heineken n.v. full year results 2005 presentation

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Heineken N.V. Full Year Results 2005 Presentation

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8/6/2019 Heineken N.v. Full Year Results 2005 Presentation

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Heineken N.V.

Full Year Results 2005Presentation

8/6/2019 Heineken N.v. Full Year Results 2005 Presentation

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FullFull Year Results 200 Year Results 20055Press/Analyst PresentationPress/Analyst Presentation

22 February 2006

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Jean-François van Boxmeer, Chairman Executive Board Jean-François van Boxmeer, Chairman Executive Board 

Full Year Results 2005Full Year Results 2005

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4

Highlights

Or ganic growth in all key business metr ics in 2005:

 ± Net profit +7.3%, at the top end of our 2005FY profit outlook

 ± Revenues +2.2%, driven by price, mix and volume improvements

  ± EBIT +2.9%, driven by top-line growth and costs reductions

 ± Strong free cash flow generation, cash conversion 120%

New management structure in place as per 1 October 2005

Focus 2006:

Heineken® to further strengthen its position in the premium segment

Leverage aggressively our innovations

US A: launch Premium Light®, grow core Heineken®

Russia: Strong market position achieved, accelerating integration

Targeting ¼200m cost reduction by 2008

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Consistent growth in the world¶s most prof itable segment

19.2

17.4

16.715.614.3

13.412.5

11.710.9

9.8

20.1

18.5

0

5

10

15

20

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

20 million hl

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6

Our core strategic asset: the Heineken ® 

brand

2005 was an excellent year for Heineken ® 

Exceeded 20 million hectolitres in the premium segment for the first time

Premium volume +4.5% in 2005 versus +4.1% in 2004 

Good growth in all regions

Strengthened position in highly profitable West European region

+ 2. %

+ .5%

+ .2%

stable

+ .2% + .2%

0

2

5

West Euro e Central Euro e USA est of A er  icas Afr  ica Asia Pacif ic

200

2005

Hl mn + .5%

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7

0.0 5.0 10.0 15.0 20.0

Beck's

Brahma

Tubor g

Foster's

tella rtois

mstel

Budweiser 

Corona

Carlsber g

Heineken

Heineken is clear leader in the most prof itable market segment

Based on sales volume sold outside the home market ± 2004 FY

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8

Heineken ® 

Volumes, Revenues

Volumes Revenues

Heineken ®  Other brands

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Source: Plato, > 20% participations * pro-forma, on a full year basis

Our leading market positions and local brands (domestic sales)

Number 1 or 2

Number 3

France #2

6.2m hlPelforth

Desperados

 Austria #1

4.6m hl

Gösser, Edelweiss

Puntigamer, Zipfer 

Russia #3

12m hl*Ochota, Botcharev

PIT, Stepan Razin

Netherlands #1

5.8m hl Amstel, Heineken,

Brand

Nigeria #16.2m hl

Star, Gulder 

Poland #2

10.1m hlZywiec, Krowelski,

Warka, Specjal

Spain #1

10.8m hlCruzcampo,

 Amstel, Buckler 

Italy #1

5.6m hlBirra Moretti, Dreher,

Ichnusa

Indonesia #1

1.3m hl

Bir Bintang

Chile #1

4.2m hl

Cristal, Escudo

Greece #1

3.1m hl

 Amstel, Alfa

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10

Brand portfolios

Create strong #1 or #2 market positions

latform for the Heineken ® brand growth

Local brand portfolio should be prof itable on its own

ortfolio reviews in key uropean and marketscompleted, resulting in:

 ± On average by 12 of marketing reallocated fromnon-strategic to winning brands

 ± verage K reductions by 20 (only affecting

4 of volume), increasing eff iciency in productionand marketing

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Leveraging aggressively our leadership in innovation

³David´ Draught installations: 50,000 installationsworld-wide in 63 markets (15,000 in 2005)

BeerTender: 164,000 units and over 3 million 4-litrekegs sold in 2005, roll-out in 3 new markets in 2006

DraughtKeg: 2,200,000 units sold, accelerated roll-out to more than 30 markets, invest in capacity tomeet demand

