Slide 1: Full-year results 2017 Conference
Full-year results 2017 Conference 1 | February 15, 2018 | Nestlé full-year results 2017
Slide 2: Disclaimer
Disclaimer This presentation contains forward looking statements which reflect Management’s current views and estimates. The forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements.
Slide 3: Full-year results 2017 – Mark Schneider, CEO
Full-year results 2017 Mark Schneider, CEO 3 | February 15, 2018 | Nestlé full-year results 2017
Slide 4: Key messages
Key messages • Organic growth at the higher end of industry, at lower end of our guidance • Solid improvement of underlying trading operating margin puts us on track for our 2020 margin target • Continued focus on organic sales growth and operating efficiencies • Encouraging progress with our portfo
Slide 5: 2017 performance highlights
2017 performance highlights Sales Organic growth Real internal Underlying TOP growth margin* CHF 89.8 bn +2.4% +1.6% +50 bps * In constant currency 5 | February 15, 2018 | Nestlé full-year results 2017
Slide 6: Delivering on our commitments
Delivering on our commitments Commitments 2017 Achievements • Deliver balanced growth with margin • Industry-leading volume growth; all categories improvement with positive sales growth; UTOP +50 bps* • Optimize portfolio • U.S. Confectionery, Atrium, Blue Bottle Coffee… • Drive speed and simplicity
Slide 7: Clear path to achieving mid-single digit growth by 2020
Clear path to achieving mid-single digit growth by 2020 2017 examples: • E-commerce sales: +32%* OG 2017 examples: • Nespresso U.S.: mid-teens OG Acquisitions: • Petcare in emerging markets: 2017 examples: Atrium, Blue Bottle +17% OG Coffee, Sweet Earth, • Yinlu stabilized Mid-single Chameleon • Per
Slide 8: Operating efficiencies driving margin improvement
Operating efficiencies driving margin improvement FY structural costs* as a % of sales (Manufacturing, Procurement, G&A) 19.6% 19.2% 19.2% 18.7% 2014 2015 2016 2017 * On comparable basis, excluding Froneri 8 | February 15, 2018 | Nestlé full-year results 2017
Slide 9: Active portfolio management
Active portfolio management U.S. Confectionery/Atrium example Disposed: USD 2.8 billion Acquired: USD 2.3 billion • Sales: ~USD 900 million • Sales: ~USD 700 million • 2015-2017 CAGR: negative sales growth • 2015-2017 CAGR: double-digit sales growth 9 | February 15, 2018 | Nestlé full-year results 2
Slide 10: 2018 outlook
2018 outlook • Organic sales growth of 2% to 4% • Underlying trading operating margin improvement in line with 2020 target • Restructuring costs* of around CHF 700 million • Increase in underlying EPS** and capital efficiency * Not including impairment of fixed assets, litigation and onerous contrac
Slide 11: Full-year results 2017 – François-Xavier Roger, CFO
Full-year results 2017 François-Xavier Roger, CFO 11 | February 15, 2018 | Nestlé full-year results 2017
Slide 12: 2017 performance highlights
2017 performance highlights Growth Underlying TOP Free cash flow Underlying EPS* margin* OG +2.4% CHF RIG +1.6% +50 bps 8.5 bn +4.7% +40 bps on a reported basis 9.5% of sales +4.6% on a reported basis * in constant currency 12 | February 15, 2018 | Nestlé full-year results 2017
Slide 13: Broad-based growth across geographies
Broad-based growth across geographies AMS EMENA AOA Sales 40.7 bn 26.1 bn 23.0 bn (in CHF) RIG 0.6% 1.8% 3.3% OG 1.3% 2.5% 4.3% Each geography includes zones, Nestlé Waters, Nestlé Nutrition, Nestlé Professional, Nespresso, Nestlé Health Science and Nestlé Skin Health 13 | February 15, 2018 | Nestlé
Slide 14: Accelerated RIG in emerging markets
Accelerated RIG in emerging markets Developed Emerging Sales (in CHF) 51.3 bn 38.5 bn % of group sales 57% 43% RIG 0.7% 3.0% OG 0.7% 4.8% 14 | February 15, 2018 | Nestlé full-year results 2017
Slide 15: Zone AMS
Zone AMS Sales CHF 28.5 bn Organic growth 0.9% Real internal growth 0.2% Underlying TOP margin 20.3% vs LY +60 bps • U.S. with flat organic growth (excluding confectionary business) in a context of soft consumer demand • Brazil with negative organic growth coming from dairy deflation • Petcare with
Slide 16: Zone EMENA
