management presentation - Ülker · management presentation june 2012 happy moments . disclaimer 1...

Management Presentation

June 2012

happy moments

Disclaimer

1

• This presentation contains information and analysis on financial statements and is prepared for the sole purpose of providing

information relating to Ülker

• This presentation contains forward-looking statements which are based on certain expectations and assumptions at the time

of publication of this presentation and are subject to risks and uncertainties that could cause actual results to differ materially

from those expressed in these materials. Many of these risks and uncertainties relate to factors that are beyond Ülker’s

ability to control or estimate precisely, such as future market and economic conditions, the behavior of other market

participants, the ability to successfully integrate acquired businesses and achieve anticipated cost savings and productivity

gains as well as the actions of government regulators

• Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of

this presentation. Ülker does not undertake any obligation to publicly release any revisions to these forward-looking

statements to reflect events or circumstances after the date of these materials

• This presentation merely serves the purpose of providing information. It neither represents an offer for sale nor for

subscription of securities in any country, including Turkey. This presentation does not include an official offer of shares; an

offering circular will not be published

• This presentation is not allowed to be reproduced, distributed or published without permission or agreement of Ülker

• The figures in this presentation are rounded to provide a better overview. The calculation of deviations is based on figures

including fractions. Therefore rounding differences may occur

• Neither Ülker nor any of its managers or employees nor any other person shall have any liability whatsoever for any loss

arising from the use of this presentation

Ülker: Leading name in Turkish confectionery

2

Biscuits

† Ülker Çikolata: Consolidated for the last quarter; Fresh cake: Not consolidated

Revenue from others excluded

• Best recognized FMCG brand in the dynamic Turkish market

for 68 years

• Turkey’s leading producer of biscuits, chocolates, chocolate

covered products, crackers, wafers and cakes

• Spread out facilities representing the largest production

capacity in the domestic market and minimizing dependency

on single location

• Exports, mainly to the Middle East, Northern Africa and EU,

accounting for c.20% of sales volume

• Consolidated annual net sales of TL1.8 bn in 2011 and

estimated net sales of TL2.3-2.5 bn in 2012

• Yıldız Holding is the

parent company. It is

Turkey’s leading food

and beverages group

with annual gross

sales of TL11.6 bn as

at the end of 2011

• Yıldız Holding ranked

10th in “Global top 100

confectionery

producers list” by

Candy Industry in 2011

Shareholding Structure

• Net sales, 2011†: TL0.9 bn

• Market share 2011: 49%

• Capacity: 403 tons/year

• CUR: c.71% Biscuit



• Capacity: 45k tons/year

• CUR: c.73% Cake




• CUR: c.60% Chocolate

Topkapı: Biscuits,

c.62k tons/year

Topkapı: Chocolate,

c.203k tons/year

Hadımköy: Cake,

c.45k tons/year

Gebze: Biscuit &

cracker, c.49k

tons/year

Karaman: Biscuit, cracker,

chocolate, cake c.180k

tons/year

Ankara: Biscuit,

c.112k tons/year

In Figures†

Silivri: Chocolate,

chocolate covered

biscuit, c.35k tons/year Yıldız

Holding44%

Dynamic Growth

Fund21%

Free Float23%

Other12%

Long lasting

relationships

with end users

enhance

brand

perception

Ülker: the “Best Recognized” FMCG brand

The Best in the

Sweet and Salty

Category

(Silver Effie Award,

Ülker Rondo, 2011)

Most

Recognized

Company

(AC Nielsen,

2nd place,

2010)

The “Brand

Award”

(International

Brands

Conference,

2011)

Best Recognized

Brands

Brand One Feels

Close To

# 1

# 2

# 3

# 4

# 5

• Strength of the brand is proven by national

and international awards

• Ülker has always been the “most recognized”

brand and “closest to consumers”

• Ülker brand essence and campaign theme:

“Happy moments with Ülker”

