Nestle S.a. · SIX:NESN
Nestle — H1 2003 Earnings Presentation
37 slides from Nestle's earnings presentation, August 2003
Slide 1: 2003 Half Year Conference Call
2003 Half Year Conference Call August 2003 1 2003 Half Year Conference Call Name of chairman
Slide 2: Forward looking statements
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. Potential
Slide 3: A good first half performance
A good first half performance • 5.5% organic growth • 30 basis points CHF EBITA margin increase • 70 basis points constant currency EBITA margin increase • All areas contributed to improvement in EBITA • Europe continued to close gap to Group margin • 4.9% increase in underlying earnings • CHF 3 bn
Slide 4: A strong operating result
A strong operating result Currency movements impact reported figures % + 70 bp + 19.1 + 24.6 + 10.4 + 11.7 + 6.3 + 30 -4 bp + 4.9 days - 4.5 Underlying Net profit Margin Free EBITA Operating Cash conversion cash flow cash flow cycle (days) - 6.3 EBITA Sales Reported Constant currency 4 2003 Half Yea
Slide 5: Dollar weak versus CHF, Euro recovered: mix effect on margins
Dollar continued to be weak versus the CHF, but Euro recovered: mix effect on margins average exchange rates CHF per H1 2002 H1 2003 % change Euro (1) 1.47 1.49 +1.5 U.S. dollar (1) 1.64 1.35 - 17.4 £ sterling (1) 2.36 2.17 - 8.1 Real (100) 67.48 41.69 - 38.2 Yen (100) 1.26 1.14 - 10.1 Mex. Peso (10
Slide 6: Divergent currency trends impact mix
Divergent currency trends impact mix Reb /USD USD/CHF 120 117 EUR/CHF 114 111 108 105 102 99 96 93 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2002 2003 6 2003 Half Year Conference Call Name of chairman
Slide 7: FX evolution lifts weight of Europe & Water
FX evolution lifts weight of Europe & Water Below group margin Above group margin +290 bp 34.1 - 300 bp 31.2 32.8 30 29.8 % of Group sales 20 - 40 bp 16.9 16.5 + 60 bp 10.1 10.1 10 8.9 9.5 02 03 02 03 02 03 02 03 02 03 Waters Europe Americas AOA Other 7 2003 Half Year Conference Call Name of chairma
Slide 8: Organic growth rate leads the food majors
Organic growth rate leads the food majors + 2.1 % RIG + 5.5 % + 6.3% ORGANIC constant + 3.4 % Pricing currency GROWTH growth Acquisitions minus + 0.8 % divestitures Exchange - 12.6 % Rates H1 2003 sales of CHF 41.4bn 8 2003 Half Year Conference Call Name of chairman
Slide 9: RIG and organic growth by management responsibilities and geographical area
RIG and organic growth by management responsibilities and geographical area 12 % RIG % Organic Growth 11.0 10 9.5 9.1 8.7 8 % Growth 5.9 6 4 3.2 3.5 2 0.9 0.9 0 0.0 Europe Americas AOA Waters Other CHF bn 14.1 12.4 6.8 3.9 4.2 9 2003 Half Year Conference Call Name of chairman
Slide 10: RIG by product group
RIG by product group 8 7.1 6 5.2 4 RIG % 1.8 2 1.0 0 -0.2 -2 -2.3 Beverages Milk Prepared Petcare Chocolate, Pharmaceutical products, dishes and confectionery products nutrition and cooking and biscuits ice cream aids CHF bn 11.2 11.0 7.6 4.7 4.4 2.5 10 2003 Half Year Conference Call Name of chairma
Slide 11: EBITA: continued improvement in performance
EBITA: continued improvement in performance H1 2002 H1 2003 Diff. basis points As % of sales (rounded) Sales (CHF million) 44'219 41'437 100 100 Cost of goods sold (43.4) (42.4) 100 Distribution (8.1) (8.0) 10 Marketing & Admin (35.3) (36.0) (70) R&D (1.3) (1.4) (10) EBITA 11.9 12.2 30 EBITA at cons
Slide 12: EBITA margin improves across Food and Bev.
EBITA margin improves across Food and Bev. - 30 bp + 40 bp 19.5 19.2 20 17.3 17.7 + 30 bp + 80 bp 15 13.4 13.7 11.8 % margin + 20 bp 11.0 10 9.4 9.6 5 0 02 03 02 03 02 03 02 03 02 03 Waters Europe Americas AOA Other CHF bn 0.4 1.7 1.7 1.2 0.8 12 2003 Half Year Conference Call Name of chairman
Slide 13: EBITA margin improvement by product group
EBITA margin improvement by product group - 50 bp 20 17.7 17.2 + 150 bp + 40 bp 15 + 60 bp 13.7 12.2 11.8 12.2 % margin 11.0 11.6 10 - 40 bp 6.6 6.2 5 0 02 03 02 03 02 03 02 03 02 03 Choc, confect Prepared Milk, nutrition Petcare Beverages and biscuits dishes and ice cream cooking aids CHF bn 0.3 0.
