Transcript presentation - United Breweries Limited

The UB Group
PRESENTATION
ON
McDOWELL & COMPANY
UNITED BREWERIES LTD
27th October 2005
India’s
leading
group
The UB
GroupAndrinks
introduction
Beer :
• The UB
Group,
is theshare
market
leader in both Spirits &
 48%
market
nationally
 Sold in over
52 countries
Beer business
the country
st global consumer brand - Kingfisher

India’s
1
• The Group has a turnover of Rs 3700 crores
Spirits :
• The core Beverage Alcohol business account for 80% of
 54% market share in the domestic market
the group turnover
 2nd largest player in the world
• Other
interests
include
Fertilizer,
Engineering
, Life
 Both
businesses
poised
for spectacular
growth
Science,
development & Media
 Infrastructure
Compelling demographics
 Rapid
rise in disposable
income
• The Group
is professionally
managed
and is headed by
Changing
& spending pattern
Dr VijayMallya,
thelifestyle
Group Chairman
 Slow but sure dismantling of regulatory
controls
Group
(India)
UB UB
Group
(India)
The Market for Beverage Alcohol
Regulatory environment :
•
The Indian market is highly regulated,
highly restricted and highly taxed.
•
Licensing requirement exists for Raw material
procurement, Stocking of raw material, Production,
Inter-state movement, Retailing and Distribution.
•
Controls also exist on Brand entry, Advertising,
Distribution & Pricing.
These regulatory hurdles constitute
an entry barrier to the industry
UB Group (India)
The Indian Market
Re-distribution structure –
•
Government market (65%) –State government is the
sole distributor
•
Auction market (16%) – State government auctions
geographical territories which has led to monopolies /
cartels
•
Free market (19%) – Through trade licenses
•
Bargaining power in the distribution network is
commanded by players with premium brands, large
volume base and product range
The UB Group enjoys a unique advantage as the
Leader in both Spirits and Beer Segments
UB Group (India)
The Indian Market
Spirits Market • India is a 112 million cases market, growing at around
9-10% p.a
• Armed Forces – another 12.5 million cases
• Whisky dominates – 62%
• Low Spirits consumption – Per capita < 2.1 liters p.a
• Changing lifestyle, exposure to global trends fueling
growth
• MNC’s entered 10 years ago, but yet to emerge strongly
• Industry has seen some shakeout consequent to
marginalization of smaller players
UB Group (India)
UB has aggressively consolidated its leadership position by
- Acquiring brands (Gilbeys Whisky) & Companies (SWC)
- Investing heavily in brand building
Acquisition of Shaw Wallace
•
Shaw Wallace was the 2nd largest player in spirits in India
(MS - 15%).
•
UB Group acquired ~ 55% stake for a consideration of
Rs.13,000 mio in July 2005
•
Stakes increased to 75% through open offer.
•
Valuation underpinned by growth prospects and synergies
arising from combined MS.
•
Vision to bring all Spirits business together and create
“United Spirits”
•
Combined business would be amongst top 50 private
sector companies in India.
