Nestle India Ltd. · NSE:NESTLEIND
Nestle India — Investor Presentation (December 2006)
67 slides from Nestle India's investor presentation, Dec 7, 2006
Slide 1: India: The Land of Opportunities
INDIA The Land of Opportunities……… Nestlé India December 7, 2006 Nestlé India Presentation, Dec 7, 2006
Slide 2: Disclaimer
Disclaimer This presentation may contain statements which reflect Management’s current views and estimates and could be construed as forward looking statements. The future involves certain risks and uncertainties that could cause actual results to differ materially from the current views being expre
Slide 3: Nestlé India
Nestlé India Martial Rolland Nestlé India Presentation, Dec 7, 2006
Slide 4: India and Nestlé
India and Nestlé Large, diverse, complex Region with v. low /skewed incomes (2/3rd people < 2$/day) however Great opportunities “unleashing 100% ( middle class, spending power, OOH, changing lifestyles, health…) + Potential” approach Sharpen current Integrate new opportunities strategies Stronger
Slide 5: Nestlé India A Balanced Portfolio
Nestlé India A Balanced Portfolio Contr. (%) Contr. (%) Milk Products 44.8 45.4 and Nutrition Prep. Dishes & Cooking Aids 20.0 18.7 Beverages 19.7 21.3 Chocolate and Confectionary 15.5 14.6 Jan-Sep 06 Jan-Sep 05 Turnover INR 21.8 bio INR 19.8 bio Nestlé India Presentation, Dec 7, 2006
Slide 6: The Milk District Model, driving a competitive advantage and a CSR
The Milk District Model, driving a competitive advantage and a CSR Nestlé Milk District Model 45 years of a progressive partnership with farmers Nestlé India Presentation, Dec 7, 2006
Slide 7: Nestlé Milk District Model
Nestlé Milk District Model 1 Nestlé India – The Business Vision 2 Evolution of the Nestlé Milk Districts 3 Nestlé processing units in India Nestlé presence in Rural India and Milk 4 Districts 5 Environment and the Community 6 Summary and Conclusions Nestlé India Presentation, Dec 7, 2006
Slide 8: Nestlé India The Business Vision
Nestlé India 1 The Business Vision To rapidly build Nestlé India as the Respected and Trustworthy leading Food, Nutrition, Health and Wellness Company ensuring long term sustainable and profitable growth Nestlé India Presentation, Dec 7, 2006
Slide 9: Evolution of Nestlé Milk Districts
2 Evolution of Nestlé Milk Districts Nestlé Corporate Business Principles: Agricultural raw materials, principally milk, coffee, cocoa, cereals, vegetables, fruit, herbs, sugar and spices, are vital factors affecting the quality and costs of Nestlé manufactured food products and, as a consequence, t
Slide 10: Evolution of Nestlé Milk Districts
2 Evolution of Nestlé Milk Districts 1866: Nestlé and the Anglo-Swiss Condensed Milk Company started the milk district development around the towns of Vevey and Cham in Switzerland 1872: With demand outstripping production, the Anglo-Swiss Condensed Milk Company set up two milk districts in the Swis
Slide 11: Evolution of Nestlé Milk Districts
2 Evolution of Nestlé Milk Districts 1912: Acquired the Dutch company – Galak Condensed Milk Company of Rotterdam, Holland and also established a skimmed milk powder company entirely for export market 1920: Entered South America by establishing a milk districts in Brazil, in Argentina in 1922, and i
Slide 12: Evolution of Nestlé Milk Districts
2 Evolution of Nestlé Milk Districts Given the ever-increasing consumer demand, it is an ongoing priority and challenge to: ¾ Secure a plentiful supply of fresh milk ¾ Find areas to produce high quality milk ¾ Find cost-effective ways to meet projected demand Nestlé India Presentation, Dec 7, 2006
