue

2.0% to 19.4c

Earnings per share

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3.6% to 14.5c

Dividends per share

6.1% to $251.2m

EBIT

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• 1. before significant items

Result Summary

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Australia

(1.1 pts) 4.4% 3.3% Capital expenditure / revenue (1.3 pts) 21.0% 19.7% EBIT margin 0.2% 217.8 218.2 EBIT 3.4% 154.9 160.1 Volume (million unit cases) 3.0% $6.71 $6.91 Revenue per unit case 6.4% 1,039.3 1,105.8 Trading revenue % Chg HY05 HY06

A$m

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Coca-Cola Zero

KEY FACTS:

• Outstanding consumer acceptance
• Coca-Cola Zero has already taken 13%

share of the Australian cola category

• We have grown our total cola market share

from 74% to 78% in the supermarket channel

• Volume growth of 9% for Coca-Cola, diet

Coke and Coca-Cola Zero in HY06

• Coca-Cola Zero already at > 60% of diet

Coke volumes

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Powerade Isotonic

• New formulation Powerade Isotonic launched in May06 – more

effective at hydrating and delivering energy to the body

• Key opportunity for the sports drink category is to increase per capita

consumption which is <30% of US and Japanese per caps

• Powerade grew volumes >25% in HY06

57 51 29 16

Japan USA Taiwan Australia Per Capita Sports Drink Consumption Per 8oz Serve

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Australia – Current Trading & Full Year 2006 Outlook

• Mount Franklin and Pump continue to grow volumes

around 15%

• Market share gains made by Coke met with strong

price competition

• Brand Coke average retail price gap to major

competitor has widened from 33% to 36% over the last 3 months

• Revenue per case increases of approx 7% since May
• Outlook:
• Solid rebound in July volume and price after slower

May and June

• Key issue for H2 will be competitive response and

impact of higher prices on volumes

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6.9 pts 4.4% 11.3% Capital expenditure / revenue (1.8 pts) 17.1% 15.3% EBIT margin (18.1%) 37.5 30.7 EBIT (4.5%) 33.0 31.5 Volume (million unit cases) (4.1%) $6.66 $6.39 Revenue per unit case (8.5%) 219.8 201.2 Trading revenue % Chg HY05 HY06

A$m

New Zealand & Fiji

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• NARTD category declined in HY06 in response to

weakening consumer spending

• Highlight for the first six months was the successful

launch of Coca-Cola Zero with full year forecast volumes achieved by early June

• Market characterised by higher levels of price

competition

• Outlook – Expecting a continuation of the trading

conditions we experienced in HY06

New Zealand – Review & Full Year 2006 Outlook

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(3.7 pts) 5.4% 1.7% Capital expenditure / revenue 2.0 pts 0.3% 2.3% EBIT margin 1 844.4% 0.9 8.5 EBIT1 (1.7%) 63.0 61.9 Volume (million unit cases) 20.1% $4.93 $5.92 Revenue per unit case 18.1% 310.5 366.7 Trading revenue % Chg HY05 HY06

A$m

South Korea

• 1. before significant items

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South Korea – Review & Full Year 2006 Outlook

• Delivered significant improvements in EBIT

with local currency revenue per case up 10%

• Continued expansion of the product portfolio

with the launch of Coca-Cola Zero, Haru green tea and Minute Maid flavour extensions

• Stabilisation of trademark Coca-Cola volumes

in an NARTD market that declined by 7%

• Outlook:
• Great progress in HY06 with the business

well on track to materially increase profits for the full year

• Product recall in July after an extortion threat

means H2 2005 outlook less certain

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1.6 pts 9.6% 11.2% Capital expenditure / revenue n/a 6.3% (6.6%) EBIT margin n/a 11.3 (12.1) EBIT (15.4%) 52.5 44.4 Volume (million unit cases) 22.4% $3.39 $4.15 Revenue per unit case 3.5% 178.1 184.4 Trading revenue % Chg HY05 HY06

A$m

Indonesia & PNG

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13 1500 2500 3500 4500 Jan05 Apr05 Jul05 Oct05 Jan06 Apr06

4% 8% 12% 16% 20% Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06

Indonesia – Economic landscape

120 130 140 150 160 170 180 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 6% 8% 10% 12% 14% Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06

Inflation Fuel Prices Retail Sales Index Interest Rates

IDR per Litre

Inflation climbed as high as 18%... Fuel prices have increased by > 160% since Jan05… Retail sales declined by 18% And interest rates have increased to 12.5%...

