Slide 1: 2010 First Half Results
2010 First Half Results
Slide 2: 2010 First Half Results
2010 First Half Results James Singh Chief Financial Officer Roddy Child-Villiers Head of Investor Relations
Slide 3: 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 4: Introduction
Introduction A broad-based top line performance – all geographies & global businesses – all product groups contribute We “managed the middle” – spent to be competitive: increased brand support & market shares – invested in new launches, capabilities, distribution – delivered significant savings
Slide 5: Strong Half Year Performance – Group
Strong Half Year Performance – Group Sales CHF 55.3 bn Organic Growth + 6.1% RIG + 4.6% EBIT (CHF) 8.4 bn + 13.6% + 100 bps reported; + 80 bps comparable EBIT Margin 15.1 % + 70 bps comparable constant currencies Net Profit (CHF) 5.5 bn + 7.5% Net Profit Margin 9.8% + 10 bps EPS (CHF) 1.60 + 13.5% 4
Slide 6: Strong Half Year Performance – Food & Beverage
Strong Half Year Performance – Food & Beverage Sales CHF 51.0 bn Organic Growth + 5.7% RIG + 4.2% EBIT (CHF) 6.7 bn + 10.6% EBIT Margin 13.0 % + 60 bps reported & constant currencies 5 11 August 2010 2010 Half Year Roadshow
Slide 7: Guidance
Guidance We expect that the second half of the year will see a continuation in the growth trend of the first two quarters, and expect to achieve organic growth of around 5%, reaffirming our earlier guidance for Food & Beverages. We also expect an improvement in the EBIT margin in constant currencies
Slide 8: Total F&B: A strong broad-based performance globally
Total F&B: A strong broad-based performance globally Positive RIG/OG in all regions: A broad-based % Organic Growth % RIG performance in developed & emerging markets 10.4 Americas: Acceleration during the half 8.9 Positive RIG in developed markets Europe: Positive RIG in developed markets 5.3
Slide 9: Operating segments: Positive RIG/OG everywhere
Operating segments: Positive RIG/OG everywhere % Organic Growth % RIG 10.3 9.0 8.9 7.6 6.1 6.2 5.7 5.2 4.2 3.1 3.0 2.2 2.5 1.3 Zone Zone Zone Nestlé Nestlé Sales Americas Europe AOA Waters Nutrition Other F&B Total F&B CHF bn 16.3 10.7 8.6 4.7 5.3 5.4 51.0 (Rounded) 8 11 August 2010 2010 Half Year R
Slide 10: Zone Americas
Zone Americas Good growth in most regions & categories LA: Continued strength: Soluble, PetCare, Milk, Powdered Beverages, Biscuits; Chocolate 6.1 Good performances in NA, particularly Chocolate, Sugar, Soluble coffee, Ice cream, PetCare, Pizza 3.1 Frozen NA: Single & nutrition market contra
Slide 11: Zone Europe
Zone Europe Western Europe: Positive RIG in all major markets; broad-based performance by category Eastern Europe: Russia still recovering Central Europe performing better 2.2 Southern Europe: Positive in Iberia & Italy text text 1.3 text Stronger categories: Soluble coffee, PetCare, Chilled
Slide 12: Zone AOA
Zone AOA Emerging markets: Strong momentum in Asia & Africa Japan RIG positive, driven by Nescafé 9.0 7.6 Popularly Positioned Products are accretive to emerging market growth Stronger categories: Ambient Culinary, RTD Beverages, Dairy, Chocolate, PetCare Sales: CHF 8.6 bn EBIT Margin: 16.9
Slide 13: Nestlé Waters
Nestlé Waters Bottled water market returning to growth Europe: Positive growth, share gains North America: Positive growth Value shares up Good cost management: Distribution, light-weighting 3.0 2.5 PPP growing double-digit: Nestlé Pure Life Mainstream growing: Poland Spring Super-premium
Slide 14: Nestlé Nutrition
Nestlé Nutrition Infant Nutrition (IN): High single-digit growth IN: Double-digit in emerging markets, particularly strong in Russia, China, South Asia, Indochina, Middle East… IN: Good growth in the US; positive in Europe 6.2 5.2 Healthcare accelerates during the half Jenny Craig subdued,
Slide 15: Other Food & Beverages
Other Food & Beverages Nespresso: Strong growth continues 2010: About 30 new boutiques France double-digit despite new entrants Nestlé Professional: Mid-single digit growth Double-digit in AOA 10.3 Above-market growth in Americas & Europe 8.9 F&B joint ventures Positive organic growth Good E
