Slide 1: Full Year Results 2002 Roadshow, March 2003
Full Year Results 2002 Roadshow, March 2003 Full Year Results 2002 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: Agenda
Agenda Wolfgang Reichenberger: • Detail on the financials • Review of cost savings initiatives • Selected business review • Summary Peter Brabeck: • 2002 objectives and achievements • Accelerating, reshaping and delivering • 2003 objectives Full Year Results 2002 Name of chairman
Slide 4: Agenda: Detail on the financials
Agenda • Detail on the financials - Key achievements Full Year Results 2002 Name of chairman
Slide 5: Key achievements: excellent results
Key achievements: excellent results Versus CHF Reported 2001 2002 results Sales 89 bio + 5.3% EBITA 10.9 bio + 9.5% EBITA margin 12.3% + 50bp Net profit 7.6 bio + 13.2% EPS 19.51 + 13.1% Full Year Results 2002 Name of chairman
Slide 6: Key achievements: excellent results (constant currency)
Key achievements: excellent results Versus CHF Illustrative 2001 2002 constant currency Sales 89 bio + 13% EBITA 10.9 bio + 19% EBITA margin 12.3% + 60bp Net profit 7.6 bio + 19% EPS 19.51 + 19% Full Year Results 2002 Name of chairman
Slide 7: Key achievements: excellent financials
Key achievements: excellent financials • Operating cash flow up 19% to CHF 10.2 billion • Free cash flow up 27.1% to CHF 6.3 billion • Cash conversion cycle improves by 6 days • Total working capital decreased by CHF 0.8 bio • Significant reduction in net debt to CHF 15 bio • Financing cost falls fa
Slide 8: Agenda: Key figures, foreign currency
Agenda • Detail on the financials - Key achievements - Key figures, foreign currency Full Year Results 2002 Name of chairman
Slide 9: Key figures in foreign currency
Key figures* in foreign currency % % % mio CHF change EUR change USD change Sales 89'160 + 5.3 60'777 +8 57'560 + 14 EBITA 10'940 + 9.5 7'458 + 13 7'063 + 19 Net profit 7'564 + 13.2 5'156 + 17 4'883 + 23 EPS 19.51 + 13.1 13.30 + 17 12.60 + 23 Market cap. 113'368 - 17.4 77'649 - 16 81'560 +/- 0 *Illu
Slide 10: Agenda: Operational financials
Agenda • Detail on the financials - Key achievements - Key figures, foreign currency - Operational financials Full Year Results 2002 Name of chairman
Slide 11: Efficiency improvement drives EBITA margin
Efficiency improvement drives EBITA margin Diff. basis (% of sales) 2001 2002 points Sales (CHF million) 84'698 89'160 100 100 Cost of goods sold (44.5) (43.2) 130 Distribution (7.6) (8.0) (40) Marketing and admin. (34.7) (35.2) (50) R&D (1.4) (1.3) 10 EBITA 11.8 12.3 50 EBITDA 15.0 15.3 30 Calculat
Slide 12: Profitability by management responsibilities and geographic area
Profitability by management responsibilities and geographic area 2001 2002 Margin CHF bio EBITA Margin* EBITA Margin* improv bps Europe 2.9 11.0% 3.4 12.0% 100 Americas 3.6 13.5% 4.2 14.3% 80 AOA 2.7 17.2% 2.6 17.2% - Nestlé Waters 0.6 8.4% 0.7 9.0% 60 F&B EBITA up 11%, up 19% in constant currencies
Slide 13: Profitability by product group
Profitability by product group 2001 2002 margin CHF bio EBITA Margin* EBITA Margin* improv bps Beverages 4.26 17.7% 4.07 17.5% (20) Milk products, nutrition & ice cream 2.58 11.2% 2.76 11.8% 60 Prepared dishes & cooking aids 1.57 10.4% 1.71 10.8% 40 Chocolate, confectionery & biscuits 1.23 11.0% 1.1
Slide 14: Healthy cash flow
Healthy cash flow Mio 10248 10000 8851 8614 8187 8000 7401 6372 6000 5633 4000 3839 6278 5501 5599 4938 2000 4390 2691 3706 917 0 1995 1996 1997 1998 1999 2000 2001 2002 Free cash flow Operating Cash Flow (OCF) Good improvement in working capital Full Year Results 2002 Name of chairman
Slide 15: Net indebtedness down sharply, AAA maintained
Net indebtedness* down sharply "AAA" maintained Bio 25 19.4 20 15 15 10 6.6 6.2 5 3.0 0 1998 1999 2000 2001 2002 * Total financial liabilities minus liquid assets. Liquid assets do not include the carrying value of treasury shares (CHF 2.6 bio. at year-end 2002) Full Year Results 2002 Name of chairm
Slide 16: Agenda: Non operational financials
Agenda • Detail on the financials - Key achievements - Key figures, foreign currency - Operational financials - Non operational financials Full Year Results 2002 Name of chairman
