2013 Full Year Result Terry Davis Group Managing Director John Murphy - - PDF document

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18 February 2014

2013 Full Year Result

Terry Davis Group Managing Director John Murphy Managing Director Australian Beverages Nessa O’Sullivan Group Chief Financial Officer

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2013 Result Overview

• Difficult trading conditions in the Australian grocery channel resulted in a

9.3% decline in Australian beverage earnings

• >10% volume growth in Indonesia. However, input cost inflation, currency

depreciation and continued economic challenges in PNG impacted segment earnings

• Strong return to growth in New Zealand with over 10% local currency EBIT

growth

• Strong cash flow generation and the continued strength of the balance sheet

and financial ratios supports the maintenance of full year ordinary dividends in line with last year. Total dividends, including the special dividend, declined by 1.7%

• Ongoing impact of the high Australian dollar on SPCA and the associated

impact on the business’ competitiveness against imported packaged fruit and vegetable products led to the $404 million write down of SPCA intangibles and other assets

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Australia

Lower than target price recovery due to difficult trading conditions in the Australian grocery channel led to a 9.3% decline in Australian beverage earnings

$Am

FY13 FY12 Change Trading revenue 2,947.2 3,027.9 (2.7%) Revenue per unit case $8.71 $8.67 0.5% Volume (million unit cases) 338.2 349.3 (3.2%) EBIT 566.0 624.0 (9.3%) EBIT margin 19.2% 20.6% (1.4) pts

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Non-Grocery business continues to grow volume and earnings driven by increases in shelf share and the continued growth of frozen beverages

Source: Internal Systems

2.3%

• 8.2%
• 10%
• 8%
• 6%
• 4%
• 2%

0% 2% 4%

Non-Grocery Grocery

Volume Growth vs LY (%)

Australian Beverages Volume Growth 2013

Driven by aggressive competitor pricing & reduction in level of warehouse inventories by retailers during the year

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Cold drink shelf share increased through ongoing investment in product, technology and equipment innovation

60.7% 62.0%

60.0% 60.5% 61.0% 61.5% 62.0% 62.5% 2012 2013 Shelf Share (%)

CCA Cold Drink Shelf Share

Source: Shelf Share for total IC (National and Operational accounts) based on our new Trax system. (2012 equivalent 65%)

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Using Business Intelligence capability to identify and target growth opportunities for our key account customers

Time of Day Sales

Outlet C Late night food Outlet B Lunch focus

Outlet A Early morning trade

Source: Internal Systems: BI

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Frozen category increased 5 fold since 2004 with ~159m serves sold during 2013 driven by continued innovation in flavour variants

~30m ~85m ~120m ~159m

20 40 60 80 100 120 140 160 180

2004 2008 2012 2013

Frozen Beverage Serves (millions)

Frozen Beverages Serves

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Grocery channel materially affected by aggressive competitor pricing and retailer de-stocking

Source: Internal Systems

2.3%

• 8.2%
• 10%
• 8%
• 6%
• 4%
• 2%

0% 2% 4%

Non-Grocery Grocery

Volume Growth vs LY (%)

Australian Beverages Volume Growth 2013

Driven by aggressive competitor pricing & reduction in level of warehouse inventories by retailers during the year

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Carbonated beverages in the grocery channel materially impacted by a 6 pt increase in the price gap to the major competitor

43% 49%

40% 41% 42% 43% 44% 45% 46% 47% 48% 49% 50%

Year 2012 Year 2013

TCCC Soft Drink Price Premium to Pepsi Schweppes

TCCC Soft Drinks Price Premium to Pepsi Schweppes in Grocery

Source: Aztec Grocery excludes 600ml

+6pts

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Mount Franklin Cold Drink Beverages Portion Control Packs

Non-CSD beverages grew volume by 10% in the grocery channel driven by Mount Franklin Water and continued momentum with convenience and portion control offerings

11 50m 85m 120m

0m 20m 40m 60m 80m 100m 120m 140m

2012 2013 2014 Target

Individula Mincans Sold (m)

Mini-Cans Sold

Continued shift to premium offerings. Mini-can volumes grew by ~70% in 2013 – targeting 120m cans in 2014

