Nestle S.a. · SIX:NESN
Nestle — FY2023 Earnings Presentation
52 slides from Nestle's earnings presentation, Feb 22, 2024
Slide 1: Full-year results 2023
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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 2023 – Mark Schneider, CEO
Full-year results 2023 Mark Schneider, CEO
Slide 4: Key messages
Key messages Resilient performance in the context of soft consumer demand • Strong organic sales growth of 7.2%, led by pricing, with slightly negative RIG • Underlying trading operating profit margin up 40 bps in constant currency • Underlying earnings per share growth of 8.4% in constant currency
Slide 5: Historically high-level of food price inflation
Historically high-level of food price inflation OECD countries: annual food price inflation % 18 16.3% 16 14.7% 14 12 10% 10 8 6.3% 8.8% 6 4 2 0.4% 3.5% 2.4% 0 Source: OECD CPI: Food and non-alcoholic beverages; Annual growth rate (%), 1971 to 2022; Q3 2023 or latest available, Annual growth rate (%
Slide 6: 2023 highlights: Nestlé's ability to generate growth catalysts
2023 highlights Nestlé’s ability to generate growth catalysts PetCare Nespresso KitKat HMO*products Nestlé Professional Innovation-driven Premier D2C business Powerhouse brand Driving growth in Pivoting to fast-growing business focused on delivering high-quality with industry-leading premium segment
Slide 7: 2024 operational priorities
2024 operational priorities • Ensure execution excellence • Raise marketing/growth investments, focus on fast-growing billionaire brands • Deliver RIG-led growth • Restore gross margin and further increase free cash flow 7 February 22, 2024 Nestlé full-year results 2023
Slide 8: Nestlé Health Science: overcoming operational hurdles to capture full strategic potential
Nestlé Health Science: overcoming operational hurdles to capture full strategic potential • Operating in segments with attractive long-term trends – leading positions in Consumer Care and Medical Nutrition – high single-digit growth outlook – strong, focused portfolio across brands, price points and
Slide 9: Premiumization is core to our growth strategy
Premiumization is core to our growth strategy Premium products Attractive growth Strong margin Increasing contribution to sales (3x vs. 2013) 11% 11.5% +230 bps 36% 10-year CAGR Underlying TOP margin % of premium products (2013-2023) Premium vs. Group vs. total group sales Driving premiumization thr
Slide 10: Growing healthy aging solutions
Growing healthy aging solutions Favorable demographic trend: population over 65 doubling to 1.6 billion by 2050 Active lifestyle support Nutritional balance Life stage transitions Preventive care Collagen Functional foods Nutritional gaps High-protein Menopause Cardio-health Immunity Cellular suppor
Slide 11: Helping consumers on their weight-loss journey
Helping consumers on their weight-loss journey Supporting nutritional needs of GLP-1 consumers Muscle mass preservation Micronutrient deficiencies Gastrointestinal health Preserving lean body mass Filling nutritional gaps Managing digestive issues with high-protein products Managing weight and blood
Slide 12: Good for You: helping people enjoy a tasty, balanced diet
Good for You: helping people enjoy a tasty, balanced diet Grow • Grow the sales of more nutritious offerings • Continue to invest in R&D and launch new technologies to reduce sugar and fat • Increased share of more nutritious products* from 57% to 59% in 2023 Guide • Implement industry-leading respo
Slide 13: Good for the Planet: advancing towards Net Zero
Good for the Planet: advancing towards Net Zero • >13.5% net reduction of GHG emissions versus 2018 baseline* • >15.3% reduction of methane versus the 2018 baseline* • On track with our Net Zero plan • 91.9% of electricity at our sites globally from renewable sources * Covers emissions related to ou
Slide 14: 2024 guidance, 2025 mid-term targets fully confirmed
2024 guidance • organic sales growth around 4% • moderate increase in underlying trading operating profit margin • underlying earnings per share growth in constant currency between 6% and 10% 2025 mid-term targets fully confirmed • mid single-digit organic sales growth • underlying trading operating
