CNPF: branded food company/ manufacturing food company.

Supply chain:
CNPF buys the raw materials (tuna, beef, dairy)
CNPF doesnt have their own fishing vessels
TUNA: They buy from fishing companies, fishing vessels more than 50% from Western Pacific
Ocean particularly in Papua New Guinea, the rest from Gen San.
MEAT & MILK: no local milk and beef industry, almost 100% imported.
Dairy New Zealand, Fonterra, partly Europe
Beef diversified Brazil, US, Australia
TIN CAN: it used to be sourced 100% from local tin can manufacturers, until they had their own tin
can plant (2015).
30-40% from tin can plant, the rest from external suppliers
Other ingredients are just minor.

RAW MATERIALS -> FORMULATION (w/ other ingredients) -> PROCESS -> CAN -> SELL

SELLING: 2 different distribution networks

1. Traditional trade
- Sari-sari stores, local grocery chains in the provinces
- Employ 3rd party distributors exclusive to CNPF to distribute to the stores
2. Modern trade
- National supermarket chains (Robinsons, Puregold, SM)
- Serve accounts directly

Do you have the key distributors? Key accounts? Big names?

Yes, we have to serve them directly. Its a more complicated relationship in a way compared to the
3rd party distributors.

3rd party distributors - we have greater flexibility when negotiating with them
Typically, you will think Cost + Model lang siya

Modern trade may other factors pa iyan eh, may trade support kaming binibigay
Not just a simple cost + model for modern trade
There are several other metrics that we monitor

Coconut side?
Its an OEM.

We have Legacy Tuna Business and Coconut.

Coconut is a private label business. Meaning, we do not own the brand. Almost 100% of the coconut
business is exported. We dont own the coconut farms. We source from coconut farmers or
middlemen.
We have a tall manufacturing facility in Gen San. We manufacturing the Vita Coco product as it is.
Then ship to US, UK
TUNA EXPORT: Same model Pero 3 format siya eh canned, pouches, or tuna loins

We do not have those modern and traditional trade for export business. Kasi we do not own the
brand naman. We deliver it to our global customers.

What are your specific target markets per segment?...

Broad middle class. Broad C, D, Lower A, or Lower B.

Competitors in the Broad Middle Class segment?

CANNED FOOD: CDO Foodsphere
TUNA: CDO Foodsphere (15%), CNPF (84%)
MEAT: CDO Foodsphere, PureFoods
MILK: NESTLE, ALASKA
COCONUT: we do not compete with another brand

Plan to maintain / improve market share?

Marine & Meat maintaining the market share or gaining market share

Being the market leader, we can shape the perception of the consumers, not just our brand but the
category as a whole.

Competitive Edge of CNPF

1. Brand understanding the market, we do not just sell the tuna, we sell the lifestyle.
-Employed familiar names to emphasize the benefits of the product
2. Distribution Network given our dominance, a must carry, strong bargaining power

Meat COST LEADERSHIP

TO BE WHERE THE DEMAND IS.

AFFORDABLE PREMIUMIZATION more effective if you use a quality brand and make it more
affordable

Milk CHALLENGER
Fortified milk 50% of the dairy category
2-3% market share

Prices are going up (nestle wouldnt engage in a price war since they are preoccupied in another
category).
To hit it the 5% without awakening the giant (all for fortified) medium term

Do you have any plans to acquire brands in the milk segment?

We are always open to that idea. Maybe open to the idea of Joint Ventures.

We are always open to potential acquisitions not just within the categories but also in adjacent
categories.
Adjacent categories as long as they use the same distributions networks we are using, shelf staple
products, cans, does not require cold storage make use of our distribution networks.

Cold storage- fully operating, but not critical part of the process
Target market share
5% milk in the medium term (1-2 yrs)

Distribution networks rather than increasing its networks, improve on efficiency. Diminishing
marginal returns, look for improvements.
Coconut seeing big demand, increased capacity for coco water 20-25% secure operating
requirements until 2017.

Cost benefit analysis every time we acquire.

HOW DO YOU QUANTIFY SALES?

PER CASE.

Average price increase 2-4% inflation, for most products

Core categories 10- 15% growth
High single digit to low teens for Marine and meat (8-15%)
MEANING VOLUME DRIVEN THAN ASP INCREASE

CONSUMER DEMAND- heavily invest in above the line: advertisements; frequency of consumption

How do you increase your volume target?

Ultimately, End consumer demand.

Revenues that we book are based on sales on our retailers for the branded product.

Expansion plans
Funding generate stable cash flow
Net gearing level still manageable, low interest rate

Target CAPEX
Minimum of 600M maintenance CAPEX for facilities, no increase in capacity
Double capacity, focus heavy CAPEX on Coconut segment
1.1B for 2016, cold storage, coconut, meat

How do you plan to finance this expenditures?

Operating cash flows

No plans of future availment of debt?

Short term loans ang balak nila iacquire. We have plenty pa naman.

