SEB 7 January, 2020 Frans Rydén, CFO - Cloetta
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SEB 7 January, 2020 Frans Rydén, CFO
2
This is Cloetta
6.2
3
Cloetta’s strengths
Strong brand/category positions and scale in North Western Europe
Cloetta’s strategic strengths Market Category position
Chewing Pick &
Candy Pastilles Chocolate
gum mix
• Strong leading local brands 1 1 2 - 1
• Locally tailored innovation
2 1 4 1 1
• Core markets in growing North
Western Europe 1 2 3 - 1
• Own manufacturing network
2 1 3 - 1
• Route to market with own sales force
• Scale benefits in North Western 1 - - 2 -
Europe vs local competition
- - - - 1
Based on Cloetta market share in respective category in 2018.
4
Strong heritage brands liked and trusted
by our consumers
Local Global
Local Global Balance
5
Stable growth in branded confectionery market
Value growth aided by premiumization
160 gr
Index
CAGR 1,6%
70 140
60 120
50 100
SEKbn 40 80
30 60
140 gr
20 40
10 20
0 0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Total market value* Index market value growth
*Source: Datamonitor/ Mintel
Markets: Sweden, Denmark, Norway, Finland and Netherlands
6 Responsible growth Cloetta offering informed choice for consumer • Consumer as boss • NAF/NAC • Increased resource efficiency • Responsible sourcing of raw material (UTZ) • Employee development and health • Plastic reduction • “Choice for you” strategy
7 Focus on core markets and core categories From acquiring new munchy moment categories to organic growth
8
Cloetta’s Financial Goals:
Organic growth positive YTD, VIP+ plan to deliver EBIT
2017 2018 Targets
1-2%
Organic Growth* -1.2% -2.8% (In line with
market)
EBIT Margin, Adj 10.4% 10.9% ≥ 14%
Net Debt /
EBITDA
2.4 2.3 ≤ 2.5
Dividend Policy
54% 60% 40-60%
(share of profit)
*Growth at constant exchange rates
9
Continue attractive dividend – doubled in 3 years
0,0 0,0 0,0 0,50 0,75 0,75 1,00
Dividend
per share, SEK
70%
60% Target
60%
53% 54% Dividend payout
50% of 40–60 per
cent of profit for
40% 37% the period
30%
20%
10%
0 0 0
0%
2012 2013 2014 2015 2016 2017* 2018
* 2017 excluding special dividend
10
Key Business Priorities
Cloetta to organic growth and 14% operating profit margin, adjusted
• Packaged sales back to organic growth, EBIT >14%
Branded
• Absolute higher media investments on top of efficiency
growth • Pricing needed to offset raw materials and FX
• Price increases implemented on 50% of the contracts in
Pick & mix
Sweden: goal is to get to black from – 60 m SEK 2018
to sustainable value • Assortment optimization to reduce complexity & costs
Reduce costs • “Value Improvement Program+” and “Perfect Factory”
and • Five-year capacity investment plan to improve service
drive efficiency levels and fund further growth11
Branded Growth: Organic growth now a trend
Seventh consecutive quarter of growth in branded packaged products
Branded, % of Q3 '19 sales
3,6%
2,4%
1,3% 1,6% 1,4% 1,4%
0,6% 0,6%
-0,8%
-3,1%
73% -4,0%
2017 2018 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Pick & mix, % of Q3 '19 sales 18,1%
10,5%
7,8%
6,4%
27%
1,5%
-3,3%
-11,4%
-13,5%
-18,1% -19,4% -15,6%12
12
Pick & Mix to Sustainable Value
Short term plan (by year-end 2020)
• Turn around EBIT in pick & mix in Sweden from ~SEK
-60m in 2018 to average pick & mix EBIT
• Contract and price models being re-developed
• Reduce distribution cost in Sweden
• Continue to insource Candyking volumes
• Drive merchandising efficiency
• Optimize assortment13
Pick & Mix to Sustainable Value
Medium term plan
• Drive penetration in Finland, Denmark, Norway
and the UK
• Develop pick & mix category and brand offering
• Develop concepts to fit all markets
• Create “Shop in Shop” concept to increase value
• E-commerce:
– Scale e-commerce
– ‘In-store theatre’ needs14 Reduce Cost and Drive Efficiency Cloetta Leading Performance Program launched in 2019 The Perfect Factory programme creates - Repeatable lines - Measurable lines - Capable lines - Competent employees.
