Nestle S.a. · SIX:NESN
Nestle — FY2019 Earnings Presentation
40 slides from Nestle's earnings presentation, Feb 13, 2020
Slide 1: Full-year results 2019 Investor Call
Full-year results 2019 Investor Call
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 2019 – Mark Schneider, CEO
Full-year results 2019 Mark Schneider, CEO
Slide 4: Key messages 2019
Key messages 2019 • Continued progress with our value creation model • Organic growth of 3.5% led by strong momentum in the U.S. and Purina PetCare globally • Underlying trading operating profit margin increase of 60 bps to 17.6%, reaching our 2020 profitability target range one year ahead of plan •
Slide 5: Strong 2019 financial results
Strong 2019 financial results Organic Underlying Underlying EPS Free cash flow Return on growth trading operating (CHF) (CHF bn) invested capital profit margin 17.6% 4.41 11.9 12.3% 17.0% 4.02 10.8 3.5% 12.1% 3.0% 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 5 February 13, 2020 Nestlé full-year
Slide 6: Continued progress towards mid single-digit organic growth
Continued progress towards mid single-digit organic growth 2019 Growth examples 2019 • Starbucks brand with > CHF 300 m incremental sales Acquisitions 2019 • Persona TM • PetCare: +7% OG 3.5% • Vegetarian / plant-based Disposals • Waters reorganization food: strong double-digit • Nestlé Skin Health
Slide 7: Developing our portfolio
Developing our portfolio > 50 transactions Divesting / reviewing under-performing closed or announced or non-core businesses since 2017, equivalent to ~ 12% of Group sales Market attractiveness US Confectionery OG contribution in 2019 Acquiring / investing in high-growth +35 bps and core segments Ab
Slide 8: Supporting growth through faster innovation
Supporting growth through faster innovation Coffee PetCare Plant-based food Starbucks-branded products Premium brands Garden Gourmet > CHF 300 m incremental 2019 sales strong double-digit organic growth double-digit organic growth Vertuo Veterinary products and supplements Sweet Earth > 60% organic
Slide 9: Business as a force for good
Business as a force for good Creating a market for food-grade Boosting packaging innovation recycled plastics • Allocating more than CHF 1.5 bn to incentivize supply • Institute of Packaging Sciences • Sourcing up to 2 m metric tons (2020-25) • CHF 250 m venture fund focusing on start-up companies •
Slide 10: 2020 guidance
2020 guidance • Continued increase in organic sales growth, expecting further acceleration in 2021 / 2022 towards sustainable mid single-digit growth. • Underlying trading operating profit margin with continued improvement. • 2020 restructuring costs* are expected at around CHF 500 million. • Underl
Slide 11: Full-year results 2019 – François Roger, CFO
Full-year results 2019 François Roger, CFO F e b r u a
Slide 12: Full-year sales growth
Full-year sales growth OG +3.5% +0.6% +2.9% -0.8% -1.5% 92.6 91.4 Reported sales growth +1.2% -30 FY 2018 sales RIG Pricing Net M&A Foreign FY 2019 sales CHF bn exchange CHF bn 12 February 13, 2020 Nestlé full-year results 2019
Slide 13: Broad-based growth with stronger momentum in the Americas
Broad-based growth with stronger momentum in the Americas AMS EMENA AOA Sales 42.3 bn 26.5 bn 23.8 bn (in CHF) RIG 2.6% 3.0% 3.2% Pricing 1.4% -0.7% 0.6% OG 4.0% 2.3% 3.8% Each geography includes zones, Nestlé Waters, Nespresso, Nestlé Health Science and Nestlé Skin Health 13 February 13, 2020 Nestl
Slide 14: Growth acceleration driven by increased RIG in developed markets
Growth acceleration driven by increased RIG in developed markets Developed Emerging Sales (in CHF) 53.7 bn 38.9 bn % of Group sales 58% 42% RIG 2.5% 3.4% Pricing 0.1% 1.3% OG 2.6% 4.7% 14 February 13, 2020 Nestlé full-year results 2019
Slide 15: Zone AMS
