Hite -Jinro Investor Presentation
Transcript of Hite -Jinro Investor Presentation
June 2009June 2009
HiteHite--JinroJinro Investor PresentationInvestor Presentation
’09 1Q result of Hite Brewery
3
201,754
(22,587)
962,949
(106,600)
213,133
(23,635)
1,026,753
(110,241)
230,106
(23,635)
2007 1Q 2007 2008 1Q 2008 2009 1Q
Sales Volume
Trend in sales growth
� 2009 1Q sales +8.0% y-y
� Reason for sales increase
① Sales volume increased by 0.8% y-y
② 5.6% price hike in July ’08 reflected
③ Export sales volume increased by 62.8%,
export sales increased by 130.8% y-y
④ Other factors
- warmer temperature
- move narrowly because of economy
stagnation
Unit : Mn K.won / thousand Cs
(+7.8%)(+6.6%)
(+8.0%)
(+0.8%)
(+3.7%)(+4.9%)
(+5.6%)
(+3.8%)
(+4.1%)
(+3.3%)
4
Cost Breakdown
Malt, 27.8%
Cornstarch,7.3%
Other raw
material, 2.1%
Packaging,23.3%
Labor, 8.6%
Depreciation,13.9%
Others, 17.0%
진행일정� Gross profit W116.3bn (+1.9% y-y, gross profit margin 50.6% → -3.0%p y-y)
� Margin pressure by increased unit price of raw material
→ imported malt, cornstarch and packaging price increased, weaker K.Won effect maintains
� Malt
- Quantity consumed : domestic 5,832ton (18.9%),
imported 24,966ton (81.1%)
- Out of total malt cost of W31.4bn
domestic W9.1bn(29%), imported W22.3bn(71%)
→ domestic decreased W1.9bn, imported increased W6.0bn
Total increased W4.1bn (compared to sales 1.8%)
� Starch
- Quantity consumed : 11,667ton /
Cost : W8.3bn (increased W2.6bn y-y)
� Packaging
- Cost : increased W2.2bn
�Weaker K.Won
- ’08 1Q average FX W957 → ’09 1Q average FX W1,418
- import tariff : ’07 10% → ’08 0% → ’09 8%(2H 15%)
COGS breakdown
$497 / ton$600 / ton$498 / tonImported malt
’09 Mar~’10 Feb(E)’08 Apr~’09 Feb ’08 Jan~’08 MarItem
(’08 23.4%)
(’08 6.6%)
(’08 1.8%)
(’08 26.2%)
(’08 9.0%)
(’08 12.9%)
(’08 20.1%)
5
599.2
781.3
688.7
544.5552.7
596.7
820.5 834.2
781.3
492.5
513.0544.7
271 271
498498
600 600
497 497
0
100
200
300
400
500
600
700
800
900
07'1 07'2 07'3 07'4 07'5 07'6 07'7 07'8 07'9 07'10 07'11 07'12 08'1 08'2 08'3 08'4 08'5 08'6 08'7 08'8 08'9 08'10 08'11 08'12 09'1 09'2 09'3 09'4 09'5 09'6
International malt price
Hite imported malt price
진행일정
Cost fluctuation of malt
� Domestic malt price decreased 4%, imported malt average unit cost ’08 $587 → ’09 $513 (12% decreased)
� FX increased 17% y-y, if ’09 average FX is 1,300 won. Import tariff 8% resurrected (expected 15% in 2H)
� Malt cost will be increased 10bn won(9%) y-y, starch 4.5bn(14%) and packaging 3.2bn won(3%) y-y
will be reduced
Unit : dollar/ton
Input period
(’06 Autumn
contract)
Input period Contract period
($497 / ton)
Contract
period
Verbal
contract
($600 / ton)
Input period
6
Operating profit and marketing strategy
47,255
230,703
47,466
215,772
48,802
234,469
2007 2008 2009(E)
1Q Full year
� Operating profit : W48.8bn (+2.8% y-y, operating profit margin 21.2% → -1.1%p y-y)
� Royalty cost : W2.7bn (payment start from ’08 3Q)
� Marketing cost : 9.6% of sales (decreased W4.2bn, -2.7%p y-y)
Unit : Mn K.won
+0.4% +2.8%
-6.5% +8.7%
201.8bn
962.9bn
213.1bn
1,026.8bn
230.1bn
23.5bn 119.3bn
26.2bn 114.3bn
22.0bn
12.3%
11.1%12.4%11.6%
9.6%
0
2,000
4,000
6,000
8,000
10,000
12,000
2007 1Q 2007 2008 1Q 2008 2009 1Q
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
14.0%
Sales Marketing cost of sales (%)
7
25,240
136,851
28,842
157,535
29,119
147,065
2007 2008 2009(E)
1Q Full year
진행일정
Earnings improvement
� Net profit : +1.0% y-y
� Equity method gain included to Hite Holdings, interest expense increased
� Subsidiary’s equity method gain excluded
2008 1Q equity method gain : 5.5bn(Hite Brewery)
2009 1Q equity method gain : 5.3bn(Hite Holdings)
※ Since 2008 3Q, included to Hite Holdings
� Interest expense increased
End of ‘08 1Q Interest bearing debt : W1,120bn
Interest expense : W13.5bn
End of ‘09 1Q Interest bearing debt W1,070bn
Interest expense : W14.5bn
※ Interest expense of Hite Holdings excluded in
’09 result.
