Nestle S.a. · SIX:NESN
Nestle — FY2007 Earnings Presentation
66 slides from Nestle's earnings presentation, February 2008
Slide 1: Nestlé Full Year Results Roadshow 2007
Full Nestlé FullYear Results Year Results Roadshow 2007 2007 full year results roadshow – February 2008 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: 2007 Highlights – all metrics improve
2007 Highlights – all metrics improve Delivering the Nestlé Model Improvements FY 07 v 06 FY 07 Total Sales – total + 9.2% + CHF 9.1 bn CHF 107.6 bn Organic growth + 7.4% EBIT + 12.9% + CHF 1.7 bn CHF 15.0 bn EBIT margin + 50 bps 14.0% Net profit + 15.8% + CHF 1.4 bn CHF 10.6 bn Net profit margin +
Slide 4: Food & Beverage All metrics improve
Food & Beverage All metrics improve CHF 100.3 bn 7.1% CHF 12.6 bn 12.6% 4.0% 2007 Strong + 9.2% on-going + 12.7% + 40 bps growth CHF 91.8 bn 5.9% CHF 11.2 bn 12.2% 4.2% 2006 Sales RIG OG EBIT EBIT margin 4 2007 full year results roadshow – February 2008
Slide 5: Total Performance Management
Total Performance Management Growth & Value of Growth Channel Development Scale Benefits Region Development Operational Efficiencies Skills & Competences Delivering long term sustainable performance improvement 5 2007 full year results roadshow – February 2008
Slide 6: The Nestlé Model
The Nestlé Model 7.4% 6.9% 6.4% 6.2% 6.2% 5.4% 5.1% 5.2% 4.9% 5.1% 14.0% 4.5% 13.5% 12.9% 3.8% 12.5% 12.6% 12.3% 11.8% 11.8% 11.1% 10.2% 10.3% 10.3% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 % Organic Growth EBIT margin EBIT margins correspond to published figures – not restated fo
Slide 7: Growth in emerging & developed markets
Growth in emerging & developed markets Emerging markets are ~30% of Nestlé F&B sales % OG 14.0 12.0 10.0 Total Food & Bev 8.0 Developed 6.0 Emerging 4.0 Total 2.0 0.0 2006 2007 7 2007 full year results roadshow – February 2008
Slide 8: Transforming product portfolio towards healthier nutrition is also driving growth
Transforming product portfolio towards healthier nutrition is also driving growth Sales CAGR Optimising Nutrition: 2004-2007 • Adding/enhancing BAB – 2005 – 2007: Whole Grains: 700 million additional servings in Europe +23.7% Nutrition – Health benefits: BABs BAB enhanced F&B – Micronutrients: vitam
Slide 9: The Nestlé Investment Proposition
The Nestlé Investment Proposition “The Nestlé Model” 1. Long-Term Organic Growth Target 5 - 6% Sales 2. Continued year after year improvement of EBIT margin EBIT 3. Improving Capital efficiency / Business ROIC / Cash returns to shareholders Resulting in an industry outperforming, long-term total sha
Slide 10: Focus areas
Focus areas • Discipline driving performance • Operational control • Leveraging scale and skills • Strategy and performance 10 2007 full year results roadshow – February 2008
Slide 11: Discipline driving performance
Discipline driving performance • Discipline, increased transparency and excellence in execution are material influences on the 2007 results • Underperformers improved overall, especially Ice cream, European PetCare: 10 bps contribution to Group EBIT margin • Working capital improved by 10 bps despit
Slide 12: Discipline driving performance
Discipline driving performance • 10% reduction in SKUs in 2007 • 10% improvement in bad goods • Simplifying structures (200 fewer legal entities) • CHF700mn excess real estate disposed over 3 years Focus areas for 2008 include • Leverage scale & skills – overheads • Reduced working capital as % of s
Slide 13: Leveraging scale
Leveraging scale Strategic Business Units Global Media Buying Strategic Generating Demand Unit Supply Chain Optimisation Team European Purchasing Industrial Performance Team Innovation Acceleration Team Regional Treasury Centres Global Nestlé Business Services Global Business Excellence Team Enabled
