Nestle India Ltd. · NSE:NESTLEIND
Nestle India — Investor Presentation (November 2007)
44 slides from Nestle India's investor presentation, Nov 16, 2007
Slide 1: Nestlé India Limited Financial Analysts' Meet
Nestlé India Limited Financial Analysts’ Meet Nov 16, 2007
Slide 2: Agenda
Agenda Opening Remarks Martial Rolland Key Financials Shobinder Duggal Questions & Answers All
Slide 3: Disclaimer
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 expre
Slide 4: Opening Remarks
Opening Remarks
Slide 5: Over to SHD
Over to SHD
Slide 6: Snap shot
Snap shot 24.0% INR 4.8 Bio INR 27.1 Bio 20.1% 17.7% INR 2.8 Bio Jan-Sep 07 Volumes + 24.7% & Prices + 32.7% + 30.7% +110bp INR 3.6 Bio INR 21.7 Bio 11.7% INR 2.1 Bio 16.6% 9.5% Jan-Sep 06 Gross Sales RIG OG EBIT Economic Profit Includes Figures from Nestle Internal Reporting Standards All calculati
Slide 7: What is delivering the results?
What is delivering the results? Innovation & Organization Renovation Structure Indian Consumer Operational Economy Insight Efficiency GLOBe Nutrition, Health & Wellness People Engagement
Slide 8: Sales Growth (Value Driver 1)
SALES GROWTH (Value Driver -1)
Slide 9: Sales Evolution
Sales Evolution Gross Sales INR Bio Real Internal Growth (%) Organic Growth (%) 28 34.0 24.0 Gross Sales in INR Bio 30.0 20.1 21 (%) RIG & OG 26.0 12.1 11.7 14 22.0 11.5 12.1 11.4 9.7 11.3 9.5 7.9 18.0 10.4 6.3 7 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
Slide 10: Growth over the quarters
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-
Slide 11: Channel-wise Sales
Channel-wise Sales Volume (000’ Tons) Value@ (INR Bio) 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
Slide 12: Export sales Jan-Sep 2007 % Contribution
Export sales Jan-Sep 2007 % Contribution Russia Total Export sales 2,368 Mio South Asia 8.2 5.6 9.4 33.3 Europe Asia-Others 12.2 31.3 Africa America Beverages 6.7 2.3 Milk Products & 26.5 Nutrition 64.5 Prepared Dishes & Cooking Aids Choc & Conf.
Slide 13: Product Portfolio
Product Portfolio U% 27.1 INR Bio. 21.8 Contribution % Contribution % 27.4 4.3 15.8 3.4 15.5 33.2 5.8 21.4 4.4 20.0 22.3 19.3 4.3 19.7 5.2 21.1 11.8 43.5 9.7 44.8 Jan-Sep 07 Jan-Sep 06 Milk Products and Nutrition Beverages Prepared Dishes and Cooking Aids Chocolate and Confectionery Gross Sales incl
Slide 14: Product Categories: Jan-Sep 2007
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 (%)
Slide 15: Milk Products & Nutrition
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 Sales Volume (000’ tons) Sales (INR Bio) % Contribution to Total Sales 83 12 81 U 4
Slide 16: Beverages
Beverages Innovation & Renovation • Market Leader in Instant Coffee Sales Volume (000’ tons) Sales (INR Bio) % Contribution to Total Sales 18 5.5 15.8 U 22.3% 5.0 U 8.9% 43.5 17 17.9 5.2 21.4 4.5 16.5 4.3 19.3 16 4.0 Jan-Sep 06 Jan-Sep 07 Jan-Sep 06 Jan-Sep 07 Jan-Sep 07
Slide 17: Prepared Dishes & Cooking Aids
Prepared Dishes & Cooking Aids Innovation & Renovation • Market Leader in instant Noodles and Ketchups • No. 2 in Healthy Soups Sales Volume (000’ tons) Sales (INR Bio) % Contribution to Total Sales 74.0 6.0 5.5 15.8 66.0 U 27.8% U 33.2% 72.9 5.0 5.8 43.5 58.0 21.4 4.5 57.0 19.3 4.4 50.0 4.0 Jan-Sep
Slide 18: Chocolate & Confectionery
Chocolate & Confectionery Innovation & Renovation • Market Leader in Wafers and white chocolates • No. 2 in Chocolates • Market Leader in Eclairs volumes with 32.4% share. Sales Volumes (000’ tons) Sales (INR Bio) % Contribution to Total Sales 5.0 29 4.6 15.8 26 U 18.6% U 27.4% 4.2 3.8 43.5 27.2 21.
Slide 19: Profit Margins (Value Driver 2)
PROFIT MARGINS (Value Driver -2)
Slide 20: Evolution of Operating Margins
Evolution of Operating Margins INR Bio. 6.0 24 19.7 19.7 19.5 19.5 19.0 18.9 18.3 17.5 17.6 17.7 5.0 17.1 16.9 18 16.6 16.0 4.0 12 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 3.0 6 2002 2003 2004 2005 2006 Jan-Sep 06 Jan-Sep 07 EBITD-INR.Bio EBIT-INR.Bio EBITD % of Gross Sales EBIT % of
Slide 21: Total Expenditure
Total Expenditure INR Mio. Description Jan-Sep % Net Jan-Sep % Net Var. 07 Sales 06 Sales % Total Expenditure - of which 21,291 81.6 17,183 82.6 23.9 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.
