Adidas Ag · XETR:ADS
Adidas — adidas-Salomon — Q1 2005 Earnings Presentation
37 slides from Adidas's earnings presentation, May 2, 2005
Slide 1: First Quarter 2005 Financial Results Presentation
adidas-Salomon AG FIRST QUARTER 2005 FINANCIAL RESULTS PRESENTATION May 2, 2005
Slide 2: First Quarter 2005 Results: Operational Highlights
adidas-Salomon AG First Quarter 2005 Financial Results Presentation FIRST QUARTER 2005 RESULTS OPERATIONAL HIGHLIGHTS HERBERT HAINER, CEO 2
Slide 3: An Exciting Start to 2005
adidas-Salomon AG First Quarter 2005 Financial Results Presentation An Exciting Start to 2005 • Strong sales, margin and profitability improvements • Successful new products and brand positioning • Strong improvements in North America and Asia 3
Slide 4: Outstanding Financial Performance
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Outstanding Financial Performance • Currency-neutral sales grow 11% (+10% in euros) • Substantial gross and operating margin improvement • Net income attributable to shareholders grows 46% (+26% on a comparable basis) 4
Slide 5: Increasing Brand Profile in North America
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Increasing Brand Profile in North America • Currency-neutral sales grow 20% • Focus on brands and profitability • High-single-digit sales growth expected in 2005 5
Slide 6: Strong Momentum in Asia Continues
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Strong Momentum in Asia Continues • Sales and backlogs grow more than 30% on a currency-neutral basis • Strong economic and income development • Major step change expected from 2008 Olympics 6
Slide 7: All-Around Strength in Latin America
adidas-Salomon AG First Quarter 2005 Financial Results Presentation All-Around Strength in Latin America • Currency-neutral sales grow 45% • Double-digit improvement at all brands • Brand presence improves in key markets 7
Slide 8: TaylorMade-adidas Golf Delivers Impressive Growth
adidas-Salomon AG First Quarter 2005 Financial Results Presentation TaylorMade-adidas Golf Delivers Impressive Growth • Currency-neutral sales grow 31% • Double-digit increases in all regions • Leading categories: metalwoods, rac™ irons and adidas apparel • Excellent product pipeline and market posi
Slide 9: Challenging Quarter in Europe
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Challenging Quarter in Europe • Currency-neutral sales grow 1% • Growth in emerging markets, the UK and Italy • Excellent profitability • Improvements expected in remainder of 2005 9
Slide 10: Salomon Sales Down in Most Categories
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Salomon Sales Down in Most Categories • Currency-neutral sales decline 8% due to tough winter conditions in North America and Japan • Delayed ordering cycles negatively impact Mavic sales • Better full year sales expected than first
Slide 11: Major Sports Marketing Deals Signed
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Major Sports Marketing Deals Signed 11
Slide 12: Changes to Use of Sport Logos on Olympic Products
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Changes to Use of Sport Logos on Olympic Products • Limited use of Three Stripes on Olympic apparel in the future • Olympic footwear not affected • New brand promotion opportunities to be developed 12
Slide 13: Successful Product Launches
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Successful Product Launches • Excellent sell-throughs with adidas_1 • adidas by Stella McCartney exceeds initial sales projections 13
Slide 14: Exciting Product Pipeline
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Exciting Product Pipeline 14
Slide 15: Set for Further Growth in 2005
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Set for Further Growth in 2005 Impressive Impressive Acceleration Accelerationin in growth growthtrends trendsin in Europe Europedriven driven North NorthAmerica, America, by byincreasing increasing Asia Asiaand and Latin LatinAmeri
Slide 16: Salomon Group of Brands to Be Sold
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Salomon Group of Brands to Be Sold 16
Slide 17: Rapid Consolidation in Winter Sports Industry
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Rapid Consolidation in Winter Sports Industry • Scale and synergies critical to success • Efficiency as key factor • Sale of Salomon to Amer Sports Corporation a win for all parties 17
Slide 18: Strategy Tied to Key Strengths
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Strategy Tied to Key Strengths Focus on adidas and TaylorMade-adidas Golf Clear field of competition, precise priorities Cutting-edge innovation, technology and design Streamlined and stronger brand leader 18
Slide 19: First Quarter 2005 Results: Financial Highlights
adidas-Salomon AG First Quarter 2005 Financial Results Presentation FIRST QUARTER 2005 RESULTS FINANCIAL HIGHLIGHTS ROBIN STALKER, CFO 19
Slide 20: Currency-Neutral Sales Increase Driven by adidas and TaylorMade-adidas Golf Segments
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Currency-Neutral Sales Increase Driven by adidas and TaylorMade-adidas Golf Segments % of Total 11% (+10%) 85 -8% (-9%) 6 31% 9 (28%) 11% Total: 100 Group (+10%) € 1.778bn -10% 0% 10% 20% 30% 40% (Figures in euro terms) 20