UB Group (India)
Combined brand portfolio gives leadership in ALL
flavors, geographies and price points
Restructuring Mechanics
Phase I
• Investment division of McD to be demerged into NewCo
– All non-spirits investments to be demerged
– Demerged entity to have mirror shareholding as McD
• Merge all operating spirits companies into McD
–Swap ratios decided basis KPMG & Haribhakti valuations
• SWC itself may be merged few months later upon resolution of tax
/ other litigations
- However McD will directly hold 75% of SWC even in the
interim stage
Phase II
• Merger of SWC & its upstream overseas holding companies into
McD
– McD’s holding in SWC to be transferred to a Trust
– SWC’s holding in McD to be cancelled
UB Group (India)
Restructuring Process – Status Report
• Merger schemes of Phase I filed with Stock Exchanges
• Time frame for completion of mergers
• April – May 2006
• Appointed date April 1, 2005
• Following entities being merged
• McDowell & Company Limited (Listed)
• Herbertsons Limited (Listed)
• Triumph Distillers & Vintners Private Limited
• United Distillers India Limited
• Baramati Grape Industries Limited
• Phipson Distillery Limited
• United Spirits Limited
• Asian Opportunities & Investments Limited
•McDowell International Brands Limited
•Zelinka Limited
• Shaw Wallace Distilleries Limited together with its subsidiaries
• Non-spirits Investments being divested into McDowell India Spirits
Limited, a wholly-owned subsidiary
UB Group (India)
Mergers…update
• Filing of schemes with Stock exchanges
completed
• Schemes to be filed with courts –1st week of
December’05
• Court convened meetings- Mid January
• Final hearing by Courts –End March ’06
• Filing of orders with RoC and listing by end
April ‘06
UB Group (India)
Sales Performance HY–I -- FY’06
Company
McDowell
Company
‘UNITED
SPIRITS’
UB Group (India)
Line
Main
line
TOTAL
Million cases
HY-I FY’04
HY-I FY’05
%
Grwth
9.39
11.16
19%
12.39
13.51
9%
Million cases
HY-I FY’04
HY-I FY’05
%
Grwth
Main
line
18.83
23.33
24%
TOTAL
27.13
30.17
11%
Line
Resultant
Structure
McD Results
Sep’05
UBHL & Associates
YoY
17%
Net sales
Cost of goods Sold
Trust
staff cost
Advt & Sp
Other overheads
EBITDA
y%
82%
Interest /Finance cost
70%
Tax
Profit after Tax
X%
2005
630.57
400.26
63%
337.32
MCD (Spirits)
41.68
7% z% 41.57
36.72
6%
38.84
79.43
13%
83.58
72.49
11%
39.90
36.74
15.4
7.49
7.86
UBHL & Associates
Depreciation
Profit before Tax
Rs Crores
2004
541.2
42.47%
28.26
4%
12.26
MCD
(Investments)*
61%
16.00
3%
62%
8%
7%
15%
7%
Public
16.65
6.73
57.53%
9.92
UB Group (India)
* Includes non-spirits investments Aventis, Mangalore Chemicals, UBHL, UBL etc
3%
Public
2%
United Spirits Sep ‘05
Rs Crores
Net sales
Cost of goods Sold
EBITDA
Interest/Finance cost
Depreciation
PBT
UB Group (India)
USL
957.22
477.22
51%
122.16
75.39
12.21
13%
34.56
4%
Brand Performance HY–I -- FY’06
Brand
FY’05
FY’06
% Grwth
Bagpiper Whisky
3.49
5.45
56%
McDowell’s No.1 Whisky
2.56
3.02
18%
McDowell’s No.1 Brandy
2.32
2.80
21%
McDowell’s Celebration Rum
2.03
2.18
7%
McDowell’s Signature Whisky
1.48
2.04
38%
Old Cask Rum
0.82
0.82
1%
Gilbey’s Green Label Whisky
1.15
1.11
(4%)
Blue Riband Gin Series
0.56
0.56
1%
Gold Riband Whisky
0.46
1.04
127%
Antiquity Rare Whisky
0.04
0.06
53%
Royal Challenge Whisky
0.44
0.46
6%
Director’s Special Black Whisky
2.27
3.49
54%
Director’s Special Whisky
1.93
2.38
18%
White Mischief Vodka
2.78
4.20
51%
UB Group (India)
Raw Material Price Trends
• Spirit prices have been rising since early 2004
• Failed sugarcane crop
• Increased dosage of alcohol in motor spirit
• Spirit prices softening – but quantum step-up from earlier levels
• Furnace Oil prices spiralling
7,000
40.00
35.00
6,000
30.00
5,000
25.00
20.00
3,000
15.00
2,000
10.00
1,000
5.00
-
0.00
'94-95 '95-96 '96-97 '97-98 '98-99 '99-00 '00-01 '01-02 '02-03 '03-04 '04-05
UB Group (India)
MOLASSES Rs/MT
RECTIFIED SPIRIT Rs/BL
APR MAY JUNE JULY AUG
05
05
05
05
05
ENA Rs/BL
Rs. / BL
Rs. / MT
4,000
Trends - Realization & Costs
• Cost push offset by
• Increase in NSR
• Decrease in market spends
• Strategic buying of raw material including stock build-up
• Increase in NSR / Decrease in Spends
• UB has been in the forefront of the industry initiatives to drive
prices up and spends down
• Have spearheaded industry meetings with State Govts to
obtain price increases e.g. TN, Kerala, Delhi, Rajasthan
• McDowell’s NSR increase Rs 29 / case
• Decrease in COG
• Stocks built up pre-April 2004 cushioning impact of the rise in
prices
• Imported molasses
• Strategic timing of purchases to effect price reductions
• Result:
• HY-I costs of FY’04 are still lower than HY-I of FY’05 by
Rs.19/case
• Fuel cost impact accounts for Rs.5/case
UB Group (India)
Trends - Realizations & Costs
(contd.)