Zone AMS Sales CHF 33.2 bn Organic growth 3.9% Real internal growth 2.6% Underlying TOP margin 21.1% vs LY +10 bps • North America reached highest RIG in ten years • DSD exit completed 6 months ahead of plan • Latin America saw strong contributions from Brazil and Mexico • Category highlights were P
Slide 16: Zone EMENA
Zone EMENA Sales CHF 18.8 bn Organic growth 2.7% Real internal growth 4.2% Underlying TOP margin 18.9% vs LY +20 bps • Solid OG supported by best RIG in the last five years • All sub-regions had positive organic growth • Purina PetCare and infant nutrition were the main contributors to growth. Coffe
Slide 17: Zone AOA
Zone AOA Sales CHF 21.6 bn Organic growth 3.2% Real internal growth 2.5% Underlying TOP margin 22.7% vs LY unchanged • Solid growth supported by South East Asia, India and Africa • China saw softness in some categories. Premium products reported double digit growth • Key growth drivers for the zone
Slide 18: Nestlé Waters
Nestlé Waters Sales CHF 7.8 bn Organic growth 0.2% Real internal growth -1.9% Underlying TOP margin 11.8% vs LY +80 bps • Organic growth was subdued • North America posted slightly positive growth. Mainstream offerings declined and premium brands grew double digit • Europe saw negative growth, refle
Slide 19: Other Businesses
Other Businesses Sales CHF 11.2 bn Organic growth 6.4% Real internal growth 5.8% Underlying TOP margin 18.7% vs LY +220 bps • Nespresso maintained mid single-digit organic growth, led by North America and emerging markets • Nestlé Health Science grew at a high-single digit rate based on innovation a
Slide 20: Positive organic growth across categories
Positive organic growth across categories 7.0% 4.9% 3.5% 3.3% 2.8% 2.5% 1.9% 0.7% Total Group Powdered and Nutrition and PetCare Milk products Prepared dishes Confectionery Water Liquid Beverages Health Science and Ice cream and cooking aids 20 February 13, 2020 Nestlé full-year results 2019
Slide 21: Underlying trading operating profit margin by category
Underlying trading operating profit margin by category In % of sales 22.4% 22.1% 21.4% 20.4% 17.6% 17.8% 16.9% 11.4% Change in bps +60 -20 +170 -10 +140 -10 -20 +90 vs FY 2018 Total Group* Powdered and Nutrition and PetCare Milk products Prepared dishes Confectionery Water Liquid Beverages Health Sc
Slide 22: Further improvement in gross margin
Further improvement in gross margin Gross margin = (Sales - Cost of good sold) / Sales 49.6% 49.6% 49.1%* ex. Nestlé Skin Health 48.9% 48.7% 48.3%* 2017 2018 2019 * Restated to reflect implementation of IFRS 15, IFRS 16 and reclassification of certain cost items from marketing and administration to
Slide 23: Margin expansion supported by structural cost reductions
Margin expansion supported by structural cost reductions +50 bps +10 bps • Reduced structural costs • Increased 17.0% marketing investments 17.6% Margin increased by 60 bps -30 Underlying TOP Gross Distribution Administration, Underlying TOP FY 2018 margin Marketing, R&D FY 2019 23 February 13, 2020
Slide 24: Significant increase in underlying EPS
Significant increase in underlying EPS % of sales 2019 vs 2018 Underlying trading operating profit 17.6% +60 bps Restructuring +10 bps Impairment of assets -100 bps Trading operating profit 14.8% -30 bps Impairment of goodwill and non-commercialized intangible assets - 20 bps Gain / loss on disposal
Slide 25: Further progress on working capital
Further progress on working capital Working capital as a % of sales, calculated on a 5-quarter average 5.3% 4.7% 2.8% 2.2% IFRS restatement 1.6% 1.4% 0.6% 2014 2015 2016 2017 2018 2019 Note: 2017 restated, reflecting implementation of IFRS 15 and IFRS 16 25 | February 13, 2020 | Nestlé full-year res
Slide 26: 5th consecutive year of ROIC improvement
5th consecutive year of ROIC improvement 12.3% 12.1% 11.4%* 11.2% 10.9% 10.8% 2014 2015 2016 2017 2018 2019 * Excludes impairment of Nestlé Skin Health. Restated, reflecting implementation of IFRS 15 and IFRS 16 26 February 13, 2020 Nestlé full-year results 2019
