Amer Sports on the glidepath to EUR 3.5 billion and …...Amer Sports on the glidepath to EUR 3.5...

Amer Sports on the glidepath to EUR 3.5 billion and beyondAmer Sports CMD 2016

Heikki Takala, President & CEO, and Jussi Siitonen, CFO

Topics today

• Our strategy has continued to deliver

• We confirm our glidepath to EUR 3.5 billion – now organically

• We enable the acceleration through continuous productivity

improvement and targeted restructuring

• Our glidepath creates significant value

• We have even higher ambitions: toward EUR 4 billion in the

next 5+ years

Amer Sports CMD 20162

Our Sustainable Growth Model and Portfolio Logic

Our Sustainable Growth Model

1. Annual topline growth

– Both organic and via strategic acquisitions. We prefer organic.

2. Annual profit and cash flow improvement

– Profit can come from growth or through cost cutting. We prefer growth with cost discipline.

3. Investing for the future

– To sustain future growth, we invest every year back into the business

4. Continuous renewal and productivity improvement

– Toward faster growth, higher profitability, better asset efficiency

Amer Sports Roadshow April 20164 1 September 2016

We have 3 distinctive sources of profitable growth

• Organic:

– We grow the core to reinforce relevancy and authenticity.

– We add more to reinforce long term leadership.

– We fix underperformers, and if needed, eliminate bleeders.

• Game-changing learning: We develop new-to-the-world business

models

• M&A: we actively scan targets for which we can be a “better owner”



Grow the core Add more M&AGame-changing

learning

Sources of profitable growth

Our long-term portfolio aspiration and logic


Global leader in

Grand Outdoor

Sports

Priority: Growth

Podium position

in global fitness

Priority: Growth

Global

leader and

game changer in

selected ball

sports

Priority: Cash &

profit

Our strategy has continued to deliver

We moved from turnaround to sustainable growth…

*Vara consensus

• Balance sheet step-

changed (Net Debt /

EBITDA 2x)


0,0 %

2,0 %

4,0 %

6,0 %

8,0 %

10,0 %

1 200m

1 400m

1 600m

1 800m

2 000m

2 200m

2 400m

2 600m

2 800m

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

Net Sales EBIT Margin

Net Sales (EUR) EBIT Margin

...driven by strategic building blocks…


Achievement 2009 2016

Apparel & Footwear growth 300m x3.3

Arc'teryx growth x5

Salomon 50% softgoods 75% softgoods / Sales x2

Suunto EBIT negative Sales x >2 / EBIT ~10%

Cycling x1.6

Precor EBIT negative Sales x2 / EBIT ~10%

Wilson Team Low EBIT Sales x2 / EBIT 10+%

Winter Sports Equipment GM 40% 46%

China 10m >100m

B2C 20m 8% of the Group

Connected devices 0m 10% of the Group

…whilst continuing to tackle challenges


Challenge Our solution

Weather conditions • Become a 4 season company

• Winter Sports Equipment business model change

Pressure in several sports categories • Opex and working capital discipline

• Exit action sports

• New business model (example: baseball)

• Industry consolidation

Retailer landscape disruption • Amer Sports Go to Market re-invention

• Omni-channel acceleration

Country risks, currencies, financial

markets..

• Mitigate disruption in Russia and Latin America

• Contingency planning (example: hedging)

• Long-term funding secured

Amer Sports is well positionedto deliver the 2020 targets

Long-term trends offer us significant growth opportunities

• Fitness, health and wellness

• Outdoor & sports: activity and lifestyle

• Digitalization

• Consumer habits and practices: multi-activity sports,

omni-channel shopping, personalized experiences and services

• Urbanization / megacities / emerging markets


Our 2015 acceleration priorities capitalize on the trends and market potential


Topic Glidepath to 2015/16 Acceleration to 20202009

Apparel & Footwear1.

€ 300 m € ~1000 m € ~1500 m

USA2. $ 700 m $ ~1000 m $ ~1500 m

China3.

€ 13 m € ~100 m € ~200 m

B2C4.

€ 20 m € ~200 m € ~400+ m

Connected Devices & Services5. € 0 m € ~300 m € ~600+ m

Net impact: € ~900-1000 m

(net of duplication)

2016 confirms: Acceleration execution underway


Net impact: € ~900-1000 m

(net of duplication)

Topic Glidepath to 2015/16 Acceleration to 20202009 Progress in 2016

€ 300 mApparel & Footwear1.

