Atlantic Grupa
Company of Added Value
Erste Group Investor Conference 2010
1
CONTENT

Acquisition of Droga Kolinska: Investment highlights

Intermezzo: What preceded to the acquisition of Droga Kolinska?

Strategic reasoning and medium-term synergies plan

Acquisition info/Financing structure
2
VERTICALLY INTEGRATED COMPANY IN NUTRITION HEALTHCARE PERFORMANCE
INVESTMENT
HIGHLIGHTS
1.
6.
Strong
innovation &
brand
development
capabilities
One of the
leading F&B
companies in
the SEE
2.
Balanced
geographical
diversification
Atlantic Grupa
+
Droga Kolinska
5.
Strong
regional
distribution
network
3.
4.
Strong
regional
production
network
Widening of
product
portfolio
3
CONTENT

Acquisition of Droga Kolinska: Investment highlights

Intermezzo: What preceded to the acquisition of Droga Kolinska?

Strategic reasoning and medium-term synergies plan

Acquisition info/Financing structure
4
European company
ATLANTIC GRUPA’S DEVELOPMENT CYCLE
2010
Acquisition of Kalničke vode Bionatura
2010
Acquisition of DROGA KOLINSKA
2008/9
Development based on:
Acquisition of pharmacies – Farmacia
2007
IPO
 Carefully thought diversification strategy
2007
Višički komerc (Macedonia)
 Extensive M&A track record
2007
Multivita (Serbia)
2007
Fidifarm (Croatia)
2006
Representative office Moscow
2005
Power Gym (affiliated company in UK)
2005
Regional company
2004
Melem
2004
Atlantic Ljubljana
2003
Atlantic Skopje
2003
Neva
2001
Cedevita
2001
Atlantic Beograd
2001
Representative office Sarajevo
Haleko Italy (affiliated company in Italy)
Haleko
Croatian company
1999
Cooperation Johnson & Johnson
1996
Cooperation Duracell
1994
Distribution centre Rijeka
1994
Distribution centre Osijek
1992
Distribution centre Split
1991
Cooperation Wrigley
5
STRONG TRACK RECORD IN ACQUISITIONS
… 2001
… 2003
… 2005
… 2007
Acquisition
Situation before
takeover
Situation after
takeover
 Stagnating sales
 Declining market
share
 Characterized as a
product with no futures
 Enlivened sales and
brand through
innovations and
marketing campaigns
11%
Revenues at
takeover and
today
 Leading market
position lead
 Outdated products
 Barely profitable
business operations
 Market leader
 Modern products
and new plant
 Profitable business
operations
4%
356
 Company on the
verge of bankruptcy
 Shattered reputation
 Implemented
restructuring
 Profitable business
operations
 International
expansion
8%
76
 Cedevita’s main
competitor in the
Serbian market
 Successful integration
 Strengthening of
Cedevita’s position in
Serbia
 Opening of the Russian
market
501
46
48%
60
160
2001
21
365
2009
2003
2009
2005
2009
2007
2009
ATLANTIC GRUPA’S BUSINESS MODEL DEVELOPMENT
Atlantic Grupa’s sales HRKm
Atlantic Grupa’s EBITDA normalized HRKm
CAGR 06-09
+16.4%
2,003
2,199
CAGR 06-09
+24.5%
132
1,670
1,394
98
2006
2007
2008
2006
2009
No. of employees
1,332
189
169
1,452
2007
2008
2009
EBITDA margin
1,672
1,719
1,198
1,279
7.0%
7.9%
8.5%
8.6%
Sales per employee (HRK000)
1,047
1,150
7
FINANCIAL OVERVIEW: 2007-2009
FY09
FY08
FY07
CAGR 09/07
Revenues
2,225
2,020
1,699
14.4%
Sales
2,199
2,003
1,670
14.8%
Normalized EBITDA
189
169
132
19.6%
Normalized EBIT
146
129
95
24.0%
90
78
54
28.3%
EBITDA margin
8.6%
8.5%
7.9%
EBIT margin
6.6%
6.5%
5.7%
In HRKm
Normalized Net profit
Net debt
Total assets
Equity
Interest coverage
271
289
89
1,775
1,727
1,499
758
740
674
 Double-digit sales and EBIT
growth
 Stable balance sheet
 ROE improvement
6.9
6.7
5.6
Gearing ratio
26.3%
28.1%
11.6%
Normalized ROE
12.0%
11.1%
11.4%
(normalized)
 Growth in challenging macro
milieu thanks to innovation
8
OVERVIEW OF THE 1H10 FINANCIAL FIGURES
1H10
1H09
1H10/1H09
Revenues
1,087
1,070
1.6%
Sales
1,073
1,058
1.4%
Normalized EBITDA
89
87
2.6%
Normalized EBIT
65
67
-2.7%
41
38
8.2%
7.1
6.0
1H10
YE09
Net debt
296
271
Equity
799
758
In HRKm
Normalized net profit
Interest coverage
(normalized)
Current ratio
1.73
1.66
Gearing ratio
27.0%
26.3%
 Continued growth accompanied
with sound liquidity position
despite gloomy macro trends
 Performance ex. one-offs:
 Sales
+1.4% yoy
 EBITDA
+2.6% yoy
 EBIT
-2.7% yoy
One-offs refer to:
 HRK9.9m in non-recurring gain on
purchase of minority interest in
Cedevita from DEG in 2009
 HRK48.6m in one-time cost related
to transfer of Neva to new production
facility in 2010
 HRK2.4m in hitherto realised
transaction costs of HRK2.4m for the
acquisition of Droga Kolinska
9
CONTENT

