2017 Earnings Presentation April 2018
This presentation has been prepared by Beluga Group, Co. (the “Company“, or
“Beluga Group”) and together with its subsidiaries. By attending the meeting where the
presentation is made, or by reading the presentation slides, you agree to the following
limitations and notifications. This presentation is strictly confidential to the recipient, may
not be distributed to the press or any other person, and may not be reproduced in any
form, in whole or in part. Failure to comply with this restriction may constitute a violation
of applicable securities laws. This presentation does not constitute or form part of, and
should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or
acquire shares of the Company or any of its subsidiaries in any jurisdiction or an
inducement to enter into investment activity in any jurisdiction. Neither this presentation
nor any part thereof, nor the fact of its distribution, shall form the basis of, or be relied on
in connection with, any contract or commitment or investment decision whatsoever.
This presentation may contain statements that are, or may be deemed to be,
forward-looking statements within the meaning of the U.S. federal securities laws and
are intended to be covered by the safe harbors created thereby. Examples of such
forward-looking statements include, but are not limited to statements of the Company’s
predictions, forecasts, projections, strategies, plans, targets, objectives, expectations,
estimates, intentions, beliefs or goals, including those related to acquisitions, sales,
products or services, results of operations, financial condition, liquidity, prospects or
dividend policy; statements concerning future business or industry performance; other
statements that do not relate strictly to historical or current facts; and assumptions
underlying such statements.
By their very nature, forward-looking statements involve inherent risks and
uncertainties, both general and specific, and risks exist that the forward-looking
statements will not be achieved. Among other things, forward-looking statements are
based on numerous assumptions regarding the Company’s present and future business
strategies and the environment in which the Company will operate in the future.
Readers should be aware that several important factors could cause the
Company’s assumptions to be incorrect, and could cause actual results to differ
materially from the predictions, forecasts, projections, strategies, plans, targets,
objectives, expectations, estimates, intentions, beliefs or goals expressed in such
forward-looking statements.
These factors include:
• changes in political, social, legal or economic conditions in Russia generally, or in
the regions of Russia in which the Company operates, including changes in levels
of consumer spending and demand for some or all of its products;
• changes in consumer preferences and tastes, demographic trends or perceptions
about health related issues;
• increased competitive product and pricing pressures and unanticipated actions by
competitors that could impact the Company’s market share, increase expenses
and hinder growth potential;
• the ability to complete business combinations, partnerships, acquisitions or
disposals, existing or future, and to achieve integration, expected synergies and/or
costs savings;
• levels of marketing, promotional and innovation expenditure by the Company and
its competitors;
• the Company’s ability to protect its intellectual property rights;
• increasing recognition in Russia of product liability and personal injury torts;
• legal and regulatory developments and changes in the policies of the government
of the Russian Federation, including regional authorities, including regulatory
developments or policy changes regarding consumption of or advertising for
spirits, or taxation;
• changes in the cost of raw materials and labor costs;
• renewal of distribution rights and contracts on favorable terms when they expire;
• technological developments that may affect the distribution of products;
• changes in financial and equity markets, including significant interest rate and
foreign currency exchange rate fluctuations, which may affect the Company’s
access to or increase the cost of financing or which may affect the Company’s
financial results;
• changes in accounting standards, policies or practices;
• availability of qualified personnel, including accounting personnel; and
• ability to identify other risks relating to the Company’s business and manage the
risks associated with the aforementioned factors.
This list of important factors is not exhaustive. Readers should carefully
consider such factors and other uncertainties and events, especially in light of the
political, economic, social and legal environment in which the Company operates.
Such forward-looking statements speak only as of the date on which they are made,
and the Company does not undertake any obligation to update or revise any of them.
Readers should not place undue reliance on forward-looking statements. The
Company does not make any representation, warranty or prediction that the results
anticipated by such forward-looking statements will be achieved, and such forward-
looking statements represent, in each case, only one of many possible scenarios and
should not be viewed as the most likely or standard scenario.
2
COMPANY’S 2017 FINANCIAL HIGHLIGHTS
3
4% total volume increase
Sales grew 6% and reached 61 bln. Rubles
Net Revenue increased by 4% to 37 bln. Rubles
Operating profit increased by 15% to 2,9 bln. Rubles
EBITDA grew 13% to 3,6 bln. Rubles
EBITDA and Operating margins improved by 0,7 pp.
138% growth of Net Income to 655 mln. Rubles. Net margin improved by 1 pp.