Slide 14: Efficiency initiatives drive EBITA margin improvement
Efficiency initiatives drive EBITA margin improvement Net MAIN MARGIN CONTRIBUTIONS AT EBITA LEVEL Operations Improvements FX rates +100 -40 Pension costs -20 Market mix EBITA -10 improvement +30 data in basis points, based on estimates 14 2003 Half Year Conference Call Name of chairman
Slide 15: Positive evolution in underlying net profit
Positive evolution in underlying net profit H1 2002 H1 2003 Diff. basis points As % of sales (rounded) EBITA 11.9 12.2 30 Net other income/expenses 7.2 (0.4) (760) Amortisation and impairment of goodwill (3.1) (1.8) 130 Net financing cost (1.0) (0.5) 50 Taxes (2.4) (3.1) (70) Minority interests (0.4
Slide 16: Tax rate and underlying earnings per share
Tax rate and underlying earnings per share* Underlying tax rate • decreased from 30 % to 28 % - mainly due to mix / improved legal and fiscal setup On-going tax rate • likely to be around 30% Underlying EPS • CHF 9.48, up 4.9% from CHF 9.03 Underlying EPS at const. currency • up 19.1% (*Before excep
Slide 17: Conclusion
Conclusion • A strong operating result • Substantial underlying margin improvement with all businesses contributing • Zone Europe showing excellent progress • Restructuring activities and efficiency initiatives yielding tangible benefits • Ice cream continues to accelerate and Dreyer's integration i
Slide 18: Background slides
Background slides 18 2003 Half Year Conference Call Name of chairman
Slide 19: Calculation of underlying EPS - methodology
Calculation of underlying EPS - methodology Net profit before • amortisation and impairment of goodwill • impairment of property, plant and equipment • restructuring costs • results on disposals • material one-off items incl. in Net other income (expense) • material one-off tax items The tax charge
Slide 20: Positive evolution of costs of goods sold
Positive evolution of costs of goods sold 54 51.7 52 50.5 50 48.5 % sales 48 47.0 46 44.5 43.4 44 42.4 42 H1 H1 H1 H1 H1 H1 H1 1997 1998 1999 2000 2001 2002 2003 Takes into account the change to historic cost accounting in 1998 and the 2001 trade spend review 20 2003 Half Year Conference Call Name o
Slide 21: Increase in net indebtedness due to Dreyer's and Powwow
Increase in net indebtedness* due to Dreyer's and Powwow 25 21.1 19.4 20 16.2 CHF bn 15 15.0 10 6.0 5.2 5 3.0 0 H1 H2 H1 H2 H1 H2 H1 2000 2001 2002 2003 * Total financial liabilities minus liquid assets. Liquid assets do not include the carrying value of treasury shares of CHF 2.5 billion. 21 2003 H
Slide 22: Cash conversion cycle continues to improve
Cash conversion cycle continues to improve 70 65 62 59 Days 60 55 50 40 H1 H1 H1 H1 2000 2001 2002 2003 (AVG trade receivables/sales x 2) x 365 + (AVG inventory/ COGS x 2) x 365 - (AVG trade payables/ COGS x 2) x 365 22 2003 Half Year Conference Call Name of chairman
Slide 23: Operating cash flow near all-time high despite currency impact
Operating cash flow near all-time high despite currency impact 3500 3080 3167 3000 2757 2590 CHF mio 2500 2408 2223 2000 1500 1000 H1 H1 H1 H1 H1 H1 1998 1999 2000 2001 2002 2003 23 2003 Half Year Conference Call Name of chairman
Slide 24: Capex under control and on declining trend
Capex under control and on declining trend 1440 1446 1399 1500 1394 10 1230 1280 1329 1327 1314 1291 1250 1171 % of sales CHF mio 1000 5.2 4.8 4.7 750 4.3 5 4.5 4.0 3.4 3.2 500 3.3 3.2 3.1 250 0 0 H1: 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 24 2003 Half Year Conference Call Name of ch