Develop the non-alcohol and low-alcohol segment

in urope: Buckler 0/0, handy assion,Desperados Mas

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Heineken Volumes 2005

On-trade Off-trade

ales-0.3

Depletions1.2

hipmentsstable

Independentdistr ibutors

Heineken BreweryNetherlands

Heinekenarehouses

Beer market ±0.2 *

Depletions of Heineken 1.2

 ± Heineken ®  1.9

 ± mstel Light ® - 3.1

Heineken ® had a better H2 2005

mstel Light ® recover ing in Q4 2005

F M Mexican brands performed strongly at

2.2m hl ( 7.4 ). Including Femsa, Heineken isnow the 4th lar gest beer supplier in

Heineken remium Light ®  successfully testmarketed

*Source Beverage Marketing

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National roll-out of Heineken remium Light ® 

Light beer 50 of beer  consumption

Heineken remium Light in test markets has proven

its strong potential

Favourable results of test markets dr iven by coreHeineken ® brand strong reputation and perfect tasteprof ile of Heineken remium Light  ® 

National rollout from Mar ch 2006 onwards

xpected volume in 2006: 400,000 hlubstantial incremental marketing budget (¼42m)

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Russia

 ¼1.2b invested to date

Heineken¶s biggest market by volume: 12m hl

36 brands

Clear number 3 player, with a market share of 14

9 time zones

10 brewer ies

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Russia: r ior ities

Building winning brand portfolio

 ± r ior itise brands

 ± New licensed brands (Guinness, Zlaty Bazant,Gösser, mstel, Bitbur ger)

Reinfor ce distr ibution network combining:

 ± ropr ietary

 ± Independent

Integrate or ganisation

Optimise allocation of production and packaging

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RussiaCommer cial

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Strong track record in cost control

successful and consistent track record in controlling costs

Supply chain savings absorbed inflation: production costs ¼32/hl in 2005 compared with ¼36/hl in 1993

32 brewer ies closed or divested since 1993, of which 25 inurope

Reduced water consumption per hectolitre of beer over thelast 5 years by 14 to 5.3 hl

Reduced ener gy per hectolitre of beer by 10 to 113 Mj

T M* in 65 of 108 brewer ies in 2005, 80 in 2006

*TPM = Total Productive Management program, aiming at minimising cost of production

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Lower ing the cost base by ¼200 million

Tar get to reduce f ixed cost (excluding marketing) by ¼200min absolute terms in 2008 compared to 2005 of which ¼65mfrom existing programmes:

 ± In all regions and at Head Off ice

 ± In the supply chain, the commer cial or ganisation(incl. wholesale) and support functions

 ± Global benchmarking study in the support functionsis currently being conducted

 ± Better procurement and slashing general costs

 ± Level of FT reduction and restructur ing costs notyet known

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Prof it outlook for 2006*

Heineken does not expect or ganic growth in Net Prof it for 2006 to exceed mid-singledigits:

 ± Heineken ®  brand growth and implementation of the outcome of brand

portfolio and innovations will dr ive volume and mix improvements

 ±  ¼200m cost reductions tar geted by 2008, main effects in 2007/08

 ± Higher oil pr ice will affect cost of ener  gy, transportation and packaging

mater ials, only part of which can be passed on to the consumer 

 ± The introduction of  Heineken Premium Light ®  in SA will have in 2006 anegative impact on BIT of ¼25m

 ± Integration costs and the implementation of the brand portfolio strategy willput temporary pressure on results in Russia

* The full text of the full-year profit outlook for 2006 can be found in Heineken 2005 results press release

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R ené Hooft Graafland, Member of the Executive Board and CFO R ené Hooft Graafland, Member of the Executive Board and CFO 

Financial Review 2005Financial Review 2005

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Key f igures 2005 (million of hl/¼ million)

* Includes exceptional items before tax in 2005: -¼102m ( in 2004 there was no exception item at BIT level)and amortisation of brands (in 2005: ¼7m, in 2004: ¼8m).

** Includes exceptional items after tax in 2005: -¼72m ( in 2004: ¼153m) and amortisation of brands (in 2005: ¼7m, in 2004: ¼8m).

