Spring Press Conference February 23, 2006
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. Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments. 2 SPRING PRESS CONFERENCE 2006
Key Figures % Change 2004/2005 % of Sales Sales CHF 91 075 m + 7.5% EBITA CHF 11 720 m + 8.9% 12.9% Net Profit CHF 7 995 m + 20.7% 8.8% 3 SPRING PRESS CONFERENCE 2006
Total Sales and Real Internal Growth from 1995 to 2005 CHF mio 100'000 90'000 80'000 70'000 60'000 50'000 40'000 30'000 20'000 10'000 0 Not restated 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 RIG 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 4 SPRING PRESS CONFERENCE 2006
EBITA (mio CHF) mio CHF 14'000 13'000 12'000 11'000 10'000 9'000 8'000 7'000 6'000 5'000 4'000 3'000 2'000 1'000 0 Group EBITA Margin over last 10 years Nestlé Group EBITA and EBITA Margin from 1996 to 2005 10.2% 10.3% 10.3% 11.1% 11.8% 11.8% 12.3% 12.5% 12.6% 12.9% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 % of Sales Not restated; New NPS definition in 2001 5 SPRING PRESS CONFERENCE 2006 13.5% 13.0% 12.5% 12.0% 11.5% 11.0% 10.5% 10.0% 9.5% 9.0%
The Four Factors of Group Sales 1996-2005 % Growth 15% 10 years average 10% 5% 0% 1.0% 2.3% 3.4% -1.4% OG 5.7% -5% OG: Organic Growth -10% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 RIG Pricing & Other Acquisitions/Divestitures FX Impact Not restated; in 2001: including TTS effect 6 SPRING PRESS CONFERENCE 2006
The Nestlé Model 1. Long-Term Organic Growth Target 5-6 %, 2. Continued year after year improvement of EBITA margin, EBITA Margin 3. Capital efficiency / Business ROIC 1998 2000 2002 2004 2006 2008 2010 = Resulting in an industry outperforming, long-term total shareholders return. 7 SPRING PRESS CONFERENCE 2006
Food Market Growth and Nestlé Sales Indices Manufacturing value-added in food consumption actual US$, per capita Nestlé per capita sales Sustenance Convenience Pleasure and diversity Nutrition Health and Wellness WellBeing Per-capita income (PPP) US$ 4,000 US$ 13,000 US$ 22,000 US$ 28,000 Sources: UNIDO (value-added), WIDER and World Bank; Nestlé F&C; analysis EIR 8 SPRING PRESS CONFERENCE 2006
World Population by Income Groups 1995 2005-2015 7'000 6'000 5'000 4'000 People, mn 295 175 389 710 + 199 + 133 + 230 494 235 522 + 369 863 277 438 940 + 885 1825 > 28'000 22'000-28'000 PPP$ 13'000-22'000 PPP$ 3'000 2153 + 448 2601 2354 5'000-13'000 PPP$ 2'000 1500-5000 PPP$ 1'000 0 1970 1653 1429 1995 2005 2015 < 1500 PPP$ Sources: UN WIDER and World Bank (also for outlook on economic growth 2005-2015); analysis EIR 9 SPRING PRESS CONFERENCE 2006
GLOBE Program Status More than 1 3 of Nestlé s food and beverage sales: over 75,000 users of the system over 300 factories over 300 distribution centers over 200 sales offices 10 SPRING PRESS CONFERENCE 2006
Spring Press Conference Paul Polman
Restatement of 2004 Results 2004 results have been restated following the first application of IFRS 2 share-based payment and the discontinued operation resulting from the announcement in December 2005 for the chilled dairy activities in Europe, where applicable. 2005 Full Year RIG & Organic Growth also restated. 12 SPRING PRESS CONFERENCE 2006
2005: Delivering the Nestlé Model: Improvement in Key Performance Measures Strong organic growth both F&B and Pharma: 6.2% EBITA margin up 20bps to 12.9%; up 1 Billion CHF Improvement in Return on invested capital: +50bps Underlying EPS up 12.9%; dividend 9 CHF up 12.5% Strong cash flow - 1st buy-back complete; 2nd begun 4.5 Billion CHF returned to shareholders: up 59% vs 04 13 SPRING PRESS CONFERENCE 2006
Zones: Organic Growth Broad Based Improvement 12% 10 8 6 4 2 0-2 2005 sales CHFbn 11.6 10.4 8.6 7.7 7.8 6.9 6.6 2.0 0.6-0.4 04 05 04 05 04 05 04 05 04 05 America Europe AOA Water Other activities 30.8 27.6 15.7 8.8 8.2 6.2 4.5 04 05 Group 91.1 14 SPRING PRESS CONFERENCE 2006
Product Groups: Organic Growth Above 5-6% Target 12% 10 10.4 10.2 8 6 4 2 2.5 8.2 5.4 6.7 4.4 3.5 3.2 2.6 6.2 5.2 4.5 6.2 0 04 05 04 05 04 05 04 05 04 05 04 05 04 05 2005 sales CHFbn Beverages Milk products, Nutrition and Ice cream Prepared dishes and cooking aids Chocolate, confectionery and biscuits PetCare Pharma Group 23.8 23.2 16.7 10.8 10.6 6.0 91.1 15 SPRING PRESS CONFERENCE 2006
