Slide 1: 2005 full year results roadshow
2005 full year results roadshow 2005 full year roadshow – February/March 2006 Name of chairman
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: Restatement of 2004 results
Restatement of 2004 results • 2004 results have been restated following the first application of IFRS 2 share-based payment and the discontinued operation resulting from the announcement in December 2005 for the chilled dairy activities in Europe, where applicable. • 2005 Full Year Organic Growth re
Slide 4: Agenda
Agenda ¾ 2005 key messages ¾ EBITA evolution ¾ A portfolio of strong brands ¾ Nutrition, Health & Wellness – driving growth & profitability ¾ Benefits of scale ¾ Strategic review 2005/6 ¾ Corporate governance ¾ Outlook 4 2005 full year roadshow – February/March 2006 Name of chairman
Slide 5: 2005: Delivering The Nestle Model
2005: Delivering The Nestle Model: Improvement in key performance measures ¾ Strong organic growth both F&B and Pharma: 6.2% ¾ EBITA margin up 20bps to 12.9%; up CHF 1 Billion ¾ Improvement in Return on Invested Capital: +50bps ¾ Underlying EPS up 12.9%; dividend CHF 9, up 12.5% ¾ Strong cash flow –
Slide 6: Positive evolution of EBITA margin
Positive evolution of EBITA margin 13.1 Market Operational Mix activities + 30 - 20 12.9 2005 12.8 12.8 Currencies Share-based Portfolio payments optimisation 12.7 + 10 - 10 + 10 2004 12.7 6 2005 full year roadshow – February/March 2006 Name of chairman
Slide 7: EBITA influencers: 12.7% to 12.9% = +20 bps
EBITA influencers: 12.7% to 12.9% = + 20 bps Positive Negative • Efficiencies & growth +160 • Input costs, net of • Mkt mix, inc Alcon +30 pricing -155 • Portfolio • One-offs: China, optimisation +10 Russian & • Currencies +10 UK confectionery -25 • Share-based payments -10 Total positive +210 Total
Slide 8: Brands
Brands A portfolio of strong brands: The foundation for value creation 8 2005 full year roadshow – February/March 2006 Name of chairman
Slide 9: 21 brands with sales over 1 billion Swiss Franc
21 brands with sales over 1 billion Swiss Franc Beverages Water Chocolate, confectionery and biscuits Prepared dishes and cooking aids PetCare 9 2005 full year roadshow – February/March 2006 Name of chairman
Slide 10: 21 brands with sales over 1 billion Swiss Franc
21 brands with sales over 1 billion Swiss Franc Milk products BABs Pharma Nutrition Ice cream In Nutrition, Nestlé qualifies as a CHF 1 billion brand in both the Infant Nutrition and Baby Food categories. Branded Active Benefits are added to products to address a specific need state. The sales of pr
Slide 11: Bigger brands grow faster
Bigger brands grow faster (Organic growth) EUROPE AMERICAS AOA + 5.0 + 6.6 n/a + 5.4 + 11.3 + 6.3 + 0.2 + 7.8 + 12.2 n/a + 7.8 n/a n/a + 10.6 n/a + 52.8 + 51.9 +26.0 11 2005 full year roadshow – February/March 2006 Name of chairman
Slide 12: Share gains in key categories
Share gains in key categories 16.0 Market Nestlé 11.7 8.6 5.6 3.5 3.1 2.0 1.8 PetCare Waters Ice Cream Soluble Coffee CAGR CAGR CAGR CAGR (%) Value (%) Volume (%) Value (%) 95-05 02-05 98-05 01-05 12 2005 full year roadshow – February/March 2006 Name of chairman
Slide 13: The Transformation to Nutrition, Health & Wellness
The Transformation to Nutrition, Health & Wellness Driving growth & profitability 13 2005 full year roadshow – February/March 2006 Name of chairman
Slide 14: BAB's: adding relevant nutrition, health & wellness to strong brands
BAB's: adding relevant nutrition, health & wellness to strong brands in a proprietary way Vitality / Protection Immunity & Protection Heart Health Long-Lasting Energy R Intestinal Health Growth & Building Stronger Easy Energy Release Development Bones Digestion Active Cholesterol Long-Lasting Feelin
Slide 15: BAB's on increasing number of products
BAB's on increasing number of products 15 2005 full year roadshow – February/March 2006 Name of chairman
Slide 16: Accelerating sales of Branded Active Benefits
