PUBLIC
INVESTOR PRESENTATION
July 2018
INVESTOR PRESENTATION July 2018 PUBLIC Forward-Looking Statements - - PowerPoint PPT Presentation
INVESTOR PRESENTATION July 2018 PUBLIC Forward-Looking Statements This presentation includes forward-looking statements including, but not limited to, statements regarding Coca-Cola eceks (CCI) plans, objectives, expectations and
PUBLIC
July 2018
PUBLIC
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.
2
PUBLIC
Overview of CCI Opportunities Strategy Region Highlights Financial Highlights
4 11 17 25 29
PUBLIC
✓ Proven track record of expansion & growth ✓ Robust performance across all key markets with solid topline growth ✓ Abundant potential in demographics ✓ Compelling NARTD* growth opportunity in our footprint ✓ Strategy, Execution and People to accelerate quality growth ✓ Disciplined financial management to deliver stakeholder value
4
*Non-alcohol ready-to-drink
Overview of CCI
PUBLIC
Figures reflect FY 2017 numbers (1) As of 2018 (2) Unit case, 1 UC equals 5,678 liters (3) Sparkling market share
50% 25% 9% 9% 7% Turkey Pakistan Kazakhstan Iraq Others
Volume Breakdown
Market position (3)
#1 #2 #1 #2
Overview
KAZAKHSTAN KYRGYZSTAN TAJIKISTAN TURKMENISTAN AZERBAIJAN TURKEY IRAQ JORDAN SYRIA PAKISTAN
5 Overview of CCI
PUBLIC
EBITDA
CAGR 2005-2017 Single country in 2005… Expanding into Central Asia and North Iraq in 2006-2007… JV in Pakistan in 2008... A regional bottler today…
318 mn UC 1,237 mn UC
REVENUE
CAGR 2005-2017
VOLUME
CAGR 2005-2017
7x 4x 7x
South Iraq in 2012… 6 Overview of CCI
PUBLIC
9.1% 15.5% 33.9% 10.3% 16.2% 34.0% EBIT EBITDA GROSS PROFIT
FY16 FY17
GROWTH YOY MARGINS
3.2% 4.9% 3.9% 4.1% 20.9% 26.2% VOLUME NET REVENUE EBITDA
FY16 FY17
growing bottler in the Coca-Cola System*
*Across top the Coca-Cola System Bottlers
million TL
Record high
FCF
Overview of CCI 7
PUBLIC
4.5% 12.4% 30.9% 7.9% 15.1% 32.9% EBIT EBITDA GROSS PROFIT
1Q17 1Q18
12.4% 19.9% 45.7% VOLUME NET REVENUE EBITDA
Q118 GROWTH YOY MARGINS
Overview of CCI 8
PUBLIC
VOLUME GROWTH, YOY
FY17
1Q18
TURKEY CENTRAL ASIA MIDDLE EAST & PAKISTAN
Volume contribution of regions, 2017
13 % 37 % 50 %
Overview of CCI 9
PUBLIC
VOLUME GROWTH, YOY
FY17
1Q18
SPARKLING NRTD TEA STILLS
Volume contribution of categories, 2017
WATER
9 % 6 % 71 % 14 %
Overview of CCI 10
PUBLIC
Source: UN | 2017-2020
NARTD servings
urban % 2017
below age 30
Opportunities 11
PUBLIC 1,415 1,335 1,172 1,082 1,027 881 762 686 686 681 624 621 546 510 476 468 452 436 416 404 326 320 212 204 195 194 139 76 50
CCI weighted average: 273
* NARTD includes sparkling soft drinks, ready-to-drink tea, energy drinks, juices, packaged water * NARTD per cap per year in terms of number of 8 ounce servings, data as of 2017
NARTD per cap*
CCI’s share 12 Opportunities
PUBLIC
CCI Value Share Opportunity
8% CAGR
2017- 2020E
8% 9% 51% 28%
WATER STILLS SPARKLING NARTD
INDUSTRY VALUE GROWTH
Source: Nielsen, Canadean and internal estimates, data as of 2017
TOTAL NARTD INDUSTRY IN CCI COUNTRIES: $12BN (2017)
Opportunities 13
PUBLIC
Outlet Penetration*
800K OUTLETS
*Number of outlets where we are available divided by total outlets in our 10 countries ** Source: Ipsos as of 2018 YTD, B3/BGS as of 2017 data for Turkey
COOLERS
73% 73%
COVERAGE
HOUSEHOLD PENETRATION
~50 ~50%
OCCASIONAL USERS
GENERATING
18 18% % OF
VOLUME**
Monthly**
Opportunities 14
PUBLIC
58% 50% 40% 35% 28% 25%
Asia Pacific North America World Average Europe, Middle East and Africa Latin America CCI
Share of Immediate Consumption (IC) Packages in Sparkling
You
lation in in CCI I countries
Teen Recruitment Opportunit ity!
