Nestle S.a. · SIX:NESN
Nestle — H1 2023 Earnings Presentation
38 slides from Nestle's earnings presentation, Jul 27, 2023
Slide 1: Half-year results 2023
Half-year results 2023
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: Half-year results 2023 – Mark Schneider, CEO
Half-year results 2023 Mark Schneider, CEO
Slide 4: Key messages
Key messages • Strong broad-based organic sales growth of 8.7% – Strong pricing of 9.5%, reflecting significant input cost inflation – Resilient RIG of -0.8%, impacted by portfolio optimization and remaining capacity constraints • Generating resources and investing for growth – Gross margin up 110 b
Slide 5: Eliminating deforestation from Nestlé's palm oil supply chains
Eliminating deforestation from Nestlé’s palm oil supply chains 95.6% assessed as deforestation-free • Tracing palm oil back to plantation • Using satellite monitoring • Training smallholders on good agricultural practices • Restoring forests and natural ecosystems 5 July 27, 2023 Nestlé half-year re
Slide 6: 2023 guidance updated
2023 guidance updated • Organic sales growth guidance increased to a range of 7% to 8% • Underlying trading operating profit margin expected to be between 17.0% and 17.5% • Underlying earnings per share in constant currency expected to increase between 6% and 10% 6 July 27, 2023 Nestlé half-year res
Slide 7: Half-year results 2023 – François-Xavier Roger, CFO
Half-year results 2023 François-Xavier Roger, CFO
Slide 8: Half-year sales growth
Half-year sales growth OG +8.7% -0.4% -6.7% +9.5% -0.8% 46.3 45.6 Reported sales growth +1.6% -30 HY-2022 sales RIG Pricing Net M&A Foreign HY-2023 sales CHF bn exchange CHF bn 8 July 27, 2023 Nestlé half-year results 2023
Slide 9: Strong growth across developed and emerging markets
Strong growth across developed and emerging markets Developed Emerging Sales (in CHF) 26.8 bn 19.5 bn % of Group sales 58% 42% RIG -1.4% 0.0% Pricing 9.4% 9.6% OG 8.0% 9.6% 9 July 27, 2023 Nestlé half-year results 2023
Slide 10: RIG expected to turn positive in second half of 2023
RIG expected to turn positive in second half of 2023 1.7% Drivers of RIG improvement in H2-23 • Base of comparison • Increased marketing investments • Net effect of portfolio optimization turning positive -0.8% • Moderation of new pricing -1.4% H1-22 H2-22 H1-23 10 July 27, 2023 Nestlé half-year res
Slide 11: Zone North America
Zone North America Sales CHF 12.6 bn Organic growth 10.0% Real internal growth -1.0% Underlying TOP margin 21.6% vs LY +280 bps • Strong organic growth, driven by inflation-related pricing. RIG impacted by portfolio optimization and capacity constraints • Favorable mix and continued momentum in e-co
Slide 12: Zone Europe
Zone Europe Sales CHF 9.5 bn Organic growth 8.9% Real internal growth -2.4% Underlying TOP margin 16.6% vs LY -70 bps • Strong organic growth led by pricing. RIG impacted by capacity constraints and portfolio optimization • E-commerce momentum and out-of-home channels supported growth • Purina PetCa
Slide 13: Zone Asia, Oceania and Africa
Zone Asia, Oceania and Africa Sales CHF 9.1 bn Organic growth 9.3% Real internal growth 0.1% Underlying TOP margin 22.8% vs LY -70 bps • Strong organic growth, supported by pricing and positive RIG • Improved mix and continued momentum of out-of-home channels supported growth • Infant nutrition, cul
Slide 14: Zone Latin America
Zone Latin America Sales CHF 6.1 bn Organic growth 11.6% Real internal growth -0.9% Underlying TOP margin 19.8% vs LY -130 bps • Sustained double-digit organic growth based on pricing • Strong operational execution and continued momentum of out-of-home channels supported growth • Confectionery, dair