Slide 15: Full-year results 2023 – François-Xavier Roger, CFO
Full-year results 2023 François-Xavier Roger, CFO
Slide 16: Resilient financial performance in 2023
Resilient financial performance in 2023 Organic Underlying Underlying Free growth TOP margin EPS growth cash flow (in constant currency) (in CHF) +7.2% 17.3% +8.4% 10.4 bn +40 bps CHF 4.80 +3.8 billion in constant currency reported vs. 2022 16 February 22, 2024 Nestlé full-year results 2023
Slide 17: Full-year sales growth
Full-year sales growth OG +7.2% -0.9% +7.5% -7.8% -0.3% 94.4 93.0 Reported sales growth -1.5% FY-2022 sales RIG Pricing Net M&A Foreign FY-2023 sales CHF bn exchange CHF bn 17 February 22, 2024 Nestlé full-year results 2023
Slide 18: Strong growth across developed and emerging markets
Strong growth across developed and emerging markets Developed Emerging Sales (in CHF) 54.8 bn 38.2 bn % of Group sales 59% 41% RIG -1.1% 0.8% Pricing 7.5% 7.6% OG 6.4% 8.4% 18 February 22, 2024 Nestlé full-year results 2023
Slide 19: Strong mix reflects value-added strategy
Strong mix reflects value-added strategy 2018 2019 2020 2021 2022 2023 7.7% 2.0% 8.6% 1.4% 0.6% Price 0.5% 0.5% 2.2% 1.7% 3.7% Mix 1.4% 2.6% 1.1% 1.3% 1.5% 1.6% Volume -1.7% -2.5% Excludes water and Nestlé Health Science; Volume + Mix are equivalent to RIG 19 February 22, 2024 Nestlé full-year resul
Slide 20: RIG back to positive territory
RIG back to positive territory 0.4% Key factors supporting RIG recovery -0.3% despite soft consumer demand -0.5% -1.1% • Moderation of new pricing • Benefits of portfolio optimization -2.6% • Increased marketing investments Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 RIG as reported Underlying RIG adjusted for tr
Slide 21: Returning to RIG-led growth
Returning to RIG-led growth Deflation Pandemic Inflation Normalization Normalization Pricing % RIG % 8.2% 7.5% 5.5% 2.9% 3.2% 2.4% 2.5% 2.0% 1.6% 0.8% 0.5% 0.6% 0.4% 0.1% 0.8% -0.3% 2016 2017 2018 2019 2020 2021 2022 2023 2024 21 February 22, 2024 Nestlé full-year results 2023
Slide 22: Zone North America
Zone North America Sales CHF 26.0 bn Organic growth 7.3% Real internal growth -0.3% Underlying TOP margin 22.2% vs LY +120 bps • Strong organic growth driven by pricing. RIG impacted by soft consumer demand and capacity constraints • Purina PetCare, Nestlé Professional and Starbucks out- of-home pro
Slide 23: Zone Europe
Zone Europe Sales CHF 19.1 bn Organic growth 8.2% Real internal growth -2.4% Underlying TOP margin 16.4% vs LY Flat • Strong organic growth led by pricing. RIG impacted by demand elasticity and capacity constraints • Purina PetCare, coffee and confectionery were the main growth contributors • Margin
Slide 24: Zone Asia, Oceania and Africa
Zone Asia, Oceania and Africa Sales CHF 17.5 bn Organic growth 8.3% Real internal growth 0.3% Underlying TOP margin 23.5% vs LY +60 bps • Strong organic growth, driven by pricing and positive RIG • Infant nutrition, culinary and coffee were the key growth drivers • Margin +60 bps reflecting pricing,
Slide 25: Zone Latin America
Zone Latin America Sales CHF 12.2 bn Organic growth 9.2% Real internal growth 0.3% Underlying TOP margin 20.7% vs LY -50 bps • Broad-based organic growth led by pricing, with positive RIG • Confectionery, coffee and dairy were the main growth contributors • Margin -50 bps due to one-off items in 202
Slide 26: Zone Greater China
Zone Greater China Sales CHF 5.0 bn Organic growth 4.2% Real internal growth 2.5% Underlying TOP margin 16.5% vs LY +40 bps • Solid organic growth, driven by RIG and pricing • Nestlé Professional, culinary and confectionery were the key growth drivers • Margin +40 bps driven by favorable mix and dis
Slide 27: Nestlé Health Science
Nestlé Health Science Sales CHF 6.5 bn Organic growth 1.6% Real internal growth -3.2% Underlying TOP margin 12.0% vs LY -160 bps • Pricing-led organic growth, with negative RIG • Consumer Care saw negative growth, reflecting temporary supply constraints for vitamins, minerals and supplements • Medic