Slide 14: GNBS contributing to profitable growth
GNBS contributing to profitable growth Stage Get-in Standardize & Streamline Expand § Transition "as-is" § One global best- activities to NBS in-class end-to- Focus end solution § New Markets § Full accountability § Optimized § New Services for service delivery retained with NBS organizations § Scal
Slide 15: Update on GLOBE
Update on GLOBE • GLOBE Objectives changed from: To: • Implementation of harmonized Nestlé Business Excellence • Move from "Best in Nestlé" to Best Practice "Best in Class" best practices confirmed with external benchmarking • Implementation of Data Standards and Data Management – "Managing Data as
Slide 16: Operational control
Operational control • Balance sheet optimisation within "Gold Standard" parameters – minimise cost of capital • Controls – oversight of Nestlé markets Devolved responsibility balanced by controls • Guardian of shareholders' interests – Use of funds, returns hurdles, risk policies, etc • GLOBE brings
Slide 17: The role of Finance
The role of Finance • Finance is central to value creation by identifying opportunities for performance improvement • Finance is central to value protection through controls, systems, governance • Focus on maximising long term total shareholder return 17 2007 full year results roadshow – February 20
Slide 18: Differentiating strategies
Differentiating strategies Differentiating Strategies Responsibility, Leadership Benchmark & Fix to get Results Performance Objectives Management Cycle Measure & Track Focus & Implement 18 2007 full year results roadshow – February 2008
Slide 19: Nestlé Full Year Results
Full Nestlé FullYear Results Year Results Roadshow 2007 2007 full year results roadshow – February 2008 Name of chairman
Slide 20: Delivering the Nestlé Model in 2008; Driving performance longer term
2007Full Nestlé fullYear year Results results roadshow 2007 Delivering the Nestlé Model in 2008 Driving performance longer term 2007 full year results roadshow – February 2008 Name of chairman
Slide 21: Agenda
Agenda Ø The last decade Ø 2008 – another year of the Nestlé Model Ø Beyond 2008 – opportunity rich 21 2007 full year results roadshow – February 2008 Name of chairman
Slide 22: Nestlé – The Last Ten Years
Nestlé – The Last Ten Years Creating... Transforming... Delivering... Rewarding... 2007 full year results roadshow – February 2008 Name of chairman
Slide 23: The transformational opportunity
The transformational opportunity The "What" The "How" Strategic Organisational • Towards Nutrition, • Creating an agile fleet of Health businesses/markets & Wellness • Efficient support structure • Increased focus on demand generation 23 2007 full year results roadshow – February 2008 Name of chairm
Slide 24: Nestlé has evolved from Food & Beverage to global leader in Nutrition, Health and Wellness
Creating… 60/40+ Nestlé has evolved from Food & Beverage to create the global leader in Nutrition, Health and Wellness 2007 full year results roadshow – February 2008 Name of chairman
Slide 25: Transforming…
Transforming… From super-tanker to… ...an agile fleet of businesses ...independently strong and flexible, following their own rules for success, with business specific knowledgeable management. 25 2007 full year results roadshow – February 2008 Name of chairman
Slide 26: Delivering... (The Nestlé Model)
Delivering... (The Nestlé Model) Ø Sustainable Organic Growth of 5 - 6% 12 year average = 5.9% CHF 60bn to CHF 107.6bn Ø Annual improvement of EBIT margin 12 year average = 35 basis points to 14% CHF 6.2bn to CHF 15bn Ø Total cash returned to shareholders CHF 36bn in 12 years 26 2007 full year resul
Slide 27: Rewarding...
