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4 December 2019 Credit Research
Sector Report
UniCredit Research page 1 See last pages for disclaimer.
Trends and outlook: Beverage industry ■ In 2020, we assume organic operating profit growth of beverage
companies in the high-single-digit range, mainly due to continued cost-
cutting, premiumization and increased prices to offset higher input
costs, tariffs, and freight and transportation costs. From a regional
perspective, Asia should remain the growth region. Continued focus on
premium portfolios will support the profitability of beverage companies due to
higher pricing and better margins. We expect alcoholic drink companies,
particularly in the beer industry, to launch more low-alcoholic alternatives of
their brands as part of the general health and wellness trend. We expect only
limited impact on beverage and spirits companies of the recently introduced
25% tariff on EU exports of single-malt whiskey, wine and liquor to the US.
■ In our view, M&A activity in the beverage sector will likely slow as
companies streamline their portfolios and takeover multiples remain
high. According to Bloomberg calculations, acquisition prices measured by
EV/EBITDA ratio were 14.2x, up from 10.6x over the past ten years. The
largest deal in the beverage industry in 2019 was Anheuser-Busch’s pending
sale of its Australian subsidiary.
■ Brewers are set to invest heavily in Asia over the next few years, given
the region is home to 60% of the world's population and multinational brewers
have a low presence there compared to other international markets. There is
an increasing shift away from mature markets in North America and Europa
to new developing regions such as China, India and Russia.
■ Deleveraging remains a credit story, especially for brewery companies.
Anheuser-Busch (ABI) remains a deleveraging story with its continued
commitment to net leverage below 2.0x. Management highlighted that its
leverage target of <4x by FYE 2019 (FYE 2018 reported: 4.6x) would be
achieved one year earlier than planned. Carlsberg’s net leverage is well below
its own target of <2.0x (FY18 reported: 1.3x). Heineken’s leverage is up due to
the China acquisition (FY18: 2.3x; 1H19: 2.9x) versus its target of <2.5x.
Pernod Ricard showed a continued deleveraging trend, from 4.0x in 2015 to
2.7x in FY18/19. Its commitment is to remain investment grade. Diageo’s net
leverage ratio increased to 2.5x in the fiscal year ending June 2019 (FY19)
from 2.2x in FY18 due to a GBP 2.8bn share buyback. We assume that
leverage will slightly increase at Diageo as it intends to return GBP 4.5bn to
shareholders through share buybacks or special dividends over FY20-22.
Coca-Cola HBC has a balanced financial policy with a medium-term leverage
target of 1.5x-2.0x (FY18: 0.6x, 1H19: 1.2x, increase due to Bambi acquisition,
UniCredit calculation) and the lowest leverage among its Coca-Cola peers.
■ Low-alcohol and non-alcoholic drinks are supported by the health and
wellness trend. Carlsberg reported growth of 16% yoy in the alcohol-free
brews division in 1H19. Alcohol-free, craft and specialty brews make up 14% of
Carlsberg’s revenue. ABI launched zero-alcohol beer in Belgium at the
beginning of 2019 and twelve new no- and low-alcohol beers in 2018. Around
8% of its global beer sales by volume are from beers with lower or no alcohol,
and ABI has plans to increase that figure to 20% by 2025. Heineken has
launched its zero-alcohol beer in the US, Thailand and Singapore.
■ We assume that new issuance within our beverage coverage in 2020 will
be driven by IG-rated brewery names. We assume that this trend will be
supported by funding of debt maturities and potential bolt-on M&A activities. In 2019, new issuance in our coverage was mainly driven by soft-drink companies Coca-Cola (USA), Pepsi Co. (USA), Coca-Cola HBC and Coca-
Cola Enterprises and by brewery companies, but to a lesser extent.
Contents Trends in the alcoholic beverage sector ___________ 2
Regional perspective: Asian market ____________ 2Increased focus on health and wellness _________ 4Premiumization ____________________________ 4Sustainability ______________________________ 4
Trends in the non-alcoholic beverage sector _______ 5Primary markets in investment-grade beverage _____ 6Recommendation overview ____________________ 7Trading ideas _______________________________ 9Rating agency actions and outlook _____________ 10
Financial statistics Anheuser Busch ___________ 11Financial statistics Campari _________________ 12Financial statistics Carlsberg ________________ 13Financial statistics COCA-COLA HBC _________ 14Financial statistics Diageo plc ________________ 15Financial statistics Heineken NV ______________ 16Financial statistics Pernod Ricard* ____________ 17
Recommendations and ratings in this report: Anheuser-Busch (Baa1s/A-s/BBBp) -Overweight Carlsberg (Baa2s/-/BBB+s) - Overweight Heineken (Baa1s/BBB+s/-) - Marketweight Pernod Ricard (Baa1s/BBB+s/BBB+s) - Overweight Diageo (A3s/A-s/A-s) - Marketweight) Campari (not rated) - Hold Coca-Cola HBC (Baa1s/BBB+s/-) - Overweight
SNAPSHOT EUROPEAN BREWERIES
SNAPSHOT SPIRITS AND SOFT DRINKS
Source: Company data, iBoxx, UniCredit Research
Author Dr. Silke Stegemann, CEFA, Senior Credit Analyst Health Care & Pharma, Food & Beverage, (UniCredit Bank, Munich) +49 89 378-18202 [email protected] Bloomberg: UCCR Internet: www.researchunicredit.eu
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UniCredit Research page 2 See last pages for disclaimer.
4 December 2019 Credit Research
Sector Report - Food & Beverage
Trends in the alcoholic beverage sector
Regional perspective: Asian market Global market growth In terms of retail value, the global market for alcoholic beverages in 2018 was just over
USD 1tn, a number that research institute IWSR Global Database expects to increaseby 7% by 2023 as consumers continue to trade up to premium products.
Penetration into Asia According to Euromonitor and Bloomberg, the Asian market has been the chief growthregion for alcoholic drinks. Beer remains the largest alcoholic beverage market in theworld followed by spirits and wine.
REGIONAL SPLIT: ALCOHOLIC DRINKS WORLDWIDE ALCOHOLIC DRINKS PER CATEGORY
Source: Euromonitor, Bloomberg, UniCredit Research
Growth rates per category According to Euromonitor, the five-year growth rate of spirits and alcoholic drinks isabove that of beer.
ALCOHOLIC DRINKS GROWTH POTENTIAL
5Y growth world Forecast CAGR world
5Y growth Asia/Pacific
Forecast CAGR Asia/Pacific
Spirits 16.7% 4.1% 22.6% 5.6%
Alcoholic Drinks 10.9% 3.5% 18.2% 5.2%
Beer 8.3% 2.9% 15.2% 3.8%
Wine 7.2% 3.4% 12.3% 6.3%
Source: Euromonitor, Bloomberg, UniCredit Research
Growth potential of population in Asia
Population growth in Asia and the proportion of beer-drinking-age consumers willcontinue to attract the attention of brewers. There is an increasing shift away from maturemarkets in North America and Europa to new developing regions such as China, India andRussia. The Philippines and Vietnam in particular have large young populations with potentialfor brewers to persuade consumers to switch from local spirts or trade up to premium brandsin the years to come.
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UniCredit Research page 3 See last pages for disclaimer.
4 December 2019 Credit Research
Sector Report - Food & Beverage
ASIAN POPULATION
Population by country (in mn) 2019E
% of 15-34 year olds Population yoy growth
China 1,389.6 28.2 0.4%
India 1,311.6 33.5 1.1%
Japan 125.9 18.7 -0.6%
Philippines 107.5 34.9 1.5%
Vietnam 97.9 33.4 0.9%
Thailand 68.8 28 0.3%
South Korea 51.6 25.2 0.4%
Source: US Census Bureau, Bloomberg, UniCredit Research
Per capital beer consumption in Asia is still low
Per capita beer consumption in Asia is still low compared with more developedmarkets – this offers upside potential. China, the largest-volume country, still has per-capita consumption of around one third of some western European markets at about 27 liters.Vietnamese consume 42 liters each, Philippinos 20 liters and Indians just 2 liters. Accordingto Euromonitor, in 2018, Germany has per capita consumption of 117 liters, the CzechRepublic 147 liters, Austria 105 liters and Poland 102 liters.