Slide 27: Record free cash flow of CHF 11.9 bn
Record free cash flow of CHF 11.9 bn Free cash flow in % of sales 13.5% 12.9% 13.0% 12.5% 11.8% 12.0% 11.5% 11.0% 10.4% * 10.5% 10.0% 9.5% 9.0% 2017 2018 2019 8.5% * Restated, reflecting implementation of IFRS 15 and IFRS 16 27 February 13, 2020 Nestlé full-year results 2019
Slide 28: Temporary net debt decrease
Temporary net debt decrease CHF 16.9 bn returned In CHF bn to shareholders +7.2 -9.8 +1.6 +9.7 -11.9 30.3 27.1 -30 Net debt decreased by CHF 3.2 bn Net debt Share Dividends M&A Other Free cash Net debt Jan 1, 2019 buyback (net) flow Dec 31, 2019 Net debt/ Net debt/ Adjusted EBITDA: 1.6x Adjusted EBI
Slide 29: Full-year results 2019 Q&A
Full-year results 2019 Q&A F e b r u a
Slide 30: Supporting slides
Full-year results 2019 Supporting slides F e b r u a
Slide 31: FY-2019 Operating segments – quarterly summary
FY-2019 Operating segments – quarterly summary Q4-2019 sales Sales RIG Pricing OG (CHF m) % % % Zone AMS 9 159 2.3 1.3 3.6 Zone EMENA 5 184 3.0 -0.7 2.3 Zone AOA 5 664 2.6 0.9 3.5 Nestlé Waters 1 724 0.2 -0.8 -0.6 Other Businesses 2 470 3.7 0.4 4.1 Total Group 24 201 2.5 0.5 3.0 31 February 13, 2020
Slide 32: FY-2019 Operating segments – topline summary
FY-2019 Operating segments – topline summary FY-2019 sales Reported Sales RIG Pricing OG Net M&A F/X sales growth (CHF m) % % % % % % Zone AMS 33 154 2.6 1.3 3.9 3.5 -0.4 7.0 Zone EMENA 18 834 4.2 -1.5 2.7 -0.2 -3.0 -0.5 Zone AOA 21 602 2.5 0.7 3.2 -0.1 -1.8 1.3 Nestlé Waters 7 821 -1.9 2.1 0.2 -0.1
Slide 33: FY-2019 Products – topline summary
FY-2019 Products – topline summary FY-2019 sales Sales RIG Pricing OG (CHF m) % % % Powdered and liquid beverages 23 221 2.9 -0.1 2.8 Water 7 391 -1.6 2.3 0.7 Milk products and ice cream 13 268 1.7 1.6 3.3 Nutrition and Health Science 14 990 4.2 0.7 4.9 Prepared dishes and cooking aids 12 188 2.5 0.
Slide 34: FY-2019 historical eight quarters
FY-2019 historical eight quarters Period RIG Pricing OG % % % 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 Q1-2019 2.2 1.2 3.4 Q2-2019 3.0 0.9 3.9 Q3-2019 3.9 -0.2 3.7 Q4-2019 2.5 0.5 3.0 34 February 13, 2020 Nestlé full-year results 2019
Slide 35: FY-2019 Operating segments – revenue and results
FY-2019 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 amortization Zone AMS 33 154 6 998 6 159
Slide 36: FY-2019 Products – revenue and results
FY-2019 Products – revenue and results In CHF m Underlying Of which Trading Trading Net other impairment of Of which Operating Operating trading income/ property, plant restructuring Sales Profit Profit (expense) and equipment costs Powdered and Liquid Beverages 23 221 5 197 4 701 (496) (180) (63) W
Slide 37: FY-2019 currency overview
FY-2019 currency overview Weighted average rate FY-2018 FY-2019 Variation in % US Dollar 1 USD 0.979 0.993 +1.4% Euro 1 EUR 1.154 1.112 -3.6% Chinese Yuan Renminbi 100 CNY 14.776 14.366 -2.8% Brazilian Reias 100 BRL 26.663 25.118 -5.8% Philippine Peso 100 PHP 1.856 1.920 +3.4% UK Pound Sterling 1 GB
Slide 38: FY-2019 EPS reconciliation (1 of 2)
FY-2019 EPS reconciliation (1 of 2) From net profit to underlying profit In CHF m FY-2018 FY-2019 Net Profit 10 135 12 609 Restructuring costs 651 553 Impairments of property, plant & equipment, goodwill and int. assets 1 248 2 336 Net result on disposal of businesses (686) (3 416) Other adjustment
Slide 39: FY-2019 EPS reconciliation (2 of 2)
FY-2019 EPS reconciliation (2 of 2) From operating profit to underlying net profit In CHF m FY-2018 FY-2019 Operating profit adjusted 15 521 16 260 Net financial income / (expense) (761) (1 016) Adjusted taxes (3 515) (3 294) Adjusted income from associates and joint ventures 1 217 1 286 Adjusted no
Slide 40: 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 Underlyin