• Brand building exercise continues
• Packaging Innovations introduced; Others on the anvil
• Reduces costs; beats counterfeiting
• Tetra packs
• Pouch Packs to replace mono-cartons
• Other Tamper-proof and tamper-evident packaging
• Synergies
• Detailed exercise undertaken with help of Accenture to
identify potential areas
• Procurement
• Market spends
• Terms of Trade
• Removal of clashing interests e.g. Competing Brands,
Duplicate Mfg Sources
• Duplicate Services / Infrastructure
• Costs of Business e.g. levies
UB Group (India)
Synergies – Costs & Revenues
• Total synergies estimated in excess of Rs 100 cr on a sustainable
basis (Rs 0.50/bottle)
• Major synergies from areas other than consumer price increases
• Majority of revenue synergies not quantified
UB Group (India)
Outlook FY’06 United Spirits
• Sales Volumes > 61 million cases
• Bagpiper – India’s Largest Alcobev brand > 11 million cases
• McDowell’s No.1 family - ~ 17 million cases
• EBITDA Rs. 275 crores
•Realization of synergies would have commenced in full swing
UB Group (India)
The UB Group- An introduction
• The UB Group, is the market leader in both Spirits &
Beer business in the country
• The Group has a turnover of Rs 3700 crores
• The core Beverage Alcohol business account for 80% of
United Breweries Limited
the group turnover
• Other interests include Fertilizer, Engineering , Life
Science, Infrastructure development & Media
• The Group is professionally managed and is headed by
Dr Vijay Mallya, the Group Chairman
Group
(India)
UB UB
Group
(India)
The Key
UB GroupAn introduction
Highlights
• PBDIT (UBL) for the half year Rs. 64.3 crores, and
increase
of Rs.40.5
yearSpirits &
• The
UB Group,
is the crores
marketversus
leaderlast
in both
Beer business in the country
• PBDIT (Combined business) Rs. 78.1crores, and
• The
Groupof
has
a turnover
Rs 3700
increase
Rs.68
crores of
versus
last crores
year
• The core Beverage Alcohol business account for 80% of
•theVolume
growth of 22% in UBL & in the combined
group turnover
business and continues to outperform the industry
• Other interests include Fertilizer, Engineering , Life
Science, Infrastructure development & Media
• Price increases achieved in a number of key states
• The Group is professionally managed and is headed by
Dr
Vijay Mallya,
the Group
• Interim
dividend
of 15%Chairman
paid by UBL
• UBL - Winner of Super brands award
Group
(India)
UB UB
Group
(India)
TheSummary
UB Group- An
P introduction
&L
Profitability Statement
United Breweries Limited
Half year ended
30.9.2005
Year ended
30.9.2004
31.3.2005
rupees crore
• The UB InGroup,
is the market leaderUnaudited
in both SpiritsAudited
&
Income
Net Sales/Income from operations
Other Income
Total Income
Expenditure
Cost of Production
Advertisement & Sales Promotion
Other operating Cost
PBIDT
Finance charges
Depreciation
Profit Before Non recurring items &Taxation
Non Recurring items
Provision for Taxation
Profit after tax
COMBINED BEER BUSINESS
PBIDT
Finance Charges
Depreciation
Profit Before Taxation
Beer business in the country
272.00
9.08
281.07
211.93
3.64
215.57
• The Group has a turnover of Rs 3700 crores
453.91
453.91
107.09account
104.94
• The core Beverage Alcohol business
for 80%209.12
of
the group turnover
69.03
40.64
64.31
10.39
5.68
48.24
(13.18)
(17.17)
17.90
52.47
34.36
23.80
14.61
4.39
4.80
(1.20)
3.60
78.14
26.61
16.14
35.39
10.12
25.45
15.57
(30.90)
110.17
78.01
56.61
20.82
10.57
25.22