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Indonesia – Review & Full Year 2006 Outlook

• CCA volume declines in line with overall retail

sales decline

• EBIT impacted by significant increases in cost

base driven by:

Higher COGS 2005 investment in sales force and coolers Higher fuel costs Flow on effect of high inflation

• Outlook – expect Indonesia to return to

profitability in the second half as high inflation and interest rates begin to moderate

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3.6 pts 2.8% 6.4% Capital expenditure / revenue n/a 12.1% 10.2% EBIT margin n/a 17.2 20.2 EBIT n/a 141.9 197.7 Trading revenue % Chg HY05 HY06

A$m

6 months 4 months

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• Fruit snacks category benefited from new

convenience packaging of Goulburn Valley Fruit Snacks into the convenience and petroleum channel

• International business driven by good

volume and earnings growth Spain and Thailand manufacturing operations

• Cheap imported product in Australia

putting pressure on domestic volumes and margins

• Good progress in improving the

manufacturing and distribution efficiencies

• Outlook – positive momentum in the

business to continue for H2

SPCA – Review & Full Year 2006 Outlook

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2006 Half Year Results Presentation

John Wartig, CFO

10 August 2006

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(21.3%) 145.2 114.3 NPAT 0.1% 145.2 145.4 NPAT (before significant items) (33.9%) (59.9) (39.6) Income tax expense

• 205.1

(62.3) 267.4 FY05 n/a (9.8%) 6.3% (6.1%) % chg (66.2) Net interest expense (31.1) Significant items after tax 185.0 Profit before tax 251.2 EBIT (before significant items) HY06

A$m

Profit & loss

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Profit & loss

Effective tax rate of 21.4% Profits made in South Korea are not tax effected due to brought forward losses Withholding tax benefit of $7 million due to losses in Indonesia and Korea on a post significant items basis No tax payable on the $13.4 million gain on sale of the property at Eastern Creek due to Australian business utilising capital losses Reversal of over provisions from prior years of $5 million Significant Items of $31.1m in South Korea $27.9 million ERP with ~18 month payback $3.2 million VAT audit penalty Significant items are pre and post tax

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(2.9) (341.9) (344.8) Deferred income tax liability 3,557.5 (340.1) 1,998.4 1,512.5 728.6 FY05 27.8 11.8 1.2 (35.5) 53.2 $ chg 1,477.0 Property, plant & equipment 3,585.3 Capital Employed (328.3) Other net assets / (liabilities) 1,999.6 IBAs & intangible assets 781.8 Working capital HY06 A$m

Capital employed

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Working capital

Working capital

• Beverage working capital to

revenue – small increase primarily due to impact of currency translation on South Korea and Indonesian balances partially offset by improvements in Australia

• Food working capital to

revenue – further reductions expected from introduction

• f automated inventory

control system

Working capital / revenue 67.0% 12.2% FY05 78.4% 11.4% HY06 82.4% Food 11.1% Beverages HY05 Group working capital

HY05 FY05 HY06 Beverages Food Other

$729m $738m $782m

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Balance sheet remains strong

Net debt increase by $25.9 million Cash balances increased by $279 million due to pre-funding of debt maturities in Q3 Interest cover strong at 3.8x within CCA’s target range of 3.0 – 4.0x

Net Debt & Interest Cover

$0m $500m $1,000m $1,500m $2,000m $2,500m 2001 2002 2003 2004 2005 HY06 0.0x 1.0x 2.0x 3.0x 4.0x 5.0x Net Debt Interest Cover