• Highly-popular sub-brands are in the market

for many years

Consistently

ranks as one

of the best

recognized

brands in

Turkey

Source: ACNielsen, public data † Arçelik is a household durable goods brand

3

†

Corporate governance

4

• 9 members, 3 of which are independent

• Encompasses 3 proactive committees, Audit, Corporate Governance and Early Detection of Risk Committees, where independent members dominate

• Simplified corporate structure improving transparency

• Diversified communication channels with investors

• Proactive attendance in investor meetings with participation in 7 local and international investor conferences in 2011. 117 investor meetings were performed in 2011

• New investor relations materials and enriched corporate website

• Expanding coverage through active communication with sector analysts. Has been covered by 12 analysts

• Elimination of dividend privileges completed in 1Q 2012, giving equal dividend rights to each and every shareholder

• Employee rights are supported through comprehensive company-wide human resources policies

• Code of ethics regulating company – wide relations have been reviewed

• Improving environmental consciousness with the launch of green building project - carbon emission measurements confirm environment friendly production operations

Board of Directors

Public Disclosure

and Transparency

Shareholder Rights

Stakeholder Rights

Current

Structure

Corporate governance: Elimination of dividend-privileges of shares

Prior

Structure

5

• Cancellation of privilege

shares was done by a

capital increase from

internal resources after the

share capital register. There

was no cash outflow

• All C shares have the same

amount of dividend right

and there is no additional

dividend privilege attached

to any share class as of

April 2012

A 1,486 17.65% 4

B 732 17.65%

C 26,859,995,565 2

D 2,217 1

Total 26,860,000,000

Founder Certificates 22,171 11.76%

Share Class Number of Shares

Additional

Dividend

Privilege

Candidates

for Board

A 1,486 - 4

B 2,217 - 1

C 34,199,996,297 - 2

D - - -

Total 34,200,000,000

Founder Certificates - - -

Share Class Number of Shares

Additional

Dividend

Privilege

Candidates for

Board

Key Investment Highlights

Ülker story

The best recognized FMCG brand in Turkey

7

Distribution channel restructuring

– Simplification of distribution network to adopt to changing environment

– Route to a stronger but leaner distribution network

2

Corporate restructuring

– Ongoing transformation to a leaner and more sizable confectionery company by bringing all relevant companies under one umbrella and disposal of non-core assets

1

Unlocking brand potential by leveraging Ülker’s strongest sub-brands

– Leading brand since establishment

– Star sub-brand focus

– SKU optimization with focus on profitability

– Brand building programs, i.e. 360o marketing campaigns, social media, new ways of merchandising

3

A strong parent: Yıldız Holding, Turkey’s leading food and beverages group

– Started as a biscuit producer. Transformed into a mega FMCG group. Leveraged Ülker brand and penetration to launch several products in other segments

– Currently has operations in 6 sectors with TL11.6 bn gross sales in 2011

– Highly sought out as a local FMCG partner

5

Spread out production facilities

– Largest production capacity in the domestic market

– Minimizing dependency on single location

4

Biscuit production

Biscuit production

Corporate restructuring: Ülker previous structure: Too many layers was transformed into a leaner, more transparent structure

8 Production companies

1

† Indirect ownership structures

Atlas * Domestic sales

İstanbul Exports: Ülker

branded products

Birleşik Exports: Non-Ülker branded products

Rekor Non-Ülker branded

products

Atlantik * Chocolate sales

Godiva

Biskot Non-Ülker branded products (Biscuit &

chocolate production)

Ülker Çikolata†† Chocolate producer

44%

92%

Stake owned by Ülker Sales companies

İdeal Ülker branded

products (Biscuit & cracker production)

Biskot Non-Ülker branded products (Biscuit &

chocolate production)

Birlik Flour producer

Fresh Cake Cake production

Godiva

BIM Retail

Pendik Nişasta Starch production

Sağlam GYO REIT

Besler Oil and margarine

production

Hero Baby Baby food

Atlas Domestic sales

İstanbul Exports: Ülker

branded products

Birleşik

Exports: Non-Ülker

branded products

Rekor Non-Ülker branded

products 47%

84%

10%

25%

7%

24%

40%

10%

11%

• Previous structure:

