Adidas Ag · XETR:ADS
Adidas — adidas-Salomon — H1 2004 Earnings Presentation
36 slides from Adidas's earnings presentation, Aug 4, 2004
Slide 1: First Half Year 2004 Financial Results Presentation
adidas-Salomon AG FIRST HALF YEAR 2004 FINANCIAL RESULTS PRESENTATION August 4, 2004
Slide 2: First Half Year 2004 Operational Highlights
adidas-Salomon AG First Half Year 2004 Financial Results Presentation FIRST HALF YEAR 2004 OPERATIONAL HIGHLIGHTS HERBERT HAINER, CEO 2
Slide 3: Performing Better on Every Part of the Field
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Performing Better on Every Part of the Field ✓ First half currency-neutral revenues up at all brands ✓ YTD sales increase 5% currency-neutral ✓ Highest 1H gross margin ever ✓ Earnings growth of 39% in the first six months 3
Slide 4: Q2 Shows North American Turnaround in Full Swing
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Q2 Shows North American Turnaround in Full Swing ✓ Currency-neutral sales grow 4% ✓ Currency-neutral adidas sales and backlogs up 5% each ✓ Successful “Garnett” launch 4
Slide 5: Kevin Garnett's Basketball Shoe Soars
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Kevin Garnett’s Basketball Shoe Soars • Foot Locker exclusive • $100 • Double-digit sell-throughs 5
Slide 6: Other Regions Develop Strongly in Q2
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Other Regions Develop Strongly in Q2 ✓ Asian sales up nearly 30% ✓ Currency-neutral sales in Latin America increase almost 30% ✓ European operating profit grows nearly 45% 6
Slide 7: UEFA EURO 2004 European Football Championship Success
adidas-Salomon AG First Half Year 2004 Financial Results Presentation UEFA EURO 2004™ European Football Championship Success • Sponsor of event and surprise champion Greece • 6 million Roteiro™ balls to be sold in 2004 • 2004 football sales to surpass € 850m 7
Slide 8: Salomon Gains Momentum in Q2
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Salomon Gains Momentum in Q2 • Sales grow 7% • Mavic No. 1 in the 2004 Tour de France: - 12 days yellow jersey - 7 stage wins • Tender offer for Salomon & Taylor Made Co., Ltd., Japan results in >99% ownership 8
Slide 9: r7 Quad Metalwood Introduction Exceeds Expectations
adidas-Salomon AG First Half Year 2004 Financial Results Presentation r7 Quad Metalwood Introduction Exceeds Expections • Hailed as a “revolution” by golf pros • No. 1 played driver on US and European PGA Tour • Drives Q2 currency-neutral metalwood sales up 9% despite mid-May launch 9
Slide 10: Group Financial Outlook Improving
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Group Financial Outlook Improving ✓ Operational targets all on track ✓ Profitability even better than anticipated ✓ Raising full year earnings guidance 10
Slide 11: First Half Year 2004 Financial Highlights
adidas-Salomon AG First Half Year 2004 Financial Results Presentation FIRST HALF YEAR 2004 FINANCIAL HIGHLIGHTS ROBIN STALKER, CFO 11
Slide 12: Strong Sales Increase in Q2
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Strong Sales Increase in Q2 2,000 1,800 3% (-3%) 1,600 7% (+5%) 1,400 -36% 1,200 1,000 € in millions 2003 2004 2003 2004 2003 2003 (Figures in euro terms) Q1 Q2 Q3 Q4 12
Slide 13: YTD Currency-Neutral Sales Increase at All Brands
adidas-Salomon AG First Half Year 2004 Financial Results Presentation YTD Currency-Neutral Sales Increase at All Brands % of Total 5% (+2%) 84 4% (+2%) 6 3% (-3%) Total: 10 € 3.091b 5% Group (+1%) 100 0% 2% 4% 6% (Figures in euro terms) 13
Slide 14: adidas Sales Growth Accelerates
adidas-Salomon AG First Half Year 2004 Financial Results Presentation adidas Sales Growth Accelerates • YTD currency-neutral sales increase 5% (+2% in euros) • Strong football and apparel sales drive Sport Performance growth • Sport Heritage sales grow in Q2 14
Slide 15: YTD Salomon Sales Grow in All Regions
adidas-Salomon AG First Half Year 2004 Financial Results Presentation YTD Salomon Sales Grow in All Regions • YTD currency-neutral sales grow 4% (+2% in euros) • Drivers: apparel and cycling components • Successful introduction of nordic skis 15
Slide 16: Successful Product Launch Supports Sales Growth at TaylorMade-adidas Golf
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Successful Product Launch Supports Sales Growth at TaylorMade-adidas Golf • YTD currency-neutral revenues increase 3% (-3% in euros) • Successful r7 Quad metalwood launch • Other contributors: putters and apparel 16
Slide 17: Strong YTD Gross Margin Development at adidas Drives Improvement at Group Level
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Strong YTD Gross Margin Development at adidas Drives Improvement at Group Level 43.8% 4.9pp 33.9% 2.5pp 47.5% 0.2pp Group* 47.1% 3.6pp *Includes HQ/consolidation 17
Slide 18: YTD Operating Margin Improves 180 Basis Points
adidas-Salomon AG First Half Year 2004 Financial Results Presentation YTD Operating Margin Improves 180 Basis Points • Operating expenses increase 6% • Operating expenses as a percentage of net sales increase 1.8 percentage points to 39.5% due to higher marketing and sales expenses Operating profit