Source: Internal Systems

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Making diets cool

2014: Strong focus on building category trust and increasing focus on portion control and low calorie

Mini-sized refreshment Leading with the facts

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“Only Coke can do” bespoke customer programmes

2014: Focus on reconnecting with and recruiting consumers through novel product forms and sampling; working even more closely with customers on bespoke solutions

Recruiting via >1 million samples Recruiting via novel product forms and packages

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Revitalising old favourites

2014: Building our other power brands and power brands of the future

Capturing the adult soft drink opportunity Continuing to set the standard in premium water

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2014: Commencement of review of the cost of doing business

Logistics Savings

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Sales Force Productivity

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Project Phoenix

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Additional Project Zero Benefits

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Support Services Productivity

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Equipment Services Efficiencies

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Alcoholic Beverages: Successful re-building of a beer and cider capability

ST E P 1 / / Ac quir e d Pa r a dise Be ve ra g e s in F iji/ Pa c ific

Distributio n agre e me nts fo r

Corona Ca rlsbe rg a nd Molson Coors

in F iji and Pac ific / PNG

ST E P 2 / / Grow F iji Busine ss

Cre ate E xpo rt

• ppo rtunitie s

fro m F iji, le d by Rum and Be e r

ST E P 3 / / Se c ure L

• c a l

Produc tion Ca pa bility

ABC JV with Case lla

ST E P 4 / / Se c ure Inte rna tiona l par tne r s

I nte rnatio nal Be e r and Cide r partne rs fo r Australia Mo lso n Co o rs Bo sto n Be e r Re ko rde rlig

ST E P 5 / / Re - e ntry

Re c o mme nc e se lling Be e r and Cide r in Australia

17 De c e mbe r 2013

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The new beer and cider portfolio is well positioned in growth segments of the market

MAT to 1/12/13 18

More new brands to be introduced over the coming months

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Initial highlights of the return to the Australian beer and cider market

• Ranging achieved in over 2,500 outlets
• Re-order rates well ahead of target
• Consumer take-up of new products exceeding forecast with Coors sales

rate at same levels as other long established comparable beers in the market in one large customer chain

• The brewery is producing high quality product including Beam draught

products, Alehouse, ARVO, Blue Moon draught, Rekorderlig draught and Pressmans cider

• Targeting around 1% of incremental EBIT growth from alcoholic

beverages in 2014

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New Zealand & Fiji

In AUD, New Zealand & Fiji delivered 18.0% earnings growth driven by improved performances from both New Zealand and Fiji as well as a currency benefit on translation from the appreciation of the New Zealand dollar. Local currency regional EBIT increased by around 10%

$Am

FY13 FY12 Change Trading revenue 452.5 402.8 12.3% Revenue per unit case $7.36 $6.72 9.5% Volume (million unit cases) 61.5 59.9 2.7% EBIT 82.7 70.1 18.0% EBIT margin 18.3% 17.4% 0.9 pts

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New Zealand & Fiji New Zealand

• Solid recovery with a return to growth following a strong summer trading season
• Momentum improved throughout the year as a result of a number of successful new

product launches as well as benefitting from the improved economic conditions

• Highlights for the year included the relaunch of Lift Plus driving energy drink volume

growth of 11% and Keri Pulpy was successfully launched in February driving total Keri juice growth of over 11%

• The successful implementation of Project Zero initiatives continues to reduce the

cost base in New Zealand

Fiji

• Strong volume and earnings growth as it cycles the impact of major floods last year

and continues to benefit from the strong growth of Minute Maid Pulpy

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Indonesia & PNG

While strong volume momentum continued for the Indonesian business, rapid cost inflation, currency depreciation and continued economic challenges in PNG impacted segment earnings

$Am

FY13 FY12 Change Trading revenue 919.2 948.2 (3.1%) Revenue per unit case $5.14 $5.66 (9.2%) Volume (million unit cases) 178.7 167.4 6.8% EBIT 91.6 105.5 (13.2%) EBIT margin 10.0% 11.1% (1.1) pts