Rewarding... CHF TSR of 408% Over CHF 150bn of incremental value since 1996 27 2007 full year results roadshow – February 2008 Name of chairman
Slide 28: The right strategy; Performance is trending higher
Creating...Transforming...Delivering...Rewarding... • The right strategy • Performance is trending higher Our mission is to build on that success – Deliver the strategy – Enhance financial performance We intend to make Nestlé the reference for both Nutrition, Health & Wellness and for Financial Perf
Slide 29: Agenda
Agenda Ø The last decade Ø 2008 – another year of the Nestlé Model Ø Beyond 2008 – opportunity rich 29 2007 full year results roadshow – February 2008 Name of chairman
Slide 30: 2008: Achieving the Nestlé Model despite tough market conditions
2008: Achieving the Nestlé Model despite tough market conditions Market concerns • Raw material costs • Impact of high energy costs • Recession – impact on consumer demand & companies' ability to price • Fall-out from sub-prime Nestlé's commitment in 2008 To deliver the Nestlé Model 2007 full year r
Slide 31: 2008: Achieving the Nestlé Model despite tough market conditions
2008: Achieving the Nestlé Model despite tough market conditions • By delivering our strategy Nutrition, Health & Wellness Billionaire Brands • By being the best in execution Speed & Discipline Operational efficiency • Management priorities 2007 full year results roadshow – February 2008 Name of cha
Slide 32: F&B Billionaire Brands represent about 70% of F&B sales
F&B “Billionaire Brands” represent about 70% of F&B sales 32 2007 full year results roadshow – February 2008 Name of chairman
Slide 33: 2008: Achieving the Nestlé Model despite tough market conditions
2008: Achieving the Nestlé Model despite tough market conditions • By delivering our strategy Nutrition, Health & Wellness Billionaire Brands • By being the best in execution Speed & Discipline Operational efficiency • Management priorities 2007 full year results roadshow – February 2008 Name of cha
Slide 34: Speed & Discipline driving financial performance
Speed & Discipline driving financial performance • Businesses need to "earn the right" to belong – underperformers, lower performing or commoditised categories and SKUs • Overheads, total delivered costs, trade spend, etc • Focus on bigger brands – spend, R&D, resource • Rewards structure 34 2007 fu
Slide 35: Nestlé Continuous Excellence
Building a competitive platform from which to achieve margin improvement Centre-driven cost initiatives (MH'97 – Op. Excellence) Lean thinking and continuous improvement Fast, disciplined, flawless execution "Nestlé Continuous Excellence" 35 2007 full year results roadshow – February 2008 Name of ch
Slide 36: From centre-driven initiatives
From centre-driven initiatives Operation EXCELLENCE 2007 Target 2004+ Optimizing Total Delivered MH'97 Cost by... • Aligned targets across the CI Supply Chain • Functional Targets • Integrated Distribution out of Best Practice and Industrial Networks • Continuous • Restructuring the Improvements Ind
Slide 37: …to a sustainable, attitude-inspired drive for excellence
…to a sustainable, attitude-inspired drive for excellence Operation EXCELLENCE 2007 Target 2004+ MH'97 CI 1997 2001 2005 2007 On-going ...from project-driven to sustainable, attitude inspired continuous improvement 37 2007 full year results roadshow – February 2008 Name of chairman
Slide 38: One Nestlé operating model: Nestlé Continuous Excellence
One Nestlé operating model: Nestlé Continuous Excellence Deliver Eliminate Competitive Advantage Performance Improvements Supply Chain Losses Value Stream Optimization (VSO) Eliminate Delight our Factory Consumers Total Performance Management (TPM) Losses Full Excel in Operations Compliance Foundati
Slide 39: Continuous Excellence across the whole value chain
Continuous Excellence across the whole value chain TPM VSO : Consumer focused flow optimization across the full value chain (including R&D) Consumer Customer Distribution Centres Manufacturing Packaging Material Raw Material Zero Error Zero Loss Zero Waste Downstream Input... ... ensures high Upstre