15 Reduce Cost and Drive Efficiency Invest to Grow: Capacity investments ongoing • 10% capacity increase in moulding technology • Additional capacity will support – Growth in branded packaged products – Realization of additional Candyking synergies (insourcing) – Insourcing of volumes produced in previously Cloetta-owned Italian plants • Investment approximately SEK 100m will debottleneck current lines in Turnhout and Levice • New capacity will be available from mid-2020
16
Reduce Cost and Drive Efficiency:
Well-stocked road-map to deliver targeted 14% EBIT margin, adjusted
EBIT margin,
adjusted, %
ONE Cloetta
Reduce and other
indirects programs
Perfect using ZBB
≥ 14,0%
Factory
Pick & mix
portfolio
Branded
growth
10,9%
Value Improvement Program+
2018 Mid-term17
“Navigating a Peak in the Business Cycle”
Cloetta in stable category/market, yet we keep reinventing ourselves
Point of Departure Working with Uncertainty
2008 • Non-cyclical • Professional approach to
category white-space markets
• North Western • Capital deployment and
Europe acquisition strategy
• Strong • Choice that puts
heritage consumers first
consumer • Opportunities in
brands changing retail
• Agile manufacturing
• Cost concious cultureCore Strategy: Organic growth and 14% EBIT
Commercial focus on our brands whilst increasing cost consciousness
From To Healthy
Topline
Acquisition growth Organic growth 1-2%
Bottom Margins through
line Organic margin
synergies and
expansion 14%
restructuring19 Q&A
20 Appendix
21
Group Management: New Team, relevant experience
Unilever Mondelez L’Oreal
Cloetta Perfetti van Melle
Cloetta Kraft Heinz Mars Mars Cloetta Unilever22
Cloetta’s Core Strategy
“To bring a smile to your Munchy Moments”
• Strengthen the equity of our core • Drive cost saving activities –
Facilitate growth
brands • Zero tolerance for accidents ”VIP+”
Drive growth
Fund growth
• Focus on core categories and • Create “One Cloetta” • Embed ”Perfect Factory” and
core markets, double international • Strengthen brand and category Lean in the supply chain
• Fewer and stronger innovations to management competence • Insource production
drive valorization • CSR to drive consumer agenda • Improve profitability in pick &
• Create value concepts and • Create a winning culture mix
penetration in pick & mix
• Develop, attract and retain • Improve marketing efficiency
• Selective acquisitions on core skilled leaders and employees and internal systems and
categories and markets processes
Target: Organic Sales growth in line with market and EBIT margin, adjusted – at least 14%23
Sales growth historically driven by acquisitions
Shift to organic growth with selective acquisitions on top
6,2
SEKbn 0,5
0,1 0,3 1,1
0,2 -0,7
4,9
2012 Nutisal acquisition Jelly Bean Lonka acquisition Italy Disposal Candyking Forex, Other 2018
acquisition acquisition
2014 2014 2015 2017 2017 2012-201824
Track record of margin gains through
restructuring and synergies
Synergies and factory Candyking margin
restructuring from Cloetta dilution, unfavorable
LEAF merger FX, production cost
SEKm
800
690 695 677 Margin
700
632
585 604 17,0%
600
500 432
14,0% Target
13,0%
400 13,6%
12,0% 11,9% 12,2%
300
10,9%
10,4% 9,0%
200
8,9%
100
0 * 5,0%
2012 2013 2014 2015 2016 2017 2018
Operating profit, adjusted Operating profit margin, adjusted
*From 2016 and onwards, Italy is discontinued operations and excluded from result25
Core Strategy: Organic growth and 14% EBIT
From acquisition growth to organic growth
2018: Shift to organic
growth
• Consumer as boss
2017: Structure change • New management
• Disposal of Italy • ONE Cloetta
• Acquisition Candyking • Organic growth
• Overload moulded factory • Sharpened strategy on the
2014: Harmonization road to 14%
network
• One ERP system
• Factory rationalization &
2012: New company LEAN
• Merger Cloetta-LEAF • Smaller acquisitions
• Listed on Stock market
• HQ in Stockholm26 Value Improvement Program Plus: Holistic and company-wide program to safeguard delivery of the road to 14% One program for value-creating initiatives, using industry-leading practices and grounded in Zero Based Budgeting principles, launched in Q1 2019. • Transparency to confirm effort and money is spent where it matters the most to deliver profitable growth and targeted EBIT • Accountability for building blocks, with overlaps managed and no drill-sites missed • Rigor in tracking of actuals and fulfillment of commitments To help kick-start reduction of indirect spend in SG&A and Operations, Cloetta engaged Accenture for spend analysis and value targeting including benchmarking and best practices
27
Solid cash flow and healthy leverage
Cash flow Net debt/EBITDA ratio, x
SEKm
1 000 927 6
889
900
813 792 4,9
5
800
697 712 4,2
700 4,0
628 4
600 532
492 500 3,0
500 3
408 2,4 2,4 2,3
Target 2,5
400 330
2
300
200 157 131 1
100
0 0
2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018
Cashflow from Operating activities, before changes in WC Cashflow from Operating activities28
Capital allocation principles
Supports growth and continues to prioritize dividends
• Increased investments in working media to fuel branded growth
Invest for growth • Investment in production capabilities for growth and future insourcing