Acquisition of Droga Kolinska: Investment highlights

Intermezzo: What preceded to the acquisition of Droga Kolinska?

Strategic reasoning and medium-term synergies plan

Acquisition info/Financing structure
10
1.
MERGER OF AG & DK WILL CREATE … the 2ND STRONGEST F&B COMPANY IN THE REGION
Atlantic Grupa
FY09 sales EUR301m
Kalničke vode Bionatura
(water producer)
FY09 sales EUR6m
Consolidated FY09
pro-forma sales
EUR632m
Droga Kolinska
(Food & beverage)
FY09 sales EUR326m
11
2.
MERGER OF AG & DK WILL CREATE … the COMPANY WITH BALANCED GEOGRAPHICAL
DIVERSIFICATION
Atlantic Grupa
Others
24%
Atlantic Grupa (incl. KVBN) + Droga Kolinska
Others
17%
Slovenia
5%
Slovenia
12%
Macedonia
3%
Macedonia
1%
BiH
8%
BiH
3%
Montenegro
2%
Montenegro
1%
Serbia
6%
2009 sales of EUR 301m
*AG financials translated at EUR/HRK of 7.3
Croatia
32%
Croatia
60%
Serbia
26%
Pro-forma 2009 sales of EUR 632m
12
3.
MERGER OF AG & DK WILL CREATE … the COMPANY with WIDE PRODUCT/DISTRIBUTION
PORTFOLIO
COFFEE
SAVOURY
SPREADS
CONFECTIONERY &
SNACKS
• Turkish c.
• Espresso c.
• Instant c.
• Meat s.
• Fish s.
• Snacks
• Chocolate
• Biscuits & wafers
BEVERAGES
• Carbonated soft drinks
• Vitamin instant drink
• Teas & functional teas
• Functional water
• Bottled water
PERSONAL
CARE
PRODUCTS
• Toothpaste
• Body creams/universal
creams
• Lip balms
PHARMA
SPORTS &
FUNCTIONAL
FOOD
• Sports food
• Food supplements
DISTRIBUTION
• Own brands
• International brands (Wrigley,
Ferrero, Duracell,
Jonhson&Johnson, etc.)
BABY FOOD
• Pharmacy chain
• Vitamins, minerals & food
supplements
• Cereals
• Jars, tea
• Milk formula & juices
13
3.
MERGER OF AG & DK WILL CREATE … the COMPANY with 12 OWN BRANDS with
SALES > EUR10m
* In EURm
* 2009 sales
77
* 3 principal brands with sales > EUR10m
56
44
33
31
24
18
fa
Ka
d
an
Gr
a
get
r
A
de
Ce
a
vit
r
e
aff
we
c
o
r
p
Ba
l ti
Mu
a
ck t
Co
ki
o
Sm
je
žel
e
pš
jl e
a
N
15
14
at
n
Do
p
am
h
C
13
13
i
b
Be
12
o
ni t
Bo
14
3.
OVERVIEW of MARKET POSITIONS: among TOP 3 BRANDS in CATEGORY on the MARKET
Slovenia
Serbia
Croatia
BiH
Germany/
Macedonia
UK/Italy
Russia
15
4.
MERGER OF AG & DK WILL CREATE … STRONG REGIONAL PRODUCTION NETWORK
Slovenia
3 production
plants
Serbia
3 production
plants
Croatia
EU: Production
facility in Germany
5 owned production
plants (incl. KVBN
plant), 3 outsourced
BiH
2 owned production
plants, 1 outsourced
Macedonia
1 production plant
16
5.
MERGER OF AG & DK WILL CREATE … STRONG REGIONAL DISTRIBUTION NETWORK
FY09 Sales AG+DK+KVBN EURm (AG financials at EUR/HRK of 7.3)
DK
Slovenia
62
78
AG
16
KVBN
Croatia
18
Serbia
Montenegro
144
8
BiH
5
181
18
204
162
2
10
44
54
10
…
 The company with strong regional distribution network
Macedonia
3
15
18
and thus strong negotiating power in retail
 The company with the vertically integrated organization
combining R&D/production/marketing-distributionretail (pharmacies in AG and small retail formats in DK)
Other
35
71
106
17
6.
MERGER OF AG & DK WILL CREATE … the COMPANY WITH STRONG INNOVATION AND
BRAND DEVELOPMENT CAPABILITIES
 Strong competitive position built through innovation and understanding of consumer needs and consumption
trends
 Successful examples of developed products and distribution channells:
18
MERGER OF AG & DK - PRO-FORMA FINANCIALS
Consolidated sales AG+DK+KVBN, EURm, 2010 Full year
Normalized cons. EBITDA AG+DK+KVBN, EURm 2010 Full year
73
69
638
632
2009
2010E
2009
2010E
* YE10 consolidated net debt in the range of EUR360-365m
* AG financials translated at EUR/HRK of 7.3
19
CONTENT