Zone EMENA Sales CHF 16.5 bn Organic growth 2.3% Real internal growth 1.7% Underlying TOP margin 18.1% vs LY +80 bps • Good organic growth momentum, with improvement in RIG and pricing • Western Europe: positive contribution to organic growth with good RIG in petcare and culinary • Central and Easte
Slide 17: Zone AOA
Zone AOA Sales CHF 16.2 bn Organic growth 4.7% Real internal growth 2.9% Underlying TOP margin 20.1% vs LY +20 bps • China with positive organic growth despite difficult Q4 comparables • South-East Asia with strong RIG, led by Milo • South Asia region with solid growth • Oceania and Japan with volum
Slide 18: Nestlé Waters
Nestlé Waters Sales CHF 8.0 bn Organic growth 2.1% Real internal growth 1.8% Underlying TOP margin 12.7% vs LY +20 bps • Organic growth subdued, reflecting softer growth in North America and Europe • Regional brands in North America with weak demand and pricing pressures • International premium bran
Slide 19: Nestlé Nutrition
Nestlé Nutrition Sales CHF 10.4 bn Organic growth 1.1% Real internal growth 0.9% Underlying TOP margin 23.0% vs LY -10 bps • Growth in China remained soft, but improved in the second half of the year, led by illuma and NAN • The U.S. had slightly positive organic growth, with the Gerber re-launch on
Slide 20: Other Businesses
Other Businesses Sales CHF 10.2 bn Organic growth 4.8% Real internal growth 4.5% Underlying TOP margin 15.9% vs LY +50 bps • Nespresso held strong organic growth, with all regions positive and even double-digit growth in the Americas • Nestlé Skin Health returned to accretive growth to the Group • N
Slide 21: Growth by products
Growth by products 3.6% 3.0% Organic growth 2.4% 2.4% 2.1% 2.2% 2.0% Pricing RIG 0.3%* Total group Powdered and Water Milk products Nutrition and Prepared dishes Confectionery Petcare liquid beverages and ice cream Health Science and cooking aids (0.8% OG excluding U.S. business) * Comprised of +1.4
Slide 22: Underlying TOP margin by products
Underlying TOP margin by products 21.9% 21.5% 18.7% 19.4% In % of sales 17.6% 16.4% 15.8% 13.0% Reported bps +40* +30 +20 -60 +10 +160 +150 +30 evolution Total Group** Powdered and Water Milk products Nutrition and Prepared dishes Confectionery PetCare Liquid Beverages and Ice cream Health Science a
Slide 23: Gross margin impacted by higher input costs
Gross margin* impacted by higher input costs 50.6% 50.0% 49.6% 48.1% 47.8% 47.1% 2012 2013 2014 2015 2016 2017 *Gross margin = (Sales - Cost of good sold) / Sales 23 | February 15, 2018 | Nestlé full-year results 2017
Slide 24: Underlying TOP +50 bps driven by structural cost reduction
Underlying TOP +50 bps* driven by structural cost reduction 40 bps structural cost savings +10 bps -70 bps +110 bps 16.0% • Commodity 16.5% • Structural cost costs reduction • Structural cost • Marketing reduction efficiencies -30 Underlying TOP COGS & Marketing & Currency impact Underlying TOP FY 2
Slide 25: Underlying EPS +4.7%
Underlying EPS* +4.7% 2017 vs 2016 Underlying TOP 16.4% +40 bps Restructuring: +40 bps Other items: +60 bps TOP 14.7% -60 bps Impairment of goodwill and non-commercialized intangible assets: -290 bps Taxes: +180 bps Other items: +20 bps Net Profit 8.0% -150 bps Underlying EPS (CHF) 3.55 +4.7%* *In c
Slide 26: Further progress on working capital
Further progress on working capital Working capital as a % of sales, calculated on a 5-quarter average 6.5% 5.3% 4.7% 2.8% 2.2% 2013 2014 2015 2016 2017 26 | February 15, 2018 | Nestlé full-year results 2017
Slide 27: Working capital main driver for FCF reduction
Working capital main driver for FCF reduction In CHF billion 10.1 - 0.2 8.5 - 2.0 + 0.1 +0.5 Free cash flow Tax Working CAPEX Others Free cash flow (FY 2016) capital (FY 2017) 27 | February 15, 2018 | Nestlé full-year results 2017
Slide 28: Net debt increased to support share buyback and dividend
Net debt increased to support share buyback and dividend In CHF billion Over CHF 10 bn returned to shareholders -1.1 -1.1 +8.5 -7.1 -3.2 -13.9 -17.9 Net Debt Share Dividends M&A FX Free Cash Net Debt (Jan 1, 2017) Buyback (net) & Other Flow (Dec 31, 2017) 28 | February 15, 2018 | Nestlé full-year re
Slide 29: 2018 focus