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Indonesia & PNG Indonesia

• Volumes grew by >10% with local currency EBIT growth of 5% driven by the

successful launch of a number of new products and the rapid growth of the water

• business. Significant wage and fuel inflation in the second half however limited local

currency earnings growth

• OWPs grew 20% with both the modern food store and general trade performing well

supported by the acceleration of cold drink cooler placements, improved in-market execution, new products and packs and a strong promotional programme

• Highlights include strong growth of single serve carbonated beverages in OWP,

OWP Frestea grew over 15%, successful launch of Minute Maid Aloe Vera and Minute Maid Nutriboost and water volumes growth of over 50%

PNG

• The PNG business experienced a significant decline in volumes and earnings due to

a slowdown in economic activity caused by falling commodity prices, reduced mining activity, increased competition and increased unemployment levels

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Alcohol, Food & Services

Alcohol, Food & Services earnings declined by 2.2% with the growth in earnings from alcoholic beverages more than offset by the decline in earnings from SPCA

$Am

FY13 FY12 Change Trading revenue 717.5 718.5 (0.1%) EBIT1 93.0 95.1 (2.2%)

1. before significant items

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Alcohol, Food & Services Alcohol

• Solid earnings growth from Beam driven by improved mix
• Launched Jim Beam and Canadian Club Draught products and Super Premium

products including Jim Beam Distillers Masterpiece and Jim Beam Signature Craft

• Canadian Club brand grew 24% making it the Number 4 ARTD in Australia
• Strong progress made on the revitalisation of Paradise Beverages in Fiji with capital

upgrades well advanced, a strong new product pipeline and the establishment of an export business for the beer and Fiji rum portfolio

SPC Ardmona

• Restructure of production operations continued with initiatives being undertaken to

materially reduce the cost of doing business

• High AUD as well as the high cost of operating in Australia continue to materially

impact SPCA's competitiveness against imported packaged fruit and vegetables

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Profit & Loss

• EBIT decline of 6.9%, before significant items, in line with guidance provided on 4 November

2013

• Net finance costs increased by around $11 million to $124.8 million with the lapping of a timing

benefit of $8 million in the prior year A$m

FY13 FY12 % chg

EBIT (before significant items) 833.3 894.7 (6.9%) Net finance costs (124.8) (114.1) (9.4%) Taxation expense

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(205.0) (224.1) (8.5%) Outside equity interests (Paradise Beverages) (0.7) (0.2) NPAT (before significant items) 502.8 556.3 (9.6%) Significant items – after tax (422.9) (98.5) NPAT (reported) 79.9 457.8 (82.5%)

1. before significant items

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Write down of SPC Ardmona assets

• $404.0 million write down to the carrying value of SPCA

– $277.0 million goodwill write-off – $39.7 million write down in brand names – $87.3 million charge covering write downs in inventory and property, plant & equipment and recognition

• f the diminution in value of some onerous contracts
• While CCA has undertaken a substantial restructuring of the SPCA business with initiatives

undertaken to materially reduce the cost of doing business, the write down of assets has been made having regard to the ongoing impact of the high Australian dollar and the associated impact

• n the business’ competitiveness against imported packaged fruit and vegetable products
• These SPCA write downs are largely non-cash in nature and have minimal impact on operations,

cash flow or the ability of CCA to pay dividends

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Capital Expenditure

2013 geographic spend – completion of investment in PET bottle self-manufacture lines in Australia and up-weight in Indonesia capex to support the rapid growth of this market

Key projects in 2013 – $392.5m Group capex Australia – 47% of Group capex

• 4 PET bottle self-manufacture lines
• 13,800 Cold drink coolers (30% of country spend)

Indonesia & PNG – 48% of Group capex Indonesia:

• Install and upgrade 8 production lines
• Commission Cibitung 32,000 sqm warehouse
• Commission Cikedokan, Jakarta beverage facility
• 60,000+ cold drink coolers

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Cash Flow

Free cash flow of $341.6 million, a $0.6 million increase on last year despite a reduction in earnings

