Slide 1: Full-year results 2018 Investor Call
Full-year results 2018 Investor Call 1 | February 14, 2019 | Nestlé full-year results 2018
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 2018 – Mark Schneider, CEO
Full-year results 2018 Mark Schneider, CEO 3 | February 14, 2019 | Nestlé full-year results 2018
Slide 4: Key messages
Key messages • Continued progress with our accelerated value creation model • Solid organic growth of 3.0% led by stronger momentum in the U.S. and China, as well as in infant nutrition • Underlying trading operating profit margin expansion of 50 bps supported by operational efficiencies, structural
Slide 5: Strong 2018 financial results
Strong 2018 financial results Organic Underlying Underlying EPS Free cash flow Return on growth trading operating (% annual increase in (CHF bn) invested capital constant currency) profit margin 17.0% +13.9% 16.5% 12.1% 10.8 3.0% 9.4 9.1% 2.4% +4.7% 2.4% 2017 2018 2017 2018 2017 2018 2017 2018 2017
Slide 6: Delivering on our commitments
Delivering on our commitments Sharpen our • Focus on core food & beverage and nutritional health products strategic focus • Further portfolio evolution towards attractive high-growth categories Increase organic • Organic growth of 3.0%, with industry-leading RIG and improving pricing growth • Improv
Slide 7: Clear path to achieving mid-single digit growth by 2020
Clear path to achieving mid-single digit growth by 2020 2018 Growth examples 2018-2019 • Nespresso Vertuo system: > 60% Acquisitions • Petcare in emerging 2018-2019 • Starbucks license markets: double-digit Mid-single • Nestlé Skin Health • Atrium Innovations • Infant nutrition organic digit Disposa
Slide 8: Fixing base business
Fixing base business Expansion of organic range Organic growth • Significant progress made in past two years 2017 2018 • Developed convincing Visual transformation with new growth strategies campaign “Anything for Baby” • Regained competitive cost structure 2016 • Exploring strategic options 8 | Feb
Slide 9: Developing our portfolio
Developing our portfolio Sold Under Acquired or invested Main criteria for divestiture strategic review Main criteria for acquisitions • Non-core to business • Fit with strategy and culture • Limited ability to win • Sound financial model; disciplined and thorough financial valuation Starbucks – Con
Slide 10: Exploring strategic options for Herta charcuterie
Exploring strategic options for Herta charcuterie (cold cuts and meat-based products) Charcuterie business under review • Sales: ~CHF 680 m in 2018 • Markets: France, Germany, Belgium, Luxemburg, UK, Ireland • More than 2’100 employees and 3 factories Focus on high-growth plant-based offerings • Gar
Slide 11: Supporting growth through innovation
Supporting growth through innovation NAN HMO Nespresso Vertuo System Coffee-mate natural bliss (Human Milk Oligosaccharides) Reached ~ CHF 600 m of sales Reached ~ CHF 400 m of sales Reached ~ CHF 150 m of sales across 40 markets in the with growth of > 60% in 2018 with growth > 30% in 2018 driven f
Slide 12: 2019 guidance
2019 guidance • Continued improvement in organic sales growth and underlying trading operating margin towards our 2020 target • Restructuring costs expected at around CHF 700 m • Increase in underlying earnings per share in constant currency and capital efficiency 12 | February 14, 2019 | Nestlé ful
Slide 13: Business as a force for good
Business as a force for good Living our purpose and values – 2019 priorities Contribute to Lead the way towards Foster diversity and healthier lives a waste-free future inclusion at Nestlé 13 | February 14, 2019 | Nestlé full-year results 2018
Slide 14: Full-year results 2018 – François-Xavier Roger, CFO
Full-year results 2018 François-Xavier Roger, CFO 14 | February 14, 2019 | Nestlé full-year results 2018
Slide 15: Full-year sales growth
Full-year sales growth OG +3.0% +0.7% -1.6% +0.5% +2.5% 89.6 91.4 Reported sales growth +2.1% -30 FY 2017 sales RIG Pricing Net M&A Foreign FY 2018 sales CHF bn exchange CHF bn 15 | February 14, 2019 | Nestlé full-year results 2018
Slide 16: Improved RIG in the Americas