Slide 16: Powdered & Liquid Beverages
Powdered & Liquid Beverages Soluble coffee: Mid single-digit OG RIG is the driver in all Zones Nescafé Dolce Gusto going well Powdered Beverages: High single-digit OG A balanced performance across the Zones 8.4 Ready-To-Drink Beverages: Double-digit OG 6.5 Americas & AOA the growth drivers: Ne
Slide 17: Milk Products, including Ice cream
Milk Products, including Ice cream Milk Products: Approx. 10% organic growth RIG is the driver of growth Asia, Africa, Middle East performing well Accelerating in Latin America Ice cream US: Haägen Dazs & Skinny Cow growing fast; Dreyer’s slower; Shares held. Canada strong 5.6 Europe: Slow sta
Slide 18: Prepared Dishes & Cooking Aids
Prepared Dishes & Cooking Aids Frozen Food Good performances from Pizza in North America & Europe US Frozen still weak, especially "nutritional" segment Chilled Culinary Good performance in Europe Ambient Culinary Performing well in key markets/regions 3.4 2.8 EBIT Margin - 90 bps Impacted b
Slide 19: Confectionery
Confectionery A good level of RIG & organic growth Western Europe is performing well UK, France, Switzerland, KitKat Double-digit OG in the Americas The US: Wonka extension 8.4 Latin America: Brazil, Mexico Double-digit in AOA 4.3 emerging markets EBIT Margin + 70 bps Overcoming headwinds
Slide 20: PetCare
PetCare Mid single-digit growth, with increased RIG Zone Americas continued to have strong momentum: Beneful, ONE, Dog Chow Europe & AOA performing well 5.1 Performance achieved despite significant SKU 3.4 rationalisation EBIT Margin + 190 bps Raw material benefit; costs savings Sales: CHF
Slide 21: Performance of Billionaire Brands
Performance of Billionaire Brands Organic Growth: Billionaire brands achieve 7% in H1 Over 20% 10.1 to 20% 7.6 to 10% 5.1 to 7.5% 3.1 to 5% 0.0 to 3% Below 0% 20 11 August 2010 2010 Half Year Roadshow
Slide 22: Summary
Summary Positive RIG in emerging markets, and also in the developed world Increased media spend & brand support The EBIT margin improvement is broad-based 21 11 August 2010 2010 Half Year Roadshow
Slide 23: Nestlé continues to deliver total performance
Nestlé continues to deliver total performance Market uncertainty Good results from our response to pressure on Organic growth Leverage competitive advantages Improve market shares Optimise business performance Via profitable growth globally; Leveraging scale: delivering significant savings Focus & d
Slide 24: Total Performance Framework
Total Performance Framework Achieving Investment Scale Driving Simplicity for Growth Benefits Performance THE NESTLÉ MODEL 23 | 11 August 2010 | 2010 Half Year Roadshow
Slide 25: EBIT Margin improvement: + 100 bps / 80 bps
EBIT Margin improvement: + 100 bps / 80 bps Marketing COGS +20 +160 IFRS 5 Admin. R&D 15.1% Distribution +20 HY 10 -140 +40 EBIT 14.1% HY 09 EBIT COGS : Benefit of RIG, Nestlé Continuous Excellence (NCE), H2 input cost headwind IFRS 5: No longer depreciating Alcon assets (mainly COGS) Increase
Slide 26: P&L: Earnings per share up 13.5%
P&L: Earnings per share up 13.5% As % of sales HY 09 HY 10 Diff. basis points (rounded) EBIT margin 14.1 15.1 + 100 Other income/expenses (0.4) (0.4) – Net Financial income/expense (0.6) (0.8) - 20 Profit before taxes & Associates 13.1 13.9 + 80 Taxes (3.1) (3.6) - 50 Share of results of Associates
Slide 27: Operating cash flow: positive long term trend
Operating cash flow: positive long term trend H1 % 12.3 of sales 10.4 8.4 7.9 7.9 7.0 6.5 04 05 06 07 08 09 10 Operating cash flow has trended better over time H1 2010 reflects normalisation after 86% increase in H1 2009 Trend of improvement in operating cash flow to continue 26 11 August 2010
Slide 28: Working capital: positive trend as % of sales
Working capital: positive trend as % of sales H1 % of 9.4 sales 9.0 8.8 8.7 8.6 7.4 05 06 07 08 09 10 Working capital improves as a percentage of sales versus H1 2009 as we drive inventory cover to lower levels H1 2010 reflects – return to normal level of inventories in support of higher 2010 RI