TOP 10 COUNTRIES BY TOP 10 COUNTRIES BY PER CAPITA CONSUMPTION, BEER (2018) PER CAPITA CONSUMPTION, SPIRITS (2018)
Source: Euromonitor, Bloomberg, UniCredit Research
Investments in Asia expected Brewers are set to invest heavily in Asia over the next few years, given the region ishome to 60% of the world's population, and multinational brewers have a low presencethere compared to other international markets. Asia will make up about 30% of volumegains over the next five years, according to Euromonitor, complimented by value growth, asconsumers switch to premium brands.
Focus on joint-venture partners Local brewers in Asia
Breaking into Asia's fast-growth markets has already taken time for brewers, includingAB InBev, Carlsberg and Heineken, so expanding further will require patience andcash. Companies will doubtless try to acquire their joint-venture partners, but developing intonew markets such as the Philippines will be a very lengthy process. Nevertheless, there aremany small, local brewers that could give companies access to sizable populations in many ofthese countries
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UniCredit Research page 4 See last pages for disclaimer.
4 December 2019 Credit Research
Sector Report - Food & Beverage
Increased focus on health and wellness Low-alcohol and non-alcoholic brands growth
As alcohol consumption falls or at least stagnates in developed markets, beveragecompanies are focusing more and more on low-alcohol products. According to a study ofthe research institute International Wines and Spirits Record (IWSR), low-alcohol and non-alcoholic brands are showing significant growth in key markets as consumers are increasinglyseeking “better-for-you” products and exploring ways to reduce their alcohol intake. Growth ofnon-alcoholic beer is expected at 8.8%, and low-alcohol beer at 2.8%. Non-alcoholic wine isforecast at 13.5%, and low-alcohol still wine at 5.6%. Growth of no-alcoholic mixed drinks ispredicted at 8.6% (all these figures are CAGR 2018-2023).
Non-alcoholic and low-alcohol beverages:Heineken Carlsberg Anheuser-Busch
Non-alcoholic and low-alcohol products by brewers in our coverage: In 2018, Anheuser-Busch InBev launched 12 new no- and low-alcohol beers. Currently, 8% of the company'sglobal beer sales by volume are from beers with lower or no alcohol, and the company hasplans to increase that figure to 20% by 2025. Anheuser launched its zero-alcohol beer LeffeBlonde 0.0% in Belgium in January 2019. In India, Anheuser-Busch has launched non-alcoholic beers under the two brands, Hoegaarden 0.0 and Budweiser 0.0, in cities such asMumbai and Delhi. Heineken offers Heineken 0.0 beverage in around 51 markets around theworld, with concentration in Europe. Heineken launched its zero-alcohol beer Heineken 0.0 inthe US in January 2019 and in Thailand and Singapore in March. Carlsberg reported growth of16% yoy in the alcohol-free brews division in 1H19. Alcohol-free beer makes up around 4% ofCarlsberg’s net revenue and 3% of its volume. Carlsberg said it wants to drive non-alcoholic beeras a category through line extensions and standalone brands, and by investing in technology toovercome taste barriers.
Premiumization
Ongoing premiumization Consumers are trading up to more expensive or better-quality products. In mostmature and some emerging markets, consumers are starting to drink “less-but-better”alcoholic drinks. Premiumization offers the potential of further price increasessupported by product innovation, including new packaging and new flavors. The majorplayers operating in the market are expanding their product portfolios with strategicacquisitions of breweries in order to increase their footprint across the world, and tap thepremium alcoholic beverage market. Research institute Mordor Intelligence estimates a globalpremium alcohol market CAGR of 10.43% in 2019-2024 compared to a global alcoholicbeverage growth rate of 3.1% annually. From a regional perspective, Asia-Pacific is thefastest growth region in the premium alcoholic beverage market, supported by its largemillennial consumer base.
Sustainability
Sustainability Environmental concerns about excess packaging and single-use plastic are influencing consumers’ decision making. Beverage companies are responding to these concerns andbecoming more eco-friendly. Single-use plastic water bottles are an ongoing concern, especially given the increased popularity of bottled water. Companies are starting to changetheir packaging to more eco-friendly alternatives, including aluminum cans and paper-basedboxes. Alcohol producers are also using alternative sources of energy to run their distilleries,reducing waste from their plants, and eliminating plastic packaging. By reducing their environmental impact, producers can leverage their sustainability efforts as a brand differentiator in advertising campaigns.
UniCredit Research page 5 See last pages for disclaimer.
4 December 2019 Credit Research
Sector Report - Food & Beverage
Trends in the non-alcoholic beverage sector
Soft-drinks industry The soft-drinks industry comprises companies that manufacture, source, develop,market and sell non-alcoholic beverages. Soft drinks mainly include sparkling softdrinks, natural juices, enhanced water, sports and energy drinks as well as dairy andready-to-drink tea and coffee beverages. According to Euromonitor, revenue in the globalsoft-drinks segment amounts to USD 549bn in 2019 and is expected to grow annually by4.2% (CAGR: 2019-2023, source: statista).
Asia growth region for soft drinks
According to Euromonitor and Bloomberg, the Asian market has been the chief growthregion for soft drinks, surpassing that of developed regions like Western Europe andNorth America. Although the market is growing in all countries of Asia-Pacific, the highgrowth rate for this area is driven by the rapid development of the Chinese and Indianmarkets. Carbonated drinks is the largest segment in the non-alcoholic drinks segment.
REGIONAL SPLIT: SOFT DRINKS WORLDWIDE NON-ALCOHOLIC DRINKS PER CATEGORY
Source: Euromonitor, Bloomberg, UniCredit Research
Growth rates per category According to Euromonitor, the five-year growth rate of non-alcoholic drinks isdominated by energy drinks and bottled water.
SOFT DRINKS GROWTH POTENTIAL
5Y growth world
Forecast CAGR world (2019-24)
5Y growth Asia/Pacific
Forecast CAGR Asia/Pacific (2019-24)
Carbonates 1.4% 1.4% 5.3% 2.0%
Juice -2.4% 1.2% n.a. n.a.
Asian Specialty Drinks 7.2% 2.5% n.a. n.a.
Soft drinks 6.4% 2.8% 7.9% 2.9%
Energy drinks 22.0% 5.9% 34.9% 4.6%
RTD coffee 3.8% 2.8% n.a. n.a.
Concentrates -2.6% 0.1% n.a. n.a.
Bottled water 17.5% 4.0% 27.7% 5.9%
RTD tea 5.1% 2.6% n.a. n.a.
Sports drinks 3.2% 2-0% 2.9% 0.7%
Source: Euromonitor, Bloomberg, UniCredit Research
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UniCredit Research page 6 See last pages for disclaimer.
4 December 2019 Credit Research
Sector Report - Food & Beverage
Gneral trends for the non-alcoholic beverage industry
The general trends already highlighted for the alcoholic beverage industry can also beapplied to the non-alcoholic beverage industry. Consumer awareness for the environmentand their own health and wellness are two important factors. Millennials are also set to be akey driver of these trends. The non-alcoholic beverage industry has seen a rise in the numberof new products with functional benefits. From stress-relievers to immune system health tobeauty, consumers are now seeking more from their drinks than simply hydration. Majorbeverage brands, such as the Coca-Cola Company, have also jumped on this trend, releasingadditions to its VitaminWater range and a new energy drink combining caffeine, guaranaextract and B vitamins. Fermented drinks are probiotic-rich and have been found to contain aprofusion of benefits, particularly when it comes to gut health.
Primary markets in investment-grade beverage
New issuance and redemptions in 2020
In 2020, we expect more issuance from brewery companies and spirit companies. In the iBoxx FOB sector, EUR 8.2bn in bonds will mature. We estimate new issuance in the amount of EUR 10bn, slightly below the level of 2019.
