DE MASTER BLENDERS : D.E MASTER BLENDERS 1753 : First Twelve Months Fiscal Year 2013

Read Press Release in PDF:
http://hugin.info/152637/R/1724513/574874.pdf

Total segment sales remained stable at ? 2,646 mln, on a like-for-like basis, in the first twelve months of FY 13.  This performance was driven by an improvement of mix/other of 2.2%, while price contributed 0.1%. Volumes were down 2.3%.  Total reported sales decreased by 0.5%, with acquisitions contributing 0.6% while currency translation effects had a negative impact of 1.1%.

The gross margin increased 270 bps to 40.4%, excluding green coffee export sales.  This increase was largely driven by the substantial drop in green coffee Arabica prices and mix.

A&P spend went up by 26% to support our brands and product introductions across the entire portfolio.  SG&A costs went down by 3% driven by "Fit for Growth", the cost optimization program that was launched in 2012, delivering ? 27 mln of cost savings in the first twelve months of FY 13.  The resulting underlying EBIT margin significantly improved by 180 bps to 13.8%, on a like-for-like basis.

Normalized profit and normalized earnings per share amounted to ? 227 mln and ? 0.47, respectively. Reported profit, including the unusual items, and reported earnings per share amounted to ? 196 mln and ? 0.33, respectively.

Operating working capital^[6] as a percentage of total sales improved by 590 bps to 8.6% freeing up ? 154 mln in cash.  The improvement of 590 bps was largely driven by a reduction in inventories with good progress made in trade payables and trade receivables.

Total segment sales increased 0.1% to ? 669 mln, on a like-for-like basis, in the fourth quarter of FY 13.  This strong rebound, compared to the decline of (3.2)% in the preceding quarter, can be attributed to the performance of Retail Western Europe returning to growth.  The Company's sales performance had a strong mix/other development of 3.7%, reflecting the success of our focus on premiumization.  Volume performance improved to a decrease of only (1.4)%, versus (4.6)% in the third quarter.  Price, however, had a negative effect of (2.2)%, reflecting the increased pressure to lower consumer prices, as the result of the substantially lower green coffee prices.  Reported total segment sales decreased by (1.3)% driven by a negative currency translation of (1.5)%, with acquisitions adding 0.1%

The Company recorded ? (111) mln of unusual items in the first twelve months of FY 13.  The unusual items mainly relate to restructuring costs, the implementation of the new business model in February 2013 and costs relating to the public offer by Oak Leaf B.V. for all the issued and outstanding ordinary shares in the capital of D.E MASTER BLENDERS 1753 N.V.

(unaudited)

(unaudited)

(unaudited)

 *Free cash flow consists of the net cash provided by operating activities minus capital expenditures related to PP&E

Appendix 1

Throughout this earnings release the Company presents certain measures that are not recognized under IFRS or other generally accepted accounting principles (GAAP).  The Company has included these measures as they are measures the Company uses in operating its business and because it believes that these measures are useful to investors, and other users of its financial information, in helping them to understand its underlying business performance.  These measures are not calculated in accordance with IFRS and may not be comparable to similar measures presented by other companies.  Accordingly, they should not be considered as an alternative to the Company's reported IFRS measures. 

The adjusted measures throughout this press release exclude items that are income or charges (and related tax impact) that management believes have had, or are likely to have, a significant impact on the earnings of the applicable business segment or on the total Company for the period in which the item is recognized, are not indicative of the Company's core operating results and affect the comparability of underlying results from period to period.  These items may include, but are not limited to: charges for exit activities; consulting and advisory costs; transformation programs; impairment charges; spin-related costs; tax costs and benefits resulting from the disposition of a business; impact of tax law changes; changes in tax valuation allowances and favorable or unfavorable resolution of open tax matters based on the finalization of tax authority examinations or the expiration of statutes of limitations.  Management highlights these items to provide greater transparency into the underlying sales or profit trends of D.E MASTER BLENDERS 1753 or the applicable business segment or discontinued operations and to enable more meaningful comparability between financial results from period to period.  Additionally, D.E MASTER BLENDERS 1753 believes that investors desire to understand the impact of these factors to better project and assess the longer term trends and future financial performance of the corporation.

This release also contains certain underlying and normalized non-IFRS financial measures that exclude from a financial measure computed in accordance with IFRS the impact of the items described above and the impact of acquisitions and dispositions, changes in foreign currency exchange rates and non-strategic sales. Management believes that these non-IFRS financial measures reflect an additional way of viewing aspects of D.E MASTER BLENDERS 1753's business that, when viewed together with D.E MASTER BLENDERS 1753's financial results computed in accordance with IFRS, provide a more complete understanding of factors and trends affecting D.E MASTER BLENDERS 1753's historical financial performance and projected future operating results, greater transparency of underlying profit trends and greater comparability of results across periods.  These non-IFRS financial measures are not intended to be a substitute for the comparable IFRS measures and should be read only in conjunction with the Company's consolidated interim financial statements prepared in accordance with IFRS.

The definition of the Company's non-IFRS measures are as follows:

Like-for-like sales represents sales, excluding green coffee export sales, calculated at the exchange rate for the most recent period and adjusted to eliminate acquisitions to the extent they are not included in both periods.

Underlying EBIT represents profit for the period before share of profit from associates, finance income / (costs), income tax expense and adjusted to exclude income or charges that management believes are unrelated to its core operating results and that are excluded in determining segment.  

Normalized profit represents the profit for the period excluding amounts excluded in computing underlying EBIT and excludes unusual finance income and unusual tax expense.

Normalized EPS represents the normalized profit divided by the outstanding number of shares at year end.

Operating working capital represents working capital that is invested to operate the business.  Operating working capital is defined as the net amount of inventories, trade receivables and trade payables.

The following tables provide reconciliation between these measures and the Company's IFRS financial information.

Sales growth fourth quarter FY 13

* As a result of acquisitions/divestitures and inter-segment reclassifications

Sales growth first twelve months FY 13

* As a result of acquisitions/divestitures and inter-segment reclassifications

Reconciliation of EBIT and underlying EBIT for the first twelve months FY 13

Reconciliation of normalized profit

Reconciliation of operating working capital

Appendix 2

The statements contained in this document that are not historical facts are forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.  In addition, from time to time, in oral and written statements, representatives of D.E MASTER BLENDERS 1753 (the Company) discuss their expectations by making forward-looking statements regarding the Company.  Forward-looking statements are generally but not always preceded by terms such as "intends", "expects", "projects", "anticipates", "likely" or "believes". Forward-looking statements represent only the Company's beliefs regarding the future many of which are by their nature inherently uncertain.  The Company's actual results may differ, possibly materially, from those expressed or implied in the forward-looking statements.  Consequently, the Company wishes to caution readers not to place undue reliance on any forward-looking statements. Among the factors that could cause the Company's actual results to differ from such forward-looking statements are those described in the Annual Report on Form 20-F filed by the Company with the Securities and Exchange Commission.  The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law.

It is to be noted that totals in this report might deviate from the sum of the individual inputs due to rounding.