Nestl é I ndia Limited Financial Analysts ’ Meet Nov 16, 2007
Agenda Opening Remarks Martial Rolland Key Financials S hobinder Duggal Questions & Answers All
Disclaimer This presentation may contain statements which reflect Management’s current views and estimates and could be construed as forward looking statements. The future involves certain risks and uncertainties that could cause actual results to differ materially from the current views being expressed. Potential risks and uncertainties include factors such as general economic conditions, availability and prices of commodities, competitive products and pricing pressures and regulatory developments etc. Responses can only be given to questions, which are not price sensitive.
Opening Remarks
Over to SHD
Snap shot INR 4.8 Bio 24.0 % INR 27.1 Bio 20.1% INR 2.8 Bio 17.7% Jan-Sep 07 Volumes + 32.7% + 30.7% + 24.7% & Prices +110bp INR 3.6 Bio INR 21.7 Bio INR 2.1 Bio 11.7 % 16.6% 9.5 % Jan-Sep 06 Gross Sales RIG OG EBIT Economic Profit Includes Figures from Nestle Internal Reporting Standards All calculations are based on non-rounded figures
What is delivering the results? Organization Innovation & Structure Renovation Consumer Indian Operational Insight Economy Efficiency GLOBe Nutrition, Health & Wellness People Engagement
SALES GROWTH (Value Driver -1)
Sales Evolution Gross Sales INR Bio Real Internal Growth (% ) Organic Growth (% ) 28 34.0 24.0 io 30.0 20.1 21 B G R & O in IN 26.0 IG 14 ales 12. 1 11.7 ) R 11.5 11.4 22.0 12.1 (% S 9.7 11.3 9.5 7. 9 s ros 10.4 18.0 6. 3 7 G 4. 4 14.0 20.6 22.9 23.9 26.7 29.7 22.0 27.4 10.0 0 2002 2003 2004 2005 2006 Jan-Sep Jan-Sep 06 07 Basis Nestle Internal Reporting Standards
Growth over the quarters INR Bio Gross Sales including excise duty 9. 5 8. 5 7. 5 6. 5 5. 5 6.6 6.5 6.7 6.7 7.2 7.0 7.5 7.7 9.0 8.7 9.4 4. 5 Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 2.0 EBIT 1.5 1.0 0.5 1. 26 1. 23 1. 12 1. 03 1. 18 1. 20 1. 23 1. 03 1. 61 1. 46 1. 73 - Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07
Channel-wise Sales Value @ (INR Bio) Volume (000’ Tons) Jan-Sep 07 Jan-Sep 06 Var% Jan-Sep 07 Jan-Sep 06 Var% Domestic 187.4 162.3 15.5 24.8 19.7 25.6# Exports 12.6 12.3 2.4 2.4 2.0 16.3 Total 200.0 174.6 14.6 27.1 21.8 24.7 Domestic 93.7 92.9 0.8 91.3 90.6 0.7 Contr. % Exports 6.3 7.1 (0.8) 8.7 9.4 (0.7) Contr. % @ Gross Sales including excise duty # Net Domestic Sales up 26.4% All calculations are based on non-rounded figures
Export sales Jan-Sep 2007 % Contribution Total Export sales 2,368 Mio Russia South Asia 5.6 8.2 33.3 9.4 Europe 12.2 Asia-Others 31.3 Africa America Beverages 6.7 2.3 26.5 Milk Products & Nutrition 64.5 Prepared Dishes & Cooking Aids Choc & Conf.