13, 14, 15, 16, 17, 18, 19 low, mid, high teens
TARGET MARGIN
Gross margins per segment
Branded high 20s to mid 30s
Unbranded:
Tuna OEM high single digit to low teens (8-15) gross margin which is typical to a private label
business
Coconut OEM global demand greatly outweighs supply, low teens to mid-teens (13- 16) type of
gross margins

TARGET REVENUE
CNPF wide 10-15% revenue growth YOY
Marine & Meat, core category GDP + type of growth, high single digit
Coconut- doubling revenues for the next 3-5 yrs
Milk faster growth than marine & meat
There is a possibility to add a new segment (hopefully, 6 months)

Current loans
1.65B outstanding loan 5 yrs, 4.5% fixed, long term
Short term: revolving credit line, below 4%
Acquiring loans depend on the acquisition plans of CNPF

ROE target level 20-25% (CNPF), Peers ROE 16 18% (Consumer companies)

Biological assets more on sa bangus, hindi nila priority ang century bangus, more on fresh rather
than canned.

Due from related parties the parent company uses CNPF to invest on dollar denominated
securities, normalized (parent), by October it was already settled

Due to related parties frozen meat business: same raw material, booking kung sino nagbobook
whether its the parent or CNPF, normalized in succeeding years

Marine & Meat walang entity

SMDC hindi lahat ng milk wala dun sa entity

Just use revenue breakdown, and margin indication for forecasting

Dividend up to 30% previous net income

Disadvantages:
Key Risks:
1.) Movement of input costs source raw materials globally, we have to take it as it is that is why
we have volatile gross margins. To address this: build the brand. Periods of low commodity
prices, rather than lowering prices, invest in brand building initiatives. Low tuna prices- invest
in advertisement and maintan operating margins. Worst case: gross margins decline. A&P
percentage of sales we can decrease.
2.) Execution more on the milk segment, competing against multinational giant, revenue growth
guidance. Biggest challenge: Milk, dominance for meat and milk.
3.) Competition

How often do you increase price?

On average, once a year 2-4%, depending on the movement of raw material prices
We try to maintain Operating Margin than Gross Margin

Advertising and Promotion as a % of sales

Weakening of Peso
- CNPF is a net importer
- 40% COGS dollar denominated
- Export 13% total revenues tuna OEM, 10% coconut, 3% branded exports (26% revenues)
- 6% exposure of total dollar requirements
- 6%*40%*COGS
- We try to pass on to consumers, we dictate the price being a market leader

Exposure to US Market
-mainly the coconut business, vita coco US based
- small lang for tuna exports

Coconut important supplier of coconut to US, 2nd largest supplier of Vita Coco, very important
relationship, bargaining power.
Tuna export Europe & Japan, protectionist policies, tuna export wouldnt be as affected.

JVs in China
- outside the listed company
- 50/50 with Thai Union (one of the biggest seafood company in the world)
- small lang business in China
- In some way, nakakatulong pa sa CNPF ang slowdown ng economy sa China
- since yung commodity prices are influenced on what happens globally
- we also see commodity prices softening which is good for us.

Foreign currency futures and contracts

- That is not our competency
- Inventory hedging if favorable ang raw material prices, we lock in raw material requirements
- Forex, parang cash flow hedging lang for that 6% exposure, minimal lang naman

Receivables/Payables
-DSO/DPO at par with other consumer companies
-Longer Receivable days intentional, scrapping early payment discount will save more / benefit
more to the company (3rd party distributors)
-Inventory days we do inventory hedging, lock in, for gross margins
-Margins: building the brand, pass on higher costs, inventory hedging, preserve margin despite
volatility.
Float % (free float)
- low compared to competitors
- investors are open to improving liquidity
- active investor relations initiative

Year in Year out CAPEX 1-2B

Investor relations, how do you want your investors to perceive CNPF

A company that consistently delivers healthy results
-consistency, delivering your targets

3-5 years no change in management structure

Comparable peers
- Jollibee
- URC
- Thai Union

Entry of competitors wont change the landscape so much

We are open to partnership, collaborative than competitive

No target capital structure, on the current level, we can take up more debt depending on the
interest rate

Coconut
- Vita Coco
- existing customers, new customers
- develop other by-products VCO (20-30% coconut revenues), (end of this yr) - desiccated coconut
meat, coconut flour (gluten free, healthy alternative to usual flour), (end of 2017) coconut milk,
coconut cream

Trump administrations effect on BPO industry

- Look for other sources of growth macroeconomic perspective
- Infrastructure spending increase 5%
- Great equalizer ang Infra sa ibang inudtry (BPO, etc)
- Thus improving broad middle income
- In the end, it is not good if that pushes through

Our products are food staples kaya mas magpupurchase ka

Kahit walang BPO, you still have to eat.
Demand for staples will be more robust than discretionary items

Weakening export market

- Domestic branded company, mas focused doon
- Coconut health and wellness trend

As long as there is demand, we have to be present

Aqua Coco
- small lang, Middle East
- it would still be profitable if you own the brand
- it is not our focus

We are looking for eventually setting up a branded business for coconut more on the coconut
milk, coconut cream more culinary
To create a domestic market for that

Enough cash operating cash flows to finance expansions

- Steady cash flows will be driven from core businesses (marine and meat)
- Our cash flows can finance our CAPEX requirements
- Kapag nagacquire, tsaka titingin sa potential financing

Company Presentation Infos

CNPF:

Build brands, organically or through acquisition.