• Maintaining attractive dividend target of 40-60% of profit for the period
Dividends • Maintaining attractive dividend target of 40-60% of profit for the period
• Footprint in existing core geographies and categories of Cloetta
Targeted M&A
• Clear objective of synergy realization and solid financial returns
• Keep stable debt ratio in line with target to maintain flexibility for M&A
Repayment of debt29
Cash Flow supports temporary step-up in CAPEX
in 2019-2020 including Candyking insourcing
CAPEX/
Deprecation ratio 1,6 1,2 0,9 0,7 0,8 0,7 0,8
Temporary step-up, including
350 5,5% announced Candyking 6,0%
integration CAPEX*
300 5,0%
4,3% ~5,0%
250 269
3,5% 4,0%
3,3%
200 211 3,0%
2,8% 2,7% 3,5%
186 184 3,0%
150 161 170
157
2,0%
100
50 1,0%
0 0,0%
2012 2013 2014 2015 2016 2017 2018 2019
2019-2020
CAPEX CAPEX/Sales
*Part of the previously announced Candyking integration cost of SEK 175m31
Pick & mix – this is how it works
Service concept not only selling individual products and brands
Selling services
Assortment Fixtures Merchandisers
• Wide range of products • Play an important role in • Fill up products into
• Consumer preferences a successful pick & mix fixtures
vary by market concept: • Keep fixtures fresh and
• Mainly products from ‒ Branding clean
candy and chocolate perspective +
categories ‒ How products are
displayed32
Pick & mix strengths
► Geographical spread
Norway Finland
• Very strong position in the Nordic countries 23% 17%
• High share of total confectionary consumption UK Sweden
1% Denmark 30%
► Consumer trend: Individualization 10%
• Pick & mix concept catering to consumers
seeking to satisfy individual needs
• Consumers choosing products and services
individually
Pick & mix share of confectionery market volume33
Cloetta’s pick & mix sales by market
Norway Finland
6% 18 %
Sweden
Denmark 38 %
16 %
The UK
17 %
Other
markets
5%34
Four pick & mix business models
Bulk
• Full concept covers everything from branding, 24%
assortment and fixtures to merchandising
• Trade own concept is similar to full concept but with Business
Full concept
55%
a retailers own branding Hybrid models
7%
• In Hybrid models e.g. merchandising can be
handled by the customer themselves
Trade own
• Bulk business is products sold to someone else’s 14%
pick & mix solution35
Offering consumers the choice
Functional &
Indulgence conscious
23 % of Sales36
Accelerate Marketing Return On Investment
Step 1: make 70% of marketing Step 2: Maximize effective pure media
spend visible to consumer 70% (boost hard, measure fast)
60% 60%
55%
45%
40% 40%
2017 2018 2019*
Working Media % Non-Working Media % Linear (Working Media %)
* Ambition for 2019
*Nielsen 2018, Sweden37
Creating Centers of Excellence
Volume and technologies in 2018, tonnes
Nuts
The Jelly Bean Factory
Gum, Lozenges & Hard boiled
Moulding, Extrusion, Hard boiled pastilles
Toffees, Fudge, Nougat
Moulding
Moulding Moulded Foam, Chocolate
Moulding & enrobing38 Cost structure 2018
39
Disclaimer
• This presentation has been prepared by Cloetta AB (publ) (the “Company”) solely for use at this presentation and is furnished to you solely for your information and may
not be reproduced or redistributed, in whole or in part, to any other person. The presentation does not constitute an invitation or offer to acquire, purchase or subscribe for
securities. By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations.
• This presentation is not for presentation or transmission into the United States or to any U.S. person, as that term is defined under Regulation S promulgated under the
Securities Act of 1933, as amended.
• This presentation contains various forward-looking statements that reflect management’s current views with respect to future events and financial and operational
performance. The words “believe,” “expect,” “anticipate,” “intend,” “may,” “plan,” “estimate,” “should,” “could,” “aim,” “target,” “might,” or, in each case, their negative, or
similar expressions identify certain of these forward-looking statements. Others can be identified from the context in which the statements are made. These forward-looking
statements involve known and unknown risks, uncertainties and other factors, which are in some cases beyond the Company’s control and may cause actual results or
performance to differ materially from those expressed or implied from such forward-looking statements. These risks include but are not limited to the Company’s ability to
operate profitably, maintain its competitive position, to promote and improve its reputation and the awareness of the brands in its portfolio, to successfully operate its
growth strategy and the impact of changes in pricing policies, political and regulatory developments in the markets in which the Company operates, and other risks.
• The information and opinions contained in this document are provided as at the date of this presentation and are subject to change without notice.
• No representation or warranty (expressed or implied) is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information
contained herein. Accordingly, none of the Company, or any of its principal shareholders or subsidiary undertakings or any of such person’s officers or employees accepts
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