Slide 29: Net Debt outlook / Use of cash
Net Debt outlook / Use of cash Net Debt: Announced for 2010: FY 09: CHF 18.1 bn Acquisitions - CHF 4.4 bn Dividend - CHF 5.4 bn H1 share buy-back - CHF 5 bn HY 10: CHF 29.6 bn H2 share buy-back - CHF 5 bn Alcon + USD 28 bn 2011 buy-back - CHF 5 bn 28 11 August 2010 2010 Half Year Roa
Slide 30: Alcon disposal
Alcon disposal Likely deal closure Q3 2010 Treasury management & performance: Capital preservation: counter-party & instrument risks Continuing businesses will deliver profitable growth Business performance combined with share buy-back will have a positive incremental impact on EPS in 2010 &
Slide 31: Nestlé’s growth profile: H1 2010
Nestlé’s growth profile: H1 2010 Global organic growth 6.1 % F&B organic growth 5.7 % Developed markets 3.2 % PIIGS 2.5 % Emerging markets 11.3 % PPP 12 % Billionaire brands 7% 2010 Innovations 60 bps of RIG Market shares improving globally 30 11 August 2010 2010 Half Year Roadshow
Slide 32: Billionaire Brands
Billionaire Brands 31 11 August 2010 2010 Half Year Roadshow
Slide 33: Innovation & Renovation: 2010 launches add 60 bps to H1 RIG
Innovation & Renovation: 2010 launches add 60 bps to H1 RIG 32 11 August 2010 2010 Half Year Roadshow
Slide 34: Current M&A is a future growth enabler
Current M&A is a future growth enabler M&A bolt-ons to support roadmap Food & Beverages Nutrition, Health & Wellness Adjacencies to existing businesses Emerging and developed markets Recent activity Culinary in Ukraine Water in China Pizza in the US Healthcare Nutrition in the UK 3
Slide 35: Emerging markets: 82% of global population
Emerging markets : 82% of global population : CHF 35 bn of Nestlé Sales World Population % of Nestlé sales 1 billion new emerging consumers by 2020 7'000'000 70% 6'000'000 60% 5'000'000 50% 4'000'000 40% 3'000'000 30% 2'000'000 20% 1'000'000 10% Emerging Markets Population - Developed Markets Popula
Slide 36: Nestlé: The leader in Food and Beverages
Nestlé: The leader in Food and Beverages In emerging markets… In developed markets… Globally… Weighted Average Exchange Rates 35 11 August 2010 2010 Half Year Roadshow
Slide 37: A focus on % presence in any given market
A focus on % presence in any given market raises questions… Scale ? Local manufacturing, local R&D ? Duration in a market ? Market presence, shares, leadership ? Brand strength, consumer relationships & insight ? Local know-how: distribution, retail environment ? Role in society ? Un
Slide 38: A focus on absolute sales in any given market answers those questions…
A focus on absolute sales in any given market answers those questions… Scale Local manufacturing, local R&D Duration in a market Market presence, shares, leadership Brand strength, consumer relationships & insight Local know-how: distribution, retail environment Role in society Under
Slide 39: Leadership: Scale – all over the world
Leadership: Scale – all over the world Europe CHF 36 bn Americas CHF 44 bn AOA CHF 20 bn Emerging markets have sales of CHF 35 billion FY 2009 F&B sales 35% of F&B sales 38 11 August 2010 2010 Half Year Roadshow
Slide 40: …achieving high growth, EBIT margins & ROIC
Emerging market presence – geographic 18 countries each with CHF 500 mn+ sales, leader in many… CHF 5 bn+ No. CHF 1 bn+ No. CHF 500 m+ No. Brazil 1 Philippines 2 Indonesia 3 India 2 Turkey 7 CHF 2 bn+ Poland 1 Pakistan 2 South Africa 3 Colombia 4 Mexico 4 Thailand 1 Czech Rep 1 Russia 1 Chile 1 Ukra
Slide 41: Emerging market presence – product groups
Emerging market presence – product groups Number of Number of Percent Percent EMs in EMs in Sales in Sales in Top 10 Top 10 EMs EMs Markets Markets Dairy 80 9 Ice cream 20 1 Powdered Beverages 65 5 Water 15 2 Infant Nutrition 50 6 Healthcare Nutrition 10 2 Ambient Culinary 50 4 PetCare 10 0 Soluble
Slide 42: Nestlé in emerging markets