Product Portfolio INR Bio. � % 27.1 21.8 Contribution % Contribution % 4.3 3.4 27.4 15.8 15.5 4.4 5.8 33.2 21.4 20.0 19.7 22.3 19.3 4.3 5.2 21.1 43.5 44.8 9.7 11.8 Jan-Sep 07 Jan-Sep 06 Milk Products and Nutrition Beverages Prepared Dishes and Cooking Aids Chocolate and Confectionery Gross Sales including excise duty
Product Categories: Jan - Sep 2007 X = 14.6 Prepared Dishes 5.8 & Cooking Aids ) Organic Growth (% 30 Chocolate & 4.3 Confectionery X = 24.7 24 Beverages 5.2 11.8 Milk Products & Nutrition Bubble size represents Gross Sales (INR Bio) 18 2 12 22 Volume Growth (% )
Milk Products & Nutrition Innovation & Renovation • Market Leader in Baby Foods and Sweetened Condensed Milk • Very close to market leader in Infant Formula • No. 2 in Dairy Whitener • Growing presence in Fresh Dairy % Contribution to Total Sales Sales Volume (000’ tons) Sales (INR Bio) 83 12 81 � 4.9% 15.8 79 11 � 21.1% 82.0 43.5 11.8 77 21.4 10 78.2 75 9.7 19.3 73 9 Jan-Sep 06 Jan-Sep 07 Jan-Sep 06 Jan-Sep 07 Jan-Sep 07
Beverages • Market Leader in Instant Coffee Innovation & Renovation % Contribution to Total Sales Sales Volume (000’ tons) Sales (INR Bio) 18 5.5 15.8 � 22.3% 5.0 � 8.9% 43.5 17 17.9 21.4 5.2 4.5 16.5 19.3 4.3 16 4.0 Jan-Sep 06 Jan-Sep 07 Jan-Sep 06 Jan-Sep 07 Jan-Sep 07
Prepared Dishes & Cooking Aids Innovation & Renovation • Market Leader in instant Noodles and Ket chups • No. 2 in Healthy Soups % Contribution to Total Sales Sales (INR Bio) Sales Volume (000’ tons) 6.0 74.0 5.5 15.8 66.0 � 27.8% � 33.2% 43.5 5.0 72.9 5.8 21.4 58.0 4.5 57.0 19.3 4.4 50.0 4.0 Jan-Sep 06 Jan-Sep 07 Jan-Sep 06 Jan-Sep 07 Jan-Sep 07
Chocolate & Confectionery Innovation & Renovation • Market Leader in Wafers and white chocolat es • No. 2 in Chocolates • Market Leader in Eclairs volumes with 32.4% share. % Contribution to Total Sales Sales Volumes (000’ tons) Sales (INR Bio) 5.0 29 4.6 15.8 � 18.6% � 27.4% 26 4.2 43.5 3.8 27.2 21.4 4.3 23 3.4 22.9 3.4 19.3 20 3.0 Jan-Sep 06 Jan-Sep 07 Jan-Sep 06 Jan-Sep 07 Jan-Sep 07
PROFIT MARGINS (Value Driver -2)
Evolution of Operating Margins INR Bio. 24 6.0 19.7 19.7 19.5 19.5 19.0 18.9 18.3 17.6 17.7 17.5 18 5.0 17.1 16.9 16.6 16.0 12 4.0 4.0 3.5 4.4 3.9 4.5 4.0 5.2 4.6 5.4 4.7 4.1 3.6 5.3 4.8 6 3.0 2002 2003 2004 2005 2006 Jan-Sep 06 Jan-Sep 07 EBITD-INR.Bio EBIT-INR.Bio EBITD % of Gross Sales EBIT % of Gross Sales
Total Expenditure INR Mio. Description Jan-Sep % Net Jan-Sep % Net Var. 07 Sales 06 Sales % Total Expenditure 21,291 81.6 17,183 82.6 23.9 - of which Materials 12,594 48.3 9,782 47.0 28.7 Staff Cost 2,036 7.8 1,674 8.0 21.6 Advt + Sales Promotion 1,197 4.6 1,002 4.8 19.4 Distribution 1165 4.5 961 4.6 21.2 Power & Fuel 895 3.4 853 4.1 4.8 Depreciation 542 2.1 486 2.3 11.6 Figures have been regrouped / reclassified to make them comparable.