P&L to EBITA: Savings Compensate Cost Pressures FY 2004 FY 2005 Diff. basis points As % of sales Restated (rounded) Sales (CHF million) 84'690 91'075 100 100 Cost of goods sold (41.7) (41.7) - Distribution (8.1) (8.1) - Marketing & Admin (35.8) (35.7) 10 R & D (1.7) (1.6) 10 EBITA 12.7 12.9 20 2004 restated following the first application of IFRS Share-based Payment and the discontinued operation resulting from the announcement made in December 2005 for the Chilled Dairy activities in Europe, where applicable. 16 SPRING PRESS CONFERENCE 2006
P&L: EBITDA to Net Profit FY 2004 FY 2005 Diff. basis points As % of sales Restated (rounded) EBITDA 16.0 15.9 EBITA 12.7 12.9 20 Net other income/expenses (0.8) (1.0) (20) Amortisation of goodwill (1.9) 0 190 Net financing cost (0.8) (0.6) 20 Taxes (2.8) (2.9) (10) Discontinued operations 0.0 0.0 0 Share of results of Associates 1.9 1.0 (90) Profit for the period of which Attributable to Minority interests (0.5) (0.6) (10) Attrib. to the Group (Net profit) 7.8 8.8 100 Underlying EPS (CHF) 18.82 21.25 +12.9% 2004 restated following the first application of IFRS Share-based Payment and the discontinued operation resulting from the announcement made in December 2005 for the Chilled Dairy activities in Europe, where applicable. 17 SPRING PRESS CONFERENCE 2006
Cash Flow and Financial Position Remain Strong Operating and free cash flow decline slightly due to CHF600 million cash injection to pension funds Cash conversion cycle unchanged at 47 days Capital expenditure down 10bps as % of sales Net debt declines from CHF10.2 bn to CHF9.6 bn Proposed dividend up 12.5% to CHF 9 per share 3 billion share buy-back under way The Nestlé Model: Creating value for shareholders 18 SPRING PRESS CONFERENCE 2006
Actively Managed Capital Structure Benefits Shareholders: Cash Returns CHF bn 7.0 6.0 5.0 10.2 Net debt 4.5 9.6 +39% 6.2 2.6 Share buy back Dividend 4.0 +59% 1.4 3.0 2.8 2.0 3.1 3.6 1.0 0 2004 2005 2006* * 2006 assumes completion of 2nd buy-back programme and payment of proposed CHF 9 dividend 19 SPRING PRESS CONFERENCE 2006
Spring Press Conference Paul Polman
Dividend Evolution 1995 2005 9.00 9.00 8.00 8.00 in CHF 7.00 6.00 5.00 5.50 6.40 7.00 7.20 4.00 3.00 2.00 2.65 3.00 3.50 3.80 4.30 1.00 0.00 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Figures adjusted to number of shares 21 SPRING PRESS CONFERENCE 2006
Dividend Payments 1995-2005 3500 in millions of CHF 3000 3114 2500 2484 2705 2800 CHF 2000 2127 1500 1000 1040 1043 1180 1376 1469 1657 500 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 22 SPRING PRESS CONFERENCE 2006
Nestlé Corporate Social Responsibility 23 SPRING PRESS CONFERENCE 2006
Latin America 24 SPRING PRESS CONFERENCE 2006
Nestlé Corporate Governance 25 SPRING PRESS CONFERENCE 2006
Share Capital by Investor Type 1994-2005 100% 80% 56.2 56.8 54.7 53.3 54.3 52.7 48.4 44 33 34.7 32.6 31.1 60% 40% 20% 43.8 43.2 45.3 46.7 45.7 47.3 51.6 56 67 65.3 67.4 68.9 0% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Institutionals Private Shareholders 26 SPRING PRESS CONFERENCE 2006
Distribution of Share Capital by Nationality since 1992 60 50 40 30 20 10 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Switzerland USA France UK Germany 27 SPRING PRESS CONFERENCE 2006
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Chilled Dairy Brands 29 SPRING PRESS CONFERENCE 2006
How the Food Service Industry Operates 30 SPRING PRESS CONFERENCE 2006
Why Food Service is Attractive Estimated global Sales (CHF bio. 2004) 6.5 4.0 3.7 3.7 Big and growing business opportunity Relevant manufacturer market CHF 600 billion Consumer trends drive growth 1.9 Total = 19.8 Customer consolidation 31 SPRING PRESS CONFERENCE 2006
CPW Volume Growth Since 1991 +4% 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 32 SPRING PRESS CONFERENCE 2006
Record Cereal Share* 22.4% 20% 15% 10% 5% 0% 92 93 94 95 96 97 98 99 00 01 02 03 04 05 *Excluding Sweden, Australia and New Zealand 33 SPRING PRESS CONFERENCE 2006
Next Media Events 6 April 2006 Annual General Meeting 25 April 2006 First Quarter Sales 19 October 2006 Autumn Press Conference