• Other interests include Fertilizer, Engineering , Life
Science, Infrastructure development & Media
• The Group is professionally managed and is headed by
(11.18)
Dr Vijay Mallya, the Group Chairman
Group
(India)
UB UB
Group
(India)
14.04
Key
ofAn
Performance
TheDrivers
UB Groupintroduction
• The UB Group, is the market leader in both Spirits &
• Volume growth
Beer business in the country
• •Implementation
of price
increase
The Group has a turnover
of Rs 3700
crores in key
•states
The core Beverage Alcohol business account for 80% of
group turnover
• the
Reduction
in cost of sales driven by bottle
• Other interests include Fertilizer, Engineering , Life
cost
Science, Infrastructure development & Media
• •Synergized
operationmanaged
between
& by
MAL
The Group is professionally
and UBL
is headed
Dr Vijay Mallya, the Group Chairman
Group
(India)
UB UB
Group
(India)
The UBShare
Group- Movements
An introduction
Market
2003-04
• The UB Group, is the market leader in both Spirits &
Others, 17
M M, 6
UBL
Beer business in the country
UBL, 46
SAB
MM
• The Group has a turnover of Rs 3700 crores
Others
SAB, 31
2004-05
• The core Beverage Alcohol business account for 80% of
Others, 16
M M, 5
the group turnover
UBL, 48
SAB
• Other interests include Fertilizer, Engineering , Life
SAB, 31
Apr to Sept 05
Science, Infrastructure development & Media
17
• TheOthers,Group
is professionally
managed and is headed by
UBL
M M, 6
UBL, 49
Dr Vijay Mallya, the GroupM Chairman
M
SAB, 28
Group
(India)
UB UB
Group
(India)
UBL
SAB
Others
MM
Others
The UB GroupAn introduction
Volume
Performance
• The UB Group, is the market leader in both Spirits &
Volume Performance
Beer business in the country
100
• The
Group91has a turnover of Rs 3700 crores
Volume - mio cases
90
• The80
core Beverage Alcohol business account for 80% of
the group
turnover
70
57
Industry
60
• Other interests include
Fertilizer, Engineering , Life
44
UB
50
36
Science,
40 Infrastructure development & Media
Combined
27
22
22
30
• The Group is professionally managed and is headed by
20
9 11
Dr Vijay
10 Mallya, the Group Chairman
0
Qtr Sept 05
Ytd Sept 05
2004-05
Group
(India)
UB UB
Group
(India)
The UB GroupAn introduction
Analysis
by Pack
Type
Pack Salience Sept 04
Draught
1%
• The UB Group,
is the market leader in both Spirits &
Cans
Bottle Pint
10%
1%
Beer business in the
country
• The Group has a turnover of Rs 3700 crores
Bottle Quartz
88%
• The core Beverage Alcohol business account for 80% of
the group turnover
Pack Salience Sept 05
• Other interests include Fertilizer, Engineering
, Life
Draught
1%
Science, Infrastructure development & Bottle
Media
Pint
Cans
2%
11%
• The Group is professionally managed and is headed by
Dr Vijay Mallya, the Group Chairman
Bottle Quartz
86%
Group
(India)
UB UB
Group
(India)
Average
Cost of sales
The Realization
UB Group- Anand
introduction
140
Realization drivers:
Sales Realization Cost Index
• Andhra
– Price&revision after 7
• The UB Group, is the market leader in both
Spirits
129
years
120Beer business in the country
115
• Kerala – Price revision after 4
106
years
100• The
100 Group has a turnover of Rs 3700 crores
• Delhi – Matched Kerala prices
80•
The core Beverage Alcohol business account
for 80%
of market to
• Rajasthan
– Auction
72
70
Govt. distribution, policy changes
68
group turnover
60the63
40•
Other interests include Fertilizer,
20Science,
• Price increases in 2004-05 to
offset bottle
cost maintained
Engineering
, Life