Slide 25: RIG and organic growth in the zones
RIG and organic growth in the zones H1 FY H1 % 2002 2002 2003 RIG RIG RIG OG Europe 0.7 1.7 0.9 3.2 Western Europe - 0.2 0.8 0.5 2.6 Eastern Europe 11.0 11.9 4.5 9.7 Americas 3.6 2.3 0.0 5.9 US and Canada 5.2 4.3 1.0 1.7 Latin America 0.9 - 1.2 - 1.8 13.4 Asia, Oceania and Africa 3.8 3.6 0.9 3.5 25
Slide 26: RIG and organic growth in Europe
RIG and organic growth in Europe (Food) Key Markets H1 FY H1 % 2002 2002 2003 RIG RIG RIG OG Western Europe - 0.2 0.8 0.5 2.6 France 1.5 3.2 0.1 2.4 Germany - 1.5 - 0.3 - 1.5 0.7 GB market - 3.3 - 0.6 1.5 5.0 Petcare Europe - 1.9 - 0.8 2.4 3.2 Eastern Europe 11.0 11.9 4.5 9.7 Russia 24.0 22.0 5.7 17
Slide 27: RIG and organic growth in the Americas
RIG and organic growth in the Americas (Food) Key Markets H1 FY H1 % 2002 2002 2003 RIG RIG RIG OG United States and Canada 5.2 4.3 1.0 1.7 United States 4.3 3.5 2.0 2.3 Canada 9.5 6.2 7.2 11.2 Petcare North America 6.4 5.3 - 1.9 - 1.2 Latin America & Caribbean 0.9 - 1.2 - 1.8 13.4 Brazil 4.0 6.0 -
Slide 28: RIG and organic growth in AOA
RIG and organic growth in AOA (Food) Key Markets H1 FY H1 % 2002 2002 2003 RIG RIG RIG OG Oceania and Japan 0.5 0.2 - 5.7 - 5.5 Japan - 1.0 - 1.5 - 10.0 - 13.5 Other Asian markets 5.9 5.3 5.4 7.3 Philippines 6.3 6.0 3.8 8.5 Greater China 8.6 11.0 6.2 5.9 Africa 7.4 7.6 - 0.3 10.5 Middle East 2.7 3.3
Slide 29: RIG and organic growth in Nestlé Waters
RIG and organic growth in Nestlé Waters H1 FY H1 % 2002 2002 2003 RIG RIG RIG OG North America 13.7 16.0 10.2 9.4 Europe 3.3 3.0 7.6 9.0 Asia 20.6 22.8 8.0 4.8 Total 8.7 9.9 9.1 9.5 29 2003 Half Year Conference Call Name of chairman
Slide 30: RIG in Other activities
RIG in Other activities H1 FY H1 % 2002 2002 2003 RIG RIG RIG Alcon Group 8.0 8.6 7.7 Joint Ventures 9.0 8.1 4.3 Including: - Galderma 9.1 8.3 - 1.1 - CPW 9.0 8.0 4.2 Total 6.7 7.1 8.7 30 2003 Half Year Conference Call Name of chairman
Slide 31: RIG in Beverages
RIG in Beverages H1 FY H1 % 2002 2002 2003 RIG RIG RIG Soluble coffee 1.0 2.0 3.7 Nestlé Waters 8.7 9.9 9.1 Total 4.4 4.6 5.2 31 2003 Half Year Conference Call Name of chairman
Slide 32: RIG in Milk products, Nutrition & Ice Cream
RIG in Milk products, Nutrition & Ice Cream H1 FY H1 % 2002 2002 2003 RIG RIG RIG Milk products 3.5 2.2 0.1 Nutrition 1.5 1.7 0.2 Ice cream - 0.1 0.5 3.1 Total 2.5 2.0 1.0 32 2003 Half Year Conference Call Name of chairman
Slide 33: RIG in Prepared dishes and Cooking aids
RIG in Prepared dishes and Cooking aids H1 FY H1 % 2002 2002 2003 RIG RIG RIG Frozen and chilled 4.7 5.6 1.7 Culinary and others 3.5 3.3 1.8 Total 4.1 4.5 1.8 33 2003 Half Year Conference Call Name of chairman
Slide 34: RIG in Petcare
RIG in Petcare H1 FY H1 % 2002 2002 2003 RIG RIG RIG Europe - 1.9 - 0.8 2.4 North America 8.1 5.3 -1.9 Total 3.7 2.5 - 0.2 34 2003 Half Year Conference Call Name of chairman
Slide 35: RIG in Chocolate, Confectionery & Biscuits
RIG in Chocolate, Confectionery & Biscuits H1 FY H1 % 2002 2002 2003 RIG RIG RIG Chocolate 0.1 0.9 - 2.2 Confectionery - 2.4 - 0.7 - 0.4 Biscuits 1.5 2.6 - 5.8 Total - 0.1 0.8 - 2.3 35 2003 Half Year Conference Call Name of chairman
Slide 36: RIG in FoodServices
RIG in FoodServices H1 FY H1 % 2002 2002 2003 RIG RIG RIG FoodServices 2.5 2.6 0.2 36 2003 Half Year Conference Call Name of chairman
Slide 37: 2003 Half Year Conference Call
2003 Half Year Conference Call August 2003 37 2003 Half Year Conference Call Name of chairman