Full Year Results Roadshow

Transcription

1 Full Year Results Roadshow Nestlé Full Year Results 2007

2 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

3 2007 Highlights all metrics improve Delivering the Nestlé Model Improvements FY 07 v 06 FY 07 Total Sales total +9.2% + CHF 9.1 bn CHF bn Organic growth + 7.4% EBIT EBIT margin % + 50 bps + CHF 1.7 bn CHF 15.0 bn 14.0% Net profit Net profit margin % + 60 bps + CHF 1.4 bn CHF 10.6 bn 9.9% Working capital (% of sales) -10 bps 6.6% Operating cash flow % + CHF 1.7 bn CHF 13.4 bn ROIC before goodwill after goodwill bps + 50 bps 22.2% 12.2% 3

4 Food & Beverage All metrics improve CHF bn 7.1% CHF 12.6 bn 12.6% 4.0% 2007 Strong + 9.2% on-going growth % + 40 bps 2006 CHF 91.8 bn 4.2% 5.9% CHF 11.2 bn 12.2% Sales RIG OG EBIT EBIT margin 4

5 Total Performance Management Growth & Value of Growth Channel Development Scale Benefits Region Development Operational Efficiencies Skills & Competences Delivering long term sustainable performance improvement 5

6 The Nestlé Model 6.9% 5.1% 5.2% 3.8% 10.2% 10.3% 10.3% 11.1% 5.4% 6.4% 11.8% 11.8% 4.9% 5.1% 4.5% 12.3% 12.5% 12.6% 7.4% 6.2% 6.2% 13.5% 14.0% 12.9% % Organic Growth EBIT margin EBIT margins correspond to published figures not restated for accounting changes 6

7 Growth in emerging & developed markets Emerging markets are ~30% of Nestlé F&B sales % OG Total Food & Bev Developed Emerging Total

8 Transforming product portfolio towards healthier nutrition is also driving growth Sales CAGR Optimising Nutrition: BAB Nutrition enhanced F&B Everyday F&B +23.7% +7.8% +6.2% BAB Nutrition enhanced F&B Everyday F&B Adding/enhancing : Whole Grains: 700 million additional servings in Europe Health benefits: BABs Micronutrients: vitamins, minerals, trace elements... Reducing : TFAs: 34,000 metric tons removed : Salt: 5,000 metric tons removed Occasional F&B +5.6% Occasional F&B : Sugar: 240,000 metric tons removed

9 The Nestlé Investment Proposition The Nestlé Model 1. Long-Term Organic Growth Target 5-6% 2. Continued year after year improvement of EBIT margin 3. Improving Capital efficiency / Business ROIC / Cash returns to shareholders Sales EBIT Resulting in an industry outperforming, long-term total shareholder return 9

10 Focus areas Discipline driving performance Operational control Leveraging scale and skills Strategy and performance 10

11 Discipline driving performance Discipline, increased transparency and excellence in execution are material influences on the 2007 results Underperformers improved overall, especially Ice cream, European PetCare: 10 bps contribution to Group EBIT margin Working capital improved by 10 bps despite strong growth and raw material cost pressure Cash conversion cycle improved by 7 days All areas contributed 11

12 Discipline driving performance 10% reduction in SKUs in % improvement in bad goods Simplifying structures (200 fewer legal entities) CHF700mn excess real estate disposed over 3 years Focus areas for 2008 include Leverage scale & skills overheads Reduced working capital as % of sales Underperformers and SKU reduction 12

13 Leveraging scale Strategic Business Units Global Media Buying Strategic Generating Demand Unit Supply Chain Optimisation Team European Purchasing Industrial Performance Team Innovation Acceleration Team Regional Treasury Centres Global Nestlé Business Services Global Business Excellence Team Enabled by GLOBE Leveraging best practices, efficiencies, skills & know-how 13

14 GNBS contributing to profitable growth Stage Get-in Standardize & Streamline Expand Focus Transition "as-is" activities to NBS Full accountability for service delivery with NBS One global bestin-class end-toend solution Optimized retained organizations New Markets New Services Outcome Scale......resulting in consolidation savings Process improvement......resulting in lower cost Business focus on demand generation......resulting in profitable growth 14

