The East Asiatic Company Ltd. A/S - library.corporate...
Transcript of The East Asiatic Company Ltd. A/S - library.corporate...
©EAC2002-11-27 Page 2
EAC at a Glance
Focus on Asia and South America– Asia accounts for 62%, South America for 27% of turnover in 2001
Focus on 4 market-leading consumer and service businesses– Nutrition and Foods, Industrial Ingredients and Moving & Relocation Services
Strong growth in the 4 strategic businesses– Since 1998, turnover increased
by 62%, and operational profits more than tripled
– 4 businesses account for 92% of Group’s operating result in 2001 vs. 60% in 2000
0
100
200
300
400
500
600
1998 1999 2000 2001Operating profit in Strategicbusinesses
DK
Km
Operating profit in strategic businesses
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EAC’s Restructuring
Divestitures: Businesses 4 Entities 28•Nutrition
•Foods•Chemicals
•Santa Fe•Timber
•Wool
•Trading •Technical •Fibertex
•DFD •Shipping•Consumer Products
•Graphics
•Logistics
Divestitures: Businesses 5 Entities 8
•Trading 2002
2000
1998
Selectively build 4 core businesses
Divestitures: Businesses 9 Entities 43•Nutrition
•Foods (reduced)
•Chemicals
•Santa Fe•Consumer Products (reduced)
•Trading •Technical
•Fibertex
•DFD
•Various Investments
•Timber•Wool
• Nutrition• Industrial
Ingredients
• Foods• Santa Fe/Global Silverhawk
Use proceeds and free cash to pay
down debt
Exit bulk of non-core businessesin the short run
Use cash to acquire and strengthen2003
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EAC’s Strategy : 2002
Growth in the strategic businesses– Product extensions, innovation, geographic expansion and acquisitions, taking
advantage of the Group’s strong capital structure
Continue to invest in and develop our own brand– DKK 343m in advertising and promotion spendings in 2001– DKK 312m invested in intangible and tangible fixed assets in 2001
Continue restructuring and divestment of remaining non-core activities
Create value for stakeholders– Credibility as a company creating shareholder value through long-term rises in share
price– Share buy-back programmes of DKK 100m both in 2001 and 2002
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EAC’s Strategy : 2002/03
Further focus
To acquire and to expand those businesses with the most attractive potential – notably Nutrition in Asia.
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EAC NUTRITION - PROFILE
EAC Nutrition develops, produces and markets a wide range of infant and child nutrition products. EAC Nutrition enjoys a market-leading position in its established markets in China, Malaysia, Singapore and Thailand.
©EAC2002-11-27 Page 8
EAC NUTRITION – ORIGINS
Dumex trademark “Danish United Medical Exports” -was first introduced by The East Asiatic Company Ltd (EAC) in 1946Used initially for pharmaceutical productsDumex baby food products launched in 1953 and quickly achieved high popularityDumex has a long history in child nutrition:– Malaysia since 1958– Thailand since 1959– Singapore since 1960– China and Vietnam since 1992– Philippines since 2000
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EAC NUTRITION – MARKET PRESENCE
CHINA
Shanghai
Malaysia
Singapore
China
Thailand
Saudi Arabia
Vietnam Philippines
ISO 9002/HACCP
certified plants in:
-Shanghai
-Kuala Lumpur
-Bangkok
EAC Nutrition holds a strong no. 1 or 2 position in main markets
©EAC2002-11-27 Page 11
EAC NUTRITION – MARKET PRESENCE
EAC Nutrition holds a strong no. 1 or 2 position in main markets
CHINA
Shanghai
Malaysia
Singapore
China
Thailand
Saudi Arabia
Vietnam Philippines
ISO 9002/HACCP
certified plants in:
-Shanghai
-Kuala Lumpur
-Bangkok
Pakistan
Bangladesh
IndiaPopulation
1 bn
India: Approx. 22m births p.a.
Sri Lanka
©EAC2002-11-27 Page 12
India Key Statistics
Country population 1,027m India
Bombay
Bangalore
Chennai
New Delhi
Calcutta
.
..
..
.Hyderabad
GDP growth rates 5.7% in 2001 & 5.5% in 2002F
GDP per capita is US$ 460
Birth rate: over 1.9%
23 major metros more than 1m people. 277 minor metros between 0.5 – 1m people.
Bombay 17.0mCalcutta 13.2mNew Delhi12.4mHyderabad 7.3mChennai 6.9mBangalore 5.8m
Source: The World Bank
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India is Worlds largest milk producer
2 broad market segmentations
Fresh milk & dairy
Dry Milk based nutrition:
Dry Milk based nutrition market 120,000 tonnes / DKK 3.8bn
Split into 3 Sub-segments
Infant & Child Nutrition 45,000 tonnes / DKK 1.2bn
Milk powder
Growth rates of 5% p.a.
