Autumn Press Conference October 19, 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 AUTUMN PRESS CONFERENCE 2006
Research & Development, Innovation and Technology Chief Technology Officer Corporate Research Product Technology Centres R&D Centres R&D Nestlé Waters R&D Nestlé Nutrition R&D Nestlé Purina Innovation Acceleration Teams Technological Intellectual Property Innovation Partnership Management Packaging & Design Regulatory 3 AUTUMN PRESS CONFERENCE 2006
c Operations Sourcing Production Supply Chain Engineering Quality Management Safety, Health & Environment Operations Performance 4 AUTUMN PRESS CONFERENCE 2006
GLOBE Program Status End 2006 Around 80% of Nestlé s food and beverage business: over 100,000 users of the system over 500 factories (including co-packers) over 400 distribution centers over 300 sales offices 5 AUTUMN PRESS CONFERENCE 2006
Autumn Press Conference Paul Polman
Strong 9-Months Performance Sales up 9.1% to CHF 72.2 billion Food & Beverage organic growth 5.8% drives Group to 6.1% Further tackling underperformers, selective disposals Q3 GLOBE on track Raw material environment volatile Full year outlook confirmed 7 AUTUMN PRESS CONFERENCE 2006
Strong Organic Growth Driven by Food & Beverage Total Group CHF 72.2 bn Food & Beverage CHF 67.2 bn + 4.6 % + 1.5 % RIG Pricing & others + 6.1% organic growth + 9.1% total evolution + 4.2 % + 1.6 % RIG Pricing & others + 5.8% organic growth + 8.8% total evolution + 2.8 % Acqs -divests +0.2 % Exchange Rates Acquisitions / Divestitures + 2.8 % + 0.2 % Exchange Rates Acquisitions / Divestitures Food and Beverage achieved 5.8% OG & 4.2% RIG 8 AUTUMN PRESS CONFERENCE 2006
Currency Impact Reducing 9 months 2005 2006 % change Euro (1) 1.55 1.57 +1.2 U.S. dollar (1) 1.23 1.26 +2.3 sterling (1) 2.26 2.29 +1.2 Real (100) 49.29 57.99 +17.7 Yen (100) 1.14 1.09-4.4 Mex. Pesos (100) 11.19 11.52 +3.0 9 AUTUMN PRESS CONFERENCE 2006
Currency Impact Reducing % impact on sales 8 7 6 7.6 5 4.7 4 3 2.8 2 1 0 06 06 Q1 H1 06 9M 10 AUTUMN PRESS CONFERENCE 2006
Strong Growth across Categories in % 12.0 Nestlé Waters 10.0 Pharma 8.0 RIG 6.0 Prepared Dishes and Cooking Aids Powdered & Liquid Beverages 4.0 2.0 Dairy (incl. Ice-cream) Nutrition PetCare 0.0 0.5 2.5 4.5 6.5 8.5 10.5 12.5 Chocolate, Confectionery and Biscuits -2.0 Organic Growth Total F&B performance 11 AUTUMN PRESS CONFERENCE 2006
Food & Beverage Growth by Zone in % 8.0 6.0 Asia, Oceania, Africa RIG 4.0 2.0 Europe Americas 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 Organic Growth F&B Performance 12 AUTUMN PRESS CONFERENCE 2006
Food & Beverage Growth by Geographic Area in % 8.0 6.0 Asia, Oceania, Africa RIG 4.0 Europe 2.0 Americas 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 F&B Performance Organic Growth * EUR region includes sales of Food & Beverage, Water and Nutrition businesses, Nespresso and F&B JVs. 13 AUTUMN PRESS CONFERENCE 2006
Food & Beverage Growth by Geographic Area in % 8.0 6.0 Asia, Oceania, Africa RIG 4.0 Europe Americas 2.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 F&B Performance Organic Growth * EUR and AMS regions include sales of Food & Beverage, Water and Nutrition businesses, Nespresso and F&B JVs. 14 AUTUMN PRESS CONFERENCE 2006