Slide 28: Nespresso
Nespresso Sales CHF 6.4 bn Organic growth 5.3% Real internal growth 2.0% Underlying TOP margin 20.3% vs LY -120 bps • Organic growth driven by pricing and RIG • Vertuo, strong demand in out-of-home channels and innovation supported growth • North America posted double-digit growth. Europe reported l
Slide 29: Broad-based growth across categories
Broad-based growth across categories Organic sales growth % 12.1% 8.5% 7.2% 6.4% 6.1% 5.4% 4.9% 4.9% Total Group Powdered and PetCare Nutrition and Prepared dishes Milk products Confectionery Water Liquid Beverages Health Science & cooking aids and Ice cream 29 February 22, 2024 Nestlé full-year res
Slide 30: Underlying trading operating profit margin by category
Underlying trading operating profit margin by category In % of sales 24.5% 20.7% 20.7% 17.3% 18.5% 18.3% 16.8% 10.6% Change in bps +20 -150 +20 -60 +200 +180 Flat +280 vs FY-2022 Total Group* Powdered and PetCare Nutrition and Prepared dishes Milk products Confectionery Water Liquid Beverages Health
Slide 31: Gross margin recovery and increased marketing investment
Gross margin recovery and increased marketing investment 17.X% 17.2% 17.4% 17.1% +60 bps -80 bps +70 bps -30 bps 17.3% 17.1% Margin +20 bps on a reported basis and +40 bps in constant currency Underlying Gross Distribution Advertising & Administration, Underlying TOP margin margin* Marketing R&D, Ot
Slide 32: Progress on gross margin restoration
Progress on gross margin restoration Gross margin = (Sales - Cost of good sold) / Sales 46.1% 46.0% 45.6% 44.5% H1-22 H2-22 H1-23 H2-23 32 February 22, 2024 Nestlé full-year results 2023
Slide 33: Investing behind our brands to drive growth
Investing behind our brands to drive growth Advertising and marketing expenses as % of sales 8.2% 7.1% 7.1% 6.6% H1-22 H2-22 H1-23 H2-23 33 February 22, 2024 Nestlé full-year results 2023
Slide 34: Increase in underlying EPS driven by operating performance
Increase in underlying EPS driven by operating performance +1.2% -1.3% CHF 5.20 +8.5% -8.3% CHF CHF 4.80 4.80 Evolution in constant currency +8.4% Evolution on a reported basis +0.1% UEPS Operating Net finance Share UEPS FX UEPS FY-2022 performance costs, tax and buyback FY-2023 impact FY-2023 other
Slide 35: Free cash flow above CHF 10 billion
Free cash flow above CHF 10 billion In CHF billion -0.8 +0.4 10.4 +4.3 -0.1 6.6 Free cash flow Adjusted Working CAPEX Others Free cash flow FY-2022 EBITDA capital and expenditure FY-2023 on intangible assets 35 February 22, 2024 Nestlé full-year results 2023
Slide 36: Free cash flow returning to historical levels, on track for 2025 target
Free cash flow returning to historical levels, on track for 2025 target Cash flow as % sales Cash generated 20.1% 20.0% 19.5% 19.4% 19.3% from operations 12.9% 12.1% 2025 target 11.2% 10.0% 12% Free cash flow 7.0% Impacted by decision to temporarily increase inventories and high capex level 300.0% 4
Slide 37: Inventory levels normalizing
Inventory levels normalizing Total inventories as % of sales 16.5% Increase reflected conscious decision to 13.6% mitigate potential impact of energy crisis in Europe 12.8% 10.3% Dec.31 H2-19 Jun.30 H1-20 Dec.31 H2-20 Jun.30 H1-21 Dec.31 H2-21 Jun.30 H1-22 Dec.31 H2-22 Jun.30 H1-23 Dec.31 H2-23 2019
Slide 38: Return on invested capital
Return on invested capital After goodwill and intangible assets 14.7% 13.9% 12.3% 12.2% 12.2% 12.1% 9.1% 2017* 2018 2019 2020 2021 2022 2023 * Restated to reflect implementation of IFRS 15 and IFRS 16 in 2017. 38 February 22, 2024 Nestlé full-year results 2023
Slide 39: Stable net debt
Stable net debt In CHF billion CHF 12.8 bn returned to shareholders +0.6 -1.7 +7.8 -10.4 +5.1 48.2 49.6 Net debt increased by CHF 1.4 bn Net debt Share Dividends M&A* Others Free cash Net debt Jan 1, 2023 buyback flow Dec 31, 2023 Net debt / Net debt / Adjusted EBITDA: 2.45x Adjusted EBITDA: 2.54x *
Slide 40: Full-year results 2023 Q&A
Full-year results 2023 Q&A 40 February 22, 2024 Nestlé full-year results 2023
Slide 41: Thank you!