REDEMPTIONS IN THE FOB SECTOR IN 2020 OUTSTANDING VOLUME IN THE FOB SECTOR
Source: iBoxx, Bloomberg, UniCredit Research
Beverage issuance Beverage issuance in 2019 has been dominated by soft drink companies, not by brewerycompanies or food companies in general. In 2019, seventeen new bonds (fixed-coupon,Beverage, IG rating) have been issued with a combined volume of EUR 11.4bn, all of whichfrom the big beverage food names Coca-Cola (EUR 2.75bn), Pepsi Co. (EUR 1bn), Anheuser-Busch (EUR 2.25bn), Diageo (EUR 600mn), Coca-Cola European Enterprises (EUR 1bn),PepsiCo (EUR 500mn), Pernod Ricard (EUR 1.5bn) and Coca-Cola HBC (EUR 1.8bn). UScompanies Coca-Cola and Pepsi Co. together issued five EUR-denominated bonds.
ABIB
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UniCredit Research page 7 See last pages for disclaimer.
4 December 2019 Credit Research
Sector Report - Food & Beverage
2019: INVESTMENT-GRADE ISSUANCE IN THE BEVERAGE SECTOR
ISIN
Launch
Issuer
Size (EUR mn)
over MS
Coupon
M/D/Y
Tenor
Sector
Rating at issuance
Min Denomination
Issuer country
XS1955024630 02/25/19 Coca-Cola 1,000 18 0.125 09/22/22 3.6 FOB A1s/A+s/As 100,000 USA
XS1955024713 02/25/19 Coca-Cola 1,000 40 0.750 09/22/26 7.7 FOB A1s/A+s/As 100,000 USA
XS1955024986 02/25/19 Coca-Cola 750 50 1.250 03/08/31 12.2 FOB A1s/A+s/As 100,000 USA
XS1963553919 03/11/19 PepsiCo 500 40 0.750 03/18/27 8.1 FOB A1/A+ 100,000 USA
XS1963555617 03/11/19 PepsiCo 500 50 1.125 03/18/31 12.2 FOB A1/A+ 100,000 USA
BE6312821612 03/26/19 AB InBev 1,250 80 1.125 07/01/27 8.4 FOB Baa1/A- 100,000 Belgium
BE6312822628 03/26/19 AB InBev 1,000 105 1.650 03/28/31 12.2 FOB Baa1/A- 100,000 Belgium
XS1982107903 04/08/19 Diageo 600 23 0.125 10/12/23 4.6 FOB A3/A-/A- 100,000 France
XS1981054221 04/09/19 Coca-Cola European Partners
500 72 1.125 04/12/29 10.2 FOB A3/BBB+ 100,000 USA
XS1995781546 05/09/19 Coca-Cola HBC Finance
700 75 1.000 05/14/27 8.1 FOB Baa1/BBB+ 100,000 Greece/Switzerland
XS1995795504 05/09/19 Coca-Cola HBC Finance
600 102 1.625 05/14/31 12.2 FOB Baa1/BBB+ 100,000 Greece/Switzerland
XS2051655095 09/09/19 Coca-Cola European Partners
500 78 0.700 09/12/31 12.2 FOB A3/BBB+ 100,000 USA
XS2064302735 10/08/19 PepsiCo 500 75 0.875 10/17/39 20.3 FOB A1/A+ 100,000 USA
FR0013456423 10/21/19 Pernod Ricard 500 32 0.000 10/24/23 4.1 FOB Baa1/BBB+ 100,000 France
FR0013456431 10/21/19 Pernod Ricard 500 60 0.500 10/24/27 8.1 FOB Baa1/BBB+ 100,000 France
FR0013456449 10/21/19 Pernod Ricard 500 80 0.875 10/24/31 12.2 FOB Baa1/BBB+ 100,000 France
XS2082345955 11/14/19 Coca-Cola HBC 500 65 0.625 11/21/29 10.2 FOB Baa1/BBB+ 100,000 Switzerland
Source: Bloomberg, UniCredit Research
Recommendation overview
General remarks General remarks: According to our strategists (see The UniCredit Macro & Markets 2020-21 Outlook, 21 November 2019), the late-stage credit cycle warrants defensive positioningin European IG and HY credit, with a preference for non-cyclical sectors. Technical factorssuch as the CSPP should support credit, though this will likely be balanced by adeterioration in credit fundamentals and the gap to valuations will widen further.
Recommendation overview There are six IG and one non-rated issuers in our Food & Beverage coverage. We havean overweight recommendation on Anheuser-Busch, Carlsberg, Pernod Ricard andCoca-Cola HBC.
Anheuser-Busch We have an overweight recommendation on Anheuser-Busch (Baa1s/A-s/BBBp). Thecompany will receive around USD 16bn from asset sales already announced and savingsfrom USD 4.5bn lower dividends, which will be used for deleveraging. We estimate thatAnheuser-Busch will achieve adjusted leverage of below 4.0x already in 2019, including thesale of its Australian subsidiary, Carlton & United Breweries, to Asahi for an EV ofUSD 11.3bn. Anheuser has already received USD 5.75bn from the listing of 12.8% of itsAsian subsidiary Budweiser Brewing Company APAC Limited on the Hong Kong StockExchange. Its 3Q19 results were weaker qoq, mainly due to the effect of some priceincreases and shipment phasing, which are temporary problems. In the past few quarters, ABIhas experienced recurrent pressure in its two largest markets, the US and Brazil. After S&P’soutlook revision to stable from negative we see an increased likelihood that Fitch will upgradeAnheuser-Busch by one notch. Fitch has a positive outlook on the name.
UniCredit Research page 8 See last pages for disclaimer.
4 December 2019 Credit Research
Sector Report - Food & Beverage
Carlsberg We have an overweight recommendation on Carlsberg (Baa2s/-/BBB+). Carlsberg hasupgraded its 2019 earnings guidance twice this year. The company shows strong cash flowgeneration and has the lowest net leverage target (<2.0, FY18; 1.3x reported) in our beverageuniverse. In our view, management’s financial policy will support maintenance of the target.Carlsberg indicated that its cost-efficiency program, “Funding the Journey”, outperformed,with more than DKK 2.3bn in cumulative savings achieved in 2018.
Pernod Ricard We have an overweight recommendation on Pernod Ricard (Baa1s/BBB+s/BBB+s).We assume that Pernod Ricard’s credit metrics will continue to improve in FY19/20 (ending30 June 2020), supported by organic revenue growth, a slight margin increase and gradualdeleveraging. Over the past two years, Pernod has reported positive organic sales growth of6% each year and FOCF of about EUR 1.4bn. Pernod has shown a good deleveraging trend,from 4.0x in 2015 to 2.7x in FY18/19. We expect only bolt-on acquisitions, like the acquisitionof the Italian super-premium gin brand Malfy and a majority stake in the super-premiumBourbon Rabbit Hole Whiskey. Pernod’s financial policy is shareholder-friendly, but a recentannouncement offers more clarity (dividend payout ratio of 50% of net profit from recurringitems and a share buyback of up to EUR 1bn over 2020-2021). In our view, Pernod Ricard’scomment that slower growth in Asia in 1Q was in line with its expectations indicates that theslowdown is temporary.
Heineken We have a marketweight recommendation on Heineken (Baa1s/BBB+s/--). Heineken wasthe only company that has reduced its outlook for organic profit growth for 2019 (now 4%,previous outlook mid-single-digit growth rate). Heineken’s operating margin is still below its peers,mainly due to its exposure to the lower-margin European markets. Company-adjusted netdebt/EBITDA (BEIA) was up to 2.9 from 2.3x at FYE 2018 following the financing of thetransactions in China and the recognition of lease obligations as a financial liability under IFRS16.
Coca-Cola HBC We have an overweight recommendation on Coca-Cola HBC (Baa1s/BBB+s/--). Coca-Cola HBC is a key independent Coke bottler, headquartered in Switzerland, with a strongbrand portfolio and leading market positions. The product portfolio includes a wide range ofnon-alcoholic beverages with the leading brands being Coca-Cola, Coca-Cola Light, Coca-Cola Zero, Sprite, Fanta, Bonaqua. The company has steadily improved its profitability andshowed a low leverage (FY18: 0.6x) below its medium-term target of 1.5x-2.0x. After theacquisition of Bambi, a leading confectionary business in Serbia, and a proposed specialdividend, leverage should increase closer to the lower bound of its range in 2019. However,we estimate that credit metrics will improve in 2020 already.