* Based on CCI analysis for Turkey operations
NSR per case
~1.5x
higher Gross Margin vs. FC
Opportunities 15
PUBLIC
Sparkling 71% Sparkling 85%
Water 14% NRTD Tea 9% Still 6% Other 15%
2006
2017
Brands Flavors 33 154 17 44 2006 2017
Opportunities
26% 23% 8% 6% 3% 2% 1% 1% 1% 1% 1% 0.2%
North America Europe Latin America Turkey Azerbaijan Jordan Iraq Tajikistan Kyrgyzstan Turkmenistan Kazakhstan Pakistan
SHARE OF LOW/NO CALORIE IN SPARKLING VOLUME (2017) CATEGORY BREAKDOWN Increasing Household Penetration Double-digit growth in No Sugar
&
16
PUBLIC
Customer & Consumer
Being the preferred partner of our customers, offering our consumers a wide choice of products fit for every lifestyle and
Community
Being a good corporate citizen
People
Great place to work
CREATE VALUE
Be the Best FMCG Company Across
Strategy 17
PUBLIC
Accelerate Growth Win at the Point of Sale Exercise Financial Discipline Win with People
Management (RGM)
improvements
“OnePeople”
ONE C E CCI CI
Strategy 18
PUBLIC
Towards Vision 2025 Business Excellence
Fix Foundation for Real Value Creation Build New (CCI 3.0) Operating Model
Strategy 19
PUBLIC
ORGANIC GROWTH INORGANIC GROWTH DELEVERAGING SHAREHOLDER RETURN
CapEx/Sales ~7% - 8%*
Bolt-on acquisitions Geographical expansion
Optimum debt repayment
metrics Sustainable dividend policy
Optimum CapEx Allocation Debt Repayment Dividends Selective M&A Strategy
Strategy 20
PUBLIC
Grow Value Grow Scale Build Future
CCI NARTD per cap (L)
BUBBLE SIZE: EBIT
NARTD Value Leadership ratio vs nearest competitor
Grow Value
Grow Scale
Grow Leadership
Build Future
Grow Leadership
Strategy
ME & PK Central Asia Turkey
20 40 60 80 100 120 140 160 180 0.5 1 1.5 2 2.5 3 3.5 4 21
PUBLIC
Strategy
Turkey 50% Pakistan 25% Kazakhstan 9% Iraq 9% Others 7% Turkey 81% International 19% 2006
2017
Volume Breakdown Guiding principles for geographical expansion
22
PUBLIC
2017 2018 Guidance
Volume growth (total) 4.1% 4% - 6% Turkey 3.3% 2% - 4% International 4.9% 8% - 10% Net Revenue growth (FX neutral) 9.8% 10% - 12% Turkey 11.7% 8% - 10% International (FX neutral) 7.8% 12% - 14% EBITDA Margin 16.2% Slight improvement Turkey 17.6% Flat International 18.9% Slight improvement Capex / Sales 5.9% 7%-8%* Net Debt / EBITDA 1.5x < 1.5x**
*Comparable ** Organic and FX-neutral
23
PUBLIC
*Comparable ** Organic and FX-neutral
2017 Medium-Term 2018-2020 Volume growth 4.1% 4% - 6% (CAGR) Net Revenue growth (FX neutral) 9.8% 10% - 12% (CAGR) EBITDA Margin 16.2% Slight improvement Capex / Sales 5.9% 7% - 8%* Net Debt / EBITDA 1.5x < 1.5x**
24
PUBLIC
PUBLIC
14% 20% 24% 44% 53%
Volume Transactions Net Revenue EBITDA EBIT
30%
growth in Sparkling IC packages
✓ Accelerating volume growth led by Sparkling ✓ ~3 pp y-o-y increase in share of IC packs in Sparkling ✓ Successful launch of ‘Coca-Cola No Sugar’ and ‘Fanta C’ ✓ Growth in Stills driven by 58% growth in Ice Tea
51%
growth in Low/No Calorie
13%
growth in Fanta
✓ Smart pricing ✓ Promotion
Delivering on our strategic growth algorithm
1Q18 GROWTH YOY
26 Region Highlights
PUBLIC
7.1% 9.2% 2.8%
Pakistan Iraq Jordan
Region Highlights
discount management