BIT*

Net Prof it beia

BIT beia

Net Prof it**

1,283

319

1,392

1,369

334

1,377

-6.3

4.6

1.1

840 803

18.5761 642

Increase2005 2004 Or ganic growth

2.9

7.3

Revenues 10,796 10,062 7.3 2.2

Group beer volume 118.6 112.6 5.3 1.8

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Revenues (¼ million)

10,796

10,062

4.5

consolidation

2.0Pr ice/mix

0. 2volumes

9000

9400

9800

10200

10600

11000

2004 FY 2005 FY

0.6currencies

2.2Or ganic growth

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1,3921,377

-3.5%

currencies

1.7%

consolidation

2.9% organic

growth

900

1000

1100

1200

1300

1400

1500

EBIT (beia) (¼ million)

2004 FY 2005 FY

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Increased market investments in 2005

Incremental investments in marketing and innovation, in-linewith the ¼100m as announced in February 2005

Marketing and selling costs up 60 basis points to 12.5 of  Revenues

Packaging costs increased by 4.1 due to higher volumesand changes in packaging mix, of which  ¼30m is related tonew marketing and innovation programmes

Depreciation increased by 6.5 , of which +1.8 or  ganically,

partly as a result of   investments in new draught beer  installations, coolers and f illing lines for DraughtKegs andBeerTender kegs

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25

803840

0.7

consolidation

-3.4

currencies7.3

or ganic growth

600650

700

750

800

850

900

NetP

rof it (beia) (¼ million)

2004 FY 2005 FY

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26

Strong Free

Cash Flow Generation

103 97

120

0

200

400

600

800

1000

1200

2003 2004 2005

0

20

40

60

80

100

120

140

Free perating Cash Flow

et pro it beia be ore min nterests

Cash con ersion rate

Excellent cash con ersion rate and good C management

2003 data are Dutch Gaap

22 8

16 8

11 6

0

5

10

15

20

25

2003 2004 2005

NWC Days ¼ million

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Western Europe

Underlying EBIT (beia) of the operating companies improved

Heineken® in premium segment: +3.5%

Spain: Strong market: all brands up, Heineken® +7%

France:Heineken® +5%, gaining share in the premium segment

 ¼50m cost reduction programme Western Europe: ¼24m savingsachieved in 2005

Cost saving programme in the Netherlands completed: costs

reduced by ¼35m

Head count reduced by more than 1,000 FTEs

Volumes

EBIT (beia)

41

005 004 change

Beer volumes (m hl) 3 . 3 .5 -0.9

Revenues (¼m) 4, 13 4,660 1.1

EBIT (beia) (¼m) 560 565 -0.9

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Central and Eastern Europe

Central Europe shows robust growth

EBIT (beia) increased due to:

 ± Mix improvement resulting from brand portfolio reviews

 ± Significant cost savings, mainly in purchasing

Synergy realisation at BB AG on track: ¼55m of ¼80m realised

Heineken® in premium segment +6.2%

Poland: Higher EBIT driven by better price/sale mix and tight costcontrol

Romania and Hungary: Good progress in turn-around, profits up

Volumes

EBIT (beia)

22

2005 2004 change

Beer volumes (m hl) 45.5 42.6 6.

Revenues (¼m) 2,796 2,526 10.7

EBIT (beia) (¼m) 05 264 15.5

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29

TheA

mer icas

Heineken® in premium segment +1.5%

EBIT lower mainly due to forex impact (-¼67m)

US A:

 ± Depletions up 1.2%, below growth rate of import segment

 ±New management Heineken U

S A in place

 ± Clear labels and new advertising introduced

 ± Performance improved in H2 2005

Chile and Argentina: Volumes +8%, EBIT substantially up,

Heineken® grew by 22%

Volumes

13

EBIT (beia)

18

2005 2004 change

Beer volumes (m hl) 15.1 14.5 3.9

Revenues (¼m) 1,733 1,516 14.3

EBIT (beia) (¼m) 256 291 -12.0

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Afr ica and Middle East

EBIT improved slightly as good performance in Nigeria was offset

by cost pressure in Egypt

Heineken® in premium segment +8.2%

Nigeria: EBIT up significantly:

 ± Portfolio review and strong pricing

 ± Efficiency improvements flowing through

Egypt:

 ± Positive volume development, but increase in costs

Cost reductions in Middle East is priority for 2006

Volumes

13

EBIT (beia)

1

2005 200 change

Beer volumes (m hl) 15.0 13.5 11.5

Revenues (¼m) 1,052 889 18.3

EBIT (beia) (¼m) 198 187 5.9

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Asia

Pacif ic

Heineken® premium brand: +12.3%

EBIT slightly up despite additional marketing investments

China:

 ± Robust volume growth in Shanghai and Hainan

 ± Price pressure continues

Rest of Asia:

 ± Profits up in all markets

 ± Strong Heineken® growth in Vietnam (+20%), Taiwan(+20%)

Investments in breweries in Mongolia and Sri Lanka

Volumes

9

EBIT (beia)

5

2005 2004 change

Beer volumes (m hl) 10.8 9.5 13.4

Revenues (¼m) 502 471 6.6

EBIT (beia) (¼m) 73 70 4.3

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Organic net profit growth in 2005 at the top end of outlook

statement

The Heineken® brand exceeds 20m hl mark

Strong cash flow generation

Western Europe: best performing international brewer 

Central Europe solid growth

Focus 2006:

Heineken® to further strengthen its position in premium segment

Leverage aggressively our innovations

US A: launch Premium Light®, Grow core Heineken®

Russia: Strong market position achieved, accelerating integration

Targeting ¼200m cost reduction by 2008

Heineken:S

ummary 2005

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Commer cial

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QuestionspleaseQuestionsplease

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AppendixAppendix

37

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37

Expanding the business:Acquisitions and Partnerships in 2005

Patra, Russia

Stepan Razin, Russia

Baikal, Russia

Ivan Taranov, Russia

ürzbur ger, er an

Acquisitions and green f ield invest ents:

Fe sa, nited States

uinness Stout, Russia

Partnerships:

Te po, Israel

nited Brewer ies Lanka, Sr i Lanka

Jiang jsu DaFuHao, China

MCS /APB, Mongolia (green f ield)

38

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Information on

core beer markets 2005

* includes export** Includes pro-rata volumes of companies acquired and consolidated for the f irst time

Country Volumes in hl millions*

Spain 10.8

Poland 10.2

Germany 8.7

United States (incl. Femsa) 8.7

France 6.8

Russia** 7.2

Nigeria 6.2

Netherlands 5.8

Italy 5.7

 Austria 4.6

Chile 4.2

Greece 3.2

39

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Heineken¶s top-selling brands 2005

Brand Sales Volume hl millions Country

Heineken ® (premium) 20.1 International

 Amstel 11.4 International

Cruzcampo 5.2 Spain

Heineken ® (mainstream) 3.4 Netherlands

Star 2.8 Nigeria

Ochota 2.6 Russia

Cristal 2.6 Chile

Zywiec 2.6 Poland

Primus 2.1 Congo

Moretti 2.0 Italy

Gulder 1.7 Nigeria,Ghana

Tatra Pils 1.7 Poland

Specjal 1.5 Poland

Tiger 1.4  Asia

40

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Balance Sheet 2005 (¼ billion)

Current Assets

Fixed Assets

20040.7

2.5

7.6

0.6

2.7

8.5

Assets

11.810.8

Net debt position 2005 : ¼2,647m (2004 : ¼2,857m)

2005

Equity and Liabilities

10.8

2004

2.5

1.0

3.6

3.7

11.8

2005

3.0

1.0

3.3

4.5

Cash

Other liabilities

Provisions andPers. benef its

Gross f in.debt

Total Equity

41

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US Dollar Hedging

ImpactImpact ¼ million

PositionPositionUSD million

2004A

2005A

2006F

772

767

772

767

652

1.13

1.26

NetInflow

HedgedPart**

HedgedRate***

2004A

2005A

2006F*

- 124

- 67

-1

- 79

- 39

-1

EBIT NetProf it

* Assuming $ spot rate at 31 December 2006 corresponds with the hedging rate** Hedging at 21 February 2006*** Including the costs of hedging

733

1.232007F 767 90

1.27

2007F* +23 +16

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