Slide 13: Nestlé's Processing Units in India
3 Nestlé’s Processing Units in India Moga (Punjab) 1961 Choladi (Tamilnadu) 1967 Samalkha (Haryana) 1993 Ponda (Goa) 1995 *This pictorial representation does not Nanjangud (Karnataka) 1989 purport to be the political map of India. Bicholim (Goa) 1997 Pantnagar (Uttaranchal) 2006 Nestlé India Present
Slide 14: Nestlé's Milk Processing Units in India
4 Nestlé’s Milk Processing Units in India Over Four decades of sustained growth ¾ Starting in 1961, Nestlé set up its first milk processing facility at Moga in the State of Punjab ¾ Built in 1991, today Samalkha factory in Haryana along with Moga produces over 100,000 tons of milk products annually
Slide 15: Nestlé Milk Districts
4 Nestlé Milk Districts Starting in Moga with 511 kg of milk on the first day of collection (15th Nov 1961), today TOTAL AREA : Nestlé procures over 11,00,000 kg of milk per 50,362 SQ. KMS day during the peak season in the states of Punjab and Haryana. MOGA FACTORY 14,000 square kilometers area TOTA
Slide 16: Nestlé Milk Districts
4 Nestlé Milk Districts Nestlé adds value at each step of the milk supply chain… The The Milk Milk District District is is an an integral integral part part of of delivering delivering high high quality quality nutritional nutritional milk milk products products toto our our consumers consumers Dair
Slide 17: Nestlé Milk Districts
4 Nestlé Milk Districts Bringing worldwide competence of Nestlé at the doorstep of the farmers… …to help them improve milk productivity and quality Nestlé India Presentation, Dec 7, 2006
Slide 18: Nestlé Milk Districts
4 Nestlé Milk Districts Setting up an efficient Milk Collection system ¾ On-going technical assistance to farmers for improved milk productivity and quality ¾ Maintenance of sustainable farming practices ¾ Establishing milk collection points and arranging milk collection ¾ Installing chilling center
Slide 19: Technical Assistance to Farmers
4 Nestlé Milk Districts Technical Assistance to Farmers …to help them improve milk productivity and quality ¾ Training and development on good farm practices ¾ Regular audits of farmers to ensure that good farm practices are implemented & maintained ¾ Testing of milk at collection and cooling center
Slide 20: Technical Assistance to Farmers
4 Nestlé Milk Districts Technical Assistance to Farmers ¾ Veterinary & field staff offering round the clock technical services ¾ Veterinary medicines are provided to farmers ¾ Artificial insemination centers ¾ highly pedigreed bulls are provided Nestlé India Presentation, Dec 7, 2006
Slide 21: Technical Assistance to Farmers
4 Nestlé Milk Districts Technical Assistance to Farmers ¾ Good quality fodder seed is provided to farmers ¾ High quality balanced cattle feed distributed annually ¾ Subsidized milking machines have been provided ¾ Technical support is extended for: - Silage making techniques, - Bio-Gas generation &
Slide 22: Technical Assistance to Farmers
4 Technical Assistance to Farmers Silage making Bio-Gas Generators and Vermicompost production Nestlé India Presentation, Dec 7, 2006
Slide 23: Farmers Education Programs
4 Nestlé Milk Districts Farmers Education Programs ¾ Establishes herd demonstration farms ¾ Conducts field camps to impart education on good dairy practices ¾ Organizes factory visits and special educational tours for dairy farmers ¾ Offers prizes to farmers in the Nestlé milk competition ¾ Sensitiz
Slide 24: Farmers Education Programs