Slide 17: Gains on disposals benefit net profit
Gains on disposals benefit net profit Diff. basis (% of sales) 2001 2002 point EBITA 11.8 12.3 50 Net other income/(expenses) (0.2) 1.9 210 Amortisation & impairment of goodwill (0.8) (2.6) (180) Net financing cost (0.5) (0.7) (20) Taxes (2.9) (2.6) 30 Minority interests (0.2) (0.4) (20) Associated
Slide 18: Other income (expenses): the numbers
Other income (expenses): the numbers • Total income: CHF 4.9 billion • Alcon (IPO of 25%) : CHF 3.9 billion • FIS : CHF 0.6 billion Full Year Results 2002 Name of chairman
Slide 19: Other income (expenses): the numbers
Other income (expenses): the numbers Total expenses: CHF 3.3 billion • Impairment of property, p&e: CHF 1.3 billion • Restructuring costs: CHF 1.1 billion Total goodwill impairments: CHF 0.8 billion Future restructuring costs to be around 0.5% of sales per year Full Year Results 2002 Name of chairma
Slide 20: Impairments: fixed assets
Impairments: fixed assets • Economies of scale and asset utilisation are critical to improving the Group ROIC • In line with Target 2004+, and other initiatives, we have impaired property, plant and equipment • The main focus is in Europe, where 40% of the Group's factories are located This reflects
Slide 21: Impairments/restructuring: the payback
Impairments/restructuring: the payback • We view this industrial restructuring as an essential investment in our future performance • As with any investment, it will be closely monitored to ensure that its returns meet our expectations, within the timeframe established • When detailed formal plans h
Slide 22: Impairments: goodwill
Impairments: goodwill This results largely from: • changes in consumer trends for pet care in Europe (from wet to dry) • a review of the Group's ice cream and frozen food businesses, primarily in Europe and the Far East Full Year Results 2002 Name of chairman
Slide 23: Net financing cost has decreased much faster than interest rates
Nestlé's net financing cost % has decreased much faster than interest rates % 7 6 5.8% 5.0% 5.0% 5 4.8% 4 3.7% 3 3.0% 2 1 0 H2 2001 H1 2002 H2 2002 Net financing cost (as a % of average net debt) 5 years USD Swap rate Nestlé benefited from going short duration in USD Net debt =2.4xFCF (2001: 3.9x) F
Slide 24: Tax rate and earnings per share
Tax rate and earnings per share* Underlying tax rate • increased from 27.4% to 28.3% - mainly due to geographic mix (USA) On-going tax rate • likely to be around 30%, but currency a big swing factor Underlying EPS • CHF 18.90, up from CHF 18.67 Underlying EPS, 2001 FX • CHF 19.94, up from CHF 18.67
Slide 25: Pension costs recognised in the P&L
Pension costs recognised in the P&L In millions of CHF 2000 2001 2002 Expenses for: Defined benefit plan 436 499 640 Defined contribution plan 281 310 309 Total charged to the P&L 717 809 949 Estimated incremental charge in 2003: CHF 250 mio Full Year Results 2002 Name of chairman
Slide 26: Agenda: Review of cost savings initiatives
Agenda Wolfgang Reichenberger: • Detail on the financials • Review of cost savings initiatives Full Year Results 2002 Name of chairman
Slide 27: Food and beverage efficiency initiatives
Food and beverage efficiency initiatives Incremental (CHF mio) Functional Owner 2002 2003 2004 2005 2006 TOTAL 2006 1. Target 2004+ Technical 1,500 Technical / 2. GLOBE /Op. efficiencies distribution 2,000 Supply 3. Other GLOBE benefits chain / IT 1,000 Finance 1,000 4. Project FitNes and control Ta
Slide 28: Evolution of Group's factories 1997 to 2002
Evolution of Group's factories 1997 to 2002 97-2001 2002 Number of factories 489 468 Acquired/set up + 119 + 65 Sold/closed/other - 140 - 25 Factories at 31.12.01* 468 Factories at 31.12.02** 508 Impairments & restructuring charges demonstrate commitment to improving asset utilisation *excludes Rals
Slide 29: Return on invested capital improves in 2002
Return on invested capital* improves in 2002 % 20 18.9 15 17.3 17.5 15.6 14.0 10 5 0 1998 1999 2000 2001 2002 ROIC including goodwill** dipped in 2002 to 11% from 13.8%, due mainly to acquisition of Ralston Purina *EBITA on segment assets (** plus gross goodwill on balance sheet) Full Year Results 2
Slide 30: Agenda: Nestlé Waters