Acquisition of Droga Kolinska: Investment highlights

Intermezzo: What preceded to the acquisition of Droga Kolinska?

Strategic reasoning and medium-term synergies plan

Acquisition info/Financing structure
20
SUMMARY OF STRATEGIC REASONING FOR ACQUISITION OF DROGA KOLINSKA
Achieving
sales and costs
synergies
STRONG
STRATEGIC FIT
Compatibility of industries,
product assortments and
markets between Droga
Kolinska and Atlantic Grupa
Raising operating efficiency and thus
profitability in Droga Kolinska amid change in
business strategy and application of Atlantic
Grupa’s management know-how
21
SUMMARY OF STRATEGIC REASONING FOR ACQUISITION OF DROGA KOLINSKA
Focus on
categories with
higher growth
potential
Widening
product
assortment
Synergies &
Restructuring
based on Atlantic
Grupa’s knowhow
Applying
more active
marketing
support
Costs
restructuring
→ EBIT
margin
improvement
Focus on achieving
economies of scale in
raw material
procurement
Achieving stronger
negotiating power in
relationship with
suppliers and
customers
22
SALES SYNERGIES in DROGA KOLINSKA
Synergies reasoning in categories
Coffee
Confectionary
 Exploiting AG’s distribution strength in Croatia
and BiH in both the retail and the HoReCa
channels
Slovenia
Snacks
 Significantly better market positioning on
the Croatian and BiH markets on the back of
Atlantic Grupa’s distribution know-how
Spreads
 Stronger focus on this category with high
growth potential supported by more
intensive marketing investments + entering
new markets
 Combined operations and presence spurring
growth in beverages (using Cedevita GO!
fridges for Cockta/Donat Mg and exploiting
AG’s strong presence in the HoReCa channel
with Cedevita) + entering new markets
 Increasing the low weighted
distribution reach of the
confectionery category
 Introducing confectionery as the
impulse category
 Merging distribution infrastructure of Droga
Kolinska and Atlantic Grupa in Croatia
 Introducing assortment as ‘impulse category’
in Slovenia
Soft
drinks/Donat
Synergies reasoning on a country level
Croatia
 Raising the low weighted
distribution reach in all categories
across all distribution channels
Serbia
 Achieving better market coverage
via stronger product assortment in
soft drinks (Cedevita + Cockta)
BiH
 Merging DK and AG distribution
networks will enhance low weighted
distribution reach in many categories
23
INTENSITY of SYNERGIES EFFECTS
LOW
MEDIUM
HIGH
LOW
Coffee
Slovenia
Confectionary
Croatia
Snacks
Serbia
Spreads
Montenegro
Soft
drinks/Donat
BiH
MEDIUM
24
HIGH
OPERATING COSTS SYNERGIES
Distribution/
Transportation
Logistics
Procurement
Marketing
 Merging Droga Kolinska and Atlantic Grupa’s distribution networks on ex. Yugoslav markets will
enable elimination of overlapping distribution networks and thus raise utilisation capacity rates in
vehicle fleets, optimise distribution routes and sales force. All this coupled with economies of scale and
thus lower marginal costs in distribution will eventually lead toward lower overall distribution and
transportation (gas/leasing) costs.
 Merger and optimisation of the logistics processes in Droga Kolinska and Atlantic Grupa will lead
towards lower operating costs in the logistics area.
 Joining Droga Kolinska and Atlantic Grupa’s procurement operations and suppliers base will result in
higher negotiating power and better control in the procurement process of raw materials (sugar for
Cedevita and many categories in Droga Kolinska) and packaging materials (same packaging materials for
Cedevita GO!, Cockta, Donat Mg as well as for coffee and Cedevita VIN/HoReCa). All this in tandem with
the simultaneous achievement of economies of scale in the procurement process will lead toward
lower production material costs.
 Focus on the more efficient management of marketing activities (both above and below the line) in
product categories with higher growth potential through joined marketing investments will eventually
result in more efficient marketing spending.
25
SUMMARY OF STRATEGIC REASONING FOR ACQUISITION OF KALNIČKE VODE BIO NATURA
Cedevita
GO!
 Further expansion and development of Cedevita GO! requires in-house bottling with spring water
 Considering that bottling was outsourced until the acquisition – this will lower service costs for Atlantic Grupa
Cockta
 Acquisition of Kalničke vode Bio Natura will enable in-house bottling of Cockta for Croatian and BiH markets
(currently outsourced)
Spring
water
Atlantic Grupa sets up the path for creating regional water producer with brands: Donat Mg, Unique, Kapljice, Tiha,
Tempel and Karadjordje
Bulk/HOD
water
 Market leader with further growth potential
Equipment
 Modern production plant and equipment
 New distribution channel for AG products (direct distribution to final consumers)
26
CONTENT