15 Update on GLOBE GLOBE Objectives changed from: Implementation of harmonized Nestlé Business Excellence Best Practice Implementation of Data Standards and Data Management "Managing Data as a Corporate Asset" Implementation of standardized information systems & technology To: Move from "Best in Nestlé" to "Best in Class" best practices confirmed with external benchmarking Move from historical/explanatory reporting to forward looking/real time/predictive information with a greater focus on customers and consumers Enable a fast, focused and flexible "front line" with a slim, cost efficient "back-line" 15

16 Operational control Balance sheet optimisation within "Gold Standard" parameters minimise cost of capital Controls oversight of Nestlé markets Devolved responsibility balanced by controls Guardian of shareholders' interests Use of funds, returns hurdles, risk policies, etc GLOBE brings improved transparency, greater speed, and enhanced benchmarking The opportunity is to leverage best in class practices, to share excellence in execution and to enhance discipline continuous improvement 16

17 The role of Finance Finance is central to value creation by identifying opportunities for performance improvement Finance is central to value protection through controls, systems, governance Focus on maximising long term total shareholder return 17

18 Differentiating strategies Differentiating Strategies Responsibility, Leadership to get Results Performance Management Cycle Benchmark & Fix Objectives Measure & Track Focus & Implement 18

19 Full Year Results Roadshow Nestlé Full Year Results 2007

20 Nestlé 2007 Full full Year year Results results roadshow 2007 Delivering the Nestlé Model in 2008 Driving performance longer term

21 Agenda The last decade 2008 another year of the Nestlé Model Beyond 2008 opportunity rich 21

22 Nestlé The Last Ten Years Creating... Transforming... Delivering... Rewarding...

23 The transformational opportunity The "What" The "How" Strategic Towards Nutrition, Health & Wellness Organisational Creating an agile fleet of businesses/markets Efficient support structure Increased focus on demand generation 23

24 Creating Nestlé has evolved from Food & Beverage to create 60/40+ the global leader in Nutrition, Health and Wellness

25 Transforming From super-tanker to...an agile fleet of businesses...independently strong and flexible, following their own rules for success, with business specific knowledgeable management. 25

26 Delivering... (The Nestlé Model) Sustainable Organic Growth of 5-6% 12 year average = 5.9% CHF 60bn to CHF 107.6bn Annual improvement of EBIT margin 12 year average = 35 basis points to 14% CHF 6.2bn to CHF 15bn Total cash returned to shareholders CHF 36bn in 12 years 26

27 Rewarding... CHF TSR of 408% Over CHF 150bn of incremental value since

28 Creating...Transforming...Delivering...Rewarding... The right strategy Performance is trending higher Our mission is to build on that success Deliver the strategy Enhance financial performance We intend to make Nestlé the reference for both Nutrition, Health & Wellness and for Financial Performance

29 Agenda The last decade 2008 another year of the Nestlé Model Beyond 2008 opportunity rich 29

30 2008: Achieving the Nestlé Model despite tough market conditions Market concerns Raw material costs Impact of high energy costs Recession impact on consumer demand & companies' ability to price Fall-out from sub-prime Nestlé's commitment in 2008 To deliver the Nestlé Model

31 2008: Achieving the Nestlé Model despite tough market conditions By delivering our strategy Nutrition, Health & Wellness Billionaire Brands By being the best in execution Speed & Discipline Operational efficiency Management priorities

32 F&B Billionaire Brands represent about 70% of F&B sales 32

33 2008: Achieving the Nestlé Model despite tough market conditions By delivering our strategy Nutrition, Health & Wellness Billionaire Brands By being the best in execution Speed & Discipline Operational efficiency Management priorities

34 Speed & Discipline driving financial performance Businesses need to "earn the right" to belong underperformers, lower performing or commoditised categories and SKUs Overheads, total delivered costs, trade spend, etc Focus on bigger brands spend, R&D, resource Rewards structure 34

35 Building a competitive platform from which to achieve margin improvement Centre-driven cost initiatives (MH'97 Op. Excellence) Lean thinking and continuous improvement Fast, disciplined, flawless execution "Nestlé Continuous Excellence" 35

36 From centre-driven initiatives Operation EXCELLENCE 2007 MH'97 CI Continuous Improvements Target Functional Targets out of Best Practice Restructuring the Industrial Network Optimizing Total Delivered Cost by... Aligned targets across the Supply Chain Integrated Distribution and Industrial Networks Continuous Improvement culture An average CHF1 billion a year savings 36