Diageo We have a marketweight recommendation on Diageo. We estimate that the company’sgross leverage will remain stable at 3.0x over the next two years. This will be driven by highshareholder distributions, including GBP 1.7bn in annual dividends, and a program to returnGBP 4.5bn to shareholders to be executed over the next three years, up to GBP 1.25bn ofwhich will be executed by January 2020. Diageo has been quite active in terms of M&Aactivity over the past two years. All of the acquisitions were a good fit with Diageo’s portfoliobut were expensive due to high purchase multiples. Additional sizeable acquisitions couldstretch Diageo’s debt metrics.
Campari We have a hold recommendation on Campari. Campari is the world’s sixth-largest spiritscompany, with leading positions in Italy and the Americas. Over the past few years, it hasadded new brands via aggressive M&A spending. In our view, this event risk remains.The Aperol brand is the key growth driver. Campari showed strong 3Q19 top-line growth but itseems like 4Q19 will be showing somewhat weaker profitability. At 30 September 2019, netleverage was 1.9x. We expect slight deleveraging in 2020.
UniCredit Research page 9 See last pages for disclaimer.
4 December 2019 Credit Research
Sector Report - Food & Beverage
Trading ideas
BREWERY SNAPSHOT
Source: iBoxx, UniCredit Research
Trading ideas Switch from HEIANA 2.02% 5/32 to ABIBB 1.65% 3/31 Switch from CARLB 0.5% 6/23 to CARLB 0.875% 7/29 Switch from HEIANA 1.5% 10/29 to CARLB 0.875% 7/29
1. We recommend a switch from HEIANA 2.02% 5/32 to ABIBB 1.65% 1/31 for a seven-pointlower cash price and slightly higher YTW and 20bp higher Z-spread.
2. We recommend a switch from CARLB 0.5% 6/23 to CARLB 0.875% 7/29 for a one-point highercash price, a positive YTW instead of a negative YTW, a 30bp higher Z-spread but highermodified duration.
3. We recommend a switch from HEIANA 1.5% 10/29 to CARLB 0.875% 7/29 for an eight-pointlower cash price, a slightly higher YTW, and a 20bp higher Z-spread.
SNAPSHOT BBB+ FOB NAMES
Source: iBoxx, UniCredit Research
ABIBB 3.25% 1/33
ABIBB 2.75% 3/36
ABIBB 1.5% 4/30ABIBB 2% 3/28
ABIBB 1.15% 1/27ABIBB 1.125% 7/27
ABIBB 2% 3/28 ABIBB 1.5% 4/30
ABIBB 1.65% 3/31
ABIBB 3.25% 1/33
ABIBB 2% 1/35ABIBB 2% 1/35
ABIBB 2.75% 3/36
HEIANA 1.5% 10/29
HEIANA 1.5% 10/29
HEIANA 1.75% 3/31
HEIANA 2.02% 5/32
CARLB 0.875% 7/29
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iBoxx € Food & Beverage
CCHLN 1.875% 11/24
CCHLN 1% 5/27
CCHLN 1.625% 5/31
RIFP 2.125% 9/24
RIFP 0.5% 10/27
RIFP 0.875% 10/31BNFP 2.25% 11/21
BNFP 1.208% 11/28
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UniCredit Research page 10 See last pages for disclaimer.
4 December 2019 Credit Research
Sector Report - Food & Beverage
Switch from BNFP 11/28 to RIFP 10/27
4. We recommend a switch from BNFP 1.208% 11/28 to RIFP 0.5% 10/27 for a nine-point lower cash price, a 40bp higher ASW spread, a slightly better YTW and the same composite rating.
Switch from BNFP 11/28 to CCHLN 5/27
5. We recommend a switch from BNFP 1.208% 11/28 to CCHLN 1% 5/27 for a five-point lower cash price, a 40bp higher ASW spread, a better YTW and same composite rating.
Rating agency actions and outlook
Positive announcements in 2019
In 2019, there were very few rating actions and outlook revisions in the beverage sector.On 31 October, S&P revised its outlook on Anheuser-Busch to stable from negative thanks toUSD 16bn of proceeds from already announced sales of assets and an about USD 4.5bn lowerdividend. On 3 October, Fitch revised its outlook to positive. On 18 October, Moody’s and S&Pupgraded Pernod Ricard to Baa1 and BBB+, respectively. Both rating agencies have a stableoutlook on the name. They highlighted Pernod’s track record of strong profit growth, resultingfrom steady sales growth, a positive product mix and efficiency gains, which have translated intoimproved credit metrics and reduced leverage.
Moody’s has a positive outlook on the beverage industry
Moody’s revised its outlook on the global beverage industry to positive on 10 April 2019.In is update on 31 October 2019, the rating agency highlighted that pricing power andcost-cutting will continue to drive healthy profit growth, supporting the agency’scontinued positive outlook. Moody’s expects operating profit growth of 5.5% to 6.5% in thenext 12 to 18 months. Growth will be stronger in the early part of the outlook period. Growthdrivers include better contributions from some developing markets, ongoing cost-cutting andsuccessful pricing initiatives. Trade tensions and tariffs will remain a key risk.
UniCredit Research page 11 See last pages for disclaimer.
4 December 2019 Credit Research
Sector Report - Food & Beverage
Financial statistics Anheuser Busch
USD mn 2012 2013 2014 2015 2016 2017 1H18 2018 1H19
Revenue 39,758 43,195 47,063 43,604 45,517 56,444 27,087 54,619 26,552
EBIT margin adj. (UniCredit) 32.8% 48.0% 32.8% 32.4% 28.9% 30.9% 31.1% 31.8% 32.3%
EBITDA (UniCredit) 15,480 23,428 18,464 17,056 16,358 21,427 10,624 21,367 10,743
EBITDA margin adjusted (UniCredit) 40.1% 55.3% 40.1% 40.0% 36.9% 38.8% 40.1% 40.0% 41.4%
Net income 9,575 16,518 11,302 9,866 2,768 9,154 3,590 5,693 6,641
Funds from operations (FFO,UniCredit) 12,169 12,998 13,329 12,335 9,937 15,211 5,723 14,151 6,489
Operating cash flow 13,268 13,864 14,144 14,121 10,110 15,430 3,425 14,663 4,896
Free cash flow (after capex) 10,179 9,995 10,022 9,372 5,131 10,689 1,298 9,577 3,167
Dividend payment -3,632 -6,253 -7,400 -7,966 -8,450 -9,275 -5,132 -7,761 -2,389
Retained cash flow (RCF) 8,537 6,745 5,929 4,369 1,487 5,936 591 6,390 4,100
Acquisitions/disposals -1,454 -13,151 -7,083 -109 -49,259 8,325 -316 152 -20
Share buybacks/issues 102 73 -9 -1,291 -10 -206 -930 -923 0
Total debt (UniCredit) 44,341 49,120 51,081 49,453 122,559 116,382 116,923 109,800 112,636
Net debt (UniCredit) 30,463 39,158 42,423 42,475 108,321 104,606 108,949 102,639 104,370
Adj. for pensions (UniCredit) 4,261 3,141 3,826 3,467 3,637 3,629 3,464 3,264 3,157
Adj. for operating leases/others (UniCredit) 1,480 1,496 1,794 1,180 1,255 1,629 1,629 1,311 1,311
Net debt adjusted (UniCredit) 36,204 43,795 48,043 47,121 113,213 109,865 114,043 107,214 108,838
DEBT LEVERAGE (UNICREDIT)
BOND MATURITY PROFILE (30 SEPTEMBER 2019)
CREDIT METRICS ANHEUER BUSCH (ALL UNICREDIT ADJUSTMENTS)
2012 2013 2014 2015 2016 2017 1H18 2018 1H19
EBIT net interest cover adj. 6.0 11.2 8.7 8.9 3.6 4.2 3.7 2.5 3.3
EBIT gross interest cover adj. 6.0 9.7 7.3 7.3 3.1 4.0 3.4 2.4 2.5
EBITDA net interest cover adj. 7.4 12.9 10.7 10.9 4.6 5.3 4.7 3.2 4.1
EBITDA gross interest cover adj. 7.4 11.1 9.0 9.0 4.0 5.0 4.3 3.0 3.2
FFO adj./net debt adj. 34.0% 30.1% 28.0% 26.4% 8.9% 14.0% 18.6% 13.4% 13.9%
FFO adj./total debt adj. 24.6% 24.5% 23.7% 23.0% 7.9% 12.7% 17.4% 12.6% 13.0%
RCF adj./net debt adj. 23.9% 15.8% 12.6% 9.5% 1.5% 5.6% 6.0% 6.2% 9.3%
RCF adj./total debt adj. 17.3% 12.9% 10.6% 8.3% 1.3% 5.0% 5.6% 5.8% 8.7%
Net debt adj./EBITDA adj. 2.3 1.8 2.5 2.7 6.7 5.0 3.5 4.9 5.0
Total debt adj./EBITDA adj. 3.1 2.3 3.0 3.1 7.6 5.6 3.7 5.2 5.3
FFO adj./net interest adj. 5.7 7.1 7.6 7.8 2.8 3.7 3.0 2.1 2.8
FFO adj./gross interest adj. 5.7 6.1 6.4 6.4 2.4 3.5 2.8 2.0 2.2
Total debt adj./total capital. adj. 51.9% 48.9% 50.8% 53.9% 60.8% 60.0% 61.6% 61.2% 59.8%
Net debt adj./net capital. adj. 43.8% 43.8% 46.7% 50.4% 57.9% 57.6% 60.0% 59.6% 58.0%
Equity/total assets 37.1% 39.0% 38.1% 34.0% 31.5% 32.6% 31.8% 31.0% 32.9%
9M19 results only key figures Source: company data, UniCredit Research
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FFO adj./net debt adj. Net debt adj./EBITDA adj. (rs)
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UniCredit Research page 12 See last pages for disclaimer.
