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Sustainable Growth and Value Creation enabled by focused transformationAmer Sports CMD 2018

Heikki Takala, President & CEO, and Jussi Siitonen, CFO

• We continue to grow and create value

• Our strategy is working and organic growth drivers remain largely

unchanged

• We continue our transformation towards areas of faster growth,

higher profitability, and asset efficiency, with increasing weight of

Softgoods, D2C, and China

• As part of the transformation, we will broaden our toolbox to include

strategic portfolio choices – a more focused company

Amer Sports CMD 20182

Topics today

We continue to drive sustainable profitable growth and value creation

Our Glidepath: Sustainable Profitable Growth


0%

2%

4%

6%

8%

10%

1,200m

1,400m

1,600m

1,800m

2,000m

2,200m

2,400m

2,600m

2,800m

3,000m

Net Sales EBIT Margin

Net sales (EUR) and EBIT margin, 2006 – 2018 • Growth and

profitability

improvement

largely driven by

Softgoods, D2C

and China

*L12M’18 = July 2017 – June 2018, Peak Performance included4

*

2018 outlook: profitable growth continues

2018 outlook* unchanged:

• Net sales in local currencies as well as EBIT excl. IAC are expected

to increase from 2017

• Due to ongoing wholesale market uncertainties, the quarterly growth

and improvement are expected to be uneven


*Outlook given in Q2/2018

5

0

50

100

150

200

250

300

350

400

450

Our performance has driven long-term value creation


*Data as of 3th September 2018

+311%

2010 2011 2012 2013 2014 2015 2016 2017 2018

+81%

Amer Sports

OMXHCap

Since 2010

• Share: +311%

• TSR: +363%

Since 2015

• Share: +79%

• TSR: +90%

Share price development, 2010 – 9/2018 *

6

The performance has been based on our strategic choices

• Sustainable Growth Model

• Clear portfolio role for each Business Unit

• Group scale and synergy

• Transformation: Strategic acceleration in Softgoods, D2C, China,

USA and Digital


1.

2.

3.

4.

7

1) Sustainable Growth Model

1. Annual topline growth

2. Annual profit and cash flow improvement

3. Investing for the future

4. Continuous renewal and productivity improvement

5. Long-term view: 3-5 year commitment cycle to businesses


2) Clear portfolio role for each Business Unit


Apparel

WSE

Fitness

Cycling

Business Unit Role Role fulfilled?

Footwear

Ball Sports

Sports Instruments

• Full acceleration

• Sustainable, profitable growth

• Sustainable profitability in all conditions

• Cash and profit first

• Sustainable, profitable growth

• Disproportionate growth for scale

• Profitable growth

Growth accelerated,

profitability improvement next

Profit & cash in line, but growth

challenging

In line overall, growth slowdown in

2018 due to distribution clean-up

In line

In line

Growth step-changed,

profitability improvement next

Growth & profitability below

expectations

9

3) Group scale and synergy

1. Go to Market Growth

2. Operations GM%

3. Digital business platform OPEX efficiency

4. Long-term investment capacity Funding for growth


4) Transformation: Strategic acceleration


Softgoods

D2C

China

USA

Connected Devices

& Digital Services

Acceleration area 2017 Conclusion

EUR ~1,000 m

EUR ~250 m

EUR ~120 m

USD 1,000+ m

EUR ~250 m

Target CAGR

9-10%

20+%

20+%

3-5%

20%

11

4) Transformation outcome: Portfolio shift towards faster growth, higher profitability and better asset efficiency


SOFTGOODS

D2C*

CHINA

Share of business

2010Share of business

2018

~20% ~40%

~2% ~10%

~1% ~6%

*Of total Group sales, including non-D2C relevant businesses such as Fitness12

Growth and transformation continue, but recent slowdown calls for expanded toolbox

Whilst long-term performance is solid, growth and profitability improvement slowed down in 2016-17