Agenda Wolfgang Reichenberger: • Detail on the financials • Review of cost savings initiatives • Selected business review - Nestlé Waters Full Year Results 2002 Name of chairman
Slide 31: Nestlé Waters
Nestlé Waters • RIG 9.9% and EBITA grows 60bp to 9.0% • Important productivity/efficiency improvements • North America continued to be the engine of profitable growth with increased market share • Good year in Europe: East, West and HOD • Asia/Middle East 23% RIG with doubling of Nestlé PURE LIFE vo
Slide 32: Nestlé Waters North America
Nestlé Waters North America • An intense competitive environment • 2002 RIG of 16% • Revenue growth to $2.4 billion • EBITA margin improvement of 70 basis points • PET market share increases 4.6 points to 34.5% Nestlé Waters remains the clear market leader Full Year Results 2002 Name of chairman
Slide 33: Nestlé Pure Life / Nestlé Aquarel
Nestlé Pure Life / Nestlé Aquarel • Nestlé brands in 23 countries by end 2002 • Of these 8 sold Home and Office • 2002 volume nearly doubled to 650 mio litres • Several early launch markets had positive EBITA in 2002 • Expansion to 8 additional countries in 2003 • Aberfoyle brand transition to Nestl
Slide 34: Home and office at Nestlé
Home and office at Nestlé • HOD represented 17% of Nestlé Water sales in 2002 • Acquisitions in 2002/2003 have solidified our HOD leadership in three key regions USA (Sparkling Spring) Europe (Powwow, Clear Water, Saint Springs) Middle East (Al Manhal expansions) • European integration takes priorit
Slide 35: Agenda: Ice cream
Agenda • Detail on the financials • Review of cost savings initiatives • Selected business review - Nestlé Waters - Ice cream Full Year Results 2002 Name of chairman
Slide 36: Ice cream: many red markets in 2000
Ice cream: many "red" markets in 2000 EBITA . RIG . An unlikely basis for building a profitable business Full Year Results 2002 Name of chairman
Slide 37: Ice cream: more green markets in 2002
Ice cream: more "green" markets in 2002 EBITA RIG A sound basis for profitable growth Full Year Results 2002 Name of chairman
Slide 38: NIC competitive situation
NIC competitive situation % Share EUR AMS AOA 15% 16% 10% Spain Canada Australia Switzerland USA Philippines Profitable Russia Chile Malaysia market leader Peru South Africa Argentina Egypt Hong Kong Tunisia Strong no. 2 (growing & France East.Europe Brazil Thailand improving EBITA) Improvement Ital
Slide 39: Agenda: Prepared dishes and cooking aids
Agenda • Detail on the financials • Review of cost savings initiatives • Selected business review - Nestlé Waters - Ice cream - Prepared dishes and cooking aids Full Year Results 2002 Name of chairman
Slide 40: Prepared dishes and cooking aids: the US
Prepared dishes and cooking aids: the US Stouffer's Chef America USA Frozen Food prepared dishes handheld snacks 1999 2002 2002 • market size ($ billion ) 5.6 6.8 1.1 • market growth (%) - + 6.2* + 11.8** • market share Nestlé (%) 27.0 30.6 52.3 • market share nr 2 (%) 25.5 21.6 4.9 • * 3yr average;
Slide 41: Agenda: Summary
Agenda • Detail on the financials • Review of cost savings initiatives • Selected business review • Summary Full Year Results 2002 Name of chairman
Slide 42: Summary: excellent results
Summary: excellent results • EBITA increased 9.5% to CHF 10.9 billion • Net profit increased 13.2% to CHF 7.6 billion • EPS increased 13.1% to CHF 19.51 • Operating cash flow up 19% to CHF 10.2 billion • Free cash flow up 27.1% to CHF 6.3 billion • Working capital shows dramatic improvement • Signif
Slide 43: 2003E EV/EBITDA multiples
Food & Beverage 2003e EV/EBITDA multiples 14 12 10 10.1 9.9 9.3 9.4 9.5 9.5 9.5 9.0 9.0 2003E EV/EBITDA x 8 F&B Main Caps Europe avg (*) 8.2 8.8 6.2 7.2 F&B Main Caps US avg 6 F&B General Mills 4 Unilever 2 0 F&B EBITA up 11%, up 19% in constant currencies Sources : Goldman Sachs 20.02.2003 and Nest
Slide 44: 2003 possible issues and positives
2003 Possible issues • Easter is late • Petcare USA RIG impact • Dreyer's merger process • Japan competitive situation Positives • Efficiency gains: Target 2004+, GLOBE, FitNes • Soluble coffee and Nutrition performance • Purina; Schöller and Chef America synergies • China, Russia, India, Mexico...