COMPANY’S HIGHLIGHTS
•#1 distilled spirits producer in Russia
•#1 vodka producer in Russia
•#1 independent importer in Russia
•#1 flavored spirits producer including bitters, herbal liquors, flavored liquors
•#3 brandy producer
•12% legal vodka market share
•10% brandy market share
•20% flavored liquors market share
•Belenkaya is #1 vodka in Russia
•BELUGA is dominant player in super-premium category
•Myagkov is leading brand in low-premium category
Leadership
Market position
Brands
Distribution
•#1 best in class distribution platform in Russia
4
6 609 6 779
0
2 000
4 000
6 000
8 000
2016 2017
+3%
29 245 30 393
0
11 000
22 000
33 000
2016 2017
+4% 35 903
37 303
0
20 000
40 000
2016 2017
+4%
18%
82%
Alcohol
Food
18%
82%
Alcohol
Food
CONSOLIDATED REVENUE
Consolidated Revenue, million RUB Revenue breakdown by segments, million RUB (1)
Consolidated Revenue split, %
Source: Company’s IFRS financial statements
Note (1): Net of intersegment operations
Main driver for revenue increase was double digit (+35%)
growth of exclusive distribution and export (+25%) volumes.
Important note:
Due to new Trade Law implementation in the beginning of 2017
the Company’s PnL structure changed. The Company provided
reduced prices for retail chains and, accordingly, cut the trade-
marketing expenses (previously, significant part of the trade-
marketing costs was reimbursed via retro-discounts).
Alc
ohol (1
) F
ood
(1)
5
2016 2017
1 485 1 545
0
800
1 600
2016 2017
+4%
13 010 12 064
0
7 000
14 000
2016 2017
-7% 14 518
13 675
0
4 000
8 000
12 000
16 000
2016 2017
-6%
10%
90% Alcohol
Food
12%
88%
Alcohol
Food
CONSOLIDATED GROSS PROFIT
Consolidated Gross Profit, million RUB Gross Profit breakdown by segments, million RUB (1)
Consolidated Gross Profit split, %
Source: Company’s IFRS financial statements
Note (1): Net of intersegment operations
The consolidated Gross Profit and the Alcohol segment Gross
Profit declined together with the Distribution Cost (decreased
by 17%) due to changes in the PnL structure which were
caused by implementation of the New Trade Law since 1st of
January 2017. The Company provided reduced prices for retail
chains and simultaneously cut significantly the trade-marketing
expenses. Changes in the PnL structure are neutral for bottom
line profitability.
Alc
ohol
(1)
Food (
1)
6
2016 2017
3 218
3 625
0
2 000
4 000
2016 2017
+13%
CONSOLIDATED EBITDA AND NET PROFIT
EBITDA, million RUB G&A and distribution expenses , million RUB
Operating profit and Net Income, million RUB
Main reasons of 19% year-on-year increase in G&A:
4% volume growth;
growth of rent expenses;
increase in expenses on staff education.
17% year-on year decrease in distribution expenses due to the
changes in PnL structure which were caused by new Trade Law
implementation in the beginning of the year. According to the
Law the only 5% discount is allowed and no trade-marketing
activity at a producer cost.
EBITDA grew by 13% mostly due to volume growth and
proactive pricing policy.
Net income grew by 138% due to EBITDA growth and decline in
financial expenses.
2 486
2 848
275
655
0
1 000
2 000
3 000
2016 2017
2478 2951
9 346 7 719
0
4 000
8 000
12 000
2016 2017
G&A Distribution expenses
-17%
+19%
+15%
+138%
10.2% 9.7%
7
Source: Company’s IFRS financial statements
2802 2930
900
5 647 6 123 10 112
0
4 000
8 000
12 000
2015 2016 2017
Long tem debt Short term debt Net debt
2016 2017 Change, %
Debt 9 053 11 012 +22%
Cash & cash equivalents 1 010 819 -19%
Net Debt 8 043 10 193 +27%
Equity & reserves 19 453 19 448 0%
Total capital (1)
26 421 30 404 +15%
EBITDA 3 218 3 625 +13%
Net Debt/Equity 0.41 0.52 +0,11pp
Net Debt/Total capital 0.31 0.33 +0,02pp
Net Debt/EBITDA 2.50 2.81 +0,31pp
42%
26%
32%
90%
2% 8%
Less than 1 year
1-2 years
2-5 years
Less than 1
year
1-2 years
2-5 years
BELUGA GROUP GROUP DEBT STRUCTURE
Debt evolution, million RUR
7 288
8 043
10 193
8 449 9 503
11 012
As of 31 December, 2016 As of 31 December, 2017
• The cost of borrowing significantly decreased (9.4%
p.a. in 2017 vs 12.5% p.a. in 2016).
• Share of the unsecured loans reached 95%.
• The structure of the debt was considerably improved:
only 8% of the debt is short-term.
• The Company’s debt grew mainly due to growth of
our sales and inventories.