4 Nestlé Milk Districts Farmers Education Programs Helping village women learn ¾ Nestlé recognizes the role played by women in the dairy farm and has specially developed an education program. ¾ Through posters, demos and talks, village women are taught good dairying practices Over 12,000 women have
Slide 25: Nestlé Milk Districts
4 Nestlé Milk Districts 98000 2240 2006 Dec, 2006 data Nestlé India Presentation, Dec 7, 2006
Slide 26: Helping Farmer improve Milk Productivity
4 Nestlé Milk Districts Helping Farmer improve Milk Productivity …to help farmers achieve higher milk yields over longer lactation periods, in 1982 Nestlé introduced the milk cows to the benefit of its farmers …from a mere 0.5 % cow milk in 1982, today 50% of the milk procured is cow milk Nestlé Ind
Slide 27: Nestlé – The Milk Maximizer
4 Nestlé Milk Districts Nestlé – The Milk Maximizer Milk density TOTAL AREA : 50,362 SQ. KMS In Moga Milk Collection area, milk available for processing to MOGA FACTORY TOTAL AREA : Milk Plants, has risen 50,362 SQ. KMS to twice that of rest of Punjab Nestlé India Presentation, Dec 7, 2006
Slide 28: Sustainable Agriculture
Sustainable Agriculture – Key to long-term sustainable growth NESTLE What is the SAI Platform? DANONE Overall objective UNILEVER CAMPINA Promote CIO Sustainable Agriculture to meet the needs of DANISCO today and future generations COCACOLA DOLE Our definition EFICO “Sustainable agriculture (SA) is a
Slide 29: Environment and the Community
5 Environment and the Community Solar heaters at Nestlé milk collection Centres save energy Rain Water And help create Silencers on Harvesting help in awareness amongst generator exhausts better water communities at Nestlé milk management at Dairy collection Centres farms Nestlé India Presentation,
Slide 30: Environment and the Community
5 Environment and the Community Many of our factories are ZERO WASTE DISCHARGE – In Moga factory part treated waste of the Waste Water water is is treated and recovered for in- supplied to farmers house irrigation for crop irrigation. Nestlé India Presentation, Dec 7, 2006
Slide 31: Community Projects
5 Community Projects Providing access to Clean Drinking Water in Village schools • Creating awareness in the communities around its factories • Children in local village schools are the key beneficiaries Nestlé India Presentation, Dec 7, 2006
Slide 32: Community Projects
5 Community Projects Water Education Program Posters, Demonstrations are used as a medium to teach students water basics like the water cycle, ground water table, uses of water, water resources, ground water depletion etc. Nestlé India Presentation, Dec 7, 2006
Slide 33: Summary and Conclusions: Benefits the Farmer
6 Summary and Conclusions A Win-Win situation for all… …benefits the Farmer ¾ Results in steady incremental income for the farmers ¾ Generates Employment for rural residents ¾ Significant improvements in the standards of living of rural communities ¾ Affords a profitable alternative to traditional f
Slide 34: Summary and Conclusions: Benefits the Milk Processor
6 Summary and Conclusions A Win-Win situation for all… …benefits the milk processor ¾ Nestlé does not own any agricultural land or farms, but is committed to develop long-term credible relationships with dairy farmers based on mutual trust ¾ This makes mutual economic sense and ensures long- term su
Slide 35: The Summary
The Summary Large, diverse, complex Region with v. low /skewed incomes (2/3rd people < 2$/day) however Great opportunities “unleashing 100% ( middle class, spending power, OOH, changing lifestyles, health…) + Potential” approach Sharpen current Integrate new opportunities strategies Stronger cons
