CCA’s Capital Management Framework John Wartig Chief Financial Officer 13 October 2005 1 October 2005 Agenda � Capital expenditure � Acquisitions � Interest cover & gearing � Cash flow � Dividend policy � Financial Scorecard � Commodities Outlook 2 October 2005 1
Capital Expenditure.. lower levels and a shift from building manufacturing capacity to a step up in cold drink equipment rollout 16.0% Manufacturing Cold Drink Capacity 14.0% Equipment Focus Focus 12.0% Infrastructure & Other 10.0% Capex / Sales Cold Drink Equipment 8.0% 6.0% 4.0% 2.0% 0.0% 1997 1998 1999 2000 2001 2002 2003 2004 2005F Average 1992-2000 14.5% • Excluding Returnable Containers 3 October 2005 Capex Outlook 2006-2008: Target range 6-9% of sales � Growth & efficiency focus: 2-3% infrastructure Growth & spend over 3 years Efficiency � Automated warehousing – Sydney & Auckland ($200-250m) 2 - 3% � Warehouse consolidation – SPCA (~$15m pa) � Some capacity investment eg: Sydney PET line Base Capex � Base capex focus: 4-6% maintainable base capex level � Maintain acceleration of cold drink equipment 4 - 6% placement 4 October 2005 2
Acquisitions.. ‘Bolt ons’ to continue in 2006-2008 � Strategy: develop sustainable geographic and core NARTD category positions � Size: “rule of thumb” 10% of capital employed (per acquisition) � Financials: EPS accretive and achieve country WACC in first full year.. (or a compelling strategic rationale for lower initial returns) � What to expect: $50-150m total investment pa � Overall: will be disciplined and focus on the highest return geographies and segments 5 October 2005 Balance Sheet Strength Provides Flexibility � Net debt to increase due to up-weighted capex and Net Debt & Interest Cover bolt on acquisitions AUD $m times � Long-term interest cover 5.0 target range of 3.0 – 4.0x 2,000 4.0 � Comfortable with current 1,500 4.3x interest cover given 3.0 low interest rate 1,000 2.0 environment � ROCE 500 1.0 � Maintain ~20% level over time - - 2001 2002 2003 2004 H1 05 � Expect some short-term dilution Net Debt Interest Cover 6 October 2005 3
Cash Flow – Cash is King � Expect continuing strong Operating Cash Flow operating cash flows with first half seasonally low $500 due to SPCA $400 � Free cash flow will be impacted by up-weighted $300 capex � Aim to maintain $200 beverages working capital at current 12% to sales $100 level $0 2001 2002 2003 2004 H1 2005 7 October 2005 Strong cash provides strong dividend yield momentum � 70-80% target payout Dividends per share range 29c � Current payout ratio = 72% � Aim to grow dividend at 16c least in line with NPAT 13c growth 14c 11c � Expect 100% franking for 7c at least the next 2 years 14c 13c � At ~4%, fully franked 10c 8c 7c dividend yield is strong 2001 2002 2003 2004 2005 8 October 2005 4
Financial Scorecard – Key Metrics 2006-2008 Performance H1 2005 Requirements EBIT margin – Beverages 15.4% Maintain - grow EBIT margin – Food 12.1% Maintain - grow Group EBIT growth 10.2% Internal targets Group EPS growth 11.9% Internal targets Returns ROCE 19.9% Maintain and grow over time Dividend payout ratio 71% Target band 70-80% Financial Health Interest cover 4.3x Range 3.0-4.0x Cash Flow Capex / sales 4.9% Range – 6-9% Working Capital / Sales – Beverages 12% Maintain Working Capital / Sales – Food (FY) ~ 60% Reduce 9 October 2005 Key Commodity Outlook 10 October 2005 5
Key commodity inputs keep rising… PET Resin USD/MT PET Resin - Far East 1,250 PET - USD 1,200 Last 5yrs Avg 1,150 1,100 1,050 1,000 950 900 850 800 2000 2001 2002 2003 2004 2005 11 October 2005 Key commodity inputs keep rising… Raw Sugar USc/lb 12.00 SUGAR - USD 11.00 Last 5yrs Avg 10.00 9.00 8.00 7.00 6.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 12 October 2005 6
Key commodity inputs keep rising… Aluminium USD/MT 2,000 ALUMINIUM - USD 1,900 Last 5yrs Avg 1,800 1,700 1,600 1,500 1,400 1,300 2000 2001 2002 2003 2004 2005 2006 2007 2008 13 October 2005 Key commodity inputs keep rising… Tin Plate USD/MT 1000 Tin Plate US$ 900 Last 5yrs Avg 800 700 600 500 400 2000 2001 2002 2003 2004 2005 14 October 2005 7
Key commodity inputs keep rising… Summary � Continuing short-term price volatility for aluminium, sugar and PET resin � Demand and supply fundamentals not alone in driving volatility, adverse impact of � Oil � China demand � Hurricanes � Speculation � Effectively fully priced and hedged for sugar and aluminium for the balance of 2005 � Partial cover in place for 2006 � Expecting COGS to increase around 5-7% in 2006 15 October 2005 8
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