Note: Company’s IFRS audited statements,
Note (1): Total Capital = (Long term debt + Total Equity)
8
INCOME STATEMENT
Source: Company’s IFRS financial statements
9
2014 2015 2016 2017 YoY, %
Net revenue 28 163 30 706 35 903 37 303 4%
Cost of sales (16 135) (18 033) (21 385) (23 628) 10%
Gross profit 12 028 12 673 14 518 13 675 -6%
Gross margin 43,0% 41,0% 40,4% 36,7% -3,7 pp.
G&A expenses (2 411) (2 582) (2 478) (2 951) 19%
Distribution expenses (7 389) (8 260) (9 346) (7 719) -17%
Other income/(expenses) 46 278 (208) (157)
Operating profit 2 274 2 109 2 486 2 848 15%
Operating margin 8,0% 7,0% 6,9% 7,6% 0,7%
EBITDA 2 973 2 885 3 218 3 625 13%
EBITDA margin 11,0% 10,0% 9,0% 9,7% +0,7 pp.
Net finance costs (945) (1 737) (2 039) (1 931) -5%
Income tax (239) (131) (178) (271)
Net income 1 090 241 275 655 138%
Net margin 4,0% 1,0% 0,8% 1,8% +1 pp.
2014 2015 2016 2017
Operating profit 2 274 2 109 2 486 2 848
Depreciation and amortisation 699 776 726 768
Other non-cash transactions 90 (123) 183 124
Changes in working capital (2 316) 1 332 (1 231) (1 771)
CF from operating activities 747 4 094 2 164 1 969
Interest paid (1 265) (1 918) (2 004) 1 849
Income tax paid (360) (109) (63) 578
Net CF from operating activities (878) 2 067 97 (458)
Acquisition of subsidiaries and associates 11 (700) 16 (380)
Acquisition and disposal of PPE (694) (245) (500) (362)
Net CF from investing activities (683) (945) (484) (742)
Issue of share capital - - - -
Repurchase of own shares (418) (177) (179) (913)
Loans received 30 926 30 351 37 532 40 885
Loans repaid (28 916) (30 596) (37 117) (38 963)
Net CF from financing activities 1 576 (443) 236 1 009
Net increase/(decrease) in cash 15 679 (151) (191)
Cash at beginning of the year 467 482 1 161 1 010
Cash at end of the period 482 1 161 1 010 819
CASH FLOW
Source: Company’s IFRS financial statements
10
APPENDICES
APPENDICES
COMPANY’S STRATEGY
12
STRATEGY
CONTINUED DEVELOPMENT OF THE DISTRIBUTION
PLATFORM WITH A FOCUS ON DIRECT SALES
ACHIEVING DIRECT CONTACT WITH END
CUSTOMERS
THROUGH TRADE MARKETING
BEST IT PLATFORM
EXPANSION OF THE GENERAL EXPORT
GEOGRAPHY AND IN PARTICULAR
BELUGA BRAND
IMPROVING THE QUALITY OF IMPORTED
OPERATIONS THROUGH TARGETED SELECTION
OF PARTNERS
FOCUS ON SUPER-PREMIUM INTERNATIONAL VODKA
MARKETS
DIVERSIFIED BRAND PORTFOLIO, COVERAGE OF ALL
SEGMENTS
FOCUS ON PREMIUM AND MARGINAL PRODUCTS
INCREASE IN PRICE AND
BRAND RECOGNITION
STRENGTHENING THE PRESENCE
IN GROWING CATEGORIES
‣
PRODUCTION, SALE AND
DISTRIBUTION OF ITS OWN
ALCOHOL PRODUCTS
USE OF MODERN TECHNOLOGIES TO ENHANCE
THE OVERALL OPERATIONAL PERFORMANCE
BRAND
PORTFOLIO DISTRIBUTION
EXPORT KEY
BUSINESS
Become the dominant spirits company in Russia with a diversified portfolio of brands and products and best
in class distribution platform
90 000
- - - - -
100 000
13
13,1%
10,5%
9,4% 9,2%
6,4%
Beluga Group Tatspirtprom Roust Kristall ASG
11,8%
10,8% 10,2%
8,4%
7,4%
Allians ALVISA Beluga Group KVC Kin
volume
TOP 5 FLAVORED LIQUORS PRODUCERS, 2017 TOP 5 VODKA LEGAL PRODUCERS, 2017
TOP 5 BRANDY PRODUCERS, 2017
BELUGA GROUP RUSSIA MARKET
RUSSIAN SPIRITS MARKET (MAIN CATEGORIES), 2016
000, 9L Cs.