0%

2%

4%

6%

8%

10%

1,200m

1,400m

1,600m

1,800m

2,000m

2,200m

2,400m

2,600m

2,800m

3,000m

Net Sales EBIT Margin

Net sales (EUR) and EBIT margin, 2006 – 2018 2016-17

• US market

slowdown

• Investments into

Digital / Fitness /

Sports Instruments

started to yield

with a delay

14 *L12M’18 = July 2017 – June 2018, Peak Performance included

*

The slowdown resulted into lower value creation


• Value creation lagging since

2016

– Amer Sports share +10%

– Total Shareholder Return +16%

• Sharper choices and

expanded toolbox needed

Share price development, 2016 – 9/2018 *

0

20

40

60

80

100

120

140

04.01.2016 04.01.2017 04.01.2018

+10%

+30%Amer Sports

OMXHCap

2016 2017 2018

15

*Data as of 3th September 2018

We capitalize on the proven building blocks, and broaden our toolbox

1) Capitalize on the proven building blocks

• Continue Sustainable Growth Model

• Drive Business Units according to their portfolio roles

• Pursue Group scale & synergy

• Continue strategic acceleration

– Softgoods (accelerated by Peak Performance)

– D2C

– China

– USA

– Connected Devices & Services = Company digitalisation


2) Expand toolbox: Further accelerate transformationthrough strategic portfolio choices


”Better owner” logic:

current performance

Limited

Strong

“Better owner” logic:

scale & synergy potential

Low High

Footwear

• Softgoods: Accelerate

• WSE: Sustainable profitability

• Ball Sports: Cash & profit first

• Confirm role & commitment

for the next cycle

• Strategic review

Apparel

Ball

Sports

WSE

Fitness

Sports

Inst.

Cycling

= relative size

18

Our strategy continues to transform the company towards faster growth, higher profitability and better asset efficiency


SOFTGOODS

D2C*

CHINA

Share of business

FUTURE

~40% ~50%

~10% ~20%

~6% ~10%

Share of business

TODAY

Share of business

TOMORROW

Main transformational

drivers

19 *Of total Group sales, including non-D2C relevant businesses such as Fitness

Our sustainable profitable growth and transformation create valueJussi Siitonen, CFO

Our strategy creates value through several drivers

Amer Sports CMD 201821 6.9.2018

1. Our Sustainable Growth Model and scale and synergy drive

profitable growth

2. Our acceleration in Softgoods, D2C, China, USA, and Digital shift

the company to increasingly attractive areas

3. The accelerated transformation through strategic portfolio choices

changes the company profile

4. The strategy will further drive cash generation

Our mid-term targets remain intact

6.9.2018 Amer Sports CMD 201822

Financial KPI Target L12M* L5yrs*

Net Sales

growth

Mid-single digit organic, currency-neutral annual

growth4.0% 4.7%

Profit

growth

Annual EBIT growth (excl. IAC) ahead of net

sales growth+8.2% +9.8%

Cash flow

conversionFree cash flow / net profit at least 80% 58% 68%

Net Debt /

EBITDAYear-end net debt / EBITDA ratio max 3.0x 2.70X 2.18X

*) Peak Performance excluded

6.9.2018 CMD 201823

Net Sales: acceleration in Softgoods, D2C, China, and USA has delivered the majority of the growth, and will continue to do so

Category 1.3% 3.4%

SoftgoodsHardgoods

0.5% 0.6% 0.7%2.9%Channel

E-comRetailFitnessB2B

ROW

2.1% 0.9%1.7%Country

USA China

Contribution to Group, L5yrs CAGR of 4.7%

*) L12M Jun’18 vs. L12M Jun’13, (Peak Performance excluded)

CAGR, L5yrs*

Softgoods 11%

D2C 22%

China

USA

29%

6+%

Net Sales: Transformation into modern channels drives disproportionate portion of growth

• Capability investment in

transformation to modern channels

is driving disproportionate growth

• Modern channel growth is closely

linked to Softgoods growth

• Peak Performance acquisition

further accelerates growth in D2C


Modern channels = own retail, own e-comm, e-tail customers, click&mortar customers