Slide 15: Zone Greater China
Zone Greater China Sales CHF 2.5 bn Organic growth 4.7% Real internal growth 1.3% Underlying TOP margin 16.6% vs LY +160 bps • Positive organic growth, led by both RIG and pricing • Robust e-commerce momentum and a recovery of out- of-home channels supported growth • Nestlé Professional, infant nutr
Slide 16: Nestlé Health Science
Nestlé Health Science Sales CHF 3.3 bn Organic growth 3.5% Real internal growth -1.9% Underlying TOP margin 13.0% vs LY -70 bps • Organic growth increasing sequentially, supported by post-COVID normalization • Consumer Care saw negative growth, with growth in VMS turning positive in the second quart
Slide 17: Nespresso
Nespresso Sales CHF 3.1 bn Organic growth 4.5% Real internal growth 0.8% Underlying TOP margin 21.7% vs LY -260 bps • Organic growth driven by pricing, with a return to positive RIG • Vertuo, strong demand in out-of-home channels and innovation supported growth • North America posted double-digit gr
Slide 18: Broad-based growth across categories
Broad-based growth across categories Organic sales growth % 15.0% 10.8% 8.7% 7.2% 7.4% 7.5% 5.8% 4.2% Total Group Powdered and PetCare Nutrition and Prepared dishes Milk products Confectionery Water Liquid Beverages Health Science and cooking aids and Ice cream 18 July 27, 2023 Nestlé half-year resu
Slide 19: Underlying trading operating profit margin by category
Underlying trading operating profit margin by category In % of sales 23.3% 21.1% 20.9% 19.5% 17.1% 16.7% 14.5% 11.0% Change in bps +20 -250 +190 Flat +140 +80 +70 +130 Vs. H1-2022 Total Group* Powdered and PetCare Nutrition and Milk products Prepared dishes Confectionery Water Liquid Beverages Healt
Slide 20: Pricing, growth leverage and efficiencies mostly offset inflation
Pricing, growth leverage and efficiencies mostly offset inflation 17.X% 17.2% 17.4% 17.1% + 10 bps 17.1% 16.9% + 50 bps - 40 bps -30 Margin +20 bps on a reported basis Margin +30 bps in constant currency Underlying TOP Gross Distribution Administration, Underlying TOP HY-2022 margin* marketing and H
Slide 21: Starting to restore gross margin
Starting to restore gross margin Gross margin as a % of sales 46.0% 45.6% 44.5% H1-2022 H2-2022 H1-2023 21 July 27, 2023 Nestlé half-year results 2023
Slide 22: Stepping up investments in advertising and marketing
Stepping up investments in advertising and marketing Advertising and marketing expenses as a % of sales 7.1% 7.1% 6.6% H1-2022 H2-2022 H1-2023 22 July 27, 2023 Nestlé half-year results 2023
Slide 23: Net profit
Net profit % of sales H1-23 vs H1-22 Underlying trading operating profit 17.1% +20 bps Restructuring -40 bps Impairment of assets +130 bps Onerous contracts, litigations and other operating income / expenses +10 bps Trading operating profit 15.9% +120 bps Gain / loss on disposals +10 bps Net financi
Slide 24: Increasing free cash flow generation
Increasing free cash flow generation Free cash flow as a % of sales 7.4% 6.8% 3.2% H1-2021 H1-2022 H1-2023 24 July 27, 2023 Nestlé half-year results 2023
Slide 25: Inventory levels starting to normalize
Inventory levels starting to normalize Inventories as a % of sales 16.5% 15.6% 13.6% H1-2021 H1-2022 H1-2023 Inventories as a % of annualized (12-month) sales 25 July 27, 2023 Nestlé half-year results 2023
Slide 26: Underlying earnings per share
Underlying earnings per share 1.4% -1.4% 1.2% CHF 2.59 -7.0% 9.9% CHF 2.43 CHF Evolution in constant currency +11.1% 2.33 Evolution on reported basis +4.1% UEPS Operating Share Net finance costs Others* UEPS FX UEPS HY-2022 performance Buyback & tax HY-2023 impact HY-2023 in constant currency * Incl