4 December 2019 Credit Research
Sector Report - Food & Beverage
Financial statistics Campari
EUR mn 2012 2013 2014 2015 2016 2017 1H18 2018 1H19
Sales 1,341 1,524 1,560 1,657 1,727 1,753 778 1,712 848
EBIT margin adj. (UniCredit) 21.6% 19.1% 19.3% 20.2% 20.7% 22.1% 23.5% 22.6% 20.3%
EBITDA (UniCredit) 320 329 294 357 372 451 208 435 206
EBITDA margin adj. (UniCredit) 24.4% 22.1% 21.6% 23.5% 24.2% 25.1% 27.7% 26.3% 24.4%
Net income 157 150 130 176 166 356 147 296 123
Funds from operations (FFO, UniCredit) 194 202 233 259 294 341 149 332 183
Operating cash flow 172 166 226 250 324 283 128 307 106
Free cash flow rep. (after capex) 117 101 171 193 260 250 105 225 84
Dividend payment -41 -40 -46 -46 -52 -52 -58 -58 -57
Retained cash flow (RCF) 154 162 187 213 242 289 92 275 126
Acquisitions/disposals -308 -18 -184 23 -422 -33 26 18 0
Share buybacks/issues -12 -26 -7 -29 -8 -54 -18 -56 -13
Total debt (UniCredit) 1,340 1,326 1,270 1,777 1,616 1,543 1,547 1,505 1,731
Net debt (UniCredit) 870 853 1,088 1,026 1,199 981 947 846 937
Adj. for pensions 2 9 9 9 37 34 33 32 31
Adj. for operating leases and others 22 26 30 28 28 62 62 62 0
Net debt adj. (UniCredit) 894 888 1,127 1,063 1,264 1,078 1,041 940 968
DEBT LEVERAGE (UNICREDIT)
DEBT MATURITY PROFILE (30 JUNE 2019)
CREDIT METRICS (ALL UNICREDIT ADJUSTMENTS)
2012 2013 2014 2015 2016 2017 1H18 2018 1H19
EBIT net interest cover adj. 5.9 5.4 5.4 5.4 4.3 5.6 11.9 12.5 11.5
EBIT gross interest cover adj. 5.9 4.9 4.9 5.5 4.2 5.9 13.0 11.7 19.0
EBITDA net interest cover adj. 6.6 6.3 6.3 6.3 5.0 6.4 13.4 14.5 13.5
EBITDA gross interest cover adj. 6.6 5.6 5.6 6.4 4.9 6.7 14.6 13.6 22.3
FFO adj./net debt adj. 22.2% 23.4% 21.2% 25.0% 23.9% 32.5% 35.0% 36.3% 38.3%
FFO adj./total debt adj. 14.5% 15.3% 18.2% 14.7% 18.0% 21.4% 22.2% 21.4% 21.0%
RCF adj./net debt adj. 17.6% 18.9% 17.1% 20.7% 19.8% 27.7% 29.5% 30.2% 32.4%
RCF adj./total debt adj. 11.6% 12.3% 14.7% 12.1% 14.9% 18.2% 18.7% 17.8% 17.8%
Net debt adj./EBITDA adj. (rs) 2.7 2.6 3.3 2.7 3.0 2.5 2.3 2.1 2.2
Total debt adj./EBITDA adj. 4.2 4.0 3.8 4.7 4.0 3.7 3.6 3.6 4.0
FFO adj./net interest adj. 4.0 3.9 4.3 4.3 3.6 5.1 10.6 11.0 11.3
FFO adj./gross interest adj. 4.0 3.5 3.9 4.3 3.6 5.3 11.5 10.3 18.7
Total debt adj./total capital. adj. 48.4% 49.1% 45.1% 50.7% 46.6% 45.5% 44.6% 42.3% 43.8%
Net debt adj./net capital. adj. 38.1% 38.6% 41.4% 37.6% 39.7% 35.4% 33.8% 30.1% 30.0%
Equity/total assets 41.8% 43.5% 42.8% 42.3% 41.3% 43.5% 44.8% 46.7% 45.8%
9M19 results only key figures Source: company data, UniCredit Research
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UniCredit Research page 13 See last pages for disclaimer.
