Nestlé India Limited Financial Analysts Meet€¦ · rg a n ic G ro w th (%) Total Chocolate &...

Nestlé India Limited

Financial Analysts’ Meet

May 17 , 2007

Agenda

Opening Remarks Martial Rolland

Key Financials Shobinder Duggal

Questions & Answers All

This presentation may contain statements which reflect

Management’s current views and estimates and could be

construed as forward looking statements. The future

involves certain risks and uncertainties that could cause

actual results to differ materially from the current views

being expressed. Potential risks and uncertainties

include factors such as general economic conditions,

availability and prices of commodities, competitive

products and pricing pressures and regulatory

developments etc.

Responses can only be given to questions, which are not

price sensitive.

Disclaimer

Opening Remarks

Over to SHD

Key Financials

Q1 07

Q1 06

RIG OG EBIT

margin

Gross Sales

INR 9.0 Bio

INR 7.2 Bio

+ 24.7% +150bp

17.9%

16.4%

Strong

on-going

growth

17.9%

22.0%

12.4%

9.3%

EBIT

+ 36.2%

INR 1.6 Bio

INR 1.2 Bio

Snap shot of the quarter

All calculations are based on non-rounded figures

PAT crosses INR 1 Billion milestone

Our Business

We manage a diversified food & beverages business

addressing different need states having a complex

value chain with focus on value drivers to enhance

total shareholders return.

We maintain a high standard of Corporate

Governance and are a responsible corporate citizen.

Our Structure

A Multi-focal Organization with an agile fleet of businesses

The Good Food Good Life Portfolio

Convenience, Pleasure, Nutrition, Health, Wellness

Purc

hasi

ng P

ow

er

Complex Value Chain

Some Examples

Number of Stock Keeping Units 390

Number of Product Recipes 400

Number of Ingredients 330

Number of Packing Materials 800

Number of Quality Tests Performed 190

Driving Total Shareholders Return

1. Sales Growth

2. Profit Margin

3. Working Capital Intensity

4. Fixed Capital Intensity

5. Income Tax Rate

6. Cost Of Capital

7. Value Growth Duration

The Value Drivers

SALES GROWTH (1)

20.6

22.923.9

26.7

29.7

7.3

9.1

17.9

22.0

11.3 10.4

7.9

9.7 9.3

4.4

6.3

11.512.1

11.4

12.412.1

5.0

10.0

15.0

20.0

25.0

30.0

2002 2003 2004 2005 2006 Q1 06 Q1 07

Gross Sales in INR Bio

4

8

12

16

20

24

(%) RIG & OG

Gross Sales INR Bio Real Internal Growth (%) Organic Growth (%)

Sales Evolution

Basis Nestle Internal Reporting Standards

6.2 5.4 6.0 6.1 6.6 6.5 6.7 6.7 7.2 7.0 7.5 7.7 9.0

4.5

6.0

7.5

9.0

Q1-04 Q2-04 Q3-04 Q4-04 Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07

Consistently grown over the quarters

Gross sales including excise duty

Sales

in INR Bio

Volume (000’ Tons) Value@ (INR Bio)

Q1 07 Q1 06 Var% Q1 07 Q1 06 Var%

Domestic 61.9 53.4 16.0 8.1 6.7 21.3 #

Exports 4.7 3.4 36.0 0.9 0.5 69.9

Total 66.6 56.8 17.2 9.0 7.2 24.7

Domestic Contr. %

93.0 93.9 (0.9) 90.4% 93.0% (2.6)

Exports Contr. %

7.0 6.1 0.9 9.6% 7.0% 2.6

Channel-wise Sales

@ Gross Sales including excise duty# Net Domestic Sales up 24.3%

All calculations are based on non-rounded figures

Balancing Export Portfolio

INR Bio

7267

4844

32 3529

2833

5256

68 6571

2002 2003 2004 2005 2006 Q1 06 Q1 07

Exports to Russia Others

2.62.42.6 2.82.4 0.5

Contr.

(%)

0.9

3,801 3,193

1,472

1,798 1,320

1,900

1,2261,495

Q1 07 Q1 06

Milk Products and Nutrition Beverages

Prepared Dishes and Cooking Aids Chocolate and Confectionery

7,2108,994 INR Mio.