Improved RIG in the Americas AMS EMENA AOA Sales 41.0 bn 26.9 bn 23.5 bn (in CHF) RIG 1.9% 2.2% 3.7% Pricing 0.9% -0.1% 0.7% OG 2.8% 2.1% 4.4% Each geography includes zones, Nestlé Waters, Nespresso, Nestlé Health Science and Nestlé Skin Health 16 | February 14, 2019 | Nestlé full-year results 2018
Slide 17: Strong RIG in developed and emerging markets
Strong RIG in developed and emerging markets Developed Emerging Sales (in CHF) 53.0 bn 38.4 bn % of group sales 58% 42% RIG 1.7% 3.4% Pricing -0.1% 1.5% OG 1.6% 4.9% 17 | February 14, 2019 | Nestlé full-year results 2018
Slide 18: Zone AMS
Zone AMS Sales CHF 31.0 bn Organic growth 2.0% Real internal growth 1.3% Underlying TOP margin 21.1% vs LY +50 bps • North America returned to positive growth in 2018, with strong momentum in Q4 • Brazil returned to positive growth in H2 • Category highlights were Purina petcare, Nescafé, Nestlé Pro
Slide 19: Zone EMENA
Zone EMENA Sales CHF 18.9 bn Organic growth 1.9% Real internal growth 2.6% Underlying TOP margin 19.0% vs LY +80 bps • Reached solid OG with resilient RIG • Premium products grew strongly at ~10%, led by Purina Petcare and infant nutrition • Western Europe saw slightly negative growth with other geo
Slide 20: Zone AOA
Zone AOA Sales CHF 21.3 bn Organic growth 4.3% Real internal growth 3.6% Underlying TOP margin 22.8% vs LY +60 bps • Delivered consistent mid single-digit organic growth, positive in all geographies and categories • China’s growth improved, supported by innovations and e-commerce • Key growth driver
Slide 21: Nestlé Waters
Nestlé Waters Sales CHF 7.9 bn Organic growth 2.1% Real internal growth -0.6% Underlying TOP margin 11.0% vs LY -200 bps • Growth in North America was supported by increased pricing and innovations • Europe saw good growth in H2, especially the UK and France • International premium brands S.Pellegri
Slide 22: Other Businesses
Other Businesses Sales CHF 12.3 bn Organic growth 5.7% Real internal growth 5.4% Underlying TOP margin 16.5% vs LY +60 bps • Nespresso sustained mid single-digit OG, with strong momentum in North America and emerging markets • Nestlé Health Science posted mid single-digit OG, supported by new produc
Slide 23: Strong portfolio with broad-based organic growth
Strong portfolio with broad-based organic growth 4.6% 4.5% 3.3% 3.0% 2.7% 2.3% 1.8% 1.2% Total group Powdered and Nutrition and Milk products PetCare Prepared dishes Confectionery Water Liquid Beverages Health Science and Ice cream and cooking aids 23 | February 14, 2019 | Nestlé full-year results 2
Slide 24: Most product categories increasing underlying trading operating profit margin
Most product categories increasing underlying trading operating profit margin 22.7% 21.6% 20.6% 19.1% In % 18.0% 17.3% of sales 17.0% 10.5% Change in bps +50 +70 +50 +40 +10 +30 +150 -270 vs 2017 Total Group* Powdered and Nutrition and Milk products PetCare Prepared dishes Confectionery Water Liquid
Slide 25: Gross margin improvement helped by pricing, operational savings and mix
Gross margin improvement helped by pricing, operational savings and mix Gross margin = (Sales - Cost of good sold) / Sales 50.6% 50.0% 49.6% 49.6% 49.1%* 48.1% 47.8% 47.1% 2012 2013 2014 2015 2016 2017 2018 * 2017 restated to reflect implementation of IFRS 15, IFRS 16 and reclassification of certain
Slide 26: Underlying TOP +50 bps mainly driven by cost reductions
Underlying TOP +50 bps mainly driven by cost reductions -30 bps +30 bps +50 bps • Freight costs • Structural cost reduction in G&A • Marketing • Pricing efficiencies • Structural cost reduction in 16.5% manufacturing 17.0% • Operational efficiencies • Product mix -30 Underlying TOP Gross Distributio
Slide 27: Underlying EPS +13.9%
Underlying EPS +13.9%* % of sales 2018 vs 2017 Underlying TOP 17.0% +50 bps Net other trading income / (expenses) - 1.9% - 20 bps TOP 15.1% +30 bps Impairment of goodwill and non-commercialized intangible assets: - 0.7% +270 bps Gain / loss on disposals: + 0.8% + 90 bps Taxes: - 3.8% - 70 bps Other
Slide 28: Further progress on working capital
Further progress on working capital Working capital as a % of sales, calculated on a 5-quarter average 8.5% 6.5% 5.3% 4.7% 2.8% 2.2% 1.6%* 1.4% 2012 2013 2014 2015 2016 2017 2018 *2017 restated, reflecting implementation of IFRS 15 and IFRS 16 28 | February 14, 2019 | Nestlé full-year results 2018