Slide 40: Pilot results show scale of opportunity
Pilot results show scale of opportunity • 55% reduction in absenteeism • 33% reduction in consumer complaints • 50% reduction in waste • 20% reduction in change-over time • 70% reduction in unplanned stoppages • 15% increase in line efficiency • 15% reduction in rework 40 2007 full year results road
Slide 41: Operational efficiencies provide a competitive base for margin improvement
Operational efficiencies provide a competitive base for margin improvement • Nestlé has a proven ability to drive efficiencies • Nestlé Continuous Excellence takes us to a new level: – combines best practices from different industries – reaches from supplier to customer; service focused – goes beyon
Slide 42: Discipline enhanced by GLOBE
Discipline enhanced by GLOBE • An enhanced demand-focused organisation Network structure, rapid decision making, leveraging scale, complexity with efficiency • A flexible network structure Improve agility/service levels in markets Continuous excellence to drive out costs • A mentality of continuous
Slide 43: 2008: Achieving the Nestlé Model despite tough marketing conditions
2008: Achieving the Nestlé Model despite tough marketing conditions • By delivering our strategy Nutrition, Health & Wellness Billionaire Brands • By being the best in execution Speed & Discipline Operational efficiency • Management priorities 2007 full year results roadshow – February 2008 Name of
Slide 44: 2008: Management priorities
2008: Management priorities Driving financial performance Four objectives • RIG & organic growth (5-6%) • Increased EBIT margin (constant currency) The Nestlé Model • Reduce working capital • Improve ROIC Operational priorities – with internal targets • Improve returns on trade spend • Operational e
Slide 45: Agenda
Agenda Ø The last decade Ø 2008 – another year of the Nestlé Model Ø Beyond 2008 – opportunity rich 45 2007 full year results roadshow – February 2008 Name of chairman
Slide 46: Beyond 2008: Nestlé is opportunity rich
Beyond 2008: Nestlé is opportunity rich • Four competitive advantages • Four growth areas • Four Pillar strategy 46 2007 full year results roadshow – February 2008 Name of chairman
Slide 47: Beyond 2008: Four competitive advantages
Beyond 2008: Four competitive advantages • Product and brand portfolio • The industry's leading R&D capability • Unmatched geographic presence • People, culture, values, attitude 47 2007 full year results roadshow – February 2008 Name of chairman
Slide 48: Consumer Benefit Areas
Consumer Benefit Areas Relevant categories Growth & Protection Nestlé Nutrition, Coffee Nestlé Nutrition, Nestlé Development & Beverages, Dairy, Purina PetCare, Coffee & CPW, Ice cream Beverages, Dairy, Ice cream Food, Nestlé Nutrition, Weight Digestive Dairy, CPW, BPW, Management Dairy, Nestlé Nutr
Slide 49: Benefits of open innovation platform plus CHF1.9 billion R&D spend
Benefits of open innovation platform plus CHF1.9 billion R&D spend Business Focus Key Suppliers Venture Capital Universities, Universities,Start-Ups Start Benefit Focus The“Wider The widerNestlé Nestl é”… 49 2007 full year results roadshow – February 2008 Name of chairman
Slide 50: Unmatched geographic presence
Unmatched geographic presence Population Nestlé growth F&B sales 2000-2050 (CHF) Developing world* +3.3bn 34 billion North America +0.15bn 29 billion Europe -0.05bn 38 billion Source for population growth: http://www.census.gov *Developing does not include Eastern Europe. 50 2007 full year results r
Slide 51: Beyond 2008: The Four growth areas
Beyond 2008: The Four growth areas • Nutrition, Health & Wellness • Emerging markets & PPP • Leadership in "out of home" Nestlé Professional • Premiumisation 51 2007 full year results roadshow – February 2008 Name of chairman
Slide 52: PPP Demographics: A $240 billion opportunity
