2017 Earnings Presentation April 2018 This presentation has been - PowerPoint PPT Presentation

2017 Earnings Presentation April 2018

This presentation has been prepared by Beluga Group, Co. (the “Company“ , or about health related issues; “Beluga Group” ) and together with its subsidiaries. By attending the meeting where the • increased competitive product and pricing pressures and unanticipated actions by competitors that could impact the Company’s market share, increase expenses presentation is made, or by reading the presentation slides, you agree to the following limitations and notifications. This presentation is strictly confidential to the recipient, may and hinder growth potential; • not be distributed to the press or any other person, and may not be reproduced in any the ability to complete business combinations, partnerships, acquisitions or form, in whole or in part. Failure to comply with this restriction may constitute a violation disposals, existing or future, and to achieve integration, expected synergies and/or of applicable securities laws. This presentation does not constitute or form part of, and costs savings; • should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or levels of marketing, promotional and innovation expenditure by the Company and acquire shares of the Company or any of its subsidiaries in any jurisdiction or an its competitors; • the Company’s ability to protect its intellectual property rights; inducement to enter into investment activity in any jurisdiction. Neither this presentation • nor any part thereof, nor the fact of its distribution, shall form the basis of, or be relied on increasing recognition in Russia of product liability and personal injury torts; • in connection with, any contract or commitment or investment decision whatsoever. legal and regulatory developments and changes in the policies of the government of the Russian Federation, including regional authorities, including regulatory This presentation may contain statements that are, or may be deemed to be, developments or policy changes regarding consumption of or advertising for forward-looking statements within the meaning of the U.S. federal securities laws and spirits, or taxation; • are intended to be covered by the safe harbors created thereby. Examples of such changes in the cost of raw materials and labor costs; forward-looking statements include, but are not limited to statements of the Company’s • renewal of distribution rights and contracts on favorable terms when they expire; • predictions, forecasts, projections, strategies, plans, targets, objectives, expectations, technological developments that may affect the distribution of products; • estimates, intentions, beliefs or goals, including those related to acquisitions, sales, changes in financial and equity markets, including significant interest rate and foreign currency exchange rate fluctuations, which may affect the Company’s products or services, results of operations, financial condition, liquidity, prospects or access to or increase the cost of financing or which may affect the Company’s dividend policy; statements concerning future business or industry performance; other statements that do not relate strictly to historical or current facts; and assumptions financial results; • underlying such statements. changes in accounting standards, policies or practices; • availability of qualified personnel, including accounting personnel; and • ability to identify other risks relating to the Company’s business and manage the By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the forward-looking risks associated with the aforementioned factors. statements will not be achieved. Among other things, forward-looking statements are This list of important factors is not exhaustive. Readers should carefully based on numerous assumptions regarding the Company’s present and future business consider such factors and other uncertainties and events, especially in light of the strategies and the environment in which the Company will operate in the future. political, economic, social and legal environment in which the Company operates. Such forward-looking statements speak only as of the date on which they are made, Readers should be aware that several important factors could cause the and the Company does not undertake any obligation to update or revise any of them. Company’s assumptions to be incorrect, and could cause actual results to differ Readers should not place undue reliance on forward-looking statements. The materially from the predictions, forecasts, projections, strategies, plans, targets, Company does not make any representation, warranty or prediction that the results objectives, expectations, estimates, intentions, beliefs or goals expressed in such anticipated by such forward-looking statements will be achieved, and such forward- forward-looking statements. looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario. These factors include: • changes in political, social, legal or economic conditions in Russia generally, or in the regions of Russia in which the Company operates, including changes in levels of consumer spending and demand for some or all of its products; • changes in consumer preferences and tastes, demographic trends or perceptions 2

COMPANY’S 2017 FINANCIAL HIGHLIGHTS 4% total volume increase Sales grew 6% and reached 61 bln. Rubles Net Revenue increased by 4% to 37 bln. Rubles Operating profit increased by 15% to 2,9 bln. Rubles EBITDA grew 13% to 3,6 bln. Rubles EBITDA and Operating margins improved by 0,7 pp. 138% growth of Net Income to 655 mln. Rubles. Net margin improved by 1 pp. 3

COMPANY’S HIGHLIGHTS Leadership • #1 distilled spirits producer in Russia • #1 vodka producer in Russia • #1 independent importer in Russia • #1 flavored spirits producer including bitters, herbal liquors, flavored liquors • #3 brandy producer Market position • 12% legal vodka market share • 10% brandy market share • 20% flavored liquors market share Brands • Belenkaya is #1 vodka in Russia • BELUGA is dominant player in super-premium category • Myagkov is leading brand in low-premium category Distribution • #1 best in class distribution platform in Russia 4

CONSOLIDATED REVENUE Consolidated Revenue, million RUB Revenue breakdown by segments, million RUB (1) +4% 30 393 40 000 33 000 29 245 +4% 37 303 35 903 22 000 Alcohol (1) 11 000 20 000 0 2016 2017 +3% 8 000 6 779 6 609 6 000 Food (1) 4 000 0 2016 2017 2 000 0 2016 2017 Consolidated Revenue split, % Main driver for revenue increase was double digit (+35%) 2016 2017 growth of exclusive distribution and export (+25%) volumes. Food Food Important note: 18% Due to new Trade Law implementation in the beginning of 2017 18% the Company’s PnL structure changed. The Company provided reduced prices for retail chains and, accordingly, cut the trade- marketing expenses (previously, significant part of the trade- 82% 82% marketing costs was reimbursed via retro-discounts). Alcohol Alcohol Source: C ompany’s IFRS financial statements Note (1): Net of intersegment operations 5

CONSOLIDATED GROSS PROFIT Gross Profit breakdown by segments, million RUB (1) Consolidated Gross Profit, million RUB -7% 16 000 14 000 13 010 -6% 12 064 14 518 13 675 Alcohol (1) 12 000 7 000 8 000 0 2016 2017 +4% 1 545 1 600 1 485 4 000 Food (1) 800 0 2016 2017 0 2016 2017 Consolidated Gross Profit split, % The consolidated Gross Profit and the Alcohol segment Gross 2016 2017 Profit declined together with the Distribution Cost (decreased Food by 17%) due to changes in the PnL structure which were Food caused by implementation of the New Trade Law since 1 st of 12% 10% January 2017. The Company provided reduced prices for retail chains and simultaneously cut significantly the trade-marketing expenses. Changes in the PnL structure are neutral for bottom line profitability. 88% 90% Alcohol Alcohol Source: Company’s IFRS financial statements Note (1): Net of intersegment operations 6

CONSOLIDATED EBITDA AND NET PROFIT EBITDA, million RUB G&A and distribution expenses , million RUB G&A Distribution expenses 4 000 12 000 3 625 +13% 3 218 8 000 -17% 9 346 7 719 2 000 10.2% 9.7% 4 000 +19% 2951 2478 0 0 2016 2017 2016 2017 Main reasons of 19% year-on-year increase in G&A: 4% volume growth; Operating profit and Net Income, million RUB growth of rent expenses; 3 000 2 848 increase in expenses on staff education. +15% 2 486 17% year-on year decrease in distribution expenses due to the changes in PnL structure which were caused by new Trade Law implementation in the beginning of the year. According to the 2 000 Law the only 5% discount is allowed and no trade-marketing activity at a producer cost. EBITDA grew by 13% mostly due to volume growth and 1 000 655 proactive pricing policy. +138% 275 Net income grew by 138% due to EBITDA growth and decline in financial expenses. 0 2016 2017 Source: Company’s IFRS financial statements 7