Cost Drivers:
Infrastructure development & Media
• Rationalization in bottle prices
• The Group is professionally managed and
is headedof by
• Optimization
Power & inputs
0
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ar
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4
M
ay
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4
Ju
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4
Se
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Ja
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ar
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M
ay
-0
5
Ju
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Dr Vijay Mallya, the Group Chairman
Group
(India)
UB UB
Group
(India)
costs
SR
COS
• Synergy of operation –
economies of Scale
The UBofGroupintroduction
Cost
SalesAnAnalysis
Cost to Sales - Ytd Sept 05
• The UB Group, is the market leader in both Spirits &
Beer business in the country
Bottles
41%
• The Group has a turnover of Rs 3700 crores
• The
Otherscore Beverage Alcohol business account for 80% of
59%
the group turnover
Cost to Sales - Ytd Sept 04
• Other interests include Fertilizer, Engineering , Life
Science, Infrastructure development & Media
Others
48%
• The Group is professionally managed and is headed by
Dr Vijay Mallya, the Group Chairman
Group
(India)
UB UB
Group
(India)
Bottles
52%
The UB GroupAn introduction
Integration
of UBL
and MABL
• The UB Group, is the market leader in both Spirits &
• Rationalisation of brand portfolio by state
Beer business in the country
• •Changes
to sourcing
to achieve least
The Group has
a turnover ofof
Rsbeer
3700 crores
supply
•cost
The core
Beverage Alcohol business account for 80% of
group turnover
• the
Closure
of Mumbai based MABL head office
• Other interests include Fertilizer, Engineering , Life
• Science,
Synergies
taken in the areas of:
Infrastructure development & Media
Raw
material
procurement
• –The
Group
is professionally
managed and is headed by
Dr– Vijay
Mallya, the
Chairman
Marketing
andGroup
promotional
– Headcount
Group
(India)
UB UB
Group
(India)
costs
TheTrading
UB Group-Outlook
An introduction
• Strong volume performance expected to continue
• The UB Group, is the market leader in both Spirits &
– Strong beer segment to continue lead
Beer business in the country
• Hardening of raw material costs
• The
Group has a turnover of Rs 3700 crores
– Barley
• • Other
Costs
in lineAlcohol
with thebusiness
growth account
in volume
The core
Beverage
for 80% of
• the
Substantial
capital expenditure – over Rs.400 crore
group turnover
approved by the board to be incurred over a period of
• Other interests include Fertilizer, Engineering , Life
seven years to meet the growing demand
Science, Infrastructure development & Media
• Proposal to discuss merger of various subsidiaries, in
•place
The Group
is professionally
managed
and profits.
is headed by
– Substantial
improvement
in cash
Dr Vijay Mallya, the Group Chairman
Group
(India)
UB UB
Group
(India)
The UB Group- An introduction
• The UB Group, is the market leader in both Spirits &
Beer business in the country
• The Group has a turnover of Rs 3700 crores
THANK
YOU account for 80% of
• The core Beverage
Alcohol business
the group turnover
• Other interests include Fertilizer, Engineering , Life
Science, Infrastructure development & Media
• The Group is professionally managed and is headed by
Dr Vijay Mallya, the Group Chairman
Group
(India)
UB UB
Group
(India)