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Earnings Presentation for the year ended 31 December 2014

Speakers: Alexander Mechetin, CEO


Nikolay Belokopytov, CFO 07 April, 2015

This presentation has been prepared by Synergy, Co. (the Company, or Synergy) 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys access to or increase the cost
of financing or which may affect the Companys 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 Companys 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.

Synergy, a leading distilled spirits producer in Russia reports


2014 financial results

2014 vs
2013

Key
operational
developments

Sales grew 5% and reached 46.8 bln. rubles


Net Revenue increased by 7% to 28.1 bln. Rubles
Gross Profit raised by 7% to 12.0 bln. rubles
Gross profit margin remain stable at 42,7%
EBITDA declined by 19% to 3.0 bln. rubles
EBITDA margin decreased by 3.4 pp. to 10.6%
29% decline in Net Income
Net Debt to EBITDA 2.77X
12% volume decline on the back of 22% Russian vodka market
decrease

Synergy concluded exclusive, long-term distribution agreements for


Ron Barchelo Rum, Amarula liqueur and Torres brandy.
Synergy launched wine distribution signing several agreements
with wine producers. Main trade marks: Cono Sur, Maset, Pierre
Fontaine, Fleur Du Cap, Gran Castillo and others.
Fitch agency has upgraded Synergy's Long-term foreign and local
currency Issuer Default Ratings (IDRs) to 'B+' from 'B'. The Outlook
is Stable.
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Consolidated Revenue for FY2014


Revenue breakdown by segments, million RUB

Consolidated Revenue, million RUB

+6%

21 150

22 441

(1)

26 378

24 000

28 163

Alcohol

+7%

30 000

(1)

20 000

16 000
8 000
0
2013

Food (1)

10 000

0
2013

6 000

5 228

2014
+9%

5 722

3 000

2014
0

Consolidated Revenue split, %


2013: 26 378 million RUB(1)

2013

2014: 28 163 million RUB(1)

Food
Food
20%

Alcohol
80%

20%

Alcohol

80%

2014

o 6% Y-o-Y increase in alcohol revenue on the back of 12%


fall in volume due to proactive pricing policy. Ongoing
diversification leads to growth of scale of the premium
distribution as well as export sales in our operations
o Food segment revenue was driven by poultry division due
to better operational effectiveness and favorable market
conditions

Source: IFRS financial statement for FY2014


Note (1): Net of intersegment operations

Consolidated Gross Profit for FY2014


Gross Profit breakdown by segments, million RUB (1)

Consolidated Gross Profit, million RUB

12 000

Gross Profit
Gross Margin
+7%

12 028

Alcohol (1)

11 280

12 000

8 000

10 253

+5%

10 779

8 000
48,0%

48,4%

4 000
0
2013

42.8%

42.7%

1 500
Food (1)

4 000

1 066

2013

2014

+28%

1 369

1 000
500

2014

24%

20%

0
2013

2014

Consolidated Gross Profit split, %


FY2013: 11 280 million RUB(1)

FY2014: 12 028 million RUB(1)

Food
9%

Alcohol

91%

Food
11%
Alcohol

oMain drivers for the Consolidated Gross Profit growth were


export-import operations, proactive pricing policy and
positive dynamic in Food segment

oProfitability in Food business significantly improved in 2014


due to better margin in our Poultry business

89%

Source: IFRS financial statement for FY2014


Note (1): Net of intersegment operations

Alcohol segment breakdown(1). Ongoing diversification.


Alcohol segment revenue breakdown, million RUB

Alcohol segment gross profit breakdown, million RUB

-0,7%
18 458
18 336

20 000

2013

10 000

-0,8%

9 496

2014

7 500

10 000

5 000
+52%

4 105

2 692

2 500

51.8%

51.8%

25.4

0
Spirits Production

Distribution

2014: 18 336 million RUB


Distribution

Distribution

13%

18%

87%
Spirits production

1 283
31.3%

Distribution

Key Alcohol segment drivers in 2014

Alcohol segment consolidated revenue split, %


2013: 18 458 million RUB

+88%

683

0
Spirits Production

2013

2014

15 000

5 000

9 570

oSpirits production: Just 0,7% Y-o-Y decline in revenue on the


back of 12% drop in volume. Company considerably increased
prices in the beginning of 2014 - as a result the volume
reduction was significantly compensated
oGross margin of the Spirits production was flat ( 51.8%)

82%
Spirits production

oDistribution: focus on premium imported brands such as


William Grant & Sons and Camus along with new exclusive
agreements. As a result the profitability of this subsegment
considerably improved.
Note (1): Anaudited

