Slide 1: 2012 First Half Results
2012 First Half Results Wan Ling Martello Chief Financial Officer Ian Metcalfe Investor Relations Officer August 9th, 2012 Half Year Roadshow
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: Agenda
Agenda First Half 2012 Group Highlights First Half 2012 Business Performance Cash Flow Concluding Remarks 2 August 9th, 2012 Half Year Roadshow
Slide 4: First Half 2012 Group Highlights
First Half 2012 Group Highlights Competitive Advantages Consistent performance with steady momentum Making the right choices Embracing the opportunities for growth First Half performance aligned with Nestlé Roadmap Operational Growth Drivers Guidance reconfirmed: Pillars To deliver the Nes
Slide 5: First Half 2012 Group Highlights
First Half 2012 Group Highlights At constant As reported exchange rates Sales 44.1 bn Real Internal Growth +2.9% Organic Growth +6.6% Momentum Trading Operating Profit 6.6 bn +6.3% maintained Trading Operating Profit Margin 15.0% -10bps -10bps in Q2 Net Profit 5.1 bn Net Profit Margin 11.6% +10bps O
Slide 6: Growth Across All Regions
Growth Across All Regions First Half 2012 % OG % RIG Continued growth in all three regions 12.6 Europe: tough comparators and trading environment that deteriorated 8.9 Americas: the region maintained its momentum, consumer confidence 6.4 remained low in the North, US second quarter accelerated
Slide 7: Growth Continues to be Broad Based
Growth Continues to be Broad Based % OG H1 2012 12.9 12.1 12.0 8.0 6.6 2.6 -0.7 Group Emerging BRIC PPP Developed Portugal, Italy, Billionaire Markets Markets Greece & Brands Spain * Includes Zones, Nestlé Waters, Nestlé Nutrition, Nestlé Professional, Nespresso, NHSc, and JVs 6 August 9th, 2012 Hal
Slide 8: Growth Across All Operating Segments
Growth Across All Operating Segments First Half 2012 % OG % RIG 11.6 9.6 8.0 6.6 5.7 5.6 5.7 3.5 2.4 2.0 0.1 -0.1 Zone Zone Nestlé Nestlé Other Zone Europe AOA Waters Nutrition Americas Sales 13.4 7.4 9.2 3.6 3.8 6.7 CHF bn rounded 7 August 9th, 2012 Half Year Roadshow
Slide 9: Zone Americas
Zone Americas Sales CHF 13.4 bn OG 5.7% RIG -0.1% TOP Margin 17.4% +10 bps Frozen category remained under Nearly all categories double-digit pressure; innovations and related across Latin America communications in Pizza and Lean Cuisine Brazil, Mexico and the southern markets drove performance
Slide 10: Zone Europe
Zone Europe Sales CHF 7.4 bn OG 2.4% RIG 0.1% TOP Margin 15.4% -100 bps Innovation, Premium and PPPs helped drive growth in an environment that deteriorated Western Europe key highlights were France, GB region and Benelux Central and Eastern Europe had continued strong performance by Ukraine,
Slide 11: Zone Asia, Oceania & Africa
Zone Asia, Oceania & Africa Sales CHF 9.2 bn OG 11.6% RIG 8.0% TOP Margin 18.9% -60 bps Continued double-digit growth building on a strong 2011 Emerging markets double-digit in almost all categories and geographies China, India, Africa and the Middle East were highlights of the Zone Japan ac
Slide 12: Nestlé Nutrition
Nestlé Nutrition Sales CHF 3.8 bn OG 5.7% RIG 2.0% TOP Margin 20.6% -50 bps Infant nutrition Double-digit growth in emerging markets Good momentum across existing product range and acceleration from new launches such as Nestlé NAN AR, Lactogen Gut Comfort and Baby&me Weight management Remained
Slide 13: Nestlé Waters
Nestlé Waters Sales CHF 3.6 bn OG 5.6% RIG 3.5% TOP Margin 10.0% +140 bps Good growth driven by North America and Nestlé Pure Life and international premium emerging markets sparkling waters continued to do well Growth in Europe impacted by slow start to the Local brand highlights include Po
Slide 14: Other