2018 focus 2018 priorities 2018 outlook • Maintain volume growth • Organic sales growth of 2% to 4% • Margin improvement, in line with our • Underlying trading operating margin 2020 target improvement • Continued focus on structural savings • Restructuring costs* of around CHF 700m program • Capital
Slide 30: Full-year results 2017 – Discussion
Full-year results 2017 Discussion 30 | February 15, 2018 | Nestlé full-year results 2017
Slide 31: Supporting slides
Full-year results 2017 Supporting slides 31 | February 15, 2018 | Nestlé full-year results 2017
Slide 32: FY-2017 Operating segments – quarterly summary
FY-2017 Operating segments – quarterly summary Q4-2017 sales Sales RIG Pricing OG (CHF million) % % % Zone AMS 7’989 -0.1 0.1 0.0 Zone EMENA 4’714 2.3 1.0 3.3 Zone AOA 4’371 0.9 1.9 2.8 Nestlé Waters 1’805 0.9 0.8 1.7 Nestlé Nutrition 2’650 2.3 -1.0 1.3 Other businesses 2’990 3.0 1.2 4.2 Total group
Slide 33: FY-2017 Operating segments – topline summary
FY-2017 Operating segments – topline summary FY-2017 sales Reported Sales RIG Pricing OG Net M&A F/X sales growth (CHF million) % % % % % % Zone AMS 28’479 0.2 0.7 0.9 -0.5 0.8 1.2 Zone EMENA 16’535 1.7 0.6 2.3 -8.0 0.6 -5.1 Zone AOA 16’224 2.9 1.8 4.7 -0.4 -2.3 2.0 Nestlé Waters 7’955 1.8 0.3 2.1 -
Slide 34: FY-2017 Products – topline summary
FY-2017 Products – topline summary FY-2017 sales Sales RIG Pricing OG (CHF million) % % % Powdered and liquid beverages 20’408 2.1 1.5 3.6 Water 7’455 2.1 0.3 2.4 Milk products and ice cream 13’447 0.4 1.6 2.0 Nutrition and Health Science 15’257 1.9 0.2 2.1 Prepared dishes and cooking aids 11’957 1.
Slide 35: FY-2017 historical eight quarters
FY-2017 historical eight quarters Period RIG Pricing OG % % % Q1-2016 3.0 0.9 3.9 Q2-2016 2.7 0.4 3.1 Q3-2016 1.9 1.3 3.2 Q4-2016 2.0 0.9 2.9 Q1-2017 1.3 1.0 2.3 Q2-2017 1.5 0.9 2.4 Q3-2017 2.6 0.5 3.1 Q4-2017 1.2 0.7 1.9 35 | February 15, 2018 | Nestlé full-year results 2017
Slide 36: FY-2017 Operating segments – revenue and results
FY-2017 Operating segments – revenue and results In CHF mio Of which Underlying Net other impairment Trading Trading trading of property, Of which Depreciation Operating Operating income/ plant and restructuring and Sales Profit Profit (expenses) equipment costs amortisation Zone AMS 28’479 5’791 5’
Slide 37: FY-2017 Products – revenue and results
FY-2017 Products – revenue and results In CHF mio Of which Underlying Net other impairment Trading Trading trading of property, Of which Operating Operating income/ plant and restructuring Sales Profit Profit (expenses) equipment costs Powdered and Liquid Beverages 20’408 4’461 4’302 (159) (50) (56)
Slide 38: FY-2017 EPS reconciliation (1 of 2)
FY-2017 EPS reconciliation (1 of 2) From net profit to underlying profit In CHF mio FY-2016 FY-2017 Net Profit 8’531 7’183 Restructuring costs 300 673 Impairments of property, plant & equipment, goodwill and int. assets 640 3’557 Net result on disposal of businesses - 132 Other adjustment in Net oth
Slide 39: FY-2017 EPS reconciliation (2 of 2)
FY-2017 EPS reconciliation (2 of 2) From operating profit to underlying net profit In CHF mio FY-2016 FY-2017 Operating profit adjusted 14’307 14’729 Net financial income / (expense) (637) (619) Adjusted taxes (3’803) (3’844) Adjusted income from associates and joint ventures 1’011 1’089 Adjusted no
Slide 40: FY-2017 currency overview
FY-2017 currency overview Weighted average rate FY-2016 FY-2017 Variation in % US Dollar 1 USD 0.985 0.984 -0.1 Euro 1 EUR 1.090 1.113 +2.1 Chinese Yuan Renminbi 100 CNY 14.838 14.593 -1.7 Brazilian Reias 100 BRL 28.583 30.796 +7.7 UK Pound Sterling 1 GBP 1.331 1.271 -4.5 Mexican Pesos 100 MXN 5.279
Slide 41: Return on invested capital
36.0% 40.0% 38.0% Return on invested capital 31.0% 36.0% 34.0% 26.0% 31.7% 31.6% 32.0% 30.1% 30.4% 29.9% 21.0% 30.0% Goodwill ROIC before and intangible assets 28.0% 16.0% 26.0% ROIC after Goodwill 12.7% and intangible assets 10.8% 10.9% 11.2% 24.0% 11.0% 8.9% 22.0% 6.0% 20.0% 2013 2014 2015 2016 20
Slide 42: Abbreviations
Abbreviations OG Organic growth RIG Real internal growth AMS Zone Americas EMENA Zone Europe, Middle East, and North Africa AOA Zone Asia, Oceania, and sub-Saharan Africa EPS Earnings per share COGS Cost of goods sold FCF Free cash flow TOP Trading operating profit Underlying TOP/ Trading operating