Consolidated EBITDA and Net Profit for FY2014


EBITDA, million RUB

G&A and distribution expenses , million RUB


EBITDA

4 000

3 674

EBITDA Margin

-19% Y-o-Y

10 000

9 800

7 924

2 973

3 000

General & Administrative expenses


Distribution expenses

+26%
5 000

2 000

7 389

5 871

13.9%

+10%

10.6%

1 000

+17%
2 053

2 411

2013

2014

0
2013

2014

Operating profit and Net Income, million RUB


3 300

Opertating profit
Net income

3 127
-27% Y-o-Y

2 274

2 200
1 541
1 090

1 100

-29% Y-o-Y

o G&A expenses increased by 17% due to growth in salaries, rent expenses


and inflation
o 26% year-on year increase in distribution expenses as a result of increase
in trade-marketing expenditures in modern retail which are connected
with excise duties (duties grew by 25%)
o EBITDA declined by 19% mainly due to excise duty growth and distributors
destocking process
o Net income declined by 29% mainly due to the same factors as EBITDA
declined along with growth of the financial costs including banks
guarantees which are connected with excise duties

2013

2014
Source: IFRS financial statement for 2014
Note (1): Net of intersegment operations

The Companys debt structure


Net debt (1) evolution, million RUB

Debt breakdown, million RUB


Long-term debt
8 708

Short-term debt
6 626

6 679

5 567

5 544
4 963

4 324

8 226

5 804

3 164
1 243

1 663

YE2011

YE2012

As of 31 December, 2013
Total = 6 679 mln RUB

YE2014

YE2011

52%

YE2012

YE2013

YE2014

As of 31 December, 2014
Total = 8 708 mln RUB

2-5 years

34% 2-5 years

1-2 years

YE2013

Over 5 years

13%

6 212

875

12%

Less than 1
year

5 919
4 849

Less than 1
year
36%

43%

21%

1-2 years

o
o
o

Debt increased due to growth of excise duties


and corresponding trade receivables rise, buyback of own shares
Average cost of borrowing grew by 1 p.p. (to
11.74% p.a.)
Net debt/EBITDA ratio is 2.77x
In December 2014 Fitch Rating has upgraded
Synergy's Long-term foreign and local currency
Issuer Default Ratings (IDRs) to 'B+' from 'B'.
The Outlook is Stable.
Source: IFRS financial statement 2011-2014
Note (1): Net debt = Total debt Cash & Cash equivalents

APPENDICES

COMPANY STRATEGY

Become the dominant spirits company in Russia with a diversified portfolio of brands and products and best in
class distribution platform

Balanced portfolio of brands covering all price


categories

Strong distribution platform with focus on direct


sales

Focus on three key upper-priced brands including


flagship super-premium Beluga

Better contact with final consumer


through trade marketing activity

Expansion in growing alcohol categories


Increasing brand equity
Premiumizing own sales mix

Product
portfolio

Distribution
platform

Global
exports

Focus on core
operations

Widening borders of BELUGA vodka


exports
Improving the quality of export distribution
platform by carefull selecting partners

Focus on the US super-premium vodka market

Best in class IT platform

Focus on the core business of


production, distribution and sale of
spirits

Ongoing process of divesting non core


assets

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DIVERSIFIED PORTFOLIO OF NATIONAL BRANDS WITH FOCUS ON 3 KEY BRANDS


Well-established portfolio of brands with high awareness is serious competitive advantage on
dark market for advertisement
Middle

Premium

Sub-premium

Super-premium, Ultra-premium

Vodka
portfolio

Low-middle

RUR 280

RUR 300

RUR 310

RUR 400

RUR 1200

RUR 1350

RUR 2800

RUR 4500

+8%

+9%

+7%

+7%

+5%

+4%

+6%

+31%

+17%

Increase in gross
price to distributor
from Dec 14 vs Jan
14

+2%

+3%

+3%

+3%

+3%

+3%

+5%

+29%

+16%

Gosudarev
Zakaz
(Sovereigns
Order)

Belenkaya
(Whitish)

Russky
Lyod
(Russian Ice)

Key priority brand

Key priority brand

Beluga
Gold line
Gastronomic
vodka

Beluga
Allure

Aristocratic

Beluga
Transatlanti
c Racing
Vodka for
Trendsetters

Exclusive agreement for


production and distribution

Beluga
Noble
Handcrafted
Noble vodka

VEDA
ICE

High-quality
product

Positioning

Myagkov

Trendy
Vodka for
cocktails

Brand name

Patriotism,
Victory

Increase in net
price to distributor
from Dec 14 vs
Jan 14

Pure,
organic
vodka

RUR 230

Traditional
quality
vodka

Average retail
price per 0.5 liter
from Jan 2013

Key priority brand

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DEVELOPING PORTFOLIO OF NATIONAL BROWN SPIRITS BRANDS

Brown spirits
portfolio

Brandy

Average retail
price per 0.5 liter
from Jan 2013

Low-middle

RUR 400

Middle

RUR 460

Whisky

Infusions

Balsam and herbal liqueurs

RUR 500

RUR 250- 290

RUR 610

RUR 560

Sub-premium

RUR 500

new

new

new

new

Increase in gross
price to distributor
from Dec 14 vs Jan
14

+1%

+1

+4

new

new

new

new

Zolotoy
Rezerv
(Golden
Reserve)

Staraya
Gvardia
(Old
Guard)

Dr August

Ussuriiskiy
Balsam

Nature,
unique tastes

Source: Company data

Ussuriiskiy
Liqueur

Eco, pure
nature

Positioning

Fox&Dogs

Eco, pure
nature

Brand name

Kamennyi
Lev
(Stone
Lion)

Traditional
blended
whisky

+6

Classic
French style.
100% French
spirits

+2

History,
Russian
victory

+2%

Traditional,
classic, Russian
brandy

Increase in net
price to distributor
from Dec 14 vs
Jan 14

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SYNERGY IS #1 INDEPENDENT SPIRITS DISTRIBUTOR IN RUSSIA

Scotch Whisky

Synergy distributes in Russia a comprehensive portfolio of premium international brands.