37 to a sustainable, attitude-inspired drive for excellence Operation EXCELLENCE 2007 Target MH'97 CI On-going...from project-driven to sustainable, attitude inspired continuous improvement 37

38 One Nestlé operating model: Nestlé Continuous Excellence Deliver Competitive Advantage Delight our Consumers Excel in Compliance...and create a sustainable attitude inspired approach Performance Improvements Value Stream Optimization (VSO) Total Performance Management (TPM) Foundation Building Blocks Organization Alignment Leadership Eliminate Supply Chain Losses Eliminate Factory Losses Full Operations Compliance Engage people Outstanding Leadership Capability 38

39 Continuous Excellence across the whole value chain TPM VSO : Consumer focused flow optimization across the full value chain (including R&D) Consumer Customer Distribution Centres Manufacturing Packaging Material Raw Material Zero Error Zero Loss Zero Waste Downstream Input ensures high performance equipment Upstream Input... ~85% of our people in Operations work in factories. ~82% of our delivered costs are linked to factories. 39

40 Pilot results show scale of opportunity 55% reduction in absenteeism 33% reduction in consumer complaints 50% reduction in waste 20% reduction in change-over time 70% reduction in unplanned stoppages 15% increase in line efficiency 15% reduction in rework 40

41 Operational efficiencies provide a competitive base for margin improvement Nestlé has a proven ability to drive efficiencies Nestlé Continuous Excellence takes us to a new level: combines best practices from different industries reaches from supplier to customer; service focused goes beyond cost to working capital & other KPIs GLOBE provides transparency, discipline, measurement, faster decision making 41

42 Discipline enhanced by GLOBE An enhanced demand-focused organisation Network structure, rapid decision making, leveraging scale, complexity with efficiency A flexible network structure Improve agility/service levels in markets Continuous excellence to drive out costs A mentality of continuous improvement Pride in "flawless" execution Performance culture & rewards 42

43 2008: Achieving the Nestlé Model despite tough marketing conditions By delivering our strategy Nutrition, Health & Wellness Billionaire Brands By being the best in execution Speed & Discipline Operational efficiency Management priorities

44 2008: Management priorities Driving financial performance Four objectives RIG & organic growth (5-6%) Increased EBIT margin (constant currency) Reduce working capital Improve ROIC Operational priorities with internal targets Improve returns on trade spend The Nestlé Model Operational efficiency & reduced overheads 44

45 Agenda The last decade 2008 another year of the Nestlé Model Beyond 2008 opportunity rich 45

46 Beyond 2008: Nestlé is opportunity rich Four competitive advantages Four growth areas Four Pillar strategy 46

47 Beyond 2008: Four competitive advantages Product and brand portfolio The industry's leading R&D capability Unmatched geographic presence People, culture, values, attitude 47

48 Consumer Benefit Areas Protection Nestlé Nutrition, Coffee & Beverages, Dairy, CPW, Ice cream Relevant categories Nestlé Nutrition, Nestlé Purina PetCare, Coffee & Beverages, Dairy, Ice cream Growth & Development Weight Management Food, Nestlé Nutrition, Dairy, CPW, BPW, Chocolate, Confectionery & Biscuits, Ice cream, Nestlé Waters, Nestlé Purina PetCare Dairy, Nestlé Nutrition, Nestlé Purina PetCare Digestive Comfort Skin Health & Beauty innéov, Coffee & Beverages, Dairy, BPW, Nestlé Waters Nestlé Nutrition, Ice cream, Chocolate, Confectionery & Biscuits, Coffee & Beverages, Nestlé Waters Performance Healthy Recovery Nestlé Nutrition Nestlé Nutrition, Chocolate, Confectionery & Biscuits, Dairy, Food, Coffee & Beverages, Nestlé Purina PetCare Healthy Ageing 48

49 Benefits of open innovation platform plus CHF1.9 billion R&D spend Business Focus Key Suppliers Venture Capital Universities, Start-Ups Benefit Focus The wider Wider Nestlé é 49

50 Unmatched geographic presence Population growth Nestlé F&B sales (CHF) Developing