Investor Conference Financial Year 2018
Transcript of Investor Conference Financial Year 2018
Maître Chocolatier Suisse Depuis 1845
Please note that the Financial Analyst Conference will be audio and video recorded. The recording will be published on the internet at www.lindt-spruengli.com.
Information
Maître Chocolatier Suisse Depuis 1845
Group Management
5 March 2019Investor conference FY2018
Martin HugGroup CFO
Alain GermiquetCountry Responsibility
Dr Dieter WeisskopfGroup CEO
Guido SteinerInternational Operations
Dr Adalbert LechnerCountry Responsibility
Rolf FalleggerCountry Responsibility
3
Maître Chocolatier Suisse Depuis 1845
• Financial Year in brief 2018
• Market Insights and Highlights
Financial Figures 2018
• Sustainability Update
• Outlook
• Q&A
5 March 2019Investor conference FY2018 4
Agenda
Maître Chocolatier Suisse Depuis 1845
Europe:Flat chocolate markets in volume
North America:Changing retail landscape
Rest of the World: Uncertainties & volatility
Confectionery Landscape
65 March 2019Investor conference FY2018
• Moderate GDP growth only• Political uncertainties / shifts• Slightly positive consumer sentiment
• Declining store traffic, mainly drug & dept. stores• Low value growth in chocolate market• Unchanged positive trend to premium
• Usual volatile markets in GDP / FX / Politics• Good L&S starting position in BR CN ZA + JP • Underlying higher GDP growth creating consumer interest in premium
General: Trade / Consumer / Operations
• Hard discounters & private label• Price pressure• Growth of e-commerce
• Continued trend to premium • Value of sustainability & health• Importance of supply chain
Maître Chocolatier Suisse Depuis 1845
Global Retail sales
CHF~550 m
Key Figures
Investor conference FY2018 5 March 2019 7
Group sales
CHF 4.313 bn
Sales growth in CHF
+5.5%Organic growth
+5.1%
> 72,500Farmers in the
Lindt & Sprüngli Farming Program
EBITCHF 636.7 m
+6.9%EBIT-Margin
14.8% (+20bp)
Net incomeCHF 487.1 million
+7.6%
Operating cash flow
CHF 651.6 m
+10.3%
Buyback Programon track withCHF ~500 mby July 2019
~ 14,000 Employees
460 Boutiques & Cafés
Europe
+5.6%Rest of the world
+10.3%NAFTA
+2.8%
Dividend
CHF 1,000+7.5%
Organic growth:
Maître Chocolatier Suisse Depuis 1845
Global Retail: 460 stores worldwide
5 March 2019Investor conference FY2018
Lindt Outlet Store – O2 Mall (UK) Lindt Shop – Empire State Bldg. (USA) Lindt Shop – Vnukovo (RUS)
8
Lindt Shop – Jundiai (BRA) Lindt Shop – Okayama (JPN) Lindt Shop - Europa Park Rust (GER)
Maître Chocolatier Suisse Depuis 1845
Sales Analysis − Markets
5 March 2019Investor conference FY2018 10
38.4%
48.2%
13.4%
Total Group sales CHF
4.313 bn
North America CHF 1.66 bn (+2.8%)
Europe CHF 2.08 bn (+5.6%)
Rest of the World CHF 0.58 bn (+10.3%)
Maître Chocolatier Suisse Depuis 1845
15.3%9.7%
6.4%
5.7%
3.8%
7.3%
Germany
France
Italy
UK
CH (excl. Exportbusiness & Duty Free)
Rest of Europe
Europe: Market Split
5 March 2019Investor conference FY2018 11
Total sales Europe CHF
2.08 bn(+5.6%)
Confectionery Market
● Largest region for L&S: 48.2% of Group sales
● Slightly positive consumer sentiment