Evolution of Net Profit Margins INR Bio. Amount % of Gross Sales 18 3.5 16 3 14 11.8 11.7 11.6 11.5 12 10.7 10.6 9.8 2.5 10 8 2 6 2.0 2.6 2.5 3.1 3.2 2.5 3.2 4 1.5 2002 2003 2004 2005 2006 Jan-Sep 06 Jan-Sep 07
WORKING CAPITAL INTENSITY ( Value Driver -3)
Trade Net Working Capital (TNWC) INR Mio 30 th Sep 30 th Sep 2007 2006 Receivables from Customers 588 750 Inventories 3,354 2,288 Less: Trade Payables * 2,171 1,946 TNWC 1,771 1,092 As % of Gross Sales (12 rolling months ) 4.8 3.7 * Excludes payables for taxes, Staff Costs, Capex, provisions for contingencies etc. Basis Nestle Internal Reporting Standards and including affiliated customers and vendors
Operating Cash Flows INR Mio Jan-Sep Jan-Sep 2007 2006 Operating Cash Flows 3,641 3,095 As % of Gross Sales 13.3 14.1 Basis Nestle Internal Reporting Standards
Rotation of Average TNWC Times 40 36.2 34.8 32.7 30 25.5 29.5 25.4 24.6 28.0 21.8 27.0 20 Adjusted 10 2002 2003 2004 2005 2006 Jan-Sep 06 Jan-Sep 07 Nestle Internal Reporting Standards. Including affiliated customers and vendors Average of TNWC at period ends
FIXED CAPITAL INTENSITY ( Value Driver -4)
Investment in Fixed Assets INR mio. % of Gross sales Amount % of Gross sales 1600 7.0 1400 5.2 1200 4.8 5.0 1000 800 3.1 3.1 3.0 3.0 2.9 600 3.0 400 200 596 681 742 781 1,522 1,054 849 0 1.0 2002 2003 2004 2005 2006 J-S 06 J-S 07 Dep. 494 463 491 498 555 404 463
Rotation of Average Tangible Fixed Assets Times 7.0 7.2 6.6 6.6 6.8 6.5 6.3 6.2 6.4 6.0 5.4 5.6 5.2 4.8 4.4 2002 2003 2004 2005 2006 Jan-Sep 06 Jan-Sep 07 Basis Nestle Internal Reporting Standards
INCOME TAX RATE ( Value Driver -5)
Evolution of Tax Rate % 38 36.8 36.6 35.9 36 35.0 34.7 34.4 34.5 34.1 33.9 33.7 34 33.3 33.6 33.7 33.6 32 30 2002 2003 2004 2005 2006 Jan-Sep 06 Jan-Sep 07 Marginal Rate % Effective Rate % (rates are a % of pre-tax profit excluding FBT)
COST OF CAPITAL ( Value Driver -6)
Evolution – Cost of Capital WACC Risk Free Rate 14.2 15.0 11.3 12.0 10.8 10.8 10.5 9.7 9.4 9.0 9.0 7.7 7.2 7.2 7.2 6.6 5.3 6.0 3.0 0.0 2002 2003 2004 2005 2006 Jan-Sep 06 Jan-Sep 07 Basis Nestle Internal Reporting Standards
VALUE GROWTH DURATION (Value Driver 7)
Creating Shareholder Wealth Economic Profit INR Bio Return on Equity (% ) Economic Profitability (% ) 3.0 120 EP (Economic Profitability) in INR Bio (% ) 2.5 87.4 81.0 78.9 78.5 2.0 80 71.6 67.0 61.1 60.0 69.7 59.4 62.3 1.5 54.0 62.1 49.0 1.8 2.3 2.2 2.7 2.7 2.1 2.8 1.0 40 2002 2003 2004 2005 2006 Jan-Sep 06 Jan-Sep 07 EP Basis Nestle Internal Reporting Standards Invested Capital basis average at quarterly rests
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