4 December 2019 Credit Research
Sector Report - Food & Beverage
Financial statistics Carlsberg
DKK mn 2012 2013 2014 2015 2016 2017 1H18 2018 1H19
Net revenue 66,468 66,552 64,506 65,354 62,614 61,808 30,966 62,503 32,990
EBITDA (UniCredit) 13,704 13,717 12,930 12,767 13,006 13,583 6,477 13,393 7,337
EBITDA margin adjusted (UniCredit). 21.7% 22.7% 23.2% 34.2% 22.4% 22.7% 22.0% 21.3% 22.6%
Operating profit before special items 9,793 9,844 9,329 8,876 8,245 8,876 4,373 9,329 5,171
Consolidated profit 6,245 5,951 4,938 -2,582 4,857 2,065 2,884 6,133 3,543
Funds from operations (FFO,UniCredit) 9,642 9,415 8,444 8,600 9,662 10,806 5,150 10,659 6,192
Cash flow from operating activities 9,871 9,083 7,405 10,140 9,329 11,834 7,267 12,047 6.496
Free cash flow (after capex,UniCredit ) 4,898 3,352 1,677 10,405 5,737 7,989 6,036 8,602 4,696
Dividend payment -6,010 -1,664 -1,897 -2,018 -2,453 -2,421 -3,358 -3,675 -3,395
Retained cash flow (RCF) 3,632 7,751 6,547 6,582 7,209 8,385 1,792 6,984 2,797
Acquisitions/disposals 1,034 -2,381 -1,510 -3,575 -2,388 -325 35 2,719 502
Total debt (UniCredit) 40,058 40,211 40,525 36,028 30,204 24,189 24,087 23,983 26,286
Net debt (UniCredit) 34,298 36,497 38,107 32,897 26,702 20,727 18,365 18,394 20,161
Adj. for pensions (UniCredit) 3,961 3,961 3,961 5,235 4,878 3,351 3,351 2,908 2,908
Adj. for operating leases/others (UniCredit) 1,634 1,522 1,185 1,482 1,490 897 897 1,004 0
Net debt adjusted (UniCredit) 39,893 41,980 43,253 39,614 33,070 24,975 22,613 22,306 23,069
DEBT LEVERAGE (UNICREDIT)
DEBT MATURITY PROFILE (30 JUNE 2019)
CREDIT METRICS (ALL UNICREDIT ADJUSTMENTS)
2012 2013 2014 2015 2016 2017 1H18 2018 1H19
EBIT net interest cover adj. 5.3 6.5 8.1 10.5 3.9 2.7 3.9 7.9 8.8
EBIT gross interest cover adj. 3.6 4.6 5.0 8.1 3.9 2.7 3.9 7.9 8.8
EBITDA net interest cover adj. 7.7 9.2 11.5 13.6 6.1 5.6 7.6 11.6 12.4
EBITDA gross interest cover adj. 5.2 6.4 7.1 10.5 6.1 5.6 7.6 11.6 12.4
FFO adj./net debt adj. 25.2% 23.3% 20.2% 22.6% 30.3% 44.3% 45.9% 48.9% 51.3%
FFO adj./total debt adj. 22.0% 21.4% 19.2% 20.9% 27.4% 38.9% 36.7% 39.1% 40.5%
RCF adj./net debt adj. 10.1% 19.3% 15.8% 17.5% 22.8% 35.2% 16.3% 34.0% 36.7%
RCF adj./total debt adj. 8.8% 17.8% 15.0% 16.2% 20.7% 31.0% 13.0% 27.2% 29.0%
Net debt adj./EBITDA adj. 2.8 2.8 2.9 1.8 2.4 2.6 2.5 1.6 1.6
Total debt adj./EBITDA adj. 3.2 3.0 3.0 1.9 2.6 3.0 3.1 2.0 2.0
FFO adj./net interest adj. 5.3 5.9 6.7 5.4 4.4 6.5 8.6 9.1 10.0
FFO adj./gross interest adj. 3.6 4.1 4.1 4.2 4.4 6.5 8.6 9.1 10.0
Total debt adj./total capital. adj. 38.3% 39.0% 44.9% 47.5% 41.9% 36.5% 36.9% 36.8% 38.5%
Net debt adj./net capital. adj. 35.1% 37.0% 43.6% 45.6% 39.4% 33.5% 31.8% 31.8% 33.1%
Equity/total assets 47.8% 47.3% 40.9% 37.8% 40.0% 43.3% 41.2% 40.7% 37.2%
9M19 results only key figures Source: company data, UniCredit Research
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UniCredit Research page 14 See last pages for disclaimer.
4 December 2019 Credit Research
Sector Report - Food & Beverage
Financial statistics COCA-COLA HBC
EUR mn 2011 2012 2013 2014 2015 2016 2017 1H18 2018 1H19
Sales 6,824 7,045 6,874 6,510 6,346 6,219 6,522 3,228 6,657 3,352
EBIT margin adjusted (UniCredit) 8.0% 6.6% 6.5% 6.7% 7.7% 9.0% 9.3% 9.7% 9.9% 9.6%
EBITDA(UniCredit) 849 746 749 730 758 839 907 457 958 475
EBITDA margin adjusted (UniCredit) 14.4% 13.0% 12.6% 13.0% 13.6% 14.8% 14.6% 14.8% 15.3% 15.2%
Net income 266 193 200 294 281 344 440 217 448 195
Funds from operations (FFO) 694 602 652 592 635 685 929 338 810 362
Operating cash flow (UniCredit) 750 661 681 605 679 698 774 230 764 232
Free cash flow rep. (after capex) 379 266 301 243 348 350 366 53 325 39
Dividend payment -7 -1 -128 -129 -131 -145 -161 0 -199 0
Retained cash flow (RCF) 687 601 524 463 504 540 769 338 611 362
Acquisitions/disposals -103 -9 6 23 136 36 64 -148 -97 -396
Share buybacks/issues -177 -123 -4 4 -55 24 71 13 -12 -174
Total debt (UniCredit) 2,256 2,160 2,300 2,105 1,705 1,625 1,626 1,571 1,604 2,822
Net debt (UniCredit) 1,780 1,721 1,562 1,469 1,217 1,051 752 911 613 1,113
Adj. for pensions 178 199 199 199 199 215 215 215 193 193
Adj. for operating leases and others 155 173 158 150 135 106 128 106 154 0
Net debt adjusted (UniCredit) 2,113 2,092 1,919 1,817 1,551 1,373 1,094 1,233 960 1,306
DEBT LEVERAGE (UNICREDIT)
DEBT MATURITY PROFILE (31 JUNE 2019)
CREDIT METRICS (ALL UNICREDIT ADJUSTMENTS)
2011 2012 2013 2014 2015 2016 2017 1H18 2018 1H19
EBIT net interest cover adj. 5.3 4.6 4.4 4.6 6.7 7.1 13.9 12.5 11.9 9.2
EBIT gross interest cover adj. 4.9 4.2 4.0 4.2 5.9 6.5 12.0 11.7 10.8 8.4
EBITDA net interest cover adj. 9.7 9.1 8.5 8.9 11.7 11.6 21.8 19.4 18.2 14.2
EBITDA gross interest cover adj. 8.9 8.2 7.7 8.0 10.4 10.6 18.7 18.2 16.4 13.1
FFO adj./net debt adj. 34.9% 30.6% 36.1% 34.7% 43.2% 51.8% 78.0% 40.0% 70.1% 50.7%
FFO adj./total debt adj. 28.5% 25.3% 26.0% 25.7% 32.9% 36.6% 49.0% 26.1% 43.9% 30.0%
RCF adj./net debt adj. 34.6% 30.5% 29.4% 27.6% 34.7% 41.3% 64.9% 27.0% 70.1% 50.7%
RCF adj./total debt adj. 28.2% 25.2% 21.2% 20.4% 26.4% 29.1% 40.8% 17.6% 43.9% 30.0%
Net debt adj./EBITDA adj. 2.1 2.3 2.2 2.2 1.8 1.6 1.1 1.3 1.0 1.6
Total debt adj./EBITDA adj. 2.6 2.8 3.1 2.9 2.4 2.1 2.1 2.0 1.9 2.7
FFO adj./net interest adj. 7.3 6.3 6.8 6.6 9.1 9.0 21.9 9.9 15.2 11.7
FFO adj./gross interest adj. 6.7 5.7 6.2 6.0 8.1 8.2 18.9 9.3 13.7 10.8
Total debt adj./total capital. adj. 46.9% 45.4% 46.9% 46.5% 41.6% 40.4% 39.2% 38.5% 38.0% 54.6%
Net debt adj./net capital. adj. 41.9% 40.8% 39.0% 39.1% 35.2% 32.3% 28.8% 28.9% 27.7% 41.5%
Equity/total assets 40.1% 41.5% 40.8% 40.6% 43.2% 43.7% 45.4% 42.1% 45.5% 27.4%
9M19 results only key figures Source: company data, UniCredit Research
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UniCredit Research page 15 See last pages for disclaimer.