volume
13 000 11 456
4 333
-
10 000
20 000
30 000
Vodka FlavouredLiqours (LVI)
Brandy &Cognac
Whisky
Source: Rosstat,
22,5%
8,9% 8,4% 7,4%
6,1%
Beluga Group Tatspirtprom OPVZ Sordis Global Spirits
volume
6,2%
5,6% 5,5%
4,9% 4,6%
3,9% 3,7%
0%
4%
7%
60,1%
11,3% 9,4%
3,1% 3,1% 2,8% 2,4%
0%
35%
70%
12,6%
9,9%
7,4% 7,4% 6,6%
5,6% 5,3%
0%
4%
8%
12%
16%
STANDARD ECONOMY
*Source: Nielsen DJ2015 - ON2016
14,7% 13,4%
8,3% 7,8% 6,5% 6,5%
5,9%
0%
4%
8%
12%
16%
SUPER-PREMIUM LOW-PREMIUM
LEADING BRANDS* SEGMENT’S SHARES
14
VODKA PORTFOLIO
RUR 405 RUR 525 RUR 600 RUR 750 RUR 1200 – RUR 5000
TSAR Belenkaya
(Whitish)
Russky
Lyod
(Russian Ice)
Myagkov Arkhange
lskaya
VEDA
ICE
Beluga
Noble
Beluga Trans
atlantic Racing
Beluga
Noble
Celebration
Beluga
Allure
Beluga
Gold Line
Tra
ditio
na
l
qu
alit
y
vo
dka
Pu
re,
org
an
ic
vo
dka
Pa
trio
tism
,
Vic
tory
Tre
nd
y
Vo
dka
fo
r
co
ckta
ils
Cra
ft,
au
the
ntic
bra
nd
Hig
h-q
ua
lity
pro
du
ct
Han
dcra
fte
d
Nob
le v
od
ka
Vo
dka
fo
r
Tre
nd
se
tte
rs
Vo
dka
fo
r
sp
ecia
l
occa
sio
n
Ari
sto
cra
tic
Ga
str
on
om
ic
vo
dka
Low-middle Premium
50% ownership.
Exclusive agreement
for production and
distribution
Sub-premium Super-premium, Ultra-premium Middle
DIVERSIFIED PORTFOLIO OF NATIONAL BRANDS
15
VODKA PORTFOLIO
Reta
il
Pri
ce
pe
r 0,7
5 L
RUR
705
RUR
765
RUR
840
RUR
880-1100 RUR 750 RUR 325-465 RUR 615 RUR 585 RUR 570 RUR 550
Zolotoy
Rezerv
(Golden
Reserve)
Staraya
Gvardia
(Old
Guard)
Le Lion Bastion Fox&Dogs Dr August Ussuriiskiy
Balsam
Ussuriiskiy
Liqueur Captain’s Rum Captain’s Gin
Tra
ditio
na
l,
cla
ssic
, R
ussia
n
bra
nd
y
His
tory
, R
ussia
n
vic
tory
Cla
ssic
Fre
nch
sty
le. 1
00
%
Fre
nch
sp
irits
Str
on
g a
nd
em
otio
na
l
Tra
ditio
na
l S
co
tch
Natu
re, u
niq
ue
taste
s
Eco
, p
ure
na
ture
Vo
ya
ge
,
Ad
ve
ntu
res
Se
a A
dve
ntu
res
Low-middle Middle Low-premium Premium
Brandy Balsam and herbal liqueurs Flavored liquors Gin Whiskey Rum
DEVELOPING PORTFOLIO OF NATIONAL BROWN SPIRITS BRANDS
16
BROWN SPIRITS PORTFOLIO
Source: Company data
Reta
il
Pri
ce
pe
r 0,7
5 L
BELUGA GROUP IMPORTED SPIRITS PORTFOLIO
SCOTCH WHISKY IRISH WHISKY
COGNAC
BRANDY
BOURBON
TEQUILA
GIN SAMBUCA
BITTER RUM ABSINTHE
17
IMPORT. SPIRITS
BELUGA GROUP STRATEGY IN IMPORTED WINE BUSINESS
18
IMPORT. WINE
FOCUS ON MIDDLE&PREMIUM PRICE SEGMENTS
INVEST IN TRADE MARKETING AND BRAND BUILDING
LEVERAGE DISTRIBUTION
PLATFORM IN WINE DEVELOPMENT
DEVELOPMENT NOBLE HOUSE FOR PREMIUM IMPORTED PRODUCTS
Address: 30/1 Obrucheva Str., bldg. 1
Moscow 117485
Russia
Phone: +7 495 510 2695
+7 495 775 3050
Fax: +7 495 510 2697
+7 495 775 3052
E-mail: [email protected]
www.sygroup.ru
CONTACTS
19