Weaning baby Food 20,000 tonnes / DKK 0.8bn
Cereal & Milk based
Growth rates of 5% p.a.
Milk Food Nutrition 55,000 tonnes / DKK 1.8bn
Milk Food powderbeverages
Growth rates of 8% p.a.
©EAC2002-11-27 Page 14
Market segmentation for Dry Milk based Nutrition in India
1200
800
1560
240
Infant & ChildNutrition
Weaning BabyFood
Ethical ProteinSupplements
Milk BasedNutritionBeverage
1800
Market sizes in DKK million
Protinex
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Protinex (1)
“Pre-digested” protein supplement
Contains Vitamins, Mineral and carbohydrate
One pack size/one flavour
Can be purchased OTC from chemist only distribution
Prescribed by doctors for :pregnant women, recovery from surgery, children for healthy growth, malnutrition , burns
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Protinex (2)
2001 sales of DKK 36m
Compound annual growth rate of 12.5%
Over 20% operating margins
Market leader with 28% share of protein supplements market
Protein supplements segment estimated at DKK 130m
Protinex distributed in more than 70 cities with a catchment population above 100m
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Protinex Brand Awareness - Doctors
Highest top of mind awareness forHighest top of mind awareness for ProtinexProtinex
Brand Ist mention
Protinex
49%
Others
26%
B- Protein
19%
Threptin
6%
Source: AC Nielsen
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Protinex Brand Awareness - Doctors
Brand of Ethical Protein Supplement Brand of Ethical Protein Supplement recommendedrecommended
Source: AC Nielsen
32
23
95 4
1 1
65
32 33
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58 8
Proti
nex
B-Prote
inTh
reptin
Protinu
lesNu
treva
GRD
Alprov
it
Most Often
TotalMentions
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Terms of the transaction
EAC has signed a Memorandum of Understanding to acquire the Protinex brand from Pfizer India and theDumex trademark in India and other subcontinent countries from Pfizer Products Inc., subsidiaries of world’s largest pharmaceutical company Pfizer Corp.
Total consideration of DKK 105m
DKK 52.5m to Pfizer Corp and Pfizer Products
DKK 52.5m to Pfizer India
Transaction is expected to be effective by end 2002
Final contracts scheduled for signing 29th November
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Transition Arrangements
Pfizer will contract manufacture Protinex for a minimum period of 3 years
EAC will take over responsibility for medical detailing, marketing and distribution on a region-by-region basis:
2003: territories representing circa 20% of sales
2004: circa 45%
2005: circa 65%
2006: 100%
EAC books sales and margins in territories it is responsible for.
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An Advantageous Starting Point
India with a population of over 1 billion people is a high potential market for EAC Nutrition.
Acquisition of Protinex reduces the risk and learning curve in entering the Indian market
Protinex is market leader in the ethical protein segment
Acquisition leverages EAC’s experience in building businesses in emerging markets
Dumex trademark in India offers brand awareness with medical profession and trade
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The Strategic Rationale for Protinex
Low Risk Entry Platform (1)
Strong future entry platform for Dumex branded nutrition products
Reduced risk through transitional arrangement with Pfizer ensuring smooth handover and knowledge transfer
Transitional arrangement allows EAC time to build organisation and learning in India
Strong distribution platform in chemist outlets
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The Strategic Rationale for Protinex
Low Risk Entry Platform (2)
Synergy in medical detailing: fit with EAC Nutrition products
Research confirms Protinex as brand leader in its category in terms of awareness and recommendation with medical profession
Potential for new product range extensions under Protinex brand to expand to larger nutritional supplement market worth DKK 1.6 bn
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The Strategic Rationale for the Dumex Trademark Acquisition
Dumex in India is a long established trademark used on a number of OTC products
EAC founded Dumex in India in 1946. The first Dumex production facility worldwide was established in Bombay in 1954. EAC sold the Dumextrademark to Pfizer in 1958
Pfizer India has marketed a number of medicines under the Pfizer-Dumex name. A strong heritage in India for Dumex still exists with the medical profession
The repurchase of Dumex by EAC provides EAC Nutrition with a unique opportunity to build on Dumex brand successes achieved in Asia and establish Dumex in the second largest population market in the world.
DUMEX
Dumex trademark as it appeared in the 1950’s is still being prominently used on the Protinex tin
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Summary - Protinex
Platform for EAC Nutrition products
Low risk entry mode
Synergies in distribution, medical detailing when EAC Nutrition enters the infant and child nutrition market in India
Opportunities to develop Protinex brand through product improvement and extensions
Attractive margins
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Summary – Dumex Trademark
Credibility with Indian medical professionals
India and other subcontinent countries
Consistent branding across Asia