Accelerating sales of Branded Active Benefits Branded Active Ingredients Branded Active Benefits 3.0 2.9 2.5 2.5 Sales ( CHF Billions ) 2.0 1.8 1.5 1.0 1.2 0.5 0.6 GLOBE GLOBE 0.5 0.4 0.2 98 99 00 01 02 03 04 05 16 2005 full year roadshow – February/March 2006 Name of chairman
Slide 17: Driving growth and margin through BAB's
Driving growth and margin through BAB's Nesvita "Pro-Heart" with Acticol • With BAB to reduce cholesterol • 17% price premium to average Nesvita "Pro-Digestion" with Actifibras • With BAB to smoothen digestion • 19% price premium to average • Nestlé share in '05 grew from 33% to 37% • Roll out in 6
Slide 18: Nutrition driving growth
Nutrition driving growth • Nutrition sales* increased by 7.6% • Products with 60/40+ grow 15% faster than Group • Sales of products with branded active benefits increased by 20% *Excluding 2005 product exchange. All numbers 2005 18 2005 full year roadshow – February/March 2006 Name of chairman
Slide 19: Portfolio mix improving
Portfolio mix improving % 15.0 China Dreyer's 12.0 Waters 9.0 NPP NA Brazil RIG 6.0 Mexico NPPE USA 3.0 France 0.0 Germany GB Region -3.0 -3.0 0.0 3.0 6.0 9.0 12.0% Organic Growth F&B average 19 2005 full year roadshow – February/March 2006 Name of chairman
Slide 20: Scale becoming a competitive advantage
Scale becoming a competitive advantage • GLOBE roll-out accelerating 75,000+ system users; 300+ factories; 300+ distribution centres; 200+ sales offices • 80% of F&B using GLOBE systems by end 2006 • Shared service centres operational in all Zones • Selective outsourcing started • Efficiency program
Slide 21: Efficient operations driving down COGS
Efficient operations driving down COGS COGS in % of NPS CHF 55% 0.6 bio CHF Cumulative cost 1.3 bio CHF 2.2 bio CHF improvements 50% 3.1 bio CHF 51.8% 51.2% 50.1% 4.0 bio CHF 48.1% 5.2 bio CHF CHF CHF 45% 46.8% 6.4 bio 7.6 bio 8.7 bio 44.5% 43.2% 42.7% 40% 41.7% 41.7% 5% 0% 1996 1997 1998 1999 2000
Slide 22: Bigger innovations, rolled out faster
Bigger innovations, rolled out faster • NAN HA going global in Infant nutrition • Beneful going pan-European • Nescafé mixes launches going global • Nestlé Ideal rolling out across emerging markets 22 2005 full year roadshow – February/March 2006 Name of chairman
Slide 23: Going global in Infant Nutrition
Going global in Infant Nutrition Premium Infant Formula • Marketed under premium brands Nan, Nidina, Nidal or Beba • Clinically proven allergy and/or diarrhoea preventive • The roll-out is global & will be in most markets during H1/2006 Generating double digit growth in most markets 23 2005 full yea
Slide 24: Going pan-European with Beneful
Going pan-European with Beneful Beneful – launched 2001 in US • Developed to various need states in US: Healthy Radiance, Healthy Growth, etc • US sales grew over 35%; market share increased • Roll-out in Europe started in 2004 Brand sales over CHF 400 million 24 2005 full year roadshow – February/M
Slide 25: Nescafé mixes go global
Nescafé mixes go global: increasing coffee consumption among younger consumers Turkey: launch of Nescafé 3-in-1 • Purchasable individually – affordable • Soluble coffee growth of 32%, Mixes 79% Australia: launch of Nescafé Café Inspired • From 15% to over 50% share in 2.5 yrs • Total Nescafé growth
Slide 26: Nestlé Ideal rolling-out across emerging markets
Nestlé Ideal rolling-out across emerging markets: responding to milk cost crisis for low income families Milk costs rise significantly – pricing it out of reach of low income families in Latin America – risk of malnutrition in children Solution: Nestlé Ideal, engineered to a low price but with enhan
Slide 27: The Nestlé Model
The Nestlé Model 1. Long-Term Organic Growth Target 5 - 6% EBITA Margin 2. Continued year after year improvement of EBITA margin 3. Capital efficiency / Business ROIC 1998 2000 2002 2004 2006 2008 2010 Resulting in an industry outperforming, long-term total shareholder return 27 2005 full year roads
Slide 28: Strategic overview
Strategic overview • Nestlé Nutrition & steps towards a wellness future • European Chilled Dairy • Nestlé FoodServices • Corporate governance • Outlook 28 2005 full year roadshow – February/March 2006 Name of chairman