Food & Beverage Growth by Geographic Area in % 8.0 Asia, Oceania, Africa 6.0 RIG 4.0 Europe Americas 2.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 F&B Performance Organic Growth * each region includes sales of Food & Beverage, Water and Nutrition businesses, Nespresso and F&B JVs. 15 AUTUMN PRESS CONFERENCE 2006
F&B Outperforms Market Growth in all Regions 9 8 % RIG % Organic Growth 7.5 7.6 7 6 5.5 5.5 5 4 3 2 2.3 3.0 Sales CHFbn 1 0 x.x x.x x.x Europe Americas Asia, Oceania, Africa 25.8 28.3 13.1 * each region includes sales of Food & Beverage, Water and Nutrition businesses, Nespresso and F&B JVs. 16 AUTUMN PRESS CONFERENCE 2006
Transformation to Nutrition, Health & Wellness Acquisition of Uncle Tobys Acquisition of Jenny Craig 17 AUTUMN PRESS CONFERENCE 2006
and Tackling Underperformers Lactalis Europe Vending Japan Vlachas Dairy Greece Perrier bottle making Private label Ice cream Germany Canned liquid milk Asia 18 AUTUMN PRESS CONFERENCE 2006
Major Brands Driving Growth 40 35 BABs: OG Jan-Sep 2006 30 25 20 15 10 5 F&B OG 5.8% 0-5 19 AUTUMN PRESS CONFERENCE 2006
Index of Raw Material Prices Raw Material Costs remain volatile 160 150 140 130 120 110 100 90 80 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Index for Nestlé Source: Credit Suisse research 6m trailing average Annual average 03-05
2006 Share Price to 30 th September The Nestlé Model Benefits Shareholders Source: Bloomberg 21 AUTUMN PRESS CONFERENCE 2006
Autumn Press Conference
Nestlé Model Confirmed for 2006 1. Sustainable Organic Growth of 5-6% 2. Continued year after year improvement of EBITA margin EBITA Margin 3. Responsible capital management (Working Capital / Business ROIC) 1998 2000 2002 2004 2006 2008 2010 Food & Beverage is the main driver of the Nestlé Model 23 AUTUMN PRESS CONFERENCE 2006
Consistent Top-Line Organic Growth past 10 Years % Growth 15% Upper End of Organic Growth for 2006 1996-2005 average 10% 5% 0% 1.0% 2.3% 3.4% -1.4% OG 5.7% -5% -10% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Jan-Sep 2006 RIG Pricing & Other Acquisitions/Divestitures FX Impact OG: Organic Growth Not restated in 2001: including TTS effect 24 AUTUMN PRESS CONFERENCE 2006
Confirm EBITA Constant Currency Improvement 2006 EBITA CHF million (CHF m) 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 Not restated; New NPS definition in 2001 10.2% Consistent EBITA Progress past 10 Years 10.3% 10.3% 11.1% 11.8% 11.8% 12.3% 12.5% 12.7% 13.0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 % of Sales 25 AUTUMN PRESS CONFERENCE 2006 13.5% 13.0% 12.5% 12.0% 11.5% 11.0% 10.5% 10.0% 9.5% 9.0%
Nestlé Strategic Business Development 1. Grow the core through product and brand innovation 2. Strengthen the core through strategic acquisitions and joint-ventures 3. Restructure underperforming businesses 4. Divest non-strategic businesses 26 AUTUMN PRESS CONFERENCE 2006
Actively Driving Portfolio Mix December 2003 June 2006 21% 3% 6% 3% 7% 25% 6% 6% 11% * 10% 5% 5% 21% 27% 20% * Down due to Trinks disposal in 2004 24% Pharma Western EUR Other F&B Nutrition USA and Canada Oceania and Japan Nestlé Waters Emerging Markets * excluding Nutrition, Waters * 27 AUTUMN PRESS CONFERENCE 2006
Grow the Core through Product and Brand Innovation BABs 28 AUTUMN PRESS CONFERENCE 2006