Slide 36: Nestlé India Financials
Nestlé India Financials Vidur Mathur Nestlé India Presentation, Dec 7, 2006
Slide 37: Financials
FINANCIALS Financials
Slide 38: Total Shareholder's Return
Total Shareholder’s Return 140% over the last 19 quarters. (Bloomberg) Market Capitalization has doubled over this period from INR 49 Bio. to INR 101 Bio. Some Rankings: Return on Capital Employed: No 1 (Source: Latest Business India) Return on Equity: No 2 in BSE FMCG Index & BSE SENSEX com
Slide 39: Driving Total Shareholders Return
Driving Total Shareholders Return The Value Drivers 1. Sales Growth 2. Profit Margin 3. Working Capital Intensity 4. Fixed Capital Intensity 5. Income Tax Rate 6. Cost Of Capital 7. Value Growth Duration
Slide 40: Sales Growth (1)
SALES GROWTH (1)
Slide 41: Sales Evolution
Sales Evolution Gross Sales INR Bio Real Internal Growth (%) Organic Growth (%) 30.0 13 12.1 11.5 11.6 11.7 12 11.4 11.3 10.4 11 9.5 10 25.0 8.5 9 7.9 8 7 20.0 6.3 6 5 4.4 4 20.6 22.9 23.9 26.7 19.9 22.0 15.0 3 2002 2003 2004 2005 Jan-Sep 05 Jan-Sep 06 Aff. Exports 1.7 1.8 1.5 1.7 1.3 1.2 INR Bio Ba
Slide 42: Channel-wise Sales
Channel-wise Sales Volume (000’ Tons) – Jan-Sep Value@ (INR Bio) – Jan-Sep 2006 2005 Var% 2006 2005 Var% Domestic 162.3 149.1 8.8 19.7 17.7 11.3 # Exports 12.3 13.8 (10.1) 2.0 2.0 (0.0) Total 174.6 162.9 7.2 21.8 19.8 10.1 @ Gross Sales including excise duty Mix of Domestic to Exports remains stable
Slide 43: Balancing Export Portfolio
Balancing Export Portfolio INR Bio 2.4 2.6 2.4 2.6 2.0 2.0 28 33 52 56 54 Contr. 69 (%) 72 67 48 46 44 31 2002 2003 2004 2005 Jan-Sep 05 Jan-Sep 06 Exports to Russia Others
Slide 44: Product Categories: Jan - Sep 2006
Product Categories: Jan - Sep 2006 Organic Growth (%) Prepared Dishes & 20 Cooking Aids 4.4 3.4 Milk Products & 15 Nutrition Chocolate & Confectionery 10 21.8 9.7 Milk Products & Total Nutrition 5 Beverages 4.3 0 -14 -9 -4 1 6 11 16 Volume Growth (%) Bubble size represents Gross Sales (INR Bio)
Slide 45: Milk Products & Nutrition
Milk Products & Nutrition • Market Leader in Baby Foods, Infant Formula, Sweetened Condensed Milk • Strong No 2 in Dairy Whitener • Growing presence in Fresh Dairy Sales Volume (000’ tons) Sales (INR Bio) Contribution to Total Sales 80 10.0 78 U 2.8% 15.5 U 8.7% 76 78.2 9.0 44.8 74 9.7 20.0 76.0 72
Slide 46: Beverages
Beverages • Market Leader in Instant Coffee Sales Volume (000’ tons) Sales (INR Bio) Contribution to Total Sales 19 4.6 U (12.1)% 18 15.5 4.4 44.8 17 18.7 U 1.8% 20.0 4.2 16 4.3 16.5 4.2 19.7 15 4.0 Jan-Sep 05 Jan-Sep 06 Jan-Sep 05 Jan-Sep 06 Jan-Sep 2006
Slide 47: Prepared Dishes & Cooking Aids
Prepared Dishes & Cooking Aids • Market Leader in instant Noodles & Ketchups • Strong No 2 in Healthy Soups Sales Volume (000’ tons) Sales (INR Bio) Contribution to Total Sales 60 4.5 U 18.2% 55 4.0 15.5 U 18.0% 4.4 44.8 57.0 20.0 50 3.5 3.7 48.3 19.7 45 3.0 Jan-Sep 05 Jan-Sep 06 Jan-Sep 05 Jan-Sep
Slide 48: Chocolate & Confectionery
Chocolate & Confectionery • Market Leader in Wafers and white chocolates • Strong No 2 in Chocolates • Market Leader in Eclairs Sales Volumes (000’ tons) Sales (INR Bio) Contribution to Total Sales 23 3.6 3.4 15.5 21 U 15.7% 22.9 3.2 U 16.3% 44.8 3.4 20.0 3.0 19.8 19 19.7 2.9 Jan-Sep 05 Jan-Sep 06 2
Slide 49: Profit Margins (2)
PROFIT MARGINS (2)
Slide 50: Evolution of Operating Margins