100

120

80Modern Channels

30%

117

Fitness Channels

14%

106

Traditional Trade

56%

97

104

Net Sales growth by channel, L12M*Index

Share ofNet Sales



Gross Margin: Our proven building blocks are delivering …

Gross Margin improvement L5yrs*

SoftgoodsCategory growth and margin

improvement

Ball

Sports

Complexity reduction and acquisitions

for further scale

WSEContinuous production efficiency

improvements and complexity reduction

D2C Channel mix change

Over 300bps to ~50%

Over 300bps to 40+%

Over 300bps to 45+%

Over 300bps to ~60%


Gross Margin driver


…and contributing significantly to the company’s profitability

43.2

45.5+2.0

+0.6

+0.5

40

41

42

43

44

45

46

47

Ball Sports WSEGM

L12M

Jun’13

Softgoods

-0.8

Other GM

L12M

Jun’18

+2.3%

Category contribution to

Group Gross Margin improvement*

43.2

45.5

+1.6

+1.1

40

41

42

43

44

45

46

47

B2BGM

L12M

Jun’13

-0.4

D2C Other GM

L12M

Jun’18

+2.3

Channel contribution to

Group Gross Margin improvement*

%


Gross Margin: We have largely mitigated the recent adverse FX impacts


1.000

1.050

1.100

1.150

1.200

1.250

1.300

1.350

1.400

Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

44.8% 45.8% 44.9% 45.5%*Gross Margin

USD/EUR Hedges

USD/EUR Spot

EUR/USD

*) 1.7.2017 – 30.6.2018 (Peak Performance excluded)


OPEX: Whilst we continue investing in transformation, we have “normalized” OPEX spend through fluidity

0

1

2

3

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5

6

7

8

9

10

2015 L12M

Jun’17

2013 2014 L12M

Jun’18

2016 2017

OPEX

Net Sales

%Net Sales vs. OPEX Growth L5yrs*

• In accordance with our SGM, part of the

Gross Margin gains have been invested

back in the proven growth drivers

• Softgoods, D2C, Digital capabilities…

• OPEX efficiency actions, initiated in Feb

2017, are delivering targeted savings

together with continuous OPEX fluidity

• Sustainable mid-term OPEX level 36-37%

of Net Sales


Asset efficiency: We have continued to deliver organic improvement


0

5

10

15

20

Q4’16Q4’14Q2’13 Q2’14Q4’13 Q2’15 Q2’16Q4’15 Q2’17 Q4’17 Q2’18

ROCE (L12M)

ROCE (excl PP)

WACC (pre-tax)

%

ROCE vs. WACC, L5yrs

482 493

211

137

377

501164

237

291

431

Net W/C

M&AJune’13

1,662

Organic

PPE

June’18

Goodwill

Other

Intangibles

1,148

+514

Capital Employed change, L5yrs

Shifting portfolio towards areas of faster growth, higher profitability and better asset efficiency

Faster Softgoods growth reshapes the P&L


60.6%

39.4%Softgoods

Net Sales

Hardgoods 56.3%

43.7%

Gross Profit

46.8%

53.2%

EBITDA

41.1%

58.9%

EBIT

67.0%

33.0%

Capital

Employed

Softgoods/Hardgoods split of KPIs, pro forma* L12M

*) Peak Performance consolidated on Pro Forma basis from 1.7.2017–30.6.2018

Group unallocated excluded from EBIT, EBITDA and Capital Employed

• Softgoods’ higher growth and better

profitability drive our P&L towards

directional mid-term profitability model:

– Gross Margin 46-47%; and

– OPEX 36-37%

• Softgoods’ share growth is also

lowering company’s risk profile &

earnings volatility (Balance sheet

solidity, 365 offering, D2C)