Nestlé in emerging markets Nestlé is the biggest F&B player in emerging markets Our geographic presence is a competitive advantage – our scale – our longevity 5 year annual average OG in emerging markets of 11.5% – rich with growth potential from a significant base 41 11 August 2010 2010 Half
Slide 43: The developed markets
The developed markets Are all developed markets equal? Do all companies have the same opportunities in developed markets? Are all companies achieving the same growth in developed countries? No. Obviously not. 42 11 August 2010 2010 Half Year Roadshow
Slide 44: Nestlé in developed markets
Nestlé in developed markets Nestlé is the biggest F&B player in developed markets Has a 5 year average OG in North America of 6% Is the biggest player in NA: F&B sales of CHF 29 billion* Has a 5 year average OG in Western Europe of 2.5% *FY 2009: excludes newly acquired Pizza business 43 11
Slide 45: Nestlé in Western Europe: H1 2010
Nestlé in Western Europe: H1 2010 RIG Rounded Zone Europe Germany + 1% Excludes the globally managed France + 5% businesses, (Waters, Nutrition, Professional, Nespresso, etc) Great Britain region + 1% which were RIG enhancing in Iberia region + 2% Western Europe Italy + 2% PetCare + 3% Europe is als
Slide 46: Nestlé the leader globally
Nestlé the leader globally Emerging markets are an opportunity to enhance performance – particularly if you have scale & longevity Nestlé has a head start in the Emerging Markets…… PPP is a growth differentiator … and has the scale to win Developed markets also provide opportunities for grow
Slide 47: Winning – means winning globally
Winning – means winning globally We’re all running global businesses The winners – who create shareholder value on a sustainable basis… … will be those who win globally, not just in emerging markets 46 11 August 2010 2010 Half Year Roadshow
Slide 48: GLOBE: 10 years on
GLOBE: 10 years on Driving unique competitive advantages Creating gaps all along the value chain Increasing our own competitive intensity Weighted Average Exchange Rates 47 11 August 2010 2010 Half Year Roadshow
Slide 49: Launch of GLOBE
Launch of GLOBE “GLOBE will transform the highly successful federation of independent markets into one global Company – that's my dream, that's what I hope to achieve, and we will achieve this through leveraging the size of the Group as a strength and not a liability” Peter Brabeck-Letmathe 2001 48
Slide 50: GLOBE initial objectives
GLOBE initial objectives Implementation of harmonized Best Practices Implementation of Data Standards and Data Management Implementation of standardized Information Systems & Technology From “complexity = cost” to “complexity with efficiency” = competitive advantage 49 11 August 2010 2010 Half Year
Slide 51: IS/IT cost evolution: Inflation prior to 2000. Flat since.
IS/IT cost evolution: Inflation prior to 2000. Flat since. 2.4% 2.2% 2.0% 1.8% 1.6% 1.4% %Sales NPS 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 xxxx Costs Center Costs Zones & GMBs Depr. Intangibles Cente
Slide 52: GLOBE implementation status after 10 years
GLOBE implementation status after 10 years 90 Nestlé Markets/Businesses are operating with GLOBE processes, data & systems 95% sales coverage 2,500 factories, distribution centres & sales offices 162,000 users In 2010, GLOBE achieved a worldwide upgrade with zero business disruption This n
Slide 53: “Unlocking Nestlé’s potential” “One Step Ahead”
After 10 years of “Unlocking Nestlé’s potential” GLOBE will now enable Nestlé to move “One Step Ahead” 52 11 August 2010 2010 Half Year Roadshow
Slide 54: Nestlé Continuous Excellence & GLOBE
Nestlé Continuous Excellence & GLOBE Nestlé Continuous Excellence was inspired by Nestlé’s continual improvement drive & by the objectives of GLOBE: Global Business Excellence Today, Nestlé Continuous Excellence & GLOBE combine to create a holistic approach to driving improved performance across the
Slide 55: GLOBE & Nestlé Continuous Excellence will enable sustainable profitable growth