Demographics: A $240 billion opportunity Growth scenario "Premiumisation" PPP = Popularly Positioned (2005-15) Products + US$ 170bn 5.9% p.a. Consumption of food manufacturing value-added actual US$, per capita Convenience Sustenance Pleasure and Nutrition WellBeing diversity Growth scenario Nestlé
Slide 53: Grow in emerging markets
Grow in emerging markets CHF1.3 trillion: Value of 'traditional trade' grocery sales in our Top 10 emerging markets Source: Planet Retail, Europanel, Market Data, SGDU Estimate 53 2007 full year results roadshow – February 2008 Name of chairman
Slide 54: Emerging markets and PPP – A $70 billion opportunity
Emerging markets and PPP – A $70 billion opportunity 54 2007 full year results roadshow – February 2008 Name of chairman
Slide 55: Moving up on the escalator: World population by income bracket
Moving up on the escalator: World population by income bracket – 1995-2005-2015 7'000 People, mn + 355 > 28'000 849 6'000 + 199 494 286 235 443 22'000-28'000 295 522 175 + 133 + 885 PPP$ 5'000 389 940 1825 710 + 230 13'000-22'000 4'000 PPP$ 3'000 2153 + 448 5'000-13'000 2601 2354 PPP$ 2'000 1500-500
Slide 56: Premiumisation
Premiumisation 2. Strong Emotional Affiliation 4. Own the Expert 1. True Product Client Community Differentiation 3. Own Retail Outlets Boutiques & Bars Gift boxes 56 2007 full year results roadshow – February 2008 Name of chairman
Slide 57: Beyond 2008: The Four Pillar Strategy
Beyond 2008: The Four Pillar Strategy • Operational efficiency • Innovation & Renovation • Consumer communication • Whenever, wherever, however 57 2007 full year results roadshow – February 2008 Name of chairman
Slide 58: Out of home (OOH): A growing trend & a $400 billion market
Out of home (OOH) A growing trend & a $400 billion market • Due to shifts in demographics and socio-economic factors foodservice represents an increasingly important consumer option • Consumer demand for convenience, taste & nutrition is driving foodservice growth in all markets • In mature economie
Slide 59: Global leader in branded hot and cold non-carbonated beverage solutions
“The global leader in “The local and regional branded hot and cold leader in strategic food non-carbonated Beverage product solutions” solutions” 59 2007 full year results roadshow – February 2008 Name of chairman
Slide 60: Grow with our Top 10 Customers
Grow with our Top 10 Customers Sales growth Nestlé sales '00-'06 in Top 10 Top 10 Customers + 44% + 41% Source: Nestlé & Planet retail 60 2007 full year results roadshow – February 2008 Name of chairman
Slide 61: Top 10 forecast their growth to be 57% between '06 and '12
Top 10 forecast their growth to be 57% between '06 and '12 7 % +5 Top 10 Top 10 +39% Rest Top 100 Rest Top 100 2006 2012 Source: Planet Retail 61 2007 full year results roadshow – February 2008 Name of chairman
Slide 62: Top 10 forecast their growth to be 57% between '06 and '12
Top 10 forecast their growth to be 57% between '06 and '12 CHF10bn % 7 with no +5 Top 10 out-performance Top 10 +39% Rest Top 100 Rest Top 100 2006 2012 Source: Planet Retail 62 2007 full year results roadshow – February 2008 Name of chairman
Slide 63: Summary
Summary We intend to make Nestlé the reference for both Nutrition, Health & Wellness and for Financial Performance 2007 full year results roadshow – February 2008 Name of chairman
Slide 64: Beyond 2008: Building on momentum to drive performance
Beyond 2008: Building on momentum to drive performance Deliver the strategy – continuity • Nutrition, Health & Wellness higher margin/growth categories • Organisational Transformation structural efficiencies & growth • Key growth opportunities above market growth Build on the Competitive advantages
Slide 65: The Nestlé Investment Proposition
The Nestlé Investment Proposition “The Nestlé Model” 1. Long-Term Organic Growth Target 5 - 6% Sales 2. Continued year after year improvement of EBIT margin EBIT 3. Improving Capital efficiency / Business ROIC / Cash returns to shareholders Resulting in an industry outperforming, long-term total sha
Slide 66: 2007 full year results roadshow – February 2008 Name of chairman
66 2007 full year results roadshow – February 2008 Name of chairman