Royal Unibrew sets new goals with double up
The main objective with the new strategy plan double up is that, in 2010, Royal
Unibrew will double earnings from operations (EBIT) to DKK 500 million. Organic
growth will increase revenue to DKK 5 billion, to which should be added
acquisitions.
Royal Unibrew today presents its strategy plan double up for 2008-2010. The
main objective of the plan is to improve the Group's profitability
significantly and to double earnings from operations (EBIT) to DKK 500 million
in 2010. The ambition is that revenue should be increased to DKK 5 billion
through organic growth. Moreover, there will be contributions from possible
acquisitions in the main markets in Northern Europe, Italy and in the
international markets for malt beverages.
The means for the increase in profitability is a number of initiatives within
Customer & Consumer Excel-lence, Operational Excellence and Acquisition &
Integration Excellence.
Customer & Consumer Excellence
Royal Unibrew's goal for 2008-2010 is to achieve average, annual organic
revenue growth (CAGR) of 6%. Growth is expected to exceed the underlying market
growth.
In all main markets Royal Unibrew is planning extensive innovations with a
large number of new prod-ucts, new taste variants and new packaging within
beer, soft drink, juice, mineral water and malt bever-ages. At the same time
Royal Unibrew will allocate more means and resources for the development and
marketing of own strategic brands to continue their growth. On the other hand,
the Group will have a more opportunistic approach to products in low-price
segments.
Royal Unibrew will continue to increase sales and marketing competences in the
Group by systematically utilising the experiences within local and regional
marketing and by giving the salesmen new tools. The Group is eg establishing a
new Sales & Marketing College, where 140 executives will go through training
which they are to propagate in the Group.
Operational Excellence
The production structure should constantly be improved. As announced on 7
January, it is the intention to close down production in Aarhus, and after the
closing down of Maribo Bryggeri, all brewery and tapping in Denmark will be
gathered in two large entities in Faxe and Odense. The concentration means that
Royal Unibrew will reduce capacity costs, will achieve higher flexibility and
at the same time elimi-nate double investments.
A number of production processes need to be optimised, eg by rolling out LEAN,
and moreover Royal Unibrew will insource production of PET packaging
(non-returnable packaging) in Denmark. The Group will also through various
initiatives further improve logistics, storing and delivery processes in
Denmark, Poland and the Baltic States. Furthermore, Royal Unibrew will work on
obtaining further advantages through strategic purchases for the entire Group
and by covering critical raw materials (today 95% of the estimated demand for
malt and hops and 100% of the demand for metals in 2008 have been covered).
Finally, a number of systems and processes will be strengthened, and
administrative savings will be in-troduced.
The effect of these Operational Excellence initiatives is expected to result in
savings of DKK 90 million in 2010. To this should be added DKK 92 million, by
which Royal Unibrew expects to increase earnings based on the initiatives
announced on 14 November 2007. These included the closure of the breweries in
Maribo and Lielvarde, the dismissal of approximately 300 employees, adjustments
of sales prices in some markets as well as investments in technology and
capacity in the Danish production.
Acquisition & Integration Excellence
Royal Unibrew still wants to strengthen the Group's activities in the main
markets in Northern Europe, Italy and in the international markets for malt
beverages. Focus will be on acquisitions of profitable en-terprises which can
be integrated naturally in the existing business. The acquired enterprises must
within a maximum of three years show two-digit ROIC and EBIT margin.
The Group is also carrying through various initiatives to utilise previous
experience to integrate acquired enterprises more quickly and more efficiently.
In Poland, the acquisitions in recent years provide a solid platform in several
regions, and this platform will be utilised to double revenue to approximately
DKK 500 million in 2010. The regional brands should be strengthened,
distribution should be made deeper and broader, and new products will be
introduced. As from 1 February 2008 all activities in Poland will be fully
integrated in Royal Unibrew Polska, for which the goal is significant
improvement of earnings until 2010.
Financial goals
The financial goals for the double up strategy are a follows:
• EBIT of DKK 500 million in 2010
• Two-digit ROIC and EBIT margin (exclusive “special items”) in 2010
• Free cash flow of not less than 7% of net revenue in 2010
• DKK 5 billion revenue in 2010 through organic growth
• A capital structure where the net interest bearing debt (NIBD) in 2010 will
amount to 3 times EBITDA
Status of the previous strategy plan MACH II
Royal Unibrew can provide the following status on the six main action areas of
the previous strategy plan MACH II, covering the period 2005-2007.
1) The ambition was - through acquisitions and annual organic growth of 3% - to
ensure profitable growth so that in 2007 revenue would be DKK 4.5 billion.
Organic growth was higher than expected and amounted to approx. 6% (CAGR) in
the period and 7% in both 2006 and 2007, so that Royal Unibrew has grown more
than the markets. On the other hand, the acquisition rate was lower than
planned. Royal Unibrew made ten acquisitions, primarily in the Baltic States,
Poland and in the international malt mar-kets, but Royal Unibrew has given
higher priority to quality and the potential of the candidates than to
achieving a certain top line. The lower acquisition rate means that in 2007
revenue was approx. DKK 3.9 billion and DKK 4.2 billion if the acquisitions in
2007 had been recognised in the financial statements for the entire year.
Growth in the top line was 12% annually (CAGR) in the period.
The Group's profitability increased from 2005 to 2006, when Royal Unibrew
achieved both two-digit EBIT margin (before “special items”) and two-digit
ROIC. But, as previously stated, earnings were charged by a number of
circumstances in 2007, which meant that the goals were not achieved this year.
As mentioned in Company Announcement RU03/2008 of 7 January 2008, the Royal
Unibrew Group ex-pects profit before tax of around DKK 200-220 million (DKK
210-230 million before ”special items”), which is expected to correspond to
earnings before interest and tax (EBIT) of around DKK 235-255 mil-lion.
2) The activities in the Baltic States should be extended and optimised so that
in 2007 at the latest the re-gion would achieve two-digit ROIC and EBIT margin.
Production and supply chain in Lithuania and Latvia have been modernised and
streamlined, and sales and marketing have been improved. Conse-quently the
market shares are increasing, and profitability has improved significantly. In
2007, EBIT in the region exceeded 10%, and ROIC was higher than 12%.
3) Royal Unibrew should develop the core competences to improve strong
regional/national brands ba-sed on a firm belief that the consumers prefer beer
with which they can identify. The competences are extended, eg Royal Unibrew
has gathered its know-how and experience in the concept ”13 golden rules”,
which are used across the borders.
4) Intensified product innovation and marketing should strengthen the strategic
brands. Both the Royal Beer family in Denmark, Kalnapilis in Lithuania, Cido in
Latvia and Lithuania as well as Ceres in Italy have won market shares in the
period. At the same time the volume of the Vitamalt and Faxe Interna-tional
brands have increased.
5) A number of Business Excellence initiatives should give savings and
rationalisation gains of DKK 20 million annually from 2006. The initiatives
resulted in savings of DKK 20 million from 2006, and further initiatives to
improve efficiency resulted in extra savings of approximately DKK 15 million in
2007.
6) The Group should develop a new international identity. This was achieved
with the change of name to Royal Unibrew and the unrolling of eg a new logo and
the new slogan ”All your favourites”.
Additional information:
A presentation of the double up strategy can be found at www.royalunibrew.com,
where Royal Uni-brew's Executive Board also presents the strategy in an English
language webcast.
Please direct additional questions to:
Poul Møller, CEO, tel. +45 5677 1500
Yours sincerely
Royal Unibrew A/S