Slide 21: Highest First Quarter Gross Margin in Group's History
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Highest First Quarter Gross Margin in Group‘s History 47.1% Ï 3.0pp 28.3% Ð 3.2pp 42.7% Ð 1.6pp Group* 46.9% Ï 1.0pp *Includes HQ/consolidation 21
Slide 22: Impact of IFRS Changes on P&L
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Impact of IFRS Changes on P&L Old IFRS Rules New IFRS Rules Gross profit Gross profit Royalty and commission income Operating expenses Operating expenses Goodwill amortization/impairment Operating profit Operating profit Goodwill am
Slide 23: Operating Margin Improves 140 Basis Points Despite Higher Operating Expenses
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Operating Margin Improves 140 Basis Points Despite Higher Operating Expenses • Operating expenses increase by 11% - Launch schedule weighted towards Q1 and Q4 - Continued expansion of adidas own retail • Operating profit up 27% to €
Slide 24: Strong IBT and Earnings Performance
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Strong IBT and Earnings Performance • Financial expenses reduced by 19% • IBT grows 31% to € 170 million (+20% on a comparable basis) • Minority interests up 3% to € 5 million • Tax rate reduced Net income attributable to shareholde
Slide 25: Strong Working Capital Progress Continues
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Strong Working Capital Progress Continues • Receivables reduced by 2% currency-neutral (-4% in euros) - Driven by trade terms management and concerted collection efforts • Inventories increased 3% on a currency-neutral basis - Signi
Slide 26: Further Debt and Financial Leverage Improvements
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Further Debt and Financial Leverage Improvements € 1,045 million • Group debt reduced by € 416 million vs. prior year -40% € 629 million • Main drivers: Strong bottom- line profitability, tight working capital management • Equity ba
Slide 27: adidas Backlog Growth Continues to Accelerate (YOY)
adidas-Salomon AG First Quarter 2005 Financial Results Presentation adidas Backlog Growth Continues to Accelerate (YOY) euros currency • 11th consecutive neutral quarter of currency- neutral apparel Footwear + 2% + 5% backlog growth Apparel + 10% + 14% • Broad-based improvements in Total + 6% + 9% f
Slide 28: European Backlogs Remain Stable Despite Tough Comparison (YOY)
adidas-Salomon AG First Quarter 2005 Financial Results Presentation European Backlogs Remain Stable Despite Tough Comparison (YOY) euros currency • Significant sequential neutral improvement in currency-neutral Footwear + 4% + 5% footwear backlogs Apparel - 3% - 2% • Strong growth in emerging market
Slide 29: Highest Currency-Neutral Backlogs in North America in More Than Two Years (YOY)
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Highest Currency-Neutral Backlogs in North America in More Than Two Years (YOY) • 6th consecutive euros currency neutral quarter of sequential backlog improvement Footwear +/- 0% + 5% • Double-digit growth Apparel + 6% + 12% in curr
Slide 30: Asia Continues to Generate High Backlog Growth (YOY)
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Asia Continues to Generate High Backlog Growth (YOY) euros currency • 15th consecutive neutral quarter of double- digit underlying Footwear + 2% + 8% backlog growth Apparel + 55% + 65% • Driven by China, Total + 26% + 33% Japan, Kor
Slide 31: The Salomon Divestiture
adidas-Salomon AG First Quarter 2005 Financial Results Presentation The Salomon Divestiture • Approx. € 485 million enterprise value of Salomon segment, adjusted for changes in capital employed • All-cash transaction • Subject to customary terms and conditions (e.g. approval of antitrust authorities
Slide 32: Financial Implications of the Salomon Divestiture
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Financial Implications of the Salomon Divestiture • Visibly improved profitability ratios, especially ROCE • Proceeds to be used to fund share buyback 32
Slide 33: First Quarter 2005 Results: Outlook
adidas-Salomon AG First Quarter 2005 Financial Results Presentation FIRST QUARTER 2005 RESULTS OUTLOOK HERBERT HAINER, CEO 33
Slide 34: Increased Confidence in Full Year Sales Guidance
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Increased Confidence in Full Year Sales Guidance • Europe: mid-single-digit growth rates • North America: high-single-digit growth rates (previously: mid- to high-single-digit) • Latin America: double-digit growth rates (previously:
Slide 35: Profitability Improvement to Continue
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Profitability Improvement to Continue • Gross margin to be at least at 2004 record level • Visible underlying operating margin improvement • Reported net income to increase around 20% 35
Slide 36: Question and Answer Session
adidas-Salomon AG First Quarter 2005 Financial Results Presentation QUESTION AND ANSWER SESSION 36
Slide 37: Next Reporting Date
adidas-Salomon AG First Quarter 2005 Financial Results Presentation Next Reporting Date First Half Year 2005 Results August 3, 2005 • Press Release 7:30 CET 1:30 EST • Quarterly Report & Presentation 12:00 CET 6:00 EST available online • Conference Call 15:00 CET 9:00 EST 37