Slide 19: Record-Level Profitability Drives Exceptional YTD IBT and EPS Performance
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Record-Level Profitability Drives Exceptional YTD IBT and EPS Performance • Financial expenses rise by 15% to € 32 million • IBT grows 36% to € 202 million • Tax rate down 0.2 percentage points, minority interests at € 6 million B
Slide 20: Successful Working Capital Management Continues
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Successful Working Capital Management Continues • Inventories 1% higher year-over-year (+4% currency- neutral) Lower than adidas backlog development and Q3 sales expectations • Receivables reduced by 8% (-6% currency-neutral) 20
Slide 21: Strong Debt Reduction Continues
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Strong Debt Reduction Continues 1,800 1,600 1,400 1,200 -36% 1,000 -39% 800 2003 2004 2003 2004 2003 2003 € in millions Q1 Q2 Q3 Q4 21
Slide 22: adidas Backlog Growth Driven by Apparel (YOY)
adidas-Salomon AG First Half Year 2004 Financial Results Presentation adidas Backlog Growth Driven by Apparel (YOY) euros currency • Highest underlying neutral backlogs growth rate in seven quarters Footwear 0% + 2% Apparel + 17% + 18% • Highest apparel backlogs growth rate Total + 8% + 10% in more
Slide 23: Improving adidas Backlogs in North America (YOY)
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Improving adidas Backlogs in North America (YOY) euros currency • First positive neutral currency-neutral Footwear - 7% - 2% backlogs growth rate in six quarters Apparel + 6% + 13% • Highest apparel Total - 2% + 5% backlogs growth
Slide 24: Currency-Neutral adidas Backlog Development in North America (YOY)
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Currency-Neutral adidas Backlog Development in North America (YOY) 15% Apparel 10% 5% Total 0% Footwear -5% -10% -15% -20% -25% -30% -35% Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 24
Slide 25: Positive European adidas Backlog Development Driven by Apparel (YOY)
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Positive European adidas Backlog Development Driven by Apparel (YOY) euros currency • Fifth consecutive neutral quarter of double-digit underlying apparel Footwear 0% 0% backlog growth Apparel + 11% + 10% • Footwear orders show si
Slide 26: adidas Backlog Momentum in Asia Accelerates (YOY)
adidas-Salomon AG First Half Year 2004 Financial Results Presentation adidas Backlog Momentum in Asia Accelerates (YOY) euros currency • Highest currency- neutral neutral backlog growth in almost five Footwear + 12% + 14% years Apparel + 56% + 57% • Major drivers: China Total + 34% + 35% and Japan 2
Slide 27: 2004 Strategic Outlook
adidas-Salomon AG First Half Year 2004 Financial Results Presentation 2004 STRATEGIC OUTLOOK HERBERT HAINER, CEO 27
Slide 28: Performing Better on Every Part of the Field
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Performing Better on Every Part of the Field ✓ First half currency-neutral revenues up at all brands ✓ YTD sales increase 5% currency-neutral ✓ Highest 1H gross margin ever ✓ Earnings growth of 39% in the first six months 28
Slide 29: Improving Group Financials
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Improving Group Financials • Currency-neutral Group sales to grow by around 5% • Gross margin to clearly exceed 45% • Operating margin to improve by 100 basis points • Earnings to grow by around 20% 29
Slide 30: Getting the Most out of 2004 and Beyond
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Getting the Most out of 2004 and Beyond • Olympics and other major sporting events • Product launches Ground Control System T-MAC HUG adidas 1 30
Slide 31: Vision Asia
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Vision Asia • € 10 million investment in 2004 • Areas of focus: Infrastructure Supply chain initiatives Product range Retail activities 31
Slide 32: Supporting Momentum in North America
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Supporting Momentum in North America • € 10 million investment in 2004 • Increased point-of-sale and shop-in-shop activity • Accelerated adidas own-retail openings • Additional marketing support for T-MAC HUG 32
Slide 33: Medium-Term Profitability Target
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Medium-Term Profitability Target • 10% operating margin by 2006 • More operating margin potential to come 33
Slide 34: Medium-Term Success Factors
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Medium-Term Success Factors ✓ Continually sharpening the brand image ✓ Commitment to innovation ✓ Optimizing structures to ensure cutting-edge position 34
Slide 35: Question and Answer Session
adidas-Salomon AG First Half Year 2004 Financial Results Presentation QUESTION AND ANSWER SESSION 35
Slide 36: Upcoming Financial Dates
adidas-Salomon AG First Half Year 2004 Financial Results Presentation Upcoming Financial Dates Investor Day October 5, 2004 Nine Months 2004 Results November 3, 2004 • Press Release 7:30 CET 1:30 EST • Nine Months Presentation 12:00 CET 6:00 EST available online • Conference Call 15:00 CET 9:00 EST