plant in Pakistan
UNIT CASE VOLUME GROWTH 1Q18 YOY
9.4% y-o-y growth in 1Q17 3.1% y-o-y growth in 1Q17 7.6% y-o-y growth in 1Q17 27
GLOBAL BRAND LOVE SCORE
GLOBAL TEEN RECRUITMENT 1
Pakistan
Region Highlights
Focus on profitable volume growth
PUBLIC
23.3% 42.4%
Kazakhstan Azerbaijan Others
Region Highlights
Sparkling category
volume
currency convertibility issue in Turkmenistan
Kyrgyzstan and Tajikistan 11.5% y-o-y growth in 1Q17 37.0% y-o-y growth in 1Q17 13.0% y-o-y decline in 1Q17
Double-digit growth in key markets
UNIT CASE VOLUME GROWTH 1Q18 YOY
Region Highlights 28
PUBLIC
PUBLIC
Net Sales Revenue 7,050 8,521 20.9% 1,556 1,866 19.9% Gross Profit 2,392 2,901 21.3% 481 614 27.5% EBIT 641 874 36.4% 69 148 114.0% EBITDA 1,093 1,379 26.2% 194 282 45.7% Net Income / (Loss) (28) 238 n.m. (86) (46) 46.5% GP Margin 33.9% 34.0% 10 bps 30.9% 32.9% 200 bps EBIT Margin 9.1% 10.3% 120 bps 4.5% 7.9% 350 bps EBITDA Margin 15.5% 16.2% 70 bps 12.4% 15.1% 270 bps EPS* (0.11) 0.93 n.m. (0.34) (0.18) 46.5%
Financial Highlights
*EPS in TL per 100 shares
EBITDA Net Revenue Volume growth 1Q17 1Q18 YoY Change
TL Million
2016 2017 YoY Change
30
PUBLIC
EBITDA MARGIN 1Q18 VS. 1Q17
12.4% 15.1% 3.5% 4.0% (4.9%)
1Q17 Volume Leverage Revenue Leverage FX & input costs 1Q18 Financial Highlights 31
15.5% 16.2% 1.4% 3.7% (4.4%)
FY16 Volume Leverage Revenue Leverage FX & input costs FY17
EBITDA MARGIN FY17 VS. FY16
PUBLIC
Sugar Prices* Resin Prices** Aluminium Prices**
2015 2016 2017 2015 2016 2017 2015 2016 2017 *Sugar price in Turkey, TL/tonne **World reference prices, USD/tonne
~ 30% Packaging ~ 30% Sugar & Sweetener ~ 30% Concentrate
Raw material 85% Other 15%
manage raw material related FX exposure
Financial Highlights 32
Breakdown of COGS
PUBLIC
(86) (46) 88 (4) (40) (13) (4) (0.5) 13
1Q17 ∆ in EBITDA ∆ in D&A* ∆ in FX gain/ (loss) ∆ in
financial inc./ (exp.) ∆ in
inc./ (exp.) ∆ in minority ∆ in tax 1Q18
TL million
Financial Highlights 33
NET INCOME 1Q18 VS. 1Q17 NET INCOME FY17 VS. FY16
238 286 (73) 43 8 86 7 (91)
FY16 ∆ in EBITDA ∆ in D&A* ∆ in FX gain/ (loss) ∆ in
financial inc./ (exp.) ∆ in
inc./ (exp.) ∆ in minority ∆ in tax FY17 impairment TL 54m in FY16
*Depreciation & amortization
TL million
PUBLIC
6% 6% 10%
EBITDA Growth
Prudent CapEx Working Capital Efficiency
(TL mn) 2015 2016 2017
EBIT EBITDA 1,051 051 1,093 093 1,379 379 Ca Cap/Ex p/Ex 829 829 517 517 499 499 Chang Change in N e in NWC 13 13 201 201 3
46 642 729
2015 2016 2017 2018E
Free Cash Flow (TL mn)
Financial Highlights 34
PUBLIC
34% 31% 5% 12% 18%
Production Capacity Cold Drink Equipment IT Bottles & Cases Other 12.3% 7.3% 5.9%
2015 2016 2017
8.5%
average
*Net Sales Revenue ** Annualized
Financial Highlights 35
1.6% 2.0%
1Q17 1Q18
CapEx / NSR* CapEx Breakdown (2017)
FULL YEAR QUARTER**
PUBLIC
4%
2017 15 Days Cash Conversion Cycle 2016 26 Days 2015 39 Days
33 Days 30 Days 29 Days 2015 2016 2017 55 Days 47 Days 43 Days 49 Days 51 Days 57 Days
DSO DSI DPO
*Net Sales Revenue
Net Working Capital/NSR*
10.4% 7.4% 5.7% 2015 2016 2017 8.9% 5.6% 1Q17 1Q18 FULL YEAR QUARTER**
Financial Highlights
**Annualized
36
PUBLIC