Slide 22: Evolution of Net Profit Margins
Evolution of Net Profit Margins INR Bio. Amount % of Gross Sales 3.5 18 16 3 14 11.5 11.7 11.6 11.8 10.6 10.7 12 2.5 9.8 10 8 2 6 2.0 2.6 2.5 3.1 3.2 2.5 3.2 1.5 4 2002 2003 2004 2005 2006 Jan-Sep 06 Jan-Sep 07
Slide 23: Working Capital Intensity (Value Driver 3)
WORKING CAPITAL INTENSITY ( Value Driver -3)
Slide 24: Trade Net Working Capital (TNWC)
Trade Net Working Capital (TNWC) INR Mio 30th Sep 30th 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 conti
Slide 25: Operating Cash Flows
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
Slide 26: Rotation of Average TNWC
Rotation of Average TNWC Times 40 36.2 34.8 32.7 30 25.4 29.5 25.5 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
Slide 27: Fixed Capital Intensity (Value Driver 4)
FIXED CAPITAL INTENSITY ( Value Driver -4)
Slide 28: Investment in Fixed Assets
Investment in Fixed Assets INR mio. % of Gross sales Amount % of Gross sales 1600 7.0 1400 1200 5.2 4.8 5.0 1000 800 3.0 3.1 3.0 3.1 600 2.9 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
Slide 29: Rotation of Average Tangible Fixed Assets
Rotation of Average Tangible Fixed Assets Times 7.2 7.0 6.8 6.6 6.6 6.5 6.3 6.4 6.2 6.0 5.6 5.4 5.2 4.8 4.4 2002 2003 2004 2005 2006 Jan-Sep 06 Jan-Sep 07 Basis Nestle Internal Reporting Standards
Slide 30: Income Tax Rate (Value Driver 5)
INCOME TAX RATE ( Value Driver -5)
Slide 31: Evolution of Tax Rate
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)
Slide 32: Cost of Capital (Value Driver 6)
COST OF CAPITAL ( Value Driver -6)
Slide 33: Evolution – Cost of Capital
Evolution – Cost of Capital WACC Risk Free Rate 15.0 14.2 11.3 12.0 10.5 10.8 10.8 9.4 9.7 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
Slide 34: Value Growth Duration (Value Driver 7)
VALUE GROWTH DURATION (Value Driver 7)
Slide 35: Creating Shareholder Wealth
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 2.0 78.5 80 71.6 60.0 61.1 67.0 69.7 59.4 1.5 62.3 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-
Slide 36: Returning cash to Shareholders
Returning cash to Shareholders Dividend (INR Bio) 1.7 1.9 1.9 2.4 2.5 35 300 255 Dividend as a % of Share Capital 30 250 25 200 200 25.0 25.5 INR / Share 200 180 20 20.0 20.0 18.0 15 20.9 27.3 26.1 32.1 32.7 26.2 33.2 10 100 2002 2003 2004 2005 2006 Jan-Sep 06 Jan-Sep 07 DPS EPS % 2006 1st interim 6
Slide 37: Questions Thank You
QUESTIONS Thank You
Slide 38: Commodity Prices - Ongoing Challenge
Commodity Prices - Ongoing Challenge 40 35.9 Green Coffee 30 25.4 Milk Solids Indexed price increase % 20 15.6 Wheat Flour 10 11.7 Fats 0 Reference point - Jan-Sep 2006 prices -10 -20 -23.4 Sugar -30 -40 Jan-Sep 06 Jan-Sep 07
Slide 39: Evolution - Milk Fat Prices
Evolution - Milk Fat Prices Indexed Price per kg 128 130 122 120 116 109 110 106 103 100 97 97 97 100 95 95 94 91 88 90 80 2004 2005 2006 2007 Q1 Q2 Q3 Q4 Indexed with base Q1-04
Slide 40: Coffee - Robusta [LIFFE]
COFFEE - ROBUSTA [LIFFE] Reuters 3000 Xtra - [nestle.kof (*)] {0 File Edit View Insert Format Tools Object Favorites Window Help ContactUs [Bz | FT > akoe2 ~2\Aoy |S ORM RMS |é & ii fy BA 2 ||) nestie | B Set SM Th ee SE ae ee ee oe Paimoil | Sugar | Cocoa | Robusta | Plantation | Wheat | Dils | Com
Slide 41: Coffee - Plantation [LIFFE]
COFFEE - PLANTATION [LIFFE] Peers 3000 xtra - [nestle.kof (*)] Ls] File Edit Yiew Insert Format Tools Object Favorites Window Help ContactUs | >|) FE xKco2 ~2|/Aoy -~|\cS 7 BERR RAO ES Js ee A NB omer | bs a e- B F w aae 62 [lm jnestie | Palm oil | Sugar | Cocoa | Robusta | Plantation | Wheat | Gils
Slide 42: Palm Oil - KLE
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Slide 43: Wheat - CBOT
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Slide 44: Sugar - LIFFE
SUGAR - LIFFE Reuters 3000 Xtra - [nestle.kof (*)] {i File Edit View Insert Format Tools Object Favorites Window Help ContactUs |S?\| + /SBc3 ,2|Aov -~|SORE RAB ASCHA ER OBaT ST w |S ts OO - B S wa 62 [WR jnestle | Palm oil | Sugar | Cocoa | Robusta | Plantation | Wheat | Oils | Com&Soy | Spices MCX