● Generally flat chocolate markets in volume
● High price pressure by trade partners
● Expansion of hard discounters and private labels
Maître Chocolatier Suisse Depuis 1845
Europe Switzerland: Highlights
5 March 2019Investor conference FY2018 12
● Decreasing per capita confectionery consumption in Switzerland (long & hot summer / border traffic)
● Total sales growth L&S Switzerland (including Export business and Duty Free): +1.6%
● Opening of Lindt’s 10th shop in Basel and a pop-up store in Lucerne
● Attractive Easter and Christmas markets at Kilchberg
● “Bachmann” Shop-in-Shop concept developed - opening in January 2019 - at Zurich’s Bahnhofstrasse
● Successful launch of innovations, e.g. Lindt bread spread in wholesale and Lindt Excellence Figue and Poire Intense
● Charity event in circus Knie for Winterhilfe with Roger Federer
Maître Chocolatier Suisse Depuis 1845
● Market share gains in all markets - strong sales growth in well established and Eastern European markets
• UK +11.3%; Germany +5.4%; France +2.9%; Italy incl. Caffarel +3.0%, Austria +10.3%, Nordics +6.3%; Spain +7.6%; Central & Eastern Europe (CEE) +37.5%; Russia +29.9%
● Focus on strong key brands “Lindor” & “Excellence”
● Launch of new product formats for sharing and snacking, e.g. Lindt “Hello Bites” or Caffarel’s new sub-brand “L’Artigianale”
● Attractive range additions, e.g. “Lindor Mint” and “Excellence 78%”
● Launch of Lindt “No Sugar-Added” bars
Europe: Highlights
5 March 2019
Investor conference FY2018
14
Maître Chocolatier Suisse Depuis 1845
North America: Market Split
5 March 2019Investor conference FY2018 16
32.2%
5.9%
USA
Canada
Total sales North America CHF
1.66 bn(+2.8%)
Mexico 0.3%(re-activated inMarch 2018)
Confectionery Market
● 2nd largest region for L&S: 38.4% of Group sales
● Solid GDP growth in 2018
● Structural changes in retail environment
● Premium segment outperforming growth of total chocolate market
● Limited impact of US trade disputes on chocolate market
Maître Chocolatier Suisse Depuis 1845
● Organic sales growth + 2.8%; double-digit growth in Canada
● Investments to consolidate the logistics network in the USA lay foundation for future profitable sales growth
● Lindt & Sprüngli USA and Ghirardelli grow faster than chocolate market
• Lindt: First time partnership with the International EMMY Awards with exclusive Lindor Lounge
• Ghirardelli: Popular collaboration with restaurant chain for “Very Cherry Ghirardelli Chocolate Cheesecake” and new TV commercial “Makes Life a Bite Better”
● Lindt Canada: Distribution and marketing initiatives e.g.: Expansion of own store network & on-and offline campaign with chocolate magazine “The Season”
North America: Highlights
5 March 2019Investor conference FY201817
Maître Chocolatier Suisse Depuis 1845
● Sales performance 2018 in line with expectations, i.e. only small decline
● Successful relaunch of sugar-free chocolate products based on Stevia extract with continued positive growth in 2018
● Stable market share in Easter and Valentine’s Day 2018