Slide 27: Q&A
Q&A 27 July 27, 2023 Nestlé half-year results 2023
Slide 28: Supporting slides
Supporting slides 28 July 27, 2023 Nestlé half-year results 2023
Slide 29: HY-2023 Operating segments – topline summary
HY-2023 Operating segments – topline summary HY-2023 sales Reported Sales RIG Pricing OG Net M&A F/X sales growth (CHF m) % % % % % % Zone North America 12 553 -1.0 11.0 10.0 -2.1 -4.4 3.4 Zone Europe 9 467 -2.4 11.3 8.9 -0.9 -6.0 2.0 Zone AOA 9 060 0.1 9.2 9.3 -0.1 -12.1 -2.9 Zone Latin America 6 0
Slide 30: HY-2023 Products – topline summary
HY-2023 Products – topline summary HY-2023 sales Sales RIG Pricing OG (CHF m) % % % Powdered and liquid beverages 12 339 -0.6 7.8 7.2 Water 1 706 -6.3 10.5 4.2 Milk products and Ice cream 5 418 -3.8 11.3 7.5 Nutrition and Health Science 7 832 -0.5 7.8 7.4 Prepared dishes and cooking aids 5 931 -4.2
Slide 31: HY-2023 historical eight quarters
HY-2023 historical eight quarters Period RIG% Pricing % OG % Q3-2021 4.4 2.1 6.5 Q4-2021 4.0 3.1 7.2 Q1-2022 2.4 5.2 7.6 Q2-2022 0.9 7.7 8.7 Q3-2022 -0.2 9.5 9.3 Q4-2022 -2.6 10.1 7.5 Q1-2023 -0.5 9.8 9.3 Q2-2023 -1.1 9.1 8.0 31 July 27, 2023 Nestlé half-year results 2023
Slide 32: HY-2023 Operating segments – revenue and results
HY-2023 Operating segments – revenue and results In CHF m Of which Underlying Net other impairment Trading Trading trading of property, Of which Depreciation Operating Operating income/ plant and restructuring and Sales Profit Profit (expense) equipment costs amortization Zone North America 12 553 2
Slide 33: HY-2023 Products – revenue and results
HY-2023 Products – revenue and results In CHF m Of which Underlying Net other impairment Trading Trading trading of property, Of which Operating Operating income/ plant and restructuring Sales Profit Profit (expense) equipment costs Powdered and Liquid Beverages 12 339 2 607 2 506 (101) (50) (32) Wa
Slide 34: HY-2023 EPS reconciliation (1 of 2)
HY-2023 EPS reconciliation (1 of 2) From net profit to underlying net profit In CHF m H1-2022 H1-2023 Net Profit 5 247 5 649 Restructuring costs 87 262 Impairments of property, plant & equipment, goodwill and int. assets 741 181 Net result on disposal of businesses 52 8 Other adjustment in Net other
Slide 35: HY-2023 EPS reconciliation (2 of 2)
HY-2023 EPS reconciliation (2 of 2) From underlying trading operating profit In CHF m to underlying net profit H1-2022 H1-2023 Underlying trading operating profit 7 683 7 904 Net financial income / (expense) (434) (697) Adjusted taxes (1 515) (1 486) Adjusted income from associates and joint venture
Slide 36: HY-2023 Currency overview
HY-2023 Currency overview Weighted average rate HY-2022 HY-2023 Variation in % US Dollar 1 USD 0.945 0.911 -3.6 Euro 1 EUR 1.032 0.986 -4.5 Chinese Yuan Renminbi 100 CNY 14.568 13.164 -9.6 Brazilian Real 100 BRL 18.723 17.974 -4.0 Philippine Peso 100 PHP 1.813 1.649 -9.0 UK Pound Sterling 1 GBP 1.22
Slide 37: Free cash flow
Free cash flow In CHF billion 1.0 -0.5 1.2 0.2 3.4 1.5 Free cash flow Adjusted Working CAPEX and Others Free cash flow HY-2022 EBITDA capital expenditure on HY-2023 intangible assets 37 July 27, 2023 Nestlé half-year results 2023
Slide 38: Abbreviations
Abbreviations • OG Organic growth • RIG Real internal growth • AOA Zone Asia, Oceania, and Africa • LATAM Zone Latin America • GC Zone Greater China • EPS Earnings per share • COGS Cost of goods sold • FCF Free cash flow • TOP Trading operating profit • UTOP Underlying trading operating profit • Str