42.3%

20.0%

21.1%

16.6%

44.3%

20.4%

18.3%

17.0%

Gross Sales including excise duty

A Balanced Product Portfolio

Product Categories: Jan - Mar 2007

1.5

9.0

3.8

1.8

1.9

15

20

25

30

35

40

6 12 18 24 30 36

Volume Growth (%)

Organic Growth (%)

Total

Chocolate & Confectionery

Milk Products & Nutrition

Beverages

Prepared Dishes & Cooking Aids

Bubble size represents Gross Sales (INR Bio)

21.1

20.0

16.6

42.3

26.0

28.1

20.0

22.0

24.0

26.0

28.0

30.0

Q1 06 Q1 07

3.2

3.8

3.0

3.5

4.0

Q1 06 Q1 07

Milk Products & Nutrition

Sales Volume (000’ tons)

� 8.0%

Sales (INR Bio)

� 19.0%

• Market Leader in Baby Foods and Sweetened Condensed Milk

• Very close to market leader in Infant Formula

• No. 2 in Dairy Whitener

• Growing presence in Fresh Dairy

Contribution to Total Sales

Q1 07

20.0

16.6

21.1

42.3

Contribution to Total Sales

Q1 07

5.5

6.5

5

6

7

Q1 06 Q1 07

Sales (INR Bio)

1.5

1.9

1.0

1.5

2.0

Q1 06 Q1 07

� 29.1%� 16.8%

Beverages

Sales Volume (000’ tons)

• Market Leader in Instant Coffee

42.3

21.1

16.6

20.0

Contribution to Total Sales

Q1 07

1.3

1.8

1.0

1.5

2.0

Q1 06 Q1 07

� 36.3%

16.9

22.5

15.0

17.0

19.0

21.0

23.0

Q1 06 Q1 07

Sales Volume (000’ tons)

Prepared Dishes & Cooking Aids

� 33.1%

Sales (INR Bio)

• Market Leader in instant Noodles

and Ketchups

• No. 2 in Healthy Soups

42.3

21.1

20.0

16.6

Contribution to Total Sales

Q1 07

1.2

1.5

0.8

1.2

1.6

Q1 06 Q1 07

8.3

9.5

7

8

9

10

Q1 06 Q1 07

Chocolate & Confectionery

Sales Volumes (000’ tons)

� 14.3%

Sales (INR Bio)

� 22.0%

• Market Leader in Wafers and

white chocolates

• No. 2 in Chocolates

• Market Leader in Eclairs with

32.4% volume share.

PROFIT MARGINS (2)

4.0 4.5 1.84.7 1.2 1.64.4 5.45.2 1.43.5 4.64.03.9

19.9

18.618.3

19.719.0

19.519.5

17.9

17.117.5

16.917.6

16.416.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2002 2003 2004 2005 2006 Q1 06 Q1 07

3

6

9

12

15

18

21

EBITD-INR.Bio EBIT-INR.Bio EBITD % of Gross Sales EBIT % of Gross Sales

Evolution of Operating Margins

INR Bio.

INR Mio.

Description Q1 07 % Net Sales

Q1 06 % Net Sales

Var.%

Tot. Expenses - of which

6,843 79.3 5,421 80.2 26.2

Materials 4,149 48.1 3,098 45.8 33.9

Staff Cost 646 7.5 543 8.0 19.0

Advt. + sales Promotion

399 4.6 391 5.8 1.9

Distribution 385 4.5 306 4.5 25.6

Power & Fuel 313 3.6 279 4.1 12.1

Total Expenditure

Previous period figures have been regrouped / reclassified to make them comparable.

97

109

116

103

91

95

100

97

88 94

97

106

95

80

90

100

110

120

130

Q 1 Q2 Q3 Q4

Period

Indexed p

rice P

er

Kg

Evolution – Milk Fat Prices

122

Current

Indexed with base Q1-04

2004

2005

2006

2007

100

88

95

116

103

94

9795

97

106

91

97

109

80

90

100

110

120

2004 2005 2006 2007

Q1 Q2 Q3 Q4

Indexed Price per kg

Evolution - Milk Fat Prices

Indexed with base Q1-04

101

121

152 153

238

100100 101

114

187

170174

158

90

110

130

150

170

190

210

230

250

Q 1 Q2 Q3 Q4Period

Indexed p

rice p

er

KG

236 Current

Evolution – Green Coffee Prices

Indexed with base Q1-04

2004

2005

2006

2007

98

88

90

87

108

102100

106

93

9496 101

103

80

90

100

110

Q 1 Q2 Q3 Q4Period

Indexed p

rice p

er

KG

108

Current

Evolution – HVF Prices(329 mio, 12% of RM costs, 5% of Net Sales)

Indexed with base Q1-04

2004

2005

2006

2007

116

128

132

120

111

100

113

134

130

138

145146

141

100

110

120

130

140

150

Q 1 Q2 Q3 Q4Period

Indexed p

rice p

er

KG

117

Current

Evolution – Sugar Prices(329 mio, 12% of RM costs, 5% of Net Sales)