Other Sales CHF 6.7 bn OG 9.6% RIG 6.6% TOP Margin 17.6% +10 bps Professional Good growth driven by beverage and culinary solutions Nescafé Milano continues to build on a successful launch Nespresso Double-digit growth Environment remains competitive Nestlé Health Science Continues to buil
Slide 15: Product Segments
Product Segments First Half 2012 % OG % RIG 10.8 8.2 6.7 6.4 5.8 4.8 4.0 1.5 0.8 -0.9 Powdered & Milk Products Prepared Dishes Confectionery PetCare Liquid Beverages & Ice Cream & Cooking Aids Sales 9.6 9.1 6.9 4.6 5.2 CHF bn rounded TOP Margin 23.7% 14.4% 13.3% 14.0% 20.7% -60 bps +30 bps -10 bps -
Slide 16: Product Segment Review
Product Segment Review 15 August 9th, 2012 Half Year Roadshow
Slide 17: Product Segment Review
Product Segment Review 16 August 9th, 2012 Half Year Roadshow
Slide 18: Product Segment Review
Product Segment Review 17 August 9th, 2012 Half Year Roadshow
Slide 19: Product Segment Review
Product Segment Review 18 August 9th, 2012 Half Year Roadshow
Slide 20: Product Segment Review
Product Segment Review 19 August 9th, 2012 Half Year Roadshow
Slide 21: Trading Operating Profit Margin at 15.0%
Trading Operating Profit Margin at 15.0% Input cost pressure on COGS, mitigated by savings from NCE TOP and timely pricing 15.1% -20 TOP 15.0% +40 -10 bps Distribution costs down due to -10 -50 +30 efficiencies and mix Marketing down, but consumer facing marketing up in constant currencies A
Slide 22: Advertising Effectiveness
Advertising Effectiveness Consumer Facing Marketing spend up 1.3% in constant currencies Upper quartile scores 63 51 40 30 2009 2010 2011 YTD 2012 Base: All Nestlé Aired ads. Numbers shown are percentages of ads that fall into each category, Note: Quartiles are based on all ads on database. 21 Augus
Slide 23: Income Statement
Income Statement As % of sales Difference in June 30 June 30 basis points/% 2011 2012 (rounded) Trading operating profit 15.1 15.0 -10 Net other operating income/expense (0.1) (0.1) Operating profit 15.0 14.9 -10 Net financial income/expense (0.8) (0.5) +30 Profit before taxes and associates 14.2 14
Slide 24: Cash Flow – a Key Priority
Cash Flow – a Key Priority Driving performance – Targeting key drivers of operating cash flow: – Operating margin & working capital management – Treasury & tax Improving external visibility of our performance – Transparency – Comparability 23 August 9th, 2012 Half Year Roadshow
Slide 25: First Half 2012 Operating Cash Flow +CHF 3.0 bn
First Half 2012 Operating Cash Flow +CHF 3.0 bn All Key Drivers Contributed to Improvement + 3.0 + 0.2 + 0.4 + 1.9 5.1 + 0.5 2.1 Operating Operating Variation Variation of other Treasury, Taxes Operating Cash Flow improvement of working operating and Others Cash Flow 2011.06 capital assets/liabiliti
Slide 26: Working Capital Long-term Trend
Working Capital Long-term Trend 2005 2006 2007 2008 2009 2010 2011 TNWC as % of sales Notes: Like for like estimate. 2010 and 2011 figures exclude Alcon, Hsu Fu Chi and Yinlu. 25 August 9th, 2012 Half Year Roadshow
Slide 27: New Cash Flow Presentation – Increased Transparency
New Cash Flow Presentation – Increased Transparency th Effective 30 June 2012: Enhanced transparency and disclosure of Operating Cash Flow, segregated by key drivers: – Cash flow before changes in operating Assets and Liabilities – Working Capital and other operating Assets and Liabilities – Tax
Slide 28: Alignment Behind our Roadmap Drives Performance
Alignment Behind our Roadmap Drives Performance Competitive Advantages Operational Growth Pillars Drivers 27 August 9th, 2012 Half Year Roadshow
Slide 29: 2012 First Half Results Discussion
2012 First Half Results Discussion August 9th, 2012 Half Year Roadshow
Slide 30: Appendix
Appendix 29 August 9th, 2012 Half Year Roadshow
Slide 31: Key Elements of Sales