GLOBE & Nestlé Continuous Excellence will enable sustainable profitable growth Focus on end-to-end processes to eliminate waste, maximize efficiency, enable synergies – Facilitating integration: speed to capture synergies – Facilitating simplicity: optimising SKU’s – 35% reduction – Improved Envir
Slide 56: GLOBE & Nestlé Continuous Excellence will enable sustainable profitable growth
GLOBE & Nestlé Continuous Excellence will enable sustainable profitable growth Ensure support at competitive cost, enable business to run at optimum effectiveness & efficiency – Embedding culture of discipline – Excellence in execution, Nestlé Continuous Excellence – Driving savings in operations
Slide 57: Some GLOBE & NCE-related KPIs
Some GLOBE & NCE-related KPIs Operational Performance Efficiencies Capital returns & capital avoidance Safety record Number of quality incidents Demand planning accuracy & customer satisfaction levels Working capital Energy/input usages Benefits of scale & skill Products Growth Freshness SKU optimis
Slide 58: Manufacturing productivity has continuously improved over the last 5 years
Manufacturing productivity has continuously improved over the last 5 years Number of factories & production volume per factory 91.7 500 90.1 95 487 481 490 480 90 480 85 470 85.6 80 460 456 79.4 449 75 450 74.7 70 440 65 430 60 420 410 55 400 50 2005 2006 2007 2008 2009 # of factories Production vol
Slide 59: Strong performance on the major environment and safety indicators
Strong performance on the major environment and safety indicators Variation 2005 – 2009 Water Consumption m3/ton - 21% Energy Consumption gigajoules/ton - 15% Greenhouse Gases kg CO2/ton - 18% rate on 1mn Lost Time Injury Fr. hours worked - 71% 58 11 August 2010 2010 Half Year Roadshow
Slide 60: Business Excellence Awards
Business Excellence Awards Recognising & rewarding the best Business Excellence Project which, through GLOBE usage, leads to significant business success & to encourage further deployment to other markets. Every year, the 5 best success stories are recognised at Nestlé HQ More than 140 success s
Slide 61: GLOBE driving profitable growth for years to come
GLOBE driving profitable growth for years to come “GLOBE is a major enabler to create gaps at every step of the value chain. This is a real, holistic and sustainable competitive advantage for our Company.” Paul Bulcke 2009 60 11 August 2010 2010 Half Year Roadshow
Slide 62: Summary
Summary 2010 outlook – improved performance despite headwinds Around 5% organic growth & an improvement in the EBIT margin Winning the competition for investors’ capital Sustainable shareholder value creation is about driving profitable growth globally – not just about emerging markets GLOBE –
Slide 63: Nestlé consistent year after year improvement in performance
Conclusion Nestlé consistent year after year improvement in performance. Total performance without compromise. 62 11 August 2010 2010 Half Year Roadshow
Slide 64: Q&A
Q&A 63 11 August 2010 2010 Half Year Roadshow
Slide 65: Appendix
Appendix 64 11 August 2010 2010 Half Year Roadshow
Slide 66: Weighted average exchange rates
Weighted average exchange rates CHF per H1 2009 H1 2010 (%) US Dollar (1) 1.13 1.09 - 4.0 Euro (1) 1.51 1.44 - 4.7 £ Sterling (1) 1.68 1.65 - 1.9 Real (100) 51.66 60.34 + 16.8 Mex. Peso (100) 8.17 8.55 + 4.7 Yen (100) 1.18 1.19 + 0.7 Weighted Average Exchange Rates Weighted Average Exchange Rates 65
Slide 67: Operating segment FX impact on sales
Operating segment FX impact on sales (%) 1Q10 HY10 9M10 FY10 Zone Europe - 0.7 - 2.8 Zone Americas - 4.9 - 2.5 Zone AOA + 0.5 + 3.1 Nestlé Waters - 4.6 - 3.0 Nestlé Nutrition - 3.6 - 1.9 Other F&B - 1.1 - 1.3 Total F&B - 2.6 - 1.5 66 11 August 2010 2010 Half Year Roadshow
Slide 68: Key elements of sales
Key elements of sales Total Group Food & Beverages CHF 55.3 bn CHF 51.0 bn + 6.1% RIG + 5.7% OG OG + 5.9% + 4.6% + 4.2% + 5.6% total total + 1.5% Pricing + 1.5% + 1.4% + 1.3% Acq./Div. - 1.5% Exchange Rates - 2.6% - 1.5% OG = Organic Growth RIG = Real Internal Growth 67 11 August 2010 2010 Half Year
Slide 69: 2010 First Half Results
2010 First Half Results 68 11 August 2010 2010 Half Year Roadshow