Nestle S.a. · SIX:NESN
Nestle — H1 2018 Earnings Presentation
33 slides from Nestle's earnings presentation, Jul 26, 2018
Slide 1: Half-year results 2018
Half-year results 2018 July 26, 2018 | Nestlé half-year results 2018 | 1
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: Half-year results 2018 – Mark Schneider, CEO
Half-year results 2018 Mark Schneider, CEO July 26, 2018 | Nestlé half-year results 2018 | 3
Slide 4: Key messages
Key messages • Good progress with the Nestlé value creation model • Solid organic growth of 2.8%, with increased momentum in U.S. and China, as well an in infant nutrition • UTOP margin increased by 20 bps with a further acceleration expected in the second half • Significant Underlying EPS growth at
Slide 5: Half-year results 2018 – François-Xavier Roger, CFO
Half-year results 2018 François-Xavier Roger, CFO July 26, 2018 | Nestlé half-year results 2018 | 5
Slide 6: Half-year performance highlights
Half-year performance highlights Sales (in CHF) Organic growth Real internal Underlying TOP growth margin 43.9 bn +2.8% +2.5% +20 bps* +2.3% on a reported basis +0.3% pricing 16.1% of sales * In constant currency July 26, 2018 | Nestlé half-year results 2018 | 6
Slide 7: Broad-based OG and RIG across geographies
Broad-based OG and RIG across geographies AMS EMENA AOA Sales 19.0 bn 13.2 bn 11.7 bn (in CHF) RIG 1.8% 2.4% 3.8% OG 2.0% 2.3% 4.4% Each geography includes zones, Nestlé Waters, Nespresso, Nestlé Health Science and Nestlé Skin Health July 26, 2018 | Nestlé half-year results 2018 | 7
Slide 8: Strong RIG in developed and emerging markets
Strong RIG in developed and emerging markets Developed Emerging Sales (in CHF) 24.9 bn 19.0 bn % of group sales 57% 43% RIG 1.6% 3.6% OG 1.5% 4.3% July 26, 2018 | Nestlé half-year results 2018 | 8
Slide 9: Zone AMS
Zone AMS Sales CHF 14.2 bn Organic growth 1.0% Real internal growth 1.0% Underlying TOP margin 18.9% (vs LY) (+30 bps) • North America saw positive OG, with increased momentum in the U.S. • Latin America had positive RIG and OG • Brazil impacted by nationwide truckers’ strike • Margin supported by o
Slide 10: Zone EMENA
Zone EMENA Sales CHF 9.3 bn Organic growth 2.5% Real internal growth 3.1% Underlying TOP margin 18.9% (vs LY) (+70 bps) • Western Europe returned to positive OG • Both Central and Eastern Europe, and Middle East and North Africa had mid single-digit OG • Category highlights were petcare, coffee and
Slide 11: Zone AOA
Zone AOA Sales CHF 10.6 bn Organic growth 4.4% Real internal growth 3.7% Underlying TOP margin 22.9% (vs LY) (-20 bps) • China, South-East Asia and South Asia saw mid single- digit OG • Sub-Saharan Africa had high single-digit OG • Japan and Oceania were flat with positive RIG and negative pricing •
Slide 12: Nestlé Waters
Nestlé Waters Sales CHF 4.0 bn Organic growth 1.0% Real internal growth -0.7% Underlying TOP margin 10.0% (vs LY) (-270 bps) • North America saw positive growth, driven by the launch of the sparkling range • Europe was slightly negative, reflecting difficult comparables • Emerging markets were flat
Slide 13: Other Businesses
Other Businesses Sales CHF 5.9 bn Organic growth 5.7% Real internal growth 5.4% Underlying TOP margin 16.4% (vs LY) (+160 bps) • Nespresso sustained mid single-digit OG, with strong momentum in North America and Asia • Nestlé Health Science had mid single-digit OG, driven by RIG • Nestlé Skin Health
Slide 14: Growth by products
Growth by products 4.1% 3.8% 3.4% Organic growth 2.8% 2.8% 1.5% 1.3% 1.0% Pricing RIG Total group Powdered and Water Milk products Nutrition and Prepared dishes Confectionery Petcare liquid beverages and ice cream Health Science and cooking aids (3.5% OG excluding divested U.S. business) July 26, 20
Slide 15: Underlying TOP by products
Underlying TOP by products 23.3% 21.0% 20.3% In % of sales 17.7% 17.4% 16.1% 12.4% 9.4% Reported bps +20 +30 -360 -40 +50 +60 +190 +20 evolution Total Group* Powdered and Water Milk products Nutrition and Prepared dishes Confectionery Petcare Liquid Beverages and Ice cream Health Science and cooking
Slide 16: Gross margin
Gross margin Gross margin = (Sales - Cost of good sold) / Sales 50.8% 50.2% 49.5% 49.4%* 49.3% 48.1% 47.9% HY 2013 HY 2014 HY 2015 HY 2016 HY 2017 HY 2018 * Figure for 2017 restated July 26, 2018 | Nestlé half-year results 2018 | 16
Slide 17: Underlying TOP +20 bps