- After de-merger : Hite Brewery – W860bn
Hite Holdings – W290bn
Unit : Mn K.won
+1.0%+14.3%
+15.1%-6.6%
8
Hite Brewery financial statement
Income statement
9
Hite Brewery financial statement
Cash flow statementBalance sheet
’09 1Q result of Jinro
11
165,170
(13,427)
669,428
(54,943)
171,589
(13,944)
735,259
(59,733)
160,447
(12,149)
2007 1Q 2007 2008 1Q 2008 2009 1Q
Sales Volume
Sales growth trend
� Sales decreased 6.5%
� 1Q sales decreased 6.5%
- Sales volume decreased 12.9%
(Whole market decreased 6.8%)
- Price hike of 5.9% in end of Dec 2008
� Reason for sales decrease in 1Q
- Pre-demand before price hike in Dec ‘08
(+35% in Dec ‘08)
- Price hike of other player in Jan ’09,
pre-demand of others occurred in Jan
Unit : Mn K.won / thousand Cs
(-4.5%)
(+9.8%)
(+3.8%)
(+3.9%)
(-6.5%)
(-12.9%)(-3.1%)
(-4.7%)
(-4.2%)(+8.7%)
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Other raw
material, 3.9%
Packaging,
15.7%
Labor, 10.0%
Others, 21.8%Pure alcohol,
48.9%
Cost Breakdown
� Pure alcohol represent 48.9% of COGS
(28.9% of sales)
� Pure alcohol price hike of 3.5% in ‘07
Pure alcohol price hike of 11.5% in ’08
(Cost will be increased 25bn won y-y)
� Raw material of pure alcohol : sweet potato,
government-stock rice, tapioca, corn, etc
� Pipeline of pure alcohol
Pure alcohol company(10) → Korea Ethanol
Supplies Company → Soju company(10)
� Jinro is largely getting the pure alcohol from
Jinro Distillers close to the Icheon factoryCOGS Breakdown
� Gross profit W72.1bn (Gross profit margin 44.9%)
� Gross profit margin decreased 0.9%p because of decreased in sales volume and cost burden
(’08 49.3%)
(’08 3.6%)
(’08 15.6%)
(’08 11.2%)
(’08 20.3%)
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Competition and marketing strategy
32,690
138,096
40,661
144,828
26,327
175,422
2007 2008 2009(E)
1Q Full year
� Operating profit : -35.3% y-y (Operating profit margin 16.4%)
� Market Share : 47.9% (Pre-demand difference between price hike period)
� Marketing expense : 8.6% of sales (Because of promotion event and renewal of “J”)
Unit : Mn K.won
-35.3%+24.4%
+4.9%
+21,1
171.5bn
669.4bn
157.5bn
735.3bn
160.4bn
10.4bn 40.6bn
10.7bn 52.6bn
13.8bn
8.6%
6.8% 6.1%7.1%
6.1%
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2007 1Q 2007 2008 1Q 2008 2009 1Q
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Sales Marketing cost of sales (%)
14
23,163
150,711
33,895
154,803
26,422
166,822
2007 2008 2009(E)
1Q Full year
진행일정
Earnings reduction
� Net profit -22.0% y-y
� Sales and operating profit reduced, because of volume decreased
(Difference gap has lowered by interest expenses.)