● Developed Relaunch of Assorted Pralines in 2019 to regain momentum: Improved quality and packaging
● Continued headwinds due to declining foot traffic in store formats with high L&S exposure: Drug & Department Stores (Kmart/Sears)
● Overall, expectation of business stabilization in 2019 (flat performance compared to 2018)
North America: Russell Stover
5 March 2019Investor conference FY2018 19
Maître Chocolatier Suisse Depuis 1845
13.4%
Rest of the World: Market Split
5 March 2019Investor conference FY2018 20
Total sales All other Markets CHF
0.58 bn(+10.3%)
Confectionery Market
● 3rd largest region for L&S: 13.4% of Group sales
● Dynamic premium chocolate markets:
• Growth in all markets
● Consumer demand for chocolate increasing
● Good base for future growth in BR CN ZA & JP
Maître Chocolatier Suisse Depuis 1845
Rest of the World: Highlights
5 March 2019Investor conference FY2018 21
● Double-digit growth, particularly in Brazil, China, South Africa and Japan
● New distribution center in Tokyo (stocks-, co-packing- and e-commerce-hub)
● Successful launch of innovations, e.g. Lindor Matcha & Special Lindor edition for the Soccer World Championship
● Marketing campaign in China with Chinese actor Xin Zhilei boosting brand awareness
● Chocolate Tastings with Lindt Master Chocolatier in Hong Kong
● Exclusive collaborations with travel retail partners support Duty Free Business
Maître Chocolatier Suisse Depuis 1845
All other Markets: Overview
5 March 2019Investor conference FY2018 22
Maître Chocolatier Suisse Depuis 1845
New markets increasingly important
5 March 2019Investor conference FY2018 23
Superior performance of growth markets: +20% – +40% sales increase
Russia
Japan
BrazilSouth Africa
China
Maître Chocolatier Suisse Depuis 1845
P&L Statement L&S Group
5 March 2019Investor conference FY2018 25
Organic growth of +5.1% and EBIT margin increase of +20 BP
6.8%17.4%8.0% 7.9% 4.8%
CHF million 2017 2018 Growth in CHF
SalesGrowth in local currency
4 088.4 4 313.2 +5.5%+5.1%
EBITMargin
595.414.6%
636.714.8%
+6.9%
EBITDAMargin
764.418.7%
816.218.9%
+6.8%
Net IncomeMargin
452.511.1%
487.111.3%
+7.6%
Maître Chocolatier Suisse Depuis 1845
Shareholder Return
5 March 2019Investor conference FY2018 26
Dividend payment of CHF 1 000 (reg.) or +7.5% vs. 2017 / continuous increase over the past 25 years
6.8%17.4%8.0% 7.9% 4.8%
* Subject to approval by the AGM
1992 2014 2015 2016 2017 2018*
Dividend Reg. (CHF) 39 725 800 880 930 1 000
• From Agio 325 400 300 420 360
• From Retained Earnings 400 400 580 510 640
Increase (CHF) 75 75 80 50 70
Dividend Yield Reg. 1.4% 1.3% 1.1% 1.4% 1.3% 1.4%
Payout Ratio 16.9% 49.0% 49.4% 49.8% 49.5% 50.0%
Registered Shares(at year-end in CHF)
2 800 57 160 74 620 61 900 70 485 73 300
Market Capitalisation(CHF million)
492 12 495 16 338 13 768 15 829 16 518
Maître Chocolatier Suisse Depuis 1845
Sales Growth − In CHF
5 March 2019Investor conference FY2018 27
Continuation of growth path
Absolute in CHF million (as published)Growth Rate in % (as published)
3 3853 653
3 9014 088
4 313
2 000
2 500
3 000
3 500
4 000
4 500
2014 2015 2016 2017 2018