€ ~1000 m € ~1500 m 8-10% growth

USA2.

$ 700 m $ ~1000 m $ ~1500 m 8-10% growth

China3.

€ 13 m € ~100 m € ~200 m ~20% growth

B2C4.

€ 20 m € ~200 m € ~400+ m ~25% growth

Connected Devices & Services5.

€ 0 m € ~300 m € ~600+ m 20+% growth

Reaching EUR 3.5 billion sales − organically

Accelerating organically

• Last year we introduced new financial targets, and our building

blocks were sufficient to take us to EUR ~3.3 billion

• A gap of EUR 200 million was to be closed primarily through M&A

• Based on 2016 progress and additional acceleration building blocks,

we now target EUR 3.5 billion organically


Apparel and Footwear: Accelerating beyond EUR 1.5 billion

New building blocks:

• Arc’teryx

– Range expansion: seasonal balance, new segments, female offering

– Faster own store opening, focus North America and China

• Salomon

– New brand positioning

– Faster expansion of running

• Significant capability improvement in Apparel and Footwear


Examples of Apparel and Footwear acceleration


USA and China, further acceleration



• Distribution expansion: megacities and epicenters

• Faster own store opening

• New proven baseball Go to Market model

• Precor: new fitness segments and channels

Examples of USA and China acceleration


B2C beyond EUR 400 million



• Retail: Sustained same-store growth and accelerated store opening,

annual net opening of 25+ own stores

• Ecommerce: New brand / country expansions (Canada, Japan, Sports

Tracker multi-brand store..)

• Customization expansion

• Consumer database ramp-up

• Integrated omni-channel Go to Market

Examples of B2C acceleration


Connected Devices & Services beyond EUR 600 million


• Suunto and Precor: Significantly strengthened initiative pipeline

• Outdoor, running and fitness service content

• Digital pilots across the portfolio: Wilson X

• Consumer database, marketing automation and analytics for cross-selling


Examples of accelerating Connected Devices & Services


We are well positioned to deliver the 2020 targets, now organically


Net salesAt least EUR 3.5 billion with minimum mid-single digit organic,

FX-neutral annual growth

Profit Annual EBIT growth (excl. NRI) ahead of net sales growth

Cash flow

conversionFree cash flow / Net profit at least 80%

Net debt /

EBITDAYear-end net debt / EBITDA ratio max 3.0x

Enabling the organic acceleration: financials

We have funded our growth sustainably


Cash flow

from

operations

Net Debt

Source

of funds

1,028

851

177

356

122

Dividends/

Share buybacks

M&A

336 CAPEX

214

Use

of funds

1,028

Working

Capital

Sources and uses of funds

2010-H1/2016, EUR million

Since 2010

Source of funds:

• Operations EUR 851 million

• Net Debt increase EUR 177 million

Use of funds:

• Organic growth (working capital and

CAPEX) EUR 550 million

• Returned to the shareholders EUR 356

million

• M&A EUR 122 million

Whilst investing steadily into profitable growth


30%

35%

40%

45%

50%

2009 2010 2011 2012 2013 2014 2015 H116(LTM)

Gross Margin

Total OPEX

Cash OPEX

Gross Margin and OPEX development

2010-H1/2016, % of Net Sales

20092009

Since 2010

• Gross Margin improvement over

500bps

• OPEX efficiency gains invested

back into growth and gross

margin drivers, therefore OPEX

as % of Net Sales relatively flat

Accelerating organic growth…

• Net sales target of minimum EUR 3.5 billion by 2020 unchanged

– Equal to approx. 6.5% CAGR of which minimum mid-single-digit organically

– Gap of approximately EUR 200 million still in 2015, planned to be closed by M&A

– Now the gap will be closed by organic acceleration

• Why organic acceleration

– Proven building blocks

– Supports continuous profitability improvement and 80% cash conversion

– Improves asset efficiency vs. acquisitions, therefore driving higher ROCE


…through productivity improvement…


No/low

Overhead

Growth

Full

Overhead

Growth

WSEBall

Sports

Cycling

Arc’teryx

Salomon

A&G

Footwear

Fitness

Suunto

Business specific investment logic

Full acceleration:

invest upfront

Acceleration: Invest

for growth

Stabilization: Utilize

growth opportunities

while completing

integration

Slow growth: plan

spending for slow-

growth market

• We improve productivity and free up legacy

spending to re-allocate resources into the

prioritized areas

• Productivity improvement:

• Each Business Area has specific investment

logic

• Further on-going productivity improvement

through scale and synergy

…and through restructuring

• Main restructuring needs:

– Break-even point to be lowered and asset-efficiency to be improved further

when topline uncertain

– Factory utilization rates improvement by right-sizing capacity

– Operations: structure and distribution footprint

– Go to Market renewal into integrated omni-channel model


Restructuring financials

• Targeting EUR 20 million annual cost reduction, to be reallocated

to fund the acceleration

• Payback of the restructuring approximately 1.2 years

• Plans will be executed by the end of 2017

• One-time expenses of EUR 20-25 million (pre-tax, reported as

IAC) will be incurred in H2/2016 and H1/2017. Cash cost EUR 20

million.


Organic acceleration drives value

Organic growth – even including restructuring cost –is financially attractive

• Higher asset efficiency for EUR 200 million additional growth:

– Organic: capital employed required EUR 80-100 million

– M&A: Valuation multiples typically 1.1-1.3X net sales: EUR 220-260 million

• Shorter payback

– Organic (including restructuring cost): Total internal investment 5-6X EBITDA

– M&A: Valuation multiples typically 10+X EBITDA


Organic acceleration drives value – sustainably


2.5

5.0

7.5

10.0

12.5

1.2X 1.6X 2.0X 2.4X

2020 (20+%)

2015 (15%)

2014 (14%)

2013 (13%)2012 (12%)

2011 (12%)

2010 (10%)

2009 (5%)

2016E

Capital Turnover

EBIT%

Amer Sports ROCE and its drivers

We have even higher ambition

2009 2015 2020

Sales

4B€

Ambition: EUR 4 billion in the next 5+ years

39

Sales

>3.5B€

Sales

~2.5B€

Sales

~1.5B€

• Organic building

blocks largely in

place

• Further organic

building blocks

• M&A

Acquisitions remain in the toolbox – logic unchanged


• Logic: consolidation, and/or acceleration, and/or capabilities, and/or gaining

scale

• Acquisition criteria in line with our SGM:

– Faster growth

– Higher profitability

– Better asset efficiency

• Multiple arbitrage target: no dilution to the Company’s own valuation multiples

– Exceptions: Significant synergy benefits or critical capability gaps

Long-term funding in place to support the acceleration


1,0

2,0

3,0

0

50

100

150

200

250

300

350

2016 2017 2018 2019 2020 2021=>

EURm %Long-term debt repayment schedule

Coupon Interest (right axis)L-T debt repayment (left axis)

• Average debt maturity of new

issuances extended to 5+ years,

synchronized with the glidepath

• Significant savings in financing

expenses: Average coupon down

by approx. 150-200bps

• Cash and unused funding reserves

of approx. EUR 380 million

Our funding capacity continues to grow


0

250

500

750

1,000

1,250

201920172016 2018

Organic

Glidepath

Net Debt

2015

Net Debt

capacity

(to 3X

EBITDA)

2020

47%

45%

61%

55%

48%

39%

42%

58%

56%53%

52% 44%

• Organic acceleration provides

increasing leverage potential

– Enables us to maintain a

sustainable, steadily

increasing dividend

– Ensures we have sufficient

firepower for potential

acquisitions

Summary

Summary

• Our strategy has continued to deliver

• We confirm our glidepath to EUR 3.5 billion – now organically

• We enable the acceleration through continuous productivity

improvement and targeted restructuring

• Our glidepath creates significant value

• We have even higher ambitions: toward EUR 4 billion in the

next 5+ years


DisclaimerStatements in this presentation, which are not historical facts, such as expectations, anticipations, beliefs and estimates,are forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995.Such statements involve risks and uncertainties which may cause actual results to materially differ from those expressedin such forward-looking statements.Amer Sports assumes no responsibility to update any of the forward-looking statements contained herein.No representation or warranty, express or implied, is made or given by or on behalf of Amer Sports or its employees orany other person as to the accuracy, completeness or fairness of the information or opinions contained in this presentation.

www.amersports.com


Amer Sports on the glidepath to EUR 3.5 billion and …...Amer Sports on the glidepath to EUR 3.5...

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