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ROCE

ROCE

• Group ROCE down 1.5 pts

due to reduction in earnings from Indonesia and full six months impact of SPCA

• Short-term ROCE dilution

expected from lead times in generating returns from infrastructure capex

Post IFRS Pre IFRS

7.3% 8.8% 10.2% 21.6% 17.5% 16.0% 2001 2002 2003 2004 2005 HY06 24

Capital expenditure

Capital Expenditure

• 4.7% capex / revenue broadly in

line with last year

• Full year capex expected to be

around 7% of revenue including 2% for infrastructure

• H2 2006 increases in capex to

be driven by infrastructure spending on Sydney and Auckland automated warehouses

$0m $20m $40m $60m $80m $100m $120m HY04 HY05 HY06 PPE Other (vehicles, computers etc) Cold drink equipment 5.0% 5.0% 4.8%

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Reduced capex outlook: Target range ~7% of revenue

Reduced capex forecast

– Expect ~7% of revenue over the next 3 years

Facilities at Eastern Creek to be leased

– Eastern Creek land sold in HY06

Key areas of capex spend

– Major infrastructure capex: $160 million or ~2% of revenue

• ver 3 years on automated warehousing – Sydney & Auckland –

and SPCA warehouse consolidation – Maintenance capex focus: 5-6% maintainable base capex level focused on:

• Cold drink equipment
• Incremental capacity expansion
• Computers, vehicles etc

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(27.1)

• (27.1)

Cash impact of significant items (29.4) 150.1 120.7 Operating cash flow 11.2 (25.0) (13.8) Other 29.9 64.7 94.6 Free cash flow (5.7) (93.6) (99.3) Capital expenditure 65.0 8.2 73.2 Sale of assets & other 22.3 (90.3) (68.0) Income tax paid (66.6) (53.2) 98.2 251.2 HY06 6.3 91.9 Depreciation & amortisation (5.9) (60.7) Net interest (20.0) (33.2) Change in working capital (16.2) 267.4 EBIT $ chg HY05

A$m

Free cash flow

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Key commodity inputs trading 30-90% above 10 year averages

800 850 900 950 1,000 1,050 1,100 1,150 1,200 1,250 1,300 2000 2001 2002 2003 2004 2005 2006 USD/MT PET - USD Last 10yrs Avg (1995-2005)

PET Resin - Far East USD/MT

6.00 8.00 10.00 12.00 14.00 16.00 18.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 USc/lb SUGAR - USD Last 10yrs Avg (1995-2005)

NY No.11 Raw Sugar Futures - Usc/lb

1,300 1,500 1,700 1,900 2,100 2,300 2,500 2,700 2000 2001 2002 2003 2004 2005 2006 2007 2008 USD/MT ALUMINIUM - USD Last 10yrs Avg (1995-2005)

Aluminium 3 month - USD/MT 28

Beverages

Commodity and currency exposure to sugar, aluminium and PET resin Commodities represent ~30% of COGS Commodity inputs all trading well above 10 year average prices H1 2006 – COGS per unit case increase of 11% comprising ~8% constant currency increase + ~3% currency translation impact H2 2006 – expect COGS per unit case to increases to be in similar to H1 2006

Food

Commodity and currency exposure to tin plate and plastic Commodities represent ~25% of COGS H2 2006 - expect COGS (on a comparative basis) to increase by ~[8]%

Impact of rising commodity prices on COGS

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2006 Half Year Results Presentation

Terry Davis, MD

10 August 2006

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• JV with SABMiller to sell and distribute imported premium beer in

Australia – Peroni Nastro Azzurro, Miller Genuine Draft and Pilsner Urquell

• Leverages CCA’s scale, customer relationships, sales force capability

and distribution reach with SABMiller’s world-class marketing and technical capabilities

• Premium beer market growing 15% per annum
• Expect only a marginal contribution to earnings in the first few years

as the JV reinvests behind the brands

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Current forecast is for NPAT range of $312-325 million (before significant items) for the 2006 full year

– Commodity input costs will remain a major issue for the balance of 2006 – Need to pass through higher costs through pricing and other revenue management initiatives

Key impact areas for H2:

– Indonesian economic recovery – Impact on trading in South Korea after the product recall – Extent to which we can fully recover the continuing high commodity costs through price realisation and revenue management

Further full year profit and trading update to be issued after the next 3 months trading in early November

2006 Full Year Outlook

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2006 Half Year Results Presentation

6 months to 30 June 2006

10 August 2006