A$m FY13 FY12 $ chg EBIT (post significant items) 367.9 760.2 (392.3) Depreciation & amortisation 251.5 233.4 18.1 Impairment of intangibles 316.7 48.0 268.7 Impairment of fixed assets 44.3 23.0 21.3 Other income – non-operational

• (53.2)

53.2 Operating EBITDA 980.4 1,011.4 (31.0) Change in working capital 30.3 14.0 16.3 Net interest paid (121.9) (104.0) (17.9) Taxation paid (168.5) (167.0) (1.5) Other 12.8 (12.5) 25.3 Operating cash flow 733.1 741.9 (8.8) Capital expenditure (392.5) (464.8) 72.3 Proceeds from sale of trademarks, PPE & other 5.5 64.2 (58.7) Additions of other non-current assets (4.5) (0.3) (4.2) Free cash flow 341.6 341.0 0.6

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Capital Employed

The decrease in capital employed was largely driven by the write down of the SPCA intangibles, inventories and other assets which more than offset the impact of up-weighted capital investment over the past 12 months

A$m

FY13 FY12 $ chg Working capital 812.4 842.7 (30.3) Property, plant & equipment 2,062.2 1,993.8 68.4 IBAs & intangible assets 1,264.8 1,533.9 (269.1) Deferred tax liabilities (173.1) (151.8) (21.3) Derivatives – non-debt (32.2) (63.9) 31.7 Other net assets / (liabilities) (435.0) (458.7) 23.7 Capital employed 3,499.1 3,696.0 (196.9)

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Net Debt & Interest Cover

EBIT interest cover* remains very strong at 6.7x

* before significant items

• Net debt increased by $126.8m to

$1.76bn

• Cash deposits increased to $1.4bn as a

result of favourable borrowing terms which have enabled the pre-funding of future debt maturities to Mar16. Funds raised have been placed on deposit and are earning interest income in excess of the related borrowing costs

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Priorities & Outlook for 2014

• Australia

– Still concern over the generally weak consumer confidence and spending environment and the continued softness of the carbonated beverage category in the grocery channel – While the major competitor has taken price increases outside of the grocery channel, their pricing in the grocery channel since January has declined. Easter trading will be the next critical pricing period – Given performance in 2013, the business shall undertake a comprehensive review of the

• perating cost structure to adapt to a more competitive landscape
• Indonesia

– Expects to again deliver volume growth of over 10% in 2014 – Expect high levels of cost inflation driven by increases in wages and fuel, as well as the impact on costs from the 20-25% depreciation of the Rupiah, to reduce the rate of 2014 local currency earnings growth

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Priorities & Outlook for 2014

• Alcoholic beverages

– Targeting around 1% in incremental earnings growth in 2014

• SPCA

– $100 million co-investment agreed between CCA ($78 million) and the Victorian Government ($22 million) to revitalise the SPC Ardmona business over the next 3 years – The investment will be primarily directed towards investment in productivity and to support innovation with modern production infrastructure including production lines for snack products and new packaging formats as well as the upgrade and replacement of existing equipment – CCA will continue to seek the removal of unfair structural barriers including measures to prevent the dumping of cheap imports, the levelling of the playing field with respect to tariffs

• n imports and the enforcement of standards and inspection measures to prevent imports

which may have unsafe levels of contaminants – Consumers responding and supporting SPCA with increases in scan sales post the government rejection of support

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Q&A

2013 Full Year Result

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Disclaimer

Coca-Cola Amatil Limited (“CCA”) advises that these presentation slides contain forward looking statements which may be subject to significant uncertainties outside of CCA’s and its related entities’ control. No representation is made as to the accuracy or reliability of forward looking statements or the assumptions on which they are based. Actual future events may vary from these forward looking statements and you are cautioned not to place undue reliance on any forward looking statement. CCA does not accept any liability to any person or entity for any loss or damage suffered as a result of reliance on this presentation. Unless otherwise indicated, all references to estimates, targets and forecasts and derivations of the same in this material are references to estimates, targets and forecasts by CCA. Management estimates, targets and forecasts are based on views held only at the date of this material, and actual events and results may be materially different from them. CCA does not undertake to review the material to reflect any future events or circumstances.