- Multiple sales channels to promote

competition amongst sales agents

- Portfolio investments in various companies

• Layered structure, evolved due to fast growth and add-on acquisitions,

led to restructuring need

Structure† as of 31.12.2010

19%

92%

42%

91%

78%

98%

• Steps already taken:

- Ülker Çikolata, Fresh Cake and Atlantik Gıda were

acquired from Yıldız Holding

- İdeal, Birlik and Fresh Cake merged with Ülker

- Non-core operations were divested (Besler, Hero Baby,

Pendik Nişasta, BIM, Sağlam GYO)

- Part of Godiva shares divested

Financial assets

Current Structure†

* Not operational as of March 1st, 2012 Will be merged with related production

companies by the end of 2012

Mavi Yeşil Ülker branded diet

products

74%

51%

99%

98% 78%

69%

Biscuit production

İstanbul Gıda

Exports: Ülker

branded products

Corporate restructuring:

Ülker target structure: Leaner with focus on core businesses

9

Target Structure

• Steps in progress:

- Merge of domestic sales subsidiaries to

related production companies

- Only export operations will remain as a

separate entity

- All domestic traditional channel sales

consolidated under single sales company

“Horizon”

1

Ülker Çikolata

Chocolate

producer

Biskot

Non-Ülker branded

products (Biscuit &

chocolate

production)

44%

92% 91%

Production companies Stake owned by Ülker Sales companies

Distribution channel restructuring:

Previous distribution system: Multichannel and layered sales network

10

• As confectionery goods remain at the

top spot for impulse purchases,

availability is the key factor

determining strength of a brand

• With c.220k sales points and c.70%

share in confectionery sales,

traditional channel dominates the

market

• Ülker’s previous domestic traditional

channel consisted of:

-235 distributors

-With c.90% nationwide coverage,

the largest food network in Turkey

• Changing market conditions dictate

restructuring in distributorship

system:

-Need for scale efficient and

organized distributors with

decreasing distributor margins

• Ülker aims to increase its operational

efficiency and margins through

restructure of its domestic traditional

distribution channel

% in domestic sales

Distribution

channels

İstanbul ††

(Ülker brand) Exports Channel Distributors

Biscuit,

Chocolate &

Cake Operations Birleşik ††

(Non-Ülker brand)

Pasifik † Domestic Modern

Channel

Organized

Retail

Chains

Biscuit,

Chocolate &

Cake Operations 25%

2

Other Food &

Beverage

Products

Atlantik

(Ülker brand)

Domestic

Traditional Channel

235

Distributors

Atlas

(Ülker brand)

Atlas

Chocolates

Biscuits

Cakes

Distributors

55%

†Yıldız Holding subsidiary ††Also responsible for sales of Yıldız Holding companies product portfolio

20%

Distribution channel restructuring:

Target: Traditional channel simplified for optimized and efficient reach

11

2

Current domestic traditional channel after restructuring:

• New sales company established in 2011

• More efficient route to market with stronger, but fewer distributors (104 vs. c.235) - same coverage in sales points

• Variety of products per sales point increased by %20

• Optimization process completed in March 2012

• Inefficiency

• High level distributor discounts • Execution difficulty

• Complexity

Main Challanges

Other Food &

Beverage

Products

Distributors

Domestic

Traditional

Channel

Biscuits

Chocolates

Cakes

Atlas

(Ülker brand)

235

Distributors

Atlantik

(Ülker brand)

Atlas

Previous

Structure:

Other Food &

Beverage

Products

Domestic

Traditional

Channel

Biscuits

Chocolates

Cakes

Horizon †

(New Sales

Company)

104

Distributors

Completed

New

Structure:

Result:

• Layers to be reduced • Better and faster execution

capability

• Fewer but stronger distributors • Decreasing distributor

discounts

• # of points visited: 140k

• % of invoice issued by visit:

75%-80%

† Owned by Yıldız Holding

• # of points visited: 175k

• % of invoice issued by visit:

90%

47% 48%42% 40%43% 40%

46% 49%

9% 12% 12% 11%

2008 2009 2010 2011Ülker Eti Other

55% 56%51% 49%

10% 11% 11%11%6% 6% 9%

11%

29% 26% 29% 29%

2008 2009 2010 2011Ülker Nestle Eti Other

57% 54% 50% 49%

32% 35% 36% 39%

11% 12% 13% 12%

2008 2009 2010 2011Ülker Eti Other

Unlocking brand potential:

Strong market share across the categories

12 † Retail market, Source: ACNielsen, Euromonitor

Market Share Development, Volume Based†

• Total size of biscuit, chocolate and cake markets is

estimated to be TL4.7 bn in value and 269k tons in

volume terms

• Loss of market share caused mainly by aggressive

product launch strategy originated by the competition

- In the short run highly demanded popular products

shifted market shares from Ülker to competition

Biscuit, Chocolate & Cake Markets†

3

Bis

cu

it

Ch

oc

ola

te

Cak

e

-10%

-5%

0%

5%

10%

15%

2007 2008 2009 2010 2011

Market Volume GrowthReal GDP Growth

strategy to competition’s attack:

• Defending the position by matching aggressive product

launches - 178 new SKUs in 2009 - 9/2011 period

• Launches supported through consistent marketing

campaigns

Unlocking brand potential:

Ülker: Streamlining product portfolio

13

3

2009 2010 2011 Future

Co

mp

eti

tio

n

• Aggressive product launches in 2008-2011 period

• New tastes, hybrid products and new packaging forms

introduced to the market

Ülk

er

2012

SKU attacks for market share by the competition

x

x

Easing SKU wars Market trends:

• Short run results:

- Highly demanded popular products shifted market

shares

• Medium term results:

- Decreasing margins due to increasing operational costs

- Increasing sales and marketing expenses

- Crowded SKU portfolios difficult to control

Imp

ac

ts o

n t

he

mark

et

.’s changing strategy and prospects for

the future:

• SKU management: Portfolio restructuring started

in late 2011

- Focus on star SKUs

- Delisting of unprofitable SKUs – Reduction from

502 SKUs in 2010 to c.370 SKUs in 2011

• Packaging & pricing optimization:

- Formulizing cost effective sizes, packaging and

pricing to quickly respond to changes in

consumer choices and raw material costs

• Brand building:

- Increasing investment on star SKUs

• Innovation:

- Introduction of new trends in snack formats to

grasp market share from newly developed and

unpackaged segments

Spread out production facilities

14 Biscuit

Chocolate

Topkapı, İstanbul Facility

• Biscuits

• Established in 1944


• 28 sqm closed area

Hadımköy, İstanbul Facility

• Cake



• 27k sqm closed area

Topkapı, İstanbul Facility

• Chocolate




Cake

Biscuit & chocolate

Gebze Facility

• Biscuit & cracker




Ankara Facility

• Biscuit




• The largest biscuit

manufacturing facility in the

Middle East

Karaman Facility

• Biscuit, cake, cracker & chocolate




• Non-Ülker branded products

• 44% owned by Ülker

• Spread out facilities

representing the largest

production capacity in the

domestic market and

minimizing dependency

on single location

Silivri, İstanbul Facility

• Chocolate, chocolate

covered biscuit




4

A strong parent:

Yıldız Holding

15

Food &

Beverages

Packaging

Finance

Retail

Real

Estate

Personal

Care

A prominent name in the Turkish food industry operating in confectionery,

margarine & liquid oils, culinary products, dairy products, beverages, fruit juice and frozen foods

Experience in managing international operations

JVs with leading international players Sole and first brand sought out for co-branding