Slide 29: The transformational opportunity
The transformational opportunity Strategic Operational • From transforming • Creating an agile fleet of commodities to added businesses/markets value food products • With increased focus on demand generation • From added value to • And an efficient support Health, Nutrition & structure Wellness • Re
Slide 30: Nestlé Nutrition & steps towards a wellness future
Nestlé Nutrition & steps towards a wellness future Nestlé Nutrition • Now stand alone & reporting separately • Infant, Healthcare and Performance Nutrition • • Targets raised for growth and profitability 30 2005 full year roadshow – February/March 2006 Name of chairman
Slide 31: European Chilled Dairy
European Chilled Dairy The challenge • Private label eroding branded volumes and NCDE market shares • Chilled Dairy production overcapacity eroding margins The objective – a creative solution • To grow Nestlé's brand presence in Chilled Dairy Müller in Germany, Emmi in Switzerland, Lactalis in Europ
Slide 32: A base for renewed growth and profitability
A base for renewed growth and profitability Nestlé Lactalis Marketing Marketing Supply Chain Supply Chain Expertise Expertise expertise expertise Brands && Brands Sales Sales R&D R&D EUR 0.3 EUR 0.3 Bio Bio Growth && Growth JV can Sales Sales Profitability Profitability leverage EUR 1.2 EUR 1.2 Bio
Slide 33: The attractiveness of Food Service
The attractiveness of Food Service Estimated Global Sales (CHF bio. 2004) • Big and growing opportunity 6.5 CHF 2 trillion global consumer spend 5-7% growth in major operator segments 4.0 • Relevant market CHF 400 bio 3.7 80% in Food, 20% in Beverages 3.7 • Consumer trends drive growth 50% of US con
Slide 34: Five Strategic Business Pillars
Five Strategic Business Pillars Global Beverage Regional Food Standard Proprietary Solutions Standard Ready-to-Serve • CHF 30 bn • CHF 25 bn • CHF 230 bn • ~CHF 15 bn • 0-3% growth • 5-10% growth • 0-3% growth • 4-6% growth • High EBITA • High EBITA • Average EBITA • High EBITA • CHF 80 bn • High gr
Slide 35: Strategy
Strategy i Standard: Build on existing ingredient businesses; Nescafé, Chef, Maggi, etc. i Solutions: Roll-out of beverages & customized food solutions to major customers i Route to Market a critical service component, to be rolled-out market by market i Must win markets – North America, France, Ger
Slide 36: Corporate governance
Corporate governance Mandate to facilitate modernisation of articles • Existing articles relate to out-dated legal context • "Dispos" currently render major change impossible • Shareholder survey confirmed desire for change • Shareholder mandate will lay foundation for future modernisation with shar
Slide 37: The Four Factors of Group Sales 1996-2005
The Four Factors of Group Sales 1996-2005 % Growth 10 years average 15% 10% 1.0% 5% 2.3% OG 3.4% 5.7% 0% -1.4% -5% OG: Organic Growth -10% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Not restated; in 2001: RIG Pricing & Other Acquisitions/Divestitures FX Impact including TTS effect 37 2005 ful
Slide 38: Group EBITA Margin over last 10 years
Group EBITA Margin over last 10 years EBITA Nestlé Group EBITA and EBITA (mn CHF) Margin from 1996 to 2005 % of Sales 14'000 13.5% 13'000 12.9% 12.6% 13.0% 12'000 12.5% 12.3% 11'000 12.5% 11.8% 11.8% 10'000 12.0% 9'000 11.1% mn CHF 8'000 11.5% 7'000 6'000 11.0% 5'000 10.3% 10.3% 10.2% 10.5% 4'000 3'
Slide 39: Actively managed capital structure benefits shareholders: cash returns
Actively managed capital structure benefits shareholders: cash returns CHF 7.0 Share buy-back bn 6.2 6.0 Dividend 5.0 2.6 4.5 +39% 4.0 +59% 1.4 3.0 2.8 2.0 3.1 3.6 1.0 0 2004 2005 2006* * 2006 assumes completion of 2nd buy-back programme and payment of proposed CHF 9 dividend 39 2005 full year roads
Slide 40: Outlook
Outlook The Nestlé Model reconfirmed for 2006: 5-6% organic growth, plus consistent margin improvement 40 2005 full year roadshow – February/March 2006 Name of chairman
Slide 41: 2005 full year results roadshow
2005 full year results roadshow 2005 full year roadshow – February/March 2006 Name of chairman