� Operating profit : decreased W14.3bn
� Interest expense decreased W2.3bn
End of 2007 Interest bearing debt : W450bn
End of 2008 interest bearing debt : W380bn
End of 1Q 2009 interest bearing debt : W400bn
� No corporate tax through 2011
Unit : Mn K.won
+29.6% -22.0%
+4.9%+7.8%
15
Jinro financial statement
Income statement
16
Jinro financial statement
Cash flow statementBalance sheet
AppendixAppendix
18
진행일정
Equity status of Hite Brewery, Jinro
Foreign Investors,
22.13%
Capital Group,
6.05%
Lazard Asset
Management,
13.57%
KTCU, 9.43%
Hite Foundation for
Arts and Culture,
3.00%
Hite Holdings,
6.75%
Samjin Invest,
9.80%
Mr. Park and
Family, 16.73%
Related parties,
3.76%
Others, 8.78%
� Number of total shares : 9,936,853 shares
(common 9,563,918 / preferred 372,935)
� Major shareholder & friendly shares 40.07%
� Hite Holdings owns 6.75%
� Lazard Asset Management owns 13.57%
� Capital Group International owns 6.05%
Hite Brewery Jinro
� Number of total shares : 43,000,000 shares
(common 42,995,303 / preferred 4,697)
�Hite Holdings owns 55.40%
�Result of Put option event in 2009 2Q, equity
rate augmented from 49.74% to 64.94%(15.2%)
�Result of disposal and early put option event
in 2009 2Q, equity rate decreased from 64.94%
to 55.40%(-9.54%)
Military
pens ion,
13.15%
Hite
Holdings,
55.40%
Real D.W,
10.27%
Credit
union,
2.56%
Others,
0.20%
KTCU,
18.40%
19
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Growth Potential
BeerBeer SojuSoju
HITE 10yrs CAGR : 5.1%
BEER 10yrs CAGR : 2.5%
JINRO 10yrs CAGR : 4.8%
SOJU 10yrs CAGR : 2.3%Unit : C/S Unit : C/S
•Based on delivery numbers from Korea Alcohol & Liquor Industry Association andHite / Jinro sales volume(domestic)
� In whole liquor market, Beer and Soju are occupying 60% and 30% each.(National Tax office on May 2009)
� CAGR of Beer and Soju is about 2.5%.
20
Trend of Liquor market
� Annual consumption per adult
Beer : 2007 106.8 bottle → 2008 109.8 bottle, Soju : 2007 72.0 bottle → 2008 74.4 bottle
� Beer, soju, rice wine lead the liquor market, consumption of whisky & wine decreased because of FX, etc.
Consumption trend of main liquor(Consumption trend of main liquor(’’04 ~ 04 ~ ’’08)08) Export trend of main liquor(Export trend of main liquor(’’04 ~ 04 ~ ’’08)08)
* National tax office(2009. 5. 19)
‘04 ‘05 ‘06 ‘07 ‘08 ‘04 ‘05 ‘06 ‘07 ‘08
Total Soju Beer Rice wine
Whisky (thousand kl)
Total
Soju
Beer
Rice wine
Traditional
Hite HoldingsHite Holdings
22
진행일정
Equity status of Hite Holdings
� Number of total shares : 12,298,852 shares
(common 11,828,042 / preference 470,810)
�Treasury stock 12.86%
�KTCU owns 9.80%, Samjin invest owns 9.81%
�Foreign investor 15.72%
(Lazard Asset Management own less than 5%,
when they announced in Nov 2008)
� Major shareholder & friendly shares (include treasury stock) : 47.63%
� Shareholder with more than 5% : Samjin invest 9.81%, KTCU 9.8%
Equity status (common shares)
Foreign
Investors,
15.51%
Mr. Park and
Family , 16.74%
KTCU,
9.80%
Others, 28.66%
Hite Foundation
for Arts and
Culture, 3.00%
Samjin Invest,
9.81%
Related
parties,
5.16%
Treasury ,
12.86%
23
Hite Holdings structure after de-merger
Organization chart (End of June)
Hite Holdings
Jinro Hite Alcohol Hite Industry Hite DistillersHite Brewery
Kangwon /
Cheonju /
Suyang /
Logistics
Jinro Soju Jinro JapanForeign
Subsidiaries
Seoksu &
Puris
100%
100% 100% 82~100%
100%
55.40% 100% 100% 100%6.76%
-0.1NP
0.2OP
63.8Revenue
0.1NP
0.4OP
9.8Revenue
2.0NP
2.6OP
23.2Revenue
2.9NP
5.3OP
20.2Revenue
-2.9NP
-4.4OP
63.8Revenue
Hite Development
100%
* 2008 financial figures (before audit), Unit : KW bn
24
Hite Holdings financial statement
Balance sheet Income statement
25
Hite Holdings financial statement
Cash flow statement