Turkey's first food company to establish a nationwide distribution network

#1 Best recognized food brand #1 in biscuits & chocolates #2 in dairy products #1 in edible oils and fats #1 in overall baby food #1 in culinary products

Premium segment chocolate producer acquired in 2008

In excess of 200k sales points nationwide

c.90% coverage, second best after Coca cola

5

Financial Snapshot

62%52% 59%

38%

16%26% 17%

46%

10% 8% 11%11%

12% 13% 14%5%

FY10 FY11 1H11 1H12

Biscuit Chocolate Cake Other

Stable revenue generation

17

Sales Volume – (k tons*)

Net Sales, TL mn †

• Consolidated sales volume increased by 37.5% to 200,872 tonnes,

mainly driven by consolidation of the chocolate and cake businesses,

coupled with restructuring of the sales and distribution companies

• Consolidated revenues for the first half of 2012 were TL 1,141 million, an

increase of 55.7% when compared to revenues of TL 733 million

recorded in the same period of 2011

• Export sales accounted for 19.6% of total sales in 1H12

• Gross profit increased by 77% to TL 254 million compared to gross profit

of TL 143 million recorded in the first half of 2011

• Gross margin improved to 22.3% in the first six months of 2012, from

19.6% in the same period of 2011

• Consolidated adjusted EBITDA (excluding other operating

income/expense) for the first half of 2012 was TL 112 million compared to

TL 31 million in the same period of 2011

• Adjusted EBITDA margin was 9.8% compared to 4.2% recorded in the

same period of 2011

• Net income for the first half of 2012 totaled TL 115 million, a significant

increase compared to a net loss of TL 1.9 million recorded for the same

period of 2011 (excluding the gain on the sale of a financial asset

amounting to TL 610 million)

* Excluding the Non-confectionery sales volume; and 1Q11 flour sales volume

1H12 figures include chocolate and cake operations

† Following acquisition of Ülker Çikolata in 2011, chocolate operations has been consolidated in

2011 figures for the last quarter

• In 2012, Ülker is forecast to post net sales of TL2.3-TL2.5 bn with an

EBITDA margin of 8.5%

• EBITDA margin is expected to reach 12% levels in 2014

• Gross margin is expected to improve with stabilizing commodity prices

and increased control on cost base

301 328 146 201

1,523.5 1,798.8 732.8 1,141.0

Guidance

81%73%

85%

56%

8% 17%9%

30%

11% 10% 7% 14%

FY10 FY11 1H11 1H12

Biscuit Chocolate Cake

18

* EBITDA, excluding Net other operating income/expense 1h12 figures include chocolate and cake operations 2011 figures include 4Q chocolate results All figures in TL MM, except per share

Financial Summary 1

.41

2

1.5

06

1.5

24

1.7

99

73

3

1.1

41

2008 2009 2010 2011 1H11 1H12

Net Sales (TL mn)

30

6

37

9

32

6

36

4

14

3

25

4

2008 2009 2010 2011 1H11 1H12

Gross Profit (TL mn)

97 1

47

58 1

11

27

10

5

2008 2009 2010 2011 1H11 1H12

Operating Profit (TL mn)

95 1

44

67

75

31

11

2

2008 2009 2010 2011 1H11 1H12

EBITDA (TL mn)*

19

12

0 19

1

66

9

60

8

11

5

2008 2009 2010 2011 1H11 1H12

Net Profit (TL mn)

0,0

5

0,3 0

,54 1,9

2

1,7

7

0,2

9

2008 2009 2010 2011 1H11 1H12

EPS

19

(in TL mn) 2011 1H12

Average Trade Receivable Days 86 83

Average Inventory Days 38 33

Average Trade Payable Days 79 67

Average Working Capital Cycle 45 49

(in TL mn) 2011 1H12

- Short-Term 764 590

- Long-Term 270 522

Total Financial Liabilities 1.034 1.112

Inter-Company Receivables 582 130

Inter-Company Payables 4 2

Inter-Company Net 578 128

Cash and Cash Equivalents 402 698

Net Debt 55 286

WC & Net Debt Position in 1H12

Net Debt Position

Working Capital

Ülker Strategy and Expectations

Ülker strategy and expectations

21

PROFITABLE GROWTH Corporate

Strategy

• As a result, in mid to long-term:

- Sales are forecast to increase 3% in biscuit and cake operations and 5% in chocolate operations per annum in volume terms. Growth in

value terms are forecast around 200bps higher than volume growth.