Slide 29: Strong free cash flow: CHF 10.8 bn
Strong free cash flow: CHF 10.8 bn Free cash flow in % of sales 13.5% 13.0% 12.5% 11.8% 12.0% 11.4% 11.3% 11.2% 11.5% 11.0% 10.9%* 11.0% 10.5% 10.4% 10.0% 9.5% 9.5%** 9.0% 2012 2013 2014 2015 2016 2017 2018 8.5% * 2014 adjusted for exceptional income due to L’Oréal transaction (CHF 4.1 bn impact on
Slide 30: Free cash flow increase coming from improved EBITDA and working capital
Free cash flow increase coming from improved EBITDA* and working capital In CHF bn +0.7 Flat Flat +0.7 9.4 10.8 Free cash flow Adjusted EBITDA* Working CAPEX Tax Free cash flow FY 2017 improvement capital FY 2018 * Adjusted EDITDA, as defined in our Alternative Performance Measures 30 | February 14,
Slide 31: Net debt increased following share buyback and M&A
Net debt increased following share buyback and M&A CHF 13.9 bn returned In CHF bn to shareholders +0.6 +5.2 +7.1 -10.8 +6.8 21.4 30.3 Net debt increased by CHF 8.9 bn -30 Net Debt Share Dividends M&A FX Free cash Net Debt Jan 1, 2018 buyback (net) & Other flow Dec 31, 2018 Net debt/ Net debt/ EBITDA
Slide 32: Closing remarks
UX Ne: tle Good Food, Good Life eS a Closing remarks P< . © ee
Slide 33: Full-year results 2018 Discussion
Full-year results 2018 Discussion
Slide 34: Supporting slides
Full-year results 2018 Supporting slides 34 | February 14, 2019 | Nestlé full-year results 2018
Slide 35: FY-2018 Operating segments – quarterly summary
FY-2018 Operating segments – quarterly summary Q4-2018 sales Sales RIG Pricing OG (CHF m) % % % Zone AMS 9’057 2.5 1.1 3.6 Zone EMENA 5’201 3.4 -0.5 2.9 Zone AOA 5’532 3.0 1.4 4.4 Nestlé Waters 1’751 -2.1 4.1 2.0 Other Businesses 3’474 4.7 0.4 5.1 Total Group 25’015 2.8 0.9 3.7 35 | February 14, 201
Slide 36: FY-2018 Operating segments – topline summary
FY-2018 Operating segments – topline summary FY-2018 sales Reported Sales RIG Pricing OG Net M&A F/X sales growth (CHF m) % % % % % % Zone AMS 30’975 1.3 0.7 2.0 0.3 -3.2 -0.9 Zone EMENA 18’932 2.6 -0.7 1.9 0.1 0.5 2.5 Zone AOA 21’331 3.6 0.7 4.3 0.0 -2.1 2.2 Nestlé Waters 7’878 -0.6 2.7 2.1 -1.0 -1
Slide 37: FY-2018 Products – topline summary
FY-2018 Products – topline summary FY-2018 sales Sales RIG Pricing OG (CHF m) % % % Powdered and liquid beverages 21’620 2.5 0.8 3.3 Water 7’409 -0.6 2.9 2.3 Milk products and ice cream 13’217 1.3 0.5 1.8 Nutrition and Health Science 16’188 4.5 0.1 4.6 Prepared dishes and cooking aids 12’065 1.2 0.0
Slide 38: FY-2018 historical eight quarters
FY-2018 historical eight quarters Period RIG Pricing OG % % % 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 Q1-2018 2.6 0.2 2.8 Q2-2018 2.4 0.2 2.6 Q3-2018 2.0 0.9 2.9 Q4-2018 2.8 0.9 3.7 38 | February 14, 2019 | Nestlé full-year results 2018
Slide 39: FY-2018 Operating segments – revenue and results
FY-2018 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 (expenses) equipment costs amortisation Zone AMS 30’975 6’521 6’07
Slide 40: FY-2018 Products – revenue and results
FY-2018 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 (expenses) equipment costs Powdered and Liquid Beverages 21’620 4'898 4'572 (326) (108) (100)
Slide 41: FY-2018 currency overview
FY-2018 currency overview Weighted average rate FY-2017 FY-2018 Variation in % US Dollar 1 USD 0.984 0.979 -0.5% Euro 1 EUR 1.113 1.154 +3.7% Chinese Yuan Renminbi 100 CNY 14.593 14.776 +1.3% Brazilian Reias 100 BRL 30.796 26.663 -13.4% Philippine Peso 100 PHP 1.953 1.856 -5.0% UK Pound Sterling 1 G
Slide 42: FY-2018 EPS reconciliation (1 of 2)
FY-2018 EPS reconciliation (1 of 2) From net profit to underlying profit In CHF m FY-2017 FY-2018 Net Profit 7’156 10’135 Restructuring costs 673 651 Impairments of property, plant & equipment, goodwill and int. assets 3’582 1’248 Net result on disposal of businesses 132 (686) Other adjustment in Ne
Slide 43: FY-2018 EPS reconciliation (2 of 2)
FY-2018 EPS reconciliation (2 of 2) From operating profit to underlying net profit In CHF m FY-2017 FY-2018 Operating profit adjusted 14’771 15’521 Net financial income / (expense) (696) (761) Adjusted taxes (3’807) (3’515) Adjusted income from associates and joint ventures 1’089 1’217 Adjusted non-
Slide 44: 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 UTOP Underlying trading operating