Evolution of Operating Margins INR Bio. 20.5 6.0 19.5 19.5 19.7 21 19.0 19.2 18.3 17.5 17.6 17.1 16.9 17.0 18 5.0 15 4.0 12 9 3.0 6 4.0 3.5 4.4 3.9 4.5 4.0 5.2 4.6 4.0 3.6 4.2 3.7 2.0 3 2002 2003 2004 2005 Jan-Sep 05 Jan-Sep 06 EBITD-INR.Bio EBIT-INR.Bio EBITD % of Gross Sales EBIT % of Gross Sales
Slide 51: Evolution – Milk Solid Prices
Evolution – Milk Solid Prices 120 Current 111 110 Indexed price Per Kg 106 103 2006 100 100 97 97 97 95 2005 94 91 88 95 90 2004 80 Q1 Q2 Q3 Q4 Period Indexed with base Q1-04
Slide 52: Evolution – Green Coffee Prices
Evolution – Green Coffee Prices 230 229 Current 210 Indexed price per KG 190 174 170 158 2006 170 152 153 150 2005 130 114 121 110 100 100 101 101 2004 90 Q1 Q2 Q3 Q4 Period Indexed with base Q1-04
Slide 53: Evolution – HVF Prices
Evolution – HVF Prices (329 mio, 12% of RM costs, 5% of Net Sales) 110 Current 106 106 100 102 2006 Indexed price per KG 100 98 101 96 2004 94 90 90 93 88 87 2005 80 Q1 Q2 Period Q3 Q4 Indexed with base Q1-04
Slide 54: Evolution – Sugar Prices
Evolution – Sugar Prices (329 mio, 12% of RM costs, 5% of Net Sales) Current 150 146 145 141 140 2006 140 134 Indexed price per KG 132 130 128 2005 130 120 116 113 2004 111 110 100 100 Q1 Q2 Q3 Q4 Period Indexed with base Q1-04
Slide 55: Evolution – Wheat Flour Prices
Evolution – Wheat Flour Prices (329 mio, 12% of RM costs, 5% of Net Sales) 140 138 Current 130 Indexed price per KG 120 118 115 116 2006 110 104 2005 100 2004 100 96 97 99 96 95 90 Q1 Q2 Q3 Q4 Period Indexed with base Q1-04
Slide 56: Working Capital Intensity (3)
WORKING CAPITAL INTENSITY (3)
Slide 57: Rotation of Average Operating Working Capital
Rotation of Average Operating Working Capital Times 36 34.8 31.4 32 30.8 27.7 29.0 28 28.0 25.2 Adjusted 24 21.8 20 2002 2003 2004 2005 Jan-Sep 05 Jan-Sep 06 Basis International Accounting Standards
Slide 58: Fixed Capital Intensity (4)
FIXED CAPITAL INTENSITY (4)
Slide 59: Investment in Fixed Assets
Investment in Fixed Assets INR mio. % of Net sales 1200 7.0 1,054 1000 5.1 781 800 742 5.0 681 596 600 3.3 458 2.9 3.0 3.0 400 3.0 2.3 200 0 1.0 2002 2003 2004 2005 Jan-Sep 05 Jan-Sep 06 Amount % of NPS Dep. 494 463 491 498 385 404
Slide 60: Rotation of Average Tangible Fixed Assets
Rotation of Average Tangible Fixed Assets Times 6.8 6.7 6.8 6.5 6.3 6.4 6.2 6.0 5.6 5.4 5.2 4.8 4.4 4.0 2002 2003 2004 2005 Jan-Sep 05 Jan-Sep 06 Basis International Accounting Standards
Slide 61: Income Tax Rate (5)
INCOME TAX RATE (5)
Slide 62: Evolution of Tax
Evolution of Tax % 38 36.8 36.6 35.9 36 35.0 34.9 34.7 34.4 34.5 34.2 34 33.3 34.7 33.7 32 30 2002 2003 2004 2005 Jan-Sep 05 Jan-Sep 06 Marginal Rate % Effective Rate % ( rates are a % of pre-tax profit excluding FBT)
Slide 63: Cost of Capital (6)
COST OF CAPITAL (6)
Slide 64: Evolution – Cost of Capital
Evolution – Cost of Capital WACC Risk Free Bond Rate 15.0 14.2 12.0 10.5 10.8 9.4 9.7 9.7 9.0 9.0 7.2 7.2 6.6 6.6 5.3 6.0 3.0 0.0 2002 2003 2004 2005 Jan-Sep 05 Jan-Sep 06 Basis International Accounting Standards
Slide 65: Value Growth Duration (7)
VALUE GROWTH DURATION (7)
Slide 66: Creation of Economic Value
Creation of Economic Value 12.2 2003 12.0 2.3 11.8 60% Jan-Sep 2002 2005 2006 Return on Sales (%) 11.6 11.4 1.8 2.7 2.2 49% 61% 62% 11.2 11.0 2004 10.8 10.6 2.2 54% 10.4 10.2 5.5 5.7 5.9 6.1 6.3 6.5 Asset Turns Bubble size represents Economic Profit (INR Bio) Basis International Accounting Standards
Slide 67: Strategic Pillars for Value Growth
Strategic Pillars for Value Growth Nutrition, Health & Wellness Innovation and Renovation Availability for all ages Effective & Efficient Operations Consumer Communications People / Structure GLOBE