- Selective international growth in MENA and Eastern Europe may be possible

- The best practice in corporate governance is aimed to be achieved

Brand Perspective

• Fixing the basics: Through an ongoing

brand execution, the number of SKUs

are being reduced and focus is shifted

to profitability across the brands

• Brand activation: Brand recognition

and position are being enhanced

through new SKU management

strategies, innovation, marketing

strategies and marketing spending on

star SKUs rather than new launches

Restructuring Perspective

• Corporate structure: Capitalizing on its

strong corporate execution, Ülker is

going through a managerial and

operational transformation to form a

leaner structure through acquisitions

and disposal of non-core assets

• Distribution channel: Existing system

is being streamlined by mergers and

decreasing number of sales companies.

The same number of end points will be

reached more effectively with fewer

distributors

Financial Perspective

• Effects of restructuring: Ongoing

restructuring and simplification

processes will generate financial

benefits such as decrease in discounts

and operational costs

Appendices

A. Financial Statements

Income statements

24

Income Statement (in TL mn) 2008 2009 2010 2011* 1H11 1H12

Sales Revenue 1,412 1,506 1,524 1,799 733 1.141

Cost of Sales (1,106) (1,128) (1,197) (1,435) (589) (887)

Gross Profit 306 379 326 364 143 254

Gross Profit Margin 22% 25% 21% 20% 20% 22%

OPEX (235) (266) (286) (319) (127) (165)

Marketing, Sales and Distribution Expenses (182) (200) (228) (252) (100) (110)

General Administration Expenses (52) (65) (57) (65) (26) (51)

Research and Development Expenses (1) (1) (1) (3) (1) (4)

Other Operating Income /Expense 26 34 18 66 11 16

Operating Profit 97 146 58 111 27 105

Operating Profit Margin 7% 10% 4% 6% 4% 9%

Share in net profit of inv. accounted for equity method (15) (3) (14) (13) (8) -

Finance Income/Expenses (58) 2 179 621 628 40

Profit Before Taxation 24 145 224 720 647 145

Tax Charge from Continued Operations (4) (25) (32) (51) (40) (30)

Net Profit 19 120 191 669 608 115

EBITDA** 95 144 67 75 31 112

EBITDA Margin** 6.7% 9.5% 4.4% 4.2% 4,2% 9,8%

* 2011 Income Statement does not include Fresh Cake figures, whereas chocolate operations has been consolidated solely for the last quarter

** EBITDA, excluding Net other operating income/expense

Balance sheets and highlights

25

Balance Sheet (in TL mn) 2008 2009 2010 2011 1H12

Current Assets 1,121 1,486 1,512 1,824 1.618

Non-current Assets 913 1,243 1,374 847 865

Total Assets 2,034 2,729 2,886 2,670 2.483

Current Liabilities 901 1,254 785 1,262 960

Non-current Liabilities 377 289 573 312 565

Shareholders Equity 756 1,186 1,527 1,097 959

Total Liabilities & SHR Equity 2,034 2,729 2,886 2,670 2.483

Other Highlights (in TL mn) 2008 2009 2010 2011 1H12

Short-Term 484 540 451 764 590

Long-Term 345 241 508 270 522

Total Financial Liabilities 829 781 959 1,034 1.112

Net Debt 203 (36) 48 55 286

EPS (TL) 0,05 0,30 0,54 1,92 0,29

management presentation - Ülker · management presentation june 2012 happy moments . disclaimer 1...

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