Indexed with base Q1-04

2004

2005

2006

2007

104

96 97

104

139

96

100

95

99

115 116118

135

90

100

110

120

130

140

Q 1 Q2 Q3 Q4Period

Indexed p

rice p

er

KG

127 Current

Evolution – Wheat Flour Prices(329 mio, 12% of RM costs, 5% of Net Sales)

2004

2005

2006

Indexed with base Q1-04

2007

1.12.0 2.6 2.5 3.1 3.2 0.9

9.8

11.5

10.6

11.7

10.7

12.3 12.1

0.5

1

1.5

2

2.5

3

3.5

2002 2003 2004 2005 2006 Q1 06 Q1 07

0

2

4

6

8

10

12

14

Amount % of Gross Sales

Evolution of Net Profit Margins

INR Bio.

WORKING CAPITAL INTENSITY (3)

Operating Working Capital

INR Mio

5.8%6.5%As % of Gross Sales

1,6912,356Operating Capital tied up

1,9342,424Less: Payables

3,1634,094Inventories

462686Receivables from Customers

31st Mar

2006

31st Mar

2007

Basis Nestle Internal Reporting Standards

Payables exclude amounts payable on account of taxes, Staff Costs, Capital Expenditure, related

provisions etc.

Rotation of Average Operating Working Capital

Times

25.2

27.7

34.836.2

23.5

21.821.8

16

20

24

28

32

36

40

2002 2003 2004 2005 2006 Q1 06 Q1 07

Adjusted

28.0

Basis Nestle Internal Reporting Standards and average of two period ends

29.5

21.4

681 742 781 1,522 155596 257

3.0 3.1 3.0

5.2

2.9

1.7

3.6

0

200

400

600

800

1000

1200

1400

1600

2002 2003 2004 2005 2006 Q1 06 Q1 07

1.0

3.0

5.0

7.0

Amount % of Gross sales

INR mio. % of Gross sales

Dep. 494 463 491 498 555 131 153

Investment in Fixed Assets

6.26.3

6.56.6

7.0 7.2

5.4

4.4

4.8

5.2

5.6

6.0

6.4

6.8

7.2

2002 2003 2004 2005 2006 Q1 06 Q1 07

Rotation of Average Tangible Fixed Assets

Times

Basis Nestle Internal Reporting Standards

INCOME TAX RATE (5)

36.836.6

34.5

33.7

34.734.4

35.0

33.333.7

35.9

33.7

35.3

33.5

33.6

30

32

34

36

38

2002 2003 2004 2005 2006 Q1 06 Q1 07

Marginal Rate % Effective Rate %

Evolution of Tax Rate

(rates are a % of pre-tax profit excluding FBT)

%

COST OF CAPITAL (6)

9.4 9.7

10.8 10.811.2

7.2

5.3

6.67.2 7.2

7.7

10.5

14.2

9.0

0.0

3.0

6.0

9.0

12.0

15.0

2002 2003 2004 2005 2006 Q1 06 Q1 07

WACC Risk Free Rate

Evolution – Cost of Capital

Basis Nestle Internal Reporting Standards

VALUE GROWTH DURATION (7)

Value Growth Duration

� TSR of 94% over the last 13 quarters.

� Market Capitalization increased by 75% over

last 13 quarters - INR 63 Bio. to INR 110 Bio.

� Top performer on Return on Capital employed

� Amongst top performers on Return on Equity

75

80

85

90

95

100

105

110

Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07

Nestle BSE FMCG Index BSE SENSEX

Performance since last Analyst Meet

14,127

1,124

1,839

18.020.0 20.0

25.0 25.5

20.9 27.3 26.1 32.1 32.7 9.2 11.3

200 200

255

180

250

0

5

10

15

20

25

30

35

2002 2003 2004 2005 2006 Q1 06 Q1 07

100

300

DPS EPS %

Returning cash to Shareholders

INR / Share

2004 - Excludes special dividend of INR 4.5 / Share

1.7 1.9 1.9 2.4 2.5Dividend

(INR Bio)

Dividend as a % of Share Capital

2006 1st interim 60% May 06

2007 1st interim 65% Mar 07

1.8 2.3 2.2 2.7 2.7 0.8 1.0

101.9

69.778.5

87.4

81.0 80.178.9 82.1

54.049.0

60.0 61.1 79.059.4

0.5

1.0

1.5

2.0

2.5

3.0

2002 2003 2004 2005 2006 Q1 06 Q1 07

EP (Economic Profitability) in INR Bio

-

40.0

80.0

120.0

(%) Economic Profit INR Bio Return on Equity (%) Economic Profitability (%)

EP - Basis Nestle Internal Reporting Standards

Creating Shareholder Wealth

QUESTIONS

Thank You