4 December 2019 Credit Research
Sector Report - Food & Beverage
Financial statistics Diageo plc
GBP mn 2010/11 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 1H18/19 2018/19
Sales 9,936 11,433 10,258 10,813 10,485 12,050 12,163 6,908 12,867
EBIT margin adj. (UniCredit) 29.9% 31.6% 31.3% 29.0% 26.6% 29.7% 29.9% 35.3% 31.4%
EBITDA (UniCredit) 2,947 3,834 3,336 3,237 3,314 3,920 4,184 2,615 4,416
EBITDA margin adj. (UniCredit) 34.2% 35.9% 38.1% 33.7% 31.6% 33.4% 34.6% 38.6% 34.9%
Net income 2,017 2,594 2,264 2,467 2,362 2,772 3,144 1,921 3,193
Funds from operations (FFO) 2,293 2,637 2,387 2,434 2,601 2,981 3,243 2,260 3,470
Operating cash flow 2,183 2,084 1,790 2,551 2,548 3,132 3,084 1,604 3,248
Free cash flow rep. (after capex) 1,764 1,441 1,148 1,913 2,042 2,614 2,500 1,333 2,577
Dividend payment -1,085 -1,236 -1,316 -1,413 -1,544 -1,598 -1,661 -1,069 -1,735
Retained cash flow (RCF) 1,208 1,401 1,071 1,021 1,057 1,383 1,582 1,191 1,735
Acquisitions/disposals -35 -605 -456 -1,232 42 15 -554 400 402
Share buybacks/issues -8 -211 -36 -7 0 -40 -1,498 -1,249 -2,724
Total debt (UniCredit) 8,195 10,091 9,214 9,840 10,129 9,042 9,902 12,014 12,555
Net debt (UniCredit) 6,611 8,319 8,592 9,368 9,040 7,851 9,028 10,423 11,623
Adj. for pensions 850 658 562 410 1,211 589 348 259 436
Adj. for operating leases and others 535 497 434 424 588 288 270 270 273
Net debt adj. (UniCredit) 7,995 9,474 9,587 10,202 10,839 8,728 9,646 10,951 12,332
DEBT LEVERAGE (UNICREDIT)
DEBT MATURITY PROFILE (FY18/19)
CREDIT METRICS (ALL UNICREDIT ADJUSTMENTS)
2010/11 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 1H18/19 2018/19
EBIT net interest cover adj. 7.6 8.3 6.4 7.0 7.7 9.8 12.3 14.7 13.6
EBIT gross interest cover adj. 5.2 6.7 5.3 4.5 4.5 6.0 6.8 6.7 5.5
EBITDA net interest cover adj. 8.7 9.4 7.7 8.2 9.2 11.0 14.3 16.9 15.1
EBITDA gross interest cover adj. 5.9 7.6 6.4 5.3 5.3 6.7 7.8 7.7 6.1
FFO adj./net debt adj. 29.5% 28.7% 25.6% 24.5% 24.5% 35.0% 34.5% 34.8% 28.8%
FFO adj./total debt adj. 24.6% 24.2% 24.1% 23.4% 22.2% 30.8% 31.6% 30.4% 26.8%
RCF adj./net debt adj. 15.9% 15.7% 11.9% 10.7% 10.2% 16.7% 17.2% 19.3% 14.7%
RCF adj./total debt adj. 13.3% 13.2% 11.2% 10.2% 9.3% 14.7% 15.8% 16.8% 13.7%
Net debt adj./EBITDA adj. 2.4 2.3 2.5 2.8 3.3 2.2 2.3 2.5 2.7
Total debt adj./EBITDA adj. 2.8 2.7 2.6 2.9 3.6 2.5 2.5 2.8 3.0
FFO adj./net interest adj. 6.0 6.2 4.9 5.6 7.3 8.4 11.3 14.5 11.9
FFO adj./gross interest adj. 4.1 5.1 4.1 3.6 4.2 5.1 6.2 6.6 4.8
Total debt adj./total capital. adj. 61.4% 57.5% 56.8% 52.8% 53.9% 44.8% 46.2% 51.9% 55.7%
Net debt adj./net capital. adj. 57.0% 53.3% 55.3% 51.7% 51.5% 41.7% 44.1% 48.5% 53.9%
Equity/total assets 30.3% 32.3% 33.1% 35.9% 35.7% 41.7% 39.4% 34.7% 32.5%
year end 30 june Source: company data, UniCredit Research
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UniCredit Research page 16 See last pages for disclaimer.
4 December 2019 Credit Research
Sector Report - Food & Beverage
Financial statistics Heineken NV
EUR mn 2012 2013 2014 2015 2016 2017 1H18 2018 1H19
Revenue reported 18,383 19,203 19,257 20,511 20,792 21,629* 10,777* 22,471* 11,443*
EBITDA reported** 5,226 4,281 4,365 4,841 4,722 4,949 2,372*** 5,040 2,639***
EBITDA (beia, before one-time items, reported) 3,985 4,214 4,370 4,722 4,901 5,115 2,643*** 5,235 2,772***
EBITDA margin adjusted (UniCredit) 21.8% 22.6% 22.9% 22.4% 23.3% 23.5% 22.2% 23.1% 24.0%
Net income (UniCredit) 3,109 1,587 1,708 2,141 1,739 2,153 1,033 2,095 1,038
Funds from operations (FFO, UniCredit) 2,594 2,863 4,113 3,118 3,638 3,813 2,272 3,675 2,535
Operating cash flow 2,695 2,914 4,140 3,489 3,718 3,882 2,044 4,388 1,682
Free cash flow rep. (after capex) 1,495 1,545 2,589 1,759 1,852 2,049 1,601 2,333 3,257
Dividend payment -604 -710 -723 -909 -1,031 -1,011 -709 -1,090 -724
Retained cash flow (RCF, UniCredit) 1,990 2,153 3,390 2,209 2,607 2,802 1,563 2,585 1,811
Acquisitions/disposals -4,284 707 -49 -184 54 -927 -243 -102 -2,780
Share buybacks/issues -252 -209 -9 -377 -31 0 -34 -20 315
Total debt (UniCredit) 13,491 12,226 11,765 15,005 14,604 15,378 15,267 14,986 18,621
Net debt (UniCredit) 12,454 10,936 11,097 11,773 11,569 13,071 13,216 12,890 16,870
Adj. for pensions 1,546 1,149 1,149 1,149 1,378 1,289 1,289 954 954
Adj. for operating leases and others 501 576 576 576 1,092 1,275 1,275 1,502 1,502
Net debt adjusted (UniCredit) 14,501 12,661 12,822 13,498 14,039 15,635 15,780 15,346 19,326
DEBT LEVERAGE (UNICREDIT)
DEBT MATURITY PROFILE (31 JUNE 2019)
CREDIT METRICS (ALL UNICREDIT ADJUSTMENTS)
2012 2013 2014 2015 2016 2017 1H18 2018 1H19
EBIT net interest cover adj. 8.8 4.7 6.5 8.4 8.3 8.4 7.5 7.2 7.8
EBIT gross interest cover adj. 4.5 4.3 5.9 7.3 7.1 7.1 6.5 6.4 6.9
EBITDA net interest cover adj. 13.6 7.8 10.2 13.0 13.4 12.6 11.5 11.4 12.4
EBITDA gross interest cover adj. 7.0 7.2 9.2 11.3 11.6 10.7 10.0 10.0 10.9
FFO adj./net debt adj. 18.6% 23.8% 33.3% 24.2% 27.0% 25.5% 24.8% 25.3% 21.5%
FFO adj./total debt adj. 17.4% 21.6% 31.6% 19.5% 22.2% 22.1% 21.6% 21.2% 19.7%
RCF adj./net debt adj. 14.5% 18.2% 27.6% 17.5% 19.7% 19.1% 17.6% 18.2% 15.8%
RCF adj./total debt adj. 13.5% 16.5% 26.2% 14.1% 16.2% 16.5% 15.6% 15.3% 14.5%
Net debt adj./EBITDA adj. 3.6 2.9 2.9 2.7 2.7 3.0 3.1 2.8 3.5
Total debt adj./EBITDA adj. 3.9 3.2 3.1 3.4 3.3 3.4 3.5 3.5 3.8
FFO adj./net interest adj. 9.2 5.4 9.8 8.7 9.9 9.5 8.6 8.5 9.2
FFO adj./gross interest adj. 4.7 5.0 8.9 7.5 8.6 8.1 7.5 7.5 8.2
Total debt adj./total capital. adj. 54.7% 52.9% 50.0% 52.5% 53.9% 55.3% 54.6% 53.9% 56.3%
Net debt adj./net capital. adj. 53.0% 50.5% 48.7% 47.2% 49.0% 51.7% 51.5% 49.6% 54.1%
Equity/total assets 35.5% 38.4% 38.6% 37.6% 37.1% 35.4% 35.6% 37.0% 35.2%
*net revenues was introduced in 2017 due to changes in accounting policy on revenue (IFRS 15) Source: company data, UniCredit Research ** EBITDA includes Heineken’s share in net profit of joint ventures and associates *** UniCredit calculation 9M19 results only key figure
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UniCredit Research page 17 See last pages for disclaimer.