Dedicated team (Synergy Import) more than 400 people
Key partners: William Grant & Sons, Camus, Distell, Great Valley, Ron Barcelo
Main categories: Scotch and Irish whiskies, French Cognac, Tequila, Gin, Armenian Brandy, Rum

Cognac

Irish Whisky

Armenian Brandy

Tequila

Gin

Bitter

Cream liquor

Rum

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FOCUS ON QUALITY DISTRIBUTION


Domestic sales breakdown by geographical regions, % of Groups volume, 2013
Focus
Focus

3 key brands: BELUGA, Myagkov and

Belenkaya
High-grade distribution
Innovative approach
Better contact with final consumer through
trade marketing activity

Recent updates

Significant improvement of Synergy brand

portfolio presence on the shelf space


Establishment of unique IT distribution control
system enabling to track and evaluate the
efficiency of distribution team. Full activation
beginning of 2014
Unification of the corporate structure
Launch of the Mobile Sales Automation system

Targeting Golden Shelf

North-Western Federal
district
Population: 13,7 million
GRP per capita: $10,166
ABP (*) :55%

Urals Federal district


Population: 12 million
GRP per capita: $
15,992
ABP (*) :54%

Central Federal district


Population: 38,8 million
GRP per capita: $14,030
ABP (*) :54%

Siberian Federal
district
Population: 19 million
GRP per capita: $7,198
ABP(*) :51%

16%

20%

16%

4%

15%
5% 5%
1%

North Caucasian
Federal district
Population: 9,5 million
GRP per capita: $ 2,459
ABP(*) : 47%

18%

4%

19%
Southern Federal district
Population: 13,9 million
GRP per capita: $ 5,942
ABP(*) :50%

17%

22%

16%
21%

Far Eastern Federal


district
Population:: 6 million
GRP per capita: $ 9,637
ABP(*) :55%

1%

%
Privolzhsky Federal
district
Population: 29,7 million
GRP per capita: $7,139
ABP (*) :52%

- 2013
- 2012

Mobile Sales Automation Project


High quality resource management (finances, sales team,
marketing, distributors)
to create a system that enables to centralize and optimize sales record
processes, to get business-analytics, to control the financial discipline;
the whole process of field sales is formed under the control of Synergy
Group followed by the information being passed to the Distributor. The
Distributor is acting as a logistics' provider;
Employee control (planning, organization, motivation):
to create a single Centralized Command and Control System of
Dedicated Sales Force Activity at the level of supervisors, territory
managers, region managers and Synergy OJSC management.

Note (*) able-bodied population


Source: Rosstat, Companys
data

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SYNERGYS EXPORT REPRESENTS 6% OF THE SPIRITS SALES


World Duty Free
AND IT IS STEADILY GROWING
Abkhazia
BELUGA is exported in 70 countries + World Duty Free

Baltic

UK
France

Kiev

Kazakhstan

Germany
Georgia
Miami

Home market
Export
Synergy Foreign offices

Two foreign offices Miami (USA) and Kiev


(Ukraine)
Six foreign sales teams
In 2014 BELUGA exports is growing by 19% and
accounting for 40% of overall BELUGA sales

Synergy sales team


NEW markets 2014

Andorra
Armenia
Australia
Austria
Azerbaidjan
Bahrein
Belarus
Belgium
Brazil
Bulgaria
China

Mexico
Moldova
Mongolia
Montenegro
Netherlands
New Zealand
Oman
Portugal
Poland
Qatar
Romania
Singapore
Slovakia

Croatia
Cyprus
Czech Republic

Slovenia
Serbia
South Korea

Dominican Republic
Estonia
Finland
France
Georgia
Germany
Greece
Hungary
India
Indonesia
Iran
Iraq
Israel
Italy

Spain
Sweden
Switzerland
Taiwan
Tajikistan
Thailand
Turkey
Turkmenia
USA
UAE
UK
Ukraine
Uzbekistan
Vietnam

Japan
Jordan
Kazakhstan
Kyrgizia
Latvia
Lebanon
Lithuania
Mariana Islands
Malaisia

Official website: WWW.BELUGA.RU


Find Beluga vodka page on Facebook

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CONTACTS

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:

ir@sygroup.ru

Contacts:

Sergey Kuptsov,
Head of Corporate finance
Prokhor Malutin,
PR director

www.sygroup.ru

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