General overview of Atlantic Grupa

Acquisition of Droga Kolinska

Consolidated Group

Acquisition info/Financing structure
27
ACQUISITION INFO - VALUATION
Droga Kolinska
Ownerhip acquired
10.2
100%
Enterprise value (EURm)
382
Net debt in DK as of 31/05 (EURm)
146
Estimated net debt at closing date (EURm)
140
Estimated purchase price at closing (EURm)
242
8.4
1.2
Acquisition valuation
EV/Sales (2009)
1.2
EV/EBITDA (2009, reported)
8.4
P/S (2009)
0.7
P/EBITDA (2009, reported)
5.3
DK EV/Sales,
2009
1.1
Average
acquisition
EV/Sales
DK EV/EBITDA
(2009,
reported)
Average
acquisition
EV/EBITDA
28
FINANCING STRUCTURE
In EURm
Senior loan
106
 Senior loan by:
Raiffeisen Group (together Raiffeisenbank Austria
d.d. and Raiffeisen Zentralbank Oestereich AG)
UniCredit Group (together UniCredit Bank Austria
AG and Zagrebačka banka d.d.)
Junior loan (EBRD)
 Junior loan by EBRD
30
23
AG's equity
 Excluding transaction costs and arrangement fees
Capital increase
83
29
CAPITAL INCREASE – NEW SHAREHOLDER STRUCTURE
After capital increase (22.09.2010)
Before capital increase (30.06.2010)
50.20% TEDESCHI EMIL
52.57% TEDESCHI EMIL
8.53% EBRD
9.01% RAIFFEISEN OPF
8.49% DEG
7.73% TEDESCHI FIORIO LADA
8.39% RAIFFEISEN OPF
7.14% DEG
5.79% TEDESCHI FIORIO LADA
3.17% AZ OPF
2.47% AZ OPF
1.92% RAIFFEISEN VPF
1.62% East Capital
1.62% East Capital
1.42% RAIFFEISEN VPF
1.36% PBZ CO OPF
1.36% PBZ CO OPF
1.15% ERSTE PLAVI OPF
1.15% ERSTE PLAVI OPF
0.82% ZABA d.d./custody account
10.56% Others
13.50% Others
* 864,305 newly issued shares offered at HRK 700 a share → HRK605m in raised capital
* Subscription right: Top 15 Investors on June 30th, 2010 and Qualified investors: DEG and EBRD – additional investment by DEG,
while EBRD entered AG’s ownership structure
* Total no. of shares after the capital increase: 3,334,300
30
SHARE PRICE PERFORMANCE
6.000
1.000
Crobex
Total no. of shares
3.334.300
ATGR-R-A
800
Share price (30/09/10)
801,52
4.500
MCap (HRK000)
2.672.508
MCap (EUR000)
366.097
600
3.000
400
1.500
200
0
Nov-07
Apr-08
Aug-08
Dec-08
May-09
Sep-09
2008
2009
2010 YTD
ATGR-R-A
-47.4%
47.7%
17.7%
CROBEX
-67.1%
16.4%
-4.4%
Jan-10
Jun-10
ATGR-R-A strongly outperformed
the market
31
CONTACTS
 Lada Tedeschi Fiorio, Vice President of Business Development
lada.tedeschi.fiorio@atlantic.hr
 Zoran Stankovic, CFO
zoran.stankovic@atlantic.hr
Maja Barac, Head of Investor Relations
maja.barac@atlantic.hr
ir@atlantic.hr
+385 1 24 13 908
32
CONTACTS
 Maja Barać Adrinek, CFA
Head of Investor Relations
maja.barac@atlantic.hr
ir@atlantic.hr
+385 1 24 13 908
33