4 December 2019 Credit Research
Sector Report - Food & Beverage
Financial statistics Pernod Ricard*
EUR mn 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 1H17/18 2017/18 1H18/19 2018/19
Sales 8,215 8,575 7,945 8,558 8,682 9,010 5,082 8,987 8,987 9,182
EBIT margin adjusted (UniCredit) 24.4% 24.1% 25.9% 26.8% 24.9% 25.4% 31.2% 26.2% 25.9% 26.5%
EBITDA ( 2,132 2,226 2,259 2,452 2,314 2,451 1,663 2,512 2,407 2,601
EBITDA margin adjusted (UniCredit) 26.9% 27.1% 29.9% 30.0% 28.2% 28.6% 34.0% 29.3% 27.5% 29.7%
Net income 1,174 1,114 1,102 880 1,255 1,421 1,162 1,603 1,603 1,483
Funds from operations (FFO) 1,316 1,340 1,248 1,228 1,514 1,721 1,361 1,876 1,604 1,956
Operating cash flow 1,261 1,085 940 1,035 1,336 1,642 925 1,776 712 1,775
Free cash flow rep. (after capex) 1,010 781 667 712 1,003 1,275 790 1,402 576 1,387
Dividend payment -395 -435 -448 -461 -497 -511 -543 -551 -636 -645
Retained cash flow (RCF) 921 905 800 767 1,017 1,210 818 1,325 968 1,311
Acquisitions/disposals -176 50 20 20 16 17 5 17 6 50
Share buybacks/issues 0 21 -16 -14 -18 -36 -32 -23 -54 -121
Total debt (UniCredit) 10,532 9,280 8,893 9,510 9,362 8,545 8,266 7,693 8,116 7,555
Net debt (UniCredit) 9,745 8,683 8,416 8,965 8,793 7,868 7,380 6,939 7,206 6,632
Adj. for pensions 356 565 569 654 739 649 598 526 522 559
Adj. for operating leases and others 220 228 242 275 284 306 306 408 408 408
Net debt adjusted (UniCredit) 10,321 9,476 9,227 9,894 9,816 8,823 8,284 7,873 8,136 7,599
DEBT LEVERAGE (UNICREDIT)
DEBT MATURITY PROFILE (30 JUNE 2019)
CREDIT METRICS (ALL UNICREDIT ADJUSTMENTS)
2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 1H17/18 2017/18 1H18/19 2018/19
EBIT net interest cover adj. 3.8 3.8 4.9 4.6 4.9 5.9 7.1 7.5 6.7 7.5
EBIT gross interest cover adj. 3.8 3.6 4.1 4.1 4.3 5.2 6.1 6.1 5.3 6.8
EBITDA net interest cover adj. 4.2 4.3 5.6 5.1 5.5 6.7 8.0 8.4 7.3 8.5
EBITDA gross interest cover adj. 4.2 4.1 4.8 4.5 4.8 5.9 6.9 6.8 5.7 7.6
FFO adj./net debt adj. 13.2% 14.6% 14.2% 13.0% 16.1% 20.3% 23.7% 24.7% 26.8% 26.6%
FFO adj./total debt adj. 12.2% 13.8% 13.5% 12.3% 15.3% 18.8% 21.4% 22.5% 24.1% 23.7%
RCF adj./net debt adj. 9.4% 10.0% 9.4% 8.4% 11.1% 14.5% 17.0% 17.7% 18.9% 18.1%
RCF adj./total debt adj. 8.7% 9.4% 8.9% 7.9% 10.5% 13.5% 15.4% 16.1% 17.0% 16.2%
Net debt adj./EBITDA adj. 4.7 4.1 3.9 3.8 4.0 3.4 3.1 3.0 2.4 2.8
Total debt adj./EBITDA adj. 5.0 4.3 4.1 4.1 4.2 3.7 3.5 3.3 2.7 3.1
FFO adj./net interest adj. 2.6 2.6 3.1 2.6 3.6 4.6 6.0 6.2 4.7 6.3
FFO adj./gross interest adj. 2.6 2.4 2.6 2.3 3.1 4.1 5.1 5.0 3.7 5.6
Total debt adj./total capital. adj. 50.5% 46.8% 44.6% 43.3% 42.5% 39.9% 38.0% 36.0% 36.1% 33.7%
Net debt adj./net capital. adj. 48.7% 45.3% 43.4% 42.0% 41.2% 38.1% 35.6% 33.9% 33.7% 31.1%
Equity/total assets 38.7% 40.6% 42.6% 43.7% 44.1% 46.2% 48.9% 50.7% 50.9% 52.1%
* year end 30 june Source: company data, UniCredit Research
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4 December 2019 Credit Research
Sector Report - Food & Beverage
UniCredit Research page 18 .
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E 19/3
4 December 2019 Credit Research
Sector Report - Food & Beverage
UniCredit Research page 19 .
UniCredit Research* Credit Research
Erik F. Nielsen Group Chief Economist Global Head of CIB Research +44 207 826-1765 [email protected]
Dr. Ingo Heimig Head of Research Operations & Regulatory Controls +49 89 378-13952 [email protected]
Head of Credit Research
Dr. Sven Kreitmair, CFA Head of Credit Research +49 89 378-13246 [email protected]
Financials Credit Research
Franz Rudolf, CEFA Head Covered Bonds +49 89 378-12449 [email protected]
Dr. Michael Teig Deputy Head Banks +49 89 378-12429 [email protected]
Matthias Dax Sub-Sovereigns & Agencies, ESG +49 89 378-13946 [email protected]
Florian Hillenbrand, CFA Securitization [email protected]
Tobias Keller Banks +49 89 378-12960 [email protected]
Julian Kreipl, CFA Covered Bonds +49 89 378-12961 [email protected]
Natalie Tehrani Monfared Regulatory & Accounting Service, Insurance, Real Estate +49 89 378-12242 [email protected]
Corporate Credit Research
Christian Aust, CFA Head Industrials, Oil & Gas +49 89 378-17564 [email protected]
Gianfranco Arcovito, CFA Utilities, Hybrids +49 89 378-15449 [email protected]
Sergey Bolshakov EEMEA Corporates & Financials [email protected]
Mehmet Dere EEMEA Energy, Consumer +49 89 378-11294 [email protected]
Dr. Sven Kreitmair, CFA Automotive & Mobility +49 89 378-13246 [email protected]
Ulrich Scholz, CFA, FRM Telecoms, Technology +49 89 378-41847 [email protected]
Jonathan Schroer, CFA Telecoms, Media/Cable, Logistics, Business Services +49 89 378-13212 [email protected]
Jana Schuler, CFA Industrials +49 89 378-13211 [email protected]
Dr. Silke Stegemann, CEFA Health Care & Pharma, Food & Beverage +49 89 378-18202 [email protected]
UniCredit Research, Corporate & Investment Banking, UniCredit Bank AG, Am Eisbach 4, D-80538 Munich, [email protected] Bloomberg: UCCR, Internet: www.unicreditresearch.eu CR 19/13
*UniCredit Research is the joint research department of UniCredit Bank AG (UniCredit Bank, Munich or Frankfurt), UniCredit Bank AG London Branch (UniCredit Bank, London), UniCredit Bank AG Milan Branch (UniCredit Bank, Milan), UniCredit Bank AG Vienna Branch (UniCredit Bank, Vienna), UniCredit Bank Austria AG (Bank Austria), UniCredit Bulbank, Zagrebačka banka d.d., UniCredit Bank Czech Republic and Slovakia, ZAO UniCredit Bank Russia (UniCredit Russia), UniCredit Bank Romania.