Novartis AG · SIX:NOVN
Novartis — FY2003 Earnings Presentation
17 slides from Novartis's earnings presentation, Jan 22, 2004
Slide 1: Financial Performance 2003
Financial Performance 2003 Raymund Breu CFO, Novartis AG Agenda • Achievements in 2003 − Operating performance − Non-operating performance • Financial outlook 2 FRESCO 2003 / Raymund Breu / 2004-01-22 / Analysts 1
Slide 2: Key Financial Achievements in 2003
Key Financial Achievements in 2003 • Sustained double-digit sales and operating income growth • Operating and net income at new record level • EPS expands by 8% • Dividend increase by 5% (pay-out ratio of 39%) • Free Cash Flow jumps 23% to USD 3.6 bn 3 FRESCO 2003 / Raymund Breu / 2004-01-22 / Analy
Slide 3: Continued Attractive EPS Expansion and Dividend Payments
Continued Attractive EPS Expansion and Dividend Payments Dividend per share EPS in CHF Dividend per share EPS in USD 1.2 2.5 1 2 0.8 1.5 0.6 1 0.4 0.5 0.2 0 0 2000 2001 2002 2003 5 FRESCO 2003 / Raymund Breu / 2004-01-22 / Analysts Agenda • Achievements in 2003 − Operating performance − Non-operatin
Slide 4: Sales Growth Driven by Volume Expansion and Currency
Sales Growth Driven by Volume Expansion and Supported by Currency Developments % 20 +8% +19% 15 +2% +11% 10 +1% +8% 5 0 Volume Price Acq./Div. LC Currency USD 7 FRESCO 2003 / Raymund Breu / 2004-01-22 / Analysts Operating Income Growth 8% in Constant Currencies and 16% in USD % 20 +15% +16% 15 10 +8
Slide 5: Full Year +15% Sales Growth in US
Full Year +15% Sales Growth in US Europe Boosted by Currency Full year sales growth by region Q4 sales growth by region in % in % LC 15 14 US USD 15 14 LC 10 12 Europe USD 29 30 Asia/Aus. LC 6 9 Africa USD 16 22 Rest of LC 9 7 Americas USD 6 15 LC 11 12 Group USD 19 21 9 FRESCO 2003 / Raymund Breu /
Slide 6: Double-Digit Operating Income Expansion
… Leading to Double-Digit Operating Income Expansion 2003 operating income: USD 5 889 m Full year operating income growth Q4 operating income growth in % (USD) in % (USD) Pharma- 14 13 ceuticals Consumer 40 51 Health 16 19 Group 11 FRESCO 2003 / Raymund Breu / 2004-01-22 / Analysts 2003 Group and Ph
Slide 7: Owing to Bold Investments in R&D
… Owing to Bold Investments in R&D 2003 2002 Change in % (USD) Sales 100% 100% 19 Cost of goods sold 23.7% 23.9% 18 Marketing & Sales 31.6% 32.3% 17 Research & Development 15.1% 13.6% 32 General & Administration 5.9% 5.8% 21 Operating income 23.7% 24.4% 16 13 FRESCO 2003 / Raymund Breu / 2004-01-22
Slide 8: Excellent Operational Performance Drives Net Income Expansion
Excellent Operational Performance Drives Net Income Expansion 2003 2002 Change USD m USD m in % USD Total operating income 5 889 5 092 16 Result from assoc. companies -200 -7 * Financial income, net 379 613 -38 Income taxes -1 008 -959 5 tax rate in % 16.6 16.8 Minority interests -44 -14 214 Net inc
Slide 9: Attractive Net Financial Income Owing to Bond Capital Gains
Attractive Net Financial Income Owing to Bond Capital Gains and Currency Management … 2003 2002 Change USD m USD m in % USD Financial income 558 737 -24 % of liquidity 4.3 5.7 Financial expense -243 -194 -25 % of debt 4.2 3.6 Currency result, net 64 70 -9 Net financial income 379 613 -38 % of net li
Slide 10: Free Cash Flow Jumps 23% to USD 3.6 bn
Free Cash Flow Jumps 23% to USD 3.6 bn 2003 USD m Change in % Cash Flow 6 443 15 Change in provisions and net current assets 209 159 Cash Flow from operating activities 6 652 27 Investment in tangible fixed assets -1 329 -24 Change in other assets 29 -82 Dividends -1 724 -26 Free Cash Flow 3 628 23
Slide 11: Novartis Starts 2004 in a Strong Financial Position
Agenda • Achievements in 2003 − Operating performance − Non-operating performance • Financial outlook 21 FRESCO 2003 / Raymund Breu / 2004-01-22 / Analysts Novartis Starts 2004 in a Strong Financial Position – Continued AAA Balance Sheet Total in USD bn 49.3 45.0 49.3 45.0 • Equity covers 62% of ass
Slide 12: Financial Outlook 2004
Financial Outlook 2004 • Growth driven by continued strong performance of operating units • Net financial income to stabilize at current levels (excluding acquisitions) • Income from associated companies to revert to normal contribution • Continued favourable tax outlook 23 FRESCO 2003 / Raymund Bre
Slide 13: Financial Income Performance Due to Bond and Currency Management
Appendix Financial Income Performance Due to Bond and Currency Management 2003 2002 in USD m in USD m Interest (incl. dividends) +340 +484 Capital and option gains +125 +157 Currency gains +124 +162 Others -31 -66 Financial income 558 737 Financial expense -243 -194 Currency +64 +70 Net financial in
Slide 14: Liquidity Maintained at a High Level
Liquidity Maintained at a High Level Liquid funds in USD bn 15 Changes in 2003 13.3 13.0 12.5 - Share buyback of USD 0.3 bn net 10 - Redemption of share 2001 2002 2003 options, USD 3.5 bn Net liquidity in USD bn + Free Cash Flow of 10 81 7 7.3 USD 3.6 bn 5 0 2001 2002 2003 1 Restated for derivatives
Slide 15: Currency Distribution of Liquidity; Sales Growth Components
Currency Distribution of Liquidity JPY 1% CHF CHF 29% 48% 49% 56% 1% GBP 13% EUR EUR USD 3% GBP Dec 20021 Dec 20031 1 Including hedges 29 FRESCO 2003 / Raymund Breu / 2004-01-22 / Analysts 2003 Sales Growth Components by Division/Business Unit Volume Price Acq./Div. Currency Pharmaceuticals 10% 1% 0
Slide 16: USD Is the Predominant Currency
USD Is the Predominant Currency In % Sales Costs • Products are imported for sale into US • High cost level in CHF 43 41 26 23 19 17 15 8 4 4 USD JPY EUR CHF Other 31 FRESCO 2003 / Raymund Breu / 2004-01-22 / Analysts Major Currencies Appreciated vs USD in 2003 Change vs USD in % (using average rate
Slide 17: Full Year Impact of Currency Movements vs USD
Full Year Impact1 of Currency Movements vs USD on Sales and on Operating Income Impact of a 10% currency appreciation vs USD on group sales: • EUR: 2.6% • CHF: 0.4% • JPY: 0.8% • Others: 1.9% Impact of a 10% currency appreciation vs USD on group operating income2: • EUR: 3.6% • CHF: -3.8% • JPY: 2.1