4.8%7.9%17.4% 6.8% 5.5%
Maître Chocolatier Suisse Depuis 1845
Organic Sales Growth
5 March 2019Investor conference FY2018 28
Confirmation of Guidance given for 2018
Absolute in CHF million (as published)Growth Rate in % (organic)
3 3853 653
3 9014 088
4 313
2 000
2 500
3 000
3 500
4 000
4 500
2014 2015 2016 2017 2018
3.7%7.1%9.8% 6.0% 5.1%
Maître Chocolatier Suisse Depuis 1845
Sales − Growth Factors
5 March 2019Investor conference FY2018 29
Volume as main growth contributor
4.9% 5.1%5.5%0.2%
0.4%
0%
1%
2%
3%
4%
5%
6%
Volume Price / Mix Organic Forex Sales in CHF
Maître Chocolatier Suisse Depuis 1845
Material Costs
5 March 2019Investor conference FY2018
Material costs - including inventory changes - decreasing by -170 BP vs. 2017
Absolute in CHF millionIn % Sales
30
1 2281 306 1 376 1 425 1 434
0
200
400
600
800
1 000
1 200
1 400
1 600
2014 2015 2016 2017 2018
36.3% 35.7% 35.3% 33.1%34.8%
Maître Chocolatier Suisse Depuis 1845
Cocoa Price and Butter Ratio
5 March 2019Investor conference FY2018
36.3%
31
Price of cocoa beans slightly higher / cocoa butter slighly lower
22.5% 22.7% 21.2% 21.7%22.1%1 300
1 400
1 500
1 600
1 700
1 800
1 900
2 000
Jan. 18 Mrz. 18 Mai. 18 Jul. 18 Sep. 18 Nov. 18 Jan. 192.6
2.7
2.8
2.9
3.0
3.1
Butter ratio ICE London
Cocoa bean prices in GBP t Butter ratio
Mar. 18 May 18
Maître Chocolatier Suisse Depuis 1845
720807 846 886
938
0
200
400
600
800
1 000
2014 2015 2016 2017 2018
Personnel Expenses
5 March 2019Investor conference FY2018
Stable expense ratio – higher costs in Retail compensated by efficiency gains
21.2% 22.1% 21.7% 21.8%21.7%
32
In CHF millionIn % Sales
Maître Chocolatier Suisse Depuis 1845
Average number of employees (FTE)
Number of Employees (FTE)
5 March 2019Investor conference FY2018 33
Increase by about 600 employees – driven by expansion of Global Retail
10 712
13 180 13 539 13 94914 570
3 000
5 000
7 000
9 000
11 000
13 000
15 000
2014 2015 2016 2017 2018
Maître Chocolatier Suisse Depuis 1845
868 912982 1 030
1 144
0
200
400
600
800
1 000
1 200
2014 2015 2016 2017 2018
Operating Expenses
5 March 2019Investor conference FY2018
Higher logistics costs in the US and increased marketing investments in 2018
25.6% 25.0% 25.1% 26.5%25.2%
34
Absolute in CHF millionIn % Sales
Maître Chocolatier Suisse Depuis 1845
474519
563595
637
0
100
200
300
400
500
600
2014 2015 2016 2017 2018
Operating Profit (EBIT)
5 March 2019Investor conference FY2018
Increase in EBIT Margin by +20 BP to 14.8% (EBITA margin: 15.0%)
14.0% 14.4% 14.6% 14.8%14.2%
35
Absolute in CHF millionIn % Sales
+ 6.9%
Maître Chocolatier Suisse Depuis 1845
588646
714764
816
0
100
200
300
400
500
600
700
800
2014 2015 2016 2017 2018
EBITDA
5 March 2019Investor conference FY2018
EBITDA Margin increase by 20 BP
17.4% 17.7% 18.3% 18.9%18.7%
36
Absolute in CHF millionIn % Sales
+ 6.8%
Maître Chocolatier Suisse Depuis 1845
235253
234
185
257
0
40
80
120
160
200
240
280
2014 2015 2016 2017 2018
Capital Investments
5 March 2019Investor conference FY2018
CAPEX in line with expectations, Outlook for 2019 – 2021 CHF 300 – 350 million p.a.