Grow the Core through Product and Brand Innovation Taster s Choice Well-Being in Korea Key benefit : Well-Being Coffee contains about 2 times more polyphenols than regular coffee that is good for the body, particularly for anti-ageing. What are polyphenols : Polyphenols are anti-oxidants that naturally occurs in tea, fruits, wine and especially in coffee. 29 AUTUMN PRESS CONFERENCE 2006
Strengthen the Core through Strategic Joint-Ventures Lactalis Nestlé Marketing Expertise Brands & R&D Sales EUR 1.2 Bio Lactalis Nestlé Venture Lactalis Supply Chain expertise Sales EUR 0.3 Bio Growth & JV can Profitability leverage expertise of EUR 6.0 Bio, multi-category Chilled Business Immediate low risk, stable income stream for Nestlé without capital allocations A healthy base for renewed growth and profitability 30 AUTUMN PRESS CONFERENCE 2006
Strengthen the Core through Strategic Bolt-on Acquisitions Acquisition of Erikli in Turkey Sales : CHF 70 million Market leader in a seven billion-liter market with double-digit growth 31 AUTUMN PRESS CONFERENCE 2006
Strengthen the Core through Strategic Bolt-on Acquisitions Soluble coffee acquisition Nicaragua Sales : USD 20 million Nestlé clear market leader 32 AUTUMN PRESS CONFERENCE 2006
Strengthen the Core through Transforming Acquisitions Acquisition Uncle Tobys Australia Sales 2005 : AUD 400 million 33 AUTUMN PRESS CONFERENCE 2006
Strengthen the Core through Transforming Acquisitions Acquisition Jenny Craig USA Sales : USD 400 million, 600 centres in the USA, Australia, New Zealand 34 AUTUMN PRESS CONFERENCE 2006
Restructure Underperforming Businesses Perrier Productivity Improvement + 20 % Productivity Costs Thousands of bottles per full time job Production cost per 100 bottles in 1000 21 900 800 700 794 836 897 20.5 20 20.84 20.41 600 500 652 19.5 19.88 400 300 19 19.08 200 18.5 100 0 2004 2005 Est 2006 18 2004 2005 Est 2006 35 AUTUMN PRESS CONFERENCE 2006
Restructure Underperforming Businesses York chocolate factory - investment of CHF 40 million - staff reduction from 2450 to 1800 - sale of part site for commercial residential development built since 1988 built during the 19th century 36 AUTUMN PRESS CONFERENCE 2006
Divest Non-Strategic Businesses Disposal of Trinks in Germany (2004) Disposal of Eismann in Europe (2004) Disposal of Japanese vending (2006) Disposal of Perrier bottle making (2006) Disposal of Vlachas in Greece (Dairy in 2006) Disposal of Schöller Private Label business in Germany (announced Sep 2006) Disposal of liquid milk businesses in Thailand, Malaysia, Singapore and Brunei (announced Oct 2006) 37 AUTUMN PRESS CONFERENCE 2006
Divest Non-Strategic Businesses Liquid Milk Business in Malaysia, Thailand and other countries in the region Sales of about CHF 300 million 38 AUTUMN PRESS CONFERENCE 2006
Nestlé Model Confirmed for 2006 1. Sustainable Organic Growth of 5-6% 2. Continued year after year improvement of EBITA margin EBITA Margin 3. Responsible capital management (Working Capital / Business ROIC) 1998 2000 2002 2004 2006 2008 2010 Food & Beverage is the main driver of the Nestlé Model 39 AUTUMN PRESS CONFERENCE 2006
Nescafé Dolce Gusto 40 AUTUMN PRESS CONFERENCE 2006
Autumn Press Conference
Next Media Events 22 February 2007 Spring Press Conference 19 April 2007 Annual General Meeting 23 April 2007 First Quarter Sales 18 October 2007 Autumn Press Conference