Underlying TOP +20 bps -10 bps +60 bps • Commodity costs -30 bps • Structural cost reduction • Structural cost • Freight costs reduction 15.9% • Marketing 16.1% efficiencies -30 Underlying TOP COGS Distribution Administration, Underlying TOP HY 2017 Marketing, HY 2018 R&D July 26, 2018 | Nestlé half
Slide 18: Underlying EPS +9.2%
Underlying EPS +9.2%* HY 2018 vs HY 2017 Underlying TOP 16.1% +20 bps Restructuring: -30 bps Impairment of assets (excluding goodwill): -30 bps Other items: -10 bps TOP 14.6% -50 bps Net gains of disposal of businesses: +310 bps Taxes: -50 bps Other: -20 bps Net Profit 13.3% +190 bps Basic EPS (CHF)
Slide 19: Continued focus on working capital
Continued focus on working capital Working capital as a % of sales, calculated on a 5-quarter average 6.3% 5.8% 4.3% 3.0% 2.5%* 2.2% HY 2014 HY 2015 HY 2016 HY 2017 HY 2018 * Figure for 2017 restated July 26, 2018 | Nestlé half-year results 2018 | 19
Slide 20: Free cash flow
Free cash flow In CHF billion 2.9 +0.1 +0.1 +0.2 1.9 +0.6 Free cash flow Working Tax Cash operating Other Free cash flow (HY 2017) capital profit* (HY 2018) * Operating profit adjusted for non-cash items July 26, 2018 | Nestlé half-year results 2018 | 20
Slide 21: 2018 guidance confirmed
2018 guidance confirmed • Organic sales growth of around 3% • Underlying trading operating margin improvement in line with our 2020 target • Restructuring costs* are expected at around CHF 700 million • Increase in underlying EPS in constant currency and capital efficiency * Not including impairment
Slide 22: Discussion
Half-year results 2018 Discussion July 26, 2018 | Nestlé half-year results 2018 | 22
Slide 23: Supporting slides
Half-year results 2018 Supporting slides July 26, 2018 | Nestlé half-year results 2018 | 23
Slide 24: HY-2018 Operating segments – quarterly summary
HY-2018 Operating segments – quarterly summary Q2-2018 sales Sales RIG Pricing OG (CHF m) % % % Zone AMS 7’392 0.5 0.4 0.9 Zone EMENA 4’566 3.7 -0.9 2.8 Zone AOA 5’348 3.5 0.6 4.1 Nestlé Waters 2’235 -0.3 1.8 1.5 Other Businesses 3’115 5.7 -0.6 5.1 Total Group 22’656 2.4 0.2 2.6 July 26, 2018 | Nest
Slide 25: HY-2018 Operating segments – topline summary
HY-2018 Operating segments – topline summary HY-2018 sales Reported Sales RIG Pricing OG Net M&A F/X sales growth (CHF m) % % % % % % Zone AMS 14’153 1.0 0.0 1.0 -1.0 -3.6 -3.6 Zone EMENA 9’303 3.1 -0.6 2.5 -0.2 4.1 6.4 Zone AOA 10’634 3.7 0.7 4.4 -0.1 -0.8 3.5 Nestlé Waters 3’967 -0.7 1.7 1.0 -0.8
Slide 26: HY-2018 Products – topline summary
HY-2018 Products – topline summary HY-2018 sales Sales* RIG Pricing OG (CHF m) % % % Powdered and liquid beverages 10’265 2.8 0.6 3.4 Water 3’729 -0.4 1.7 1.3 Milk products and ice cream 6’385 0.8 0.2 1.0 Nutrition and Health Science 7’912 4.5 -0.4 4.1 Prepared dishes and cooking aids 5’819 1.4 0.1
Slide 27: HY-2018 Operating segments – revenue and results
HY-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 (expense) equipment costs amortisation Zone AMS 14’153 2’680 2’51
Slide 28: HY-2018 Products – revenue and results
HY-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 (expense) equipment costs Powdered and Liquid Beverages 10’265 2’394 2’306 (88) (17) (43) Wa
Slide 29: HY-2018 historical eight quarters
HY-2018 historical eight quarters Period RIG Pricing OG % % % 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 Q1-2018 2.6 0.2 2.8 Q2-2018 2.4 0.2 2.6 July 26, 2018 | Nestlé half-year results 2018 | 29
Slide 30: HY-2018 EPS reconciliation (1 of 2)
HY-2018 EPS reconciliation (1 of 2) From net profit to underlying profit In CHF m HY-2017 HY-2018 Net Profit 4’897 5’825 Restructuring costs 166 299 Impairments of property, plant & equipment, goodwill and int. assets 120 384 Net result on disposal of businesses (25) (1’400) Other adjustment in Net
Slide 31: HY-2018 EPS reconciliation (2 of 2)
HY-2018 EPS reconciliation (2 of 2) From operating profit to underlying net profit In CHF m HY-2017 HY-2018 Operating profit adjusted 6’821 7’063 Net financial income / (expense) (332) (346) Adjusted taxes (1’741) (1’628) Adjusted income from associates and joint ventures 650 726 Adjusted non-contro
Slide 32: HY-2018 currency overview
HY-2018 currency overview Weighted average rate HY-2017 HY-2018 Variation in % US Dollar 1 USD 0.994 0.967 - 2.7 Euro 1 EUR 1.077 1.170 +8.7 Chinese Yuan Renminbi 100 CNY 14.470 15.182 +4.9 Brazilian Reias 100 BRL 31.247 28.110 -10.0 UK Pound Sterling 1 GBP 1.251 1.329 +6.2 Mexican Pesos 100 MXN 5.1
Slide 33: 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