37
Absolute in CHF million
Maître Chocolatier Suisse Depuis 1845
114127
152169
180
0
20
40
60
80
100
120
140
160
180
2014 2015 2016 2017 2018
Depreciation and Impairments
5 March 2019Investor conference FY2018
Increased depreciation ratio due to CAPEX (> CHF 200 million) in the past years
3.4% 3.5% 3.9% 4.2%4.1%
38
Absolute in CHF millionIn % Sales
Maître Chocolatier Suisse Depuis 1845
Tax Rate
5 March 2019Investor conference FY2018
Lower tax rates in some countries (incl. changes in US tax legislation)
27.5%25.5%
24.2%22.4%
21.5%
10%
15%
20%
25%
30%
2014 2015 2016 2017 2018
39
In % of income before taxes
Maître Chocolatier Suisse Depuis 1845
343381
420453
487
0
50
100
150
200
250
300
350
400
450
500
2014 2015 2016 2017 2018
Net Income
5 March 2019Investor conference FY2018
Increase in net income margin by +20 BP
10.1% 10.4% 10.8% 11.3%11.1%
40
Absolute in CHF millionIn % Sales
+ 7.6%
Maître Chocolatier Suisse Depuis 1845
Net Financial Position − Development
5 March 2019Investor conference FY2018
Decrease of net debt mainly driven by high free cash flow generation
41
Net cash in CHF million
-154
-154 -13-200
0
200
400
600
800
2017 Operating CashFlow
CAPEX Dividend Share Buy Back Capital Increase Other 2018
+652-257
-223
-120 +87+2
Maître Chocolatier Suisse Depuis 1845
Balance Sheet
5 March 2019Investor conference FY2018
6 976
7 250
5 500
6 000
6 500
7 000
7 500
2017 2018
60.1% 61.9%
0%
10%
20%
30%
40%
50%
60%
2017 2018
-154
-13
-200
-100
0
2017 2018
Total Assets in CHF million Equity B/S Ratio in % Net Financial Position in CHF million
Strong equity further strengthened
42
Maître Chocolatier Suisse Depuis 1845
Investments>CHF 10m p.a.
Lindt & Sprüngli Farming Program
5 March 2019 44
Lindt & Sprüngli Farming Program for Cocoa
covering 5 countriesGhana Ecuador Madagascar
013
3257
79 86
2013 2014 2015 2016 2017 2018
Overall ~50% traceable and
verified cocoa products
Papua New Guinea
97% traceable
cocoa beans
86% traceable and verified cocoa beans
Dom. Rep.
90% hazelnutsfrom ITA or sustainable
programs in TUInvestor conference FY2018
Maître Chocolatier Suisse Depuis 1845 5 March 2019Investor conference FY2018 45
86%of cocoa bean supply chaintraceable &
verified
Maître Chocolatier Suisse Depuis 1845
> 10,000 farmers
benefitting from additional
incomeopportunities
Maître Chocolatier Suisse Depuis 1845
Outlook - Environment
515 March 2019Investor conference FY2018
Overall flat chocolate consumption in developed markets
Focus on growing premium segment in developed- and well performing emerging (BRCS+J) markets
Trend to «healthy» & low-sugar high-protein snacking products
Focus on Lindt premium product portfolio and indulgence (high cocoa / low-sugar; high protein nuts / almonds)
Emerging brands with specific sustainability- / ingredients positioning
Continue and communicate substantial sustainability efforts and results through the Lindt & Sprüngli Farming Program
Importance of omni channel brand presence
Extend development of stores, e-commerce & cooperation with e-platforms of trade partners
Increasing supply chain complexity Strive for global efficiency in the supply chain through ongoing projects in planning / purchasing / logistics / production
Environment Opportunities Lindt & Sprüngli
Maître Chocolatier Suisse Depuis 1845
The Group confirms its mid- to long-term goal of an organic sales growth target of
5 – 7% combined with an average increase in EBIT of 20 – 40 basis points.
For the 2019 financial year, the Group expects organic sales and profit growth to be in
those targeted mid- to long-term brackets
Outlook - Summary
5 March 2019Investor conference FY2018 52
Maître Chocolatier Suisse Depuis 1845
Milestone – Topping Out Ceremony
5 March 2019 54Investor conference FY2018
Maître Chocolatier Suisse Depuis 1845Maître Chocolatier Suisse Depuis 1845
Q&A
Investor conference FY2018 5 March 2019
Maître Chocolatier Suisse Depuis 1845
DISCLAIMER
5 March 2019Investor conference FY2018 56
This presentation contains forward-looking statements which reflect Management‘s current
views and estimates. The forward-looking statements involve certain risks and uncertainties
that could cause actual results to differ materially from those contained in the forward-
looking statements. Potential risks and uncertainties include such factors as general
economic conditions, foreign exchange and commodity price fluctuations, competitive
product and pricing pressures and regulatory developments.