Key Elements of Sales Good operating performance +2.9% RIG +6.6% RIG up versus Q1 OG +3.7% Pricing Pricing continues +7.5% total FX moderates from previous levels Acq./Div. +2.7% -1.8% Exchange Rates OG = Organic Growth RIG = Real Internal Growth 30 August 9th, 2012 Half Year Roadshow
Slide 32: Weighted Average Exchange Rates
Weighted Average Exchange Rates CHF per 1H 2011 1H 2012 (%) US Dollar (1) 0.90 0.93 +2.7 Euro (1) 1.27 1.20 -5.1 £ Sterling (1) 1.46 1.46 +0.1 Real (100) 55.36 49.90 -9.9 Mex. Peso (100) 7.62 7.01 -8.0 Yen (100) 1.11 1.16 +5.2 31 August 9th, 2012 Half Year Roadshow
Slide 33: FX Impact on Businesses
FX Impact on Businesses (%) 1Q 2012 HY 2012 Zone EUR -5.9 -4.4 Nestlé Nutrition -5.3 -2.6 Zone AMS -4.2 -0.8 Zone AOA -3.8 -0.6 Nestlé Waters -4.5 -0.5 Other -4.4 -2.4 Total -4.6 -1.8 32 August 9th, 2012 Half Year Roadshow
Slide 34: First Half Group Net Debt In line with Seasonal Trend
First Half Group Net Debt In line with Seasonal Trend 0.3 -3.1 Exchange 6.2 rates & other -2.2 -0.6 Free Cash 0.1 Flow Alcon Treasury Acquisition Dividends proceeds shares net of invested (net) disposals LT (incl. Minority) (net)a) b) 14.3 15.0 +0.7 bn Group Net Debt increased by CHF 0.7 billion Net
Slide 35: Cash Flow: Illustrative examples of new presentation
Cash Flow Illustrative examples of new presentation based on FY 2010 and FY 2011 figures 34 August 9th, 2012 Half Year Roadshow
Slide 36: Operating Cash Flow
Operating Cash Flow Old presentation (until 2011) New presentation (as from 2012) In millions of CHF 2011 2010 In millions of CHF 2011 2010 Operating activities Operating activities Profit for the period 9'804 35'384 Operating profit 12'471 38'820 Non-cash items of income and expense 3'039 (20'948)
Slide 37: Enhanced Transparency for FY Disclosure
Enhanced Transparency for FY Disclosure st Effective 31 December 2012: Presentation of the detail components of the Free Cash Flow Reconciliation between Operating Cash Flow, Free Cash Flow and evolution of the Group Net Financial Debt 36 August 9th, 2012 Half Year Roadshow
Slide 38: Enhanced Transparency for FY Disclosure
Enhanced Transparency for FY DisclosureIn millions of CHF 2011 2010 O per ating c as h flow 10'180 13'968 Capital expenditure (4'779) (4'576) Detail components Expenditure on intangible assets (247) (408) Sale of property, plant and equipment 111 113 of Free Cash Flow Investments (net of disinvestme
Slide 39: Pension Accounting Changes
2013 Pension Accounting Changes 38 August 9th, 2012 Half Year Roadshow
Slide 40: Main Changes Pension Accounting (IAS 19 revised)
Main Changes Pension Accounting (IAS 19 revised) Impact P&L as from 2013 onwards (2012 will be restated): Replacement of the Expected Return on Plan Assets (ERoA) by the Discount Rate (DR) used for Plan Liabilities => Calculation of a net interest cost/income Split of the pension costs: – Servic
Slide 41: Impact on Nestlé of New Pension Accounting (as from 2013)
Impact on Nestlé of New Pension Accounting (as from 2013) Based on 2012 estimates: Trading Operating Profit margin: approx. -20 to -30 bps Net Financing Cost increase by CHF 250 million Net Profit decrease of approx. CHF 360 million (30-40 bps) Impact on EPS of approx. 10 cents per share Jus
Slide 42: How will Nestlé Mitigate the Impact of Pension Liabilities Going Forward?
How will Nestlé Mitigate the Impact of Pension Liabilities Going Forward? Continue to progressively transition from Defined Benefit to Hybrid Plans (Defined Contribution oriented) Continued improvement in operating performance 41 August 9th, 2012 Half Year Roadshow
Slide 43: Comparability with Peers
Comparability with Peers Applies for all companies reporting in accordance with IFRS Comparability issue with US-based competitors, as reporting of pension costs has not changed under US GAAP: the use of a long-term expected return on plan assets (as maintained under US GAAP) usually results in