• Company multiples toward Softgoods

peers

Better asset efficiency drives higher ROCE


Softgoods

Group

Hardgoods

EBIT Margin Asset turn ROCE× =

% %

Softgoods/Hardgoods split of KPIs, pro forma* L12M

*) Peak Performance consolidated on Pro Forma basis from 1.7.2017 – 30.6.2018

Group unallocated excluded from EBIT, EBITDA and Capital Employed

• Softgoods business model is “Asset light”

driving company’s ROCE toward ≥ 20%

– Relatively higher Working Capital is offset by

low/no manufacturing assets

• Whilst Softgoods is structurally more

attractive, Hardgoods is still in our core

(60% of Net Sales), and continues to

improve

• Importantly, whilst each business has

future potential, we continuously reconfirm

our “better owner” logic to ensure they

contribute to our value creation model

X

Softgoods

Group

Hardgoods

Hardgoods

Softgoods

Group

Fund allocation follows the portfolio logic

• We prioritize main transformational drivers: Softgoods, D2C, China, modern

channel logistics,…

• We continue investing in those Hardgoods units where business is in line with

portfolio role (WSE, Ball Sports), and/or where our current investment program

is delivering largely in line with expectations (Sports Instruments, Fitness)

• Before we continue long-term commitment to Cycling, where business is not in

line with portfolio role and scale & synergy benefits are insufficient, we will put

Mavic under strategic review to assess whether Amer Sports is the best owner

– We have engaged investment bank Centerview to assist in the process


The strategy will further drive cash generation


Cash flow has supported organic growth and payouts but we have a gap to close vs. our financial target

901

361

Sources

Net Debt

change

Operating

Cash Flow

1,261

360

136

389

377

Payouts/

Buy-backs

Uses

M&A

CAPEX

W/C

1,261

-20

0

20

40

60

80

100

120

140

Q2

14

Q4

13

Q2

13

Q3

13

Q1

14

Q3

14

Q1

15

Q4

14

Q2

15

Q3

15

Q4

15

Q1

16

Q2

16

Q3

16

Q2

17

Q4

16

Q1

17

Q3

17

Q4

17

Q1

18

Q2

18

80

68

Cash flow L5yrs, June’18

Free Cash Flow / Net ProfitL5yrs, June’18%

Financial target

5yrs average

Strategy drives improved cash generation through faster growth,

higher profitability and better asset efficiency, closing the gap

Balance Sheet: whilst we remain within our targets, we now focus on deleveraging


1.0

2.0

3.0

4.0

30.6.1730.6.1631.12.1531.12.13 30.6.14 31.12.1731.12.1631.12.14 30.6.15 30.6.18

3.0

2.2

X

Financial target

5yrs average

• Net Debt / EBITDA up due to the acquisition

of Peak Performance

• In line with our sustainable funding

strategy for M&A’s

• Current focus on deleveraging the balance

sheet post the acquisition

• Fund allocation priorities remain unchanged

1. Secure organic growth

2. Ensure sustainable, steadily increasing

cash payouts as per dividend policy

3. M&As and share buybacks currently

deprioritized

Net Debt / L12M EBITDA, L5yrs


• Cash EUR 152.9m and unused

committed facilities EUR 200m (June

30, 2018)

• Commercial paper program EUR 500m,

out of which EUR 30m utilized

• Scheduled H2/2018 repayments of

long-term loans EUR 197.5m

• Average interest rate of loan portfolio

2.1% (June 30, 2017 2.5%)

0

50

100

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350

400

2018 2019 2020 2021 2022 2023=>

Bonds Bank loans Other

EURmRepayment schedule of long-term loans

Long-term loans: refinancing plans in place

Summary

• We continue to grow and create value

• Our strategy is working and organic growth drivers remain largely unchanged

• We continue our transformation towards areas of faster sustainable growth,

higher profitability, and asset efficiency, with increasing weight of Softgoods,

D2C, and China

• As part of the transformation, we will broaden our toolbox to include strategic

portfolio choices – a more focused company with increasingly attractive

business model


sustainable growth and value creation enabled by focused ... · business unit role role fulfilled?...

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