Thank you! 41 February 22, 2024 Nestlé full-year results 2023
Slide 42: FY-2023 Operating segments – quarterly summary
FY-2023 Operating segments – quarterly summary Q4-2023 sales Sales RIG Pricing OG (CHF m) % % % Zone North America 6 968 1.2 4.4 5.6 Zone Europe 4 954 -2.8 9.0 6.2 Zone AOA 4 296 1.4 6.1 7.5 Zone Latin America 3 057 2.7 4.5 7.2 Zone Greater China 1 413 3.1 -0.6 2.5 Nestlé Health Science 1 648 -6.7 5
Slide 43: FY-2023 Operating segments – topline summary
FY-2023 Operating segments – topline summary FY-2023 sales Reported Sales RIG Pricing OG Net M&A F/X sales growth (CHF m) % % % % % % Zone North America 25 995 -0.3 7.6 7.3 -1.7 -6.8 -1.3 Zone Europe 19 098 -2.4 10.6 8.2 -3.4 -4.9 -0.2 Zone AOA 17 519 0.3 8.0 8.3 -0.1 -13.5 -5.2 Zone Latin America 1
Slide 44: FY-2023 Products – topline summary
FY-2023 Products – topline summary FY-2023 sales Sales RIG Pricing OG (CHF m) % % % Powdered and liquid beverages 24 786 0.0 6.4 6.4 Water 3 320 -5.1 10.0 4.9 Milk products and Ice cream 10 981 -1.6 7.7 6.1 Nutrition and Health Science 15 278 -1.6 7.0 5.4 Prepared dishes and cooking aids 11 666 -2.5
Slide 45: FY-2023 historical eight quarters
FY-2023 historical eight quarters Period RIG% Pricing % OG % Q1-2022 2.4 5.2 7.6 Q2-2022 0.9 7.7 8.7 Q3-2022 -0.2 9.5 9.3 Q4-2022 -2.6 10.1 7.5 Q1-2023 -0.5 9.8 9.3 Q2-2023 -1.1 9.1 8.0 Q3-2023 -0.3 6.3 6.0 Q4-2023 0.4 5.2 5.7 45 February 22, 2024 Nestlé full-year results 2023
Slide 46: FY-2023 Operating segments – revenue and results
FY-2023 Operating segments – revenue and results In CHF m Of which Underlying Net other impairment Trading Trading trading of property, Of which Depreciation Operating Operating income/ plant and restructuring and Sales Profit Profit (expense) equipment costs amortization Zone North America 25 995 5
Slide 47: FY-2023 Products – revenue and results
FY-2023 Products – revenue and results In CHF m Of which Underlying Net other impairment Trading Trading trading of property, Of which Operating Operating income/ plant and restructuring Sales Profit Profit (expense) equipment costs Powdered and Liquid Beverages 24 786 5 130 4 945 (185) (70) (104) W
Slide 48: FY-2023 EPS reconciliation (1 of 2)
FY-2023 EPS reconciliation (1 of 2) From net profit to underlying net profit In CHF m FY-2022 FY-2023 Net Profit 9 270 11 209 Restructuring costs 273 723 Impairments of property, plant & equipment, goodwill and int. assets 2 726 647 Net result on disposal of businesses 79 221 Other adjustment in Net
Slide 49: FY-2023 EPS reconciliation (2 of 2)
FY-2023 EPS reconciliation (2 of 2) From underlying trading operating profit In CHF m to underlying net profit FY-2022 FY-2023 Underlying trading operating profit 16 103 16 053 Net financial income / (expense) (1 040) (1 360) Adjusted taxes (3 148) (3 113) Adjusted income from associates and joint v
Slide 50: Net profit impacted by exceptional items
Net profit impacted by exceptional items % of sales 2023 vs 2022 Underlying trading operating profit 17.3% +20 bps Restructuring -50 bps Impairment of assets +160 bps Onerous contracts, litigations and other operating income / expenses +30 bps Trading operating profit 15.6% +160 bps Impairment of Go
Slide 51: FY-2023 Currency overview
FY-2023 Currency overview Weighted average rate FY-2022 FY-2023 Variation in % US Dollar 1 USD 0.956 0.898 -6.1% Euro 1 EUR 1.004 0.971 -3.3% Chinese Yuan Renminbi 100 CNY 14.148 12.689 -10.3% Brazilian Real 100 BRL 18.555 17.989 -3.1% Philippine Peso 100 PHP 1.752 1.614 -7.9% UK Pound Sterling 1 GB
Slide 52: Abbreviations
Abbreviations • OG Organic growth • RIG Real internal growth • AOA Zone Asia, Oceania, and Africa • LATAM Zone Latin America • GC Zone Greater China • EPS Earnings per share • COGS Cost of goods sold • FCF Free cash flow • TOP Trading operating profit • UTOP Underlying trading operating profit • Adj