Concentrate Sugar & Sweetener Strong Balance Sheet Capacity for Bolt-on Acquisitions Improving Leverage Metrics Net Debt (USD mn) Net Debt/ EBITDA Net Interest Coverage Concentrate Sugar & Sweetener 2.3 2.1 1.5
2015 2016 2017 2018E
Covenant < 3.25x
816 652 555
2015 2016 2017 2018E
5.7 6.6 9.7 2015 2016 2017 2018E
Covenant > 4x
USD 150 million hedged in 1Q18
691 576
1Q17 1Q18
2.22 1.55
1Q17 1Q18
6.7 9.3 1Q17 1Q18
Financial Highlights 37
PUBLIC
USD 63% EUR 20% Local Currency 3% Local Currency (Hedged portion
14%
@3,80 If USD/TRY... @8,50 ...is below 3,80; CCI buys $150mn @ spot price ...is between 3,80 & 8,50 CCI buys $150mn @ 3,80 ...exceeds 8,50 CCI buys $150mn @ spot-4,70 (8,50-3,80)
Breakdown of Financial Debt (1Q18) Hedging Transaction for USD 150 mn
Financial Highlights 38
PUBLIC
ROIC ROE ROA
ROIC
10.2% 9.1% 12.0% 2015 2016 2017 2018E 3.5%
8.3% 2015 2016 2017 2018E 1.5%
2.2% 2015 2016 2017 2018E
ROIC
Significant increase in 2017 Sole metric in management long term incentive plan Continuous improvement going forward
Driving long term stakeholder value
Financial Highlights 39
PUBLIC
Dividend per Share (TL per 100 shares)
years
0.12 0.20 0.79
2015 2016 2017
* Based on market capitalization as of 18th May
Dividend Yield: 0.3% Dividend Yield: 0.5% Dividend Yield: 2.1%
Financial Highlights 40
PUBLIC
PUBLIC
Coke 38% Impacted Categories* 26% Water, NRTD Tea & other 36%
2018 OUTLOOK
New 10% SCT effective January 1, 2018 Existing 25% SCT for many years
*Flavored & plain sparkling, nectars, juice drinks and other flavored soft drinks (lemonade, energy drinks, iced tea and sports drinks).
Volume Revenue EBITDA Margin
42
TURKEY VOLUME BREAKDOWN OUR ACTION PLAN TO MITIGATE TAX IMPACT
PUBLIC
Turkey 26,500 81 50% 57 64% 50% Pakistan 5,400 208 64% 26 37% 25% Kazakhstan 26,100 18 51% 71 49% 9% Iraq 17,000 38 68% 47
Azerbaijan 17,400 10 49% 26 75% 3% Jordan 12,500 10 64% 49
Turkmenistan 18,700 6 58% 51 61% 1% Kyrgyzstan 3,700 6 59% 35 68% 1% Tajikistan 3,100 9 65% 16
Syria n.a. 18 65% n.a.
% of pop. below 30 years (5) Per cap consumption
CCI’s market share in sparkling (4) Share in CCI’s Volume Country GDP per cap. (USD)
(1) UN 2017 Estimates except for Pakistan which is based on local census (2) CIA World Factbook Estimates (3) CCI & TCCC Estimates (4) Nielsen & Ipsos (5) UN 2015 Data 43
PUBLIC
#1 position in Sparkling; 63% #1 position in Juice; 25% #3 position in Water; 4% #3 position in Ice tea; 19% #2 position in Sparkling; 37% #3 position in Water; 5% #1 position in Sparkling; 49% #3 position in Juice; 13% #4 position in Water; 11% #2 position in Ice tea; 30% #2 position in Sparkling; 42% #8 position in Juice; 1%
Source: Nielsen, Canadean
Kaza azakh khstan stan Iraq Iraq Pak Pakis istan tan Turk Turkey ey
44
PUBLIC
TR, KZ, PK, IQ 150,000 Youth
880 volunteers, 100,000 beneficiaries
24 plans, 750,000 beneficiaries
BIST 50 Sustainability Index
Included in Leading Sustainability Indices
45
PUBLIC
CCI Investor Relations Tel : +90 216 528 4000 Fax: +90 216 510 7010 CCI-IR@cci.com.tr www.cci.com.tr
Borsa Istanbul: CCOLA.IS - Bloomberg: CCOLA TI - Reuters: CCOLA.IS ADR-OTC: COLAY