40 years of track record, started out in 1978

Why not pioneer? 1986- century tuna, priced around 25-30, considerable discount which would
be priced before in 100.

Philippines is the highest consumer of canned food, affinity to the West

GDP plus type of growth, income.. increased frequeny of consumption

Getting faster growth

Cater a broad market from mass market o mass affluent

Even though they offer brands at prices, R&D ( INCLUDE THE PROCESS) allowed to tweak
formulation of products in order to remain profitable even if they address price points in the
market.

Present in more than 600K retail channels

Explore categories, organically or inorganically (acquisitions or joint ventures)

 Remaining 23% comes from non-branded business;

Globally, top exporter of coconut, given the abundant supply of coconut

The companys experience in manufacturing and exporting made us viable to be a global

partners.

20% for developed markets, Vita Coco plans to expand to developed markets (EU and Asia)

They buy the coconuts but only use the water inside, following the trends, coconut has become
the miracle product.

40% of COGS is dollar denominated, hedge: export business 23% dollar denominated

Net exposure 6% dollars

Dominant market player, easily pass on the higher costs to customers, not too much impact..
sensitive to dollar, beauty of being the market leader in the 4 categories, can dictate prices

Extensive distribution network: high barrier to entry: VERY IMPORTANT

Management:

Ricardo Po passed on to his 2 sons:

Ted Po- more than 20 years, handles manufacturing to engineering

Chris Po- the more strategic side of the business, used to be the management consultant,
rejoined the company 8 years ago. Transformed from just selling canned goods to producing
coconut water.

Meat

MARINE AND MEAT- core business 20B

Revenue of 10-15% high single digit revenue growth from the marine and meat categories

Meat and milk- volatility in the gross margins, maintain OPM more flexibility more leverage to
manage expenses. Price of products on our favor thats where you can see brand initiatives;
favorable commodity prices. No more tailwind- flexibility to scale back in advertising costs.

MEAT- we are not the pioneers, PF was the leader before argentina. Window of opportunity to
tweak formulation of argentina to make it more affordable. We were able to address price
points; purpose is to address broad middle class.

Consolidate market share: Swift premium corned beef, take in competing with purefoods
Milk

MILK- 70B market, not even part of the sub category of dairy before fortified, faster growth
category, newer business, started as

canned liquid milk- Challenger, competing against multinational, more than 50% of milk
business, 15% market share, leader is Alaska; milk content of 20%; most basic dairy
Full cream milk (Birch tree)- acquired,milk content, other end of the spectrum, 100% milk
content; premium milk product, underdeveloped compared to Thailand, 19 kilos compared to
30 kilos and 40 kilos of Malaysia, a long way to be at par for DAIRY CONSUMPTION; PREMIUM,
be present in the relevant markets which brings to a new product,
Fortified- 70% milk, lower the price point to make it more affordablel just entered into the
category, middle of last year. Nestle in the fortified more than 80% market share. Market share
of 2-3%

Marine

Made tuna affordable and accessible in the mass market

CNPFs founder to make it a mass market, started as canned sardines, most basic source of
protein for Filipinos #4 player 10-15%, top 4 players 15-20%, not far market share because it is a
more commoditized product

Derive revenues from canned tuna- 80%

Canned tuna- an upgrade of canned sardines, today 84% market share DOMINANT, shape of
perception of market for product, how people can perceive the category.

CANNED TUNA- before century there was not a century tuna domestic brand, continuous
marketing campaigns has ensured market leader for marine

Tuna Export (legacy business)

 #1 exporter of tuna coming out of the PH

TUNA EXPORT- supply to global names, Japanese brands, most important market: JAPAN 50% of
export revenues, EU markets 40%, mid-single type of growth

Branded export- 3% of total revenues, 26% of revenues dollar denominated

RISK EXPORT BUS. GIVEN ELECTION OF TRUMP- tuna export to US would just be a small portion
of business in export, more on EU and japan. but in coconut yes. but the healthy demand in the
coconut water, we are not seeing risk from the macro economic conditions.

Coconut (Private)

Company has started to develop other by products; so many by products to develop, by end of
the year dessicated coconut meat, coconut flour, coconut milk and coconut cream

Virgin coconut oil 20-30%

Most recent acquisition: COCONUT WATER; sell more than a 100 pesos in the US, considered as
premium, pioneered by Vita Coco, 60% market share in the US and UK. If not number 1, number
2 supplier of cocowater

CNPF doubles the coconut segment for the next 3-5 years