Slide 45: Agenda
Agenda Wolfgang Reichenberger: • Detail on the financials • Review of cost savings initiatives • Selected business review • Summary Peter Brabeck: • 2002 objectives and achievements • Accelerating, reshaping and delivering • 2003 objectives Full Year Results 2002 Name of chairman
Slide 46: Nestlé: Key objectives in 2002
Nestlé: Key objectives in 2002 Drive profitability through efficiency programmes Continue to deliver 4 % RIG Continued improvement in Ice cream Improve performance of Chilled dairy and Petcare Integration of Ralston Purina, Ice cream Partners, Schöller Conclude partial IPO of Alcon Full Year Results
Slide 47: Nestlé: Key achievements in 2002
Nestlé: Key achievements in 2002 Drive profitability through efficiency programmes Good performance by Target 2004+, GLOBE on track, FitNes established Continue to deliver 4 % RIG Below trend target but quality of sales improved Continued improvement in Ice cream Positive RIG and 110 basis point imp
Slide 48: Three businesses reach sales of CHF 1 billion
Three businesses reach sales of CHF 1 billion • People's Republic of China (Greater China exceeds CHF1.4 billion) • Russia • Products used as carriers for branded active ingredients • Also, our food joint ventures, CPW and BPW, now contribute combined sales in excess of CHF 1 billion Full Year Resul
Slide 49: Agenda: Accelerating, reshaping and delivering
Agenda Peter Brabeck: • 2002 objectives and achievements • Accelerating, reshaping and delivering Full Year Results 2002 Name of chairman
Slide 50: Accelerating
Accelerating '92-'96 '97-'02 Average RIG +2.68% +3.72% EBITA margin +30bps +200bps EPS improvement +37% +114% Operating cash flow CHF 24bio CHF 50bio Average RIG 2000 to 2002 is above 4% Full Year Results 2002 Name of chairman
Slide 51: Reshaping
Reshaping • The products - From basic foodstuffs to R&D based products - From sustaining life to enhancing well-being • The organisation - From multi-national to multi-focal - From complexity = cost to efficiency in complexity • The business model - An open, asset efficient network organisation - Fr
Slide 52: Delivering
Delivering • Real, measurable organic growth • Ongoing efficiencies across admin & factories • Increasing EBITA margins • Improving returns on invested capital Sustainable, capital efficient and profitable long term growth Full Year Results 2002 Name of chairman
Slide 53: Agenda
Agenda Wolfgang Reichenberger: • Detail on the financials • Review of cost savings initiatives • Selected business review • Summary Peter Brabeck: • 2002 objectives and achievements • Accelerating, reshaping and delivering • 2003 objectives Full Year Results 2002 Name of chairman
Slide 54: Nestlé: Key objectives 2003
Nestlé: Key objectives 2003: • Maintenance of 4% RIG trend target as foundation for organic growth • Continued margin improvement • Continued improvement in ROIC • Continued improvement in Ice cream and Chilled dairy • Continued successful integration of acquisitions and GLOBE • First gains from the
Slide 55: Full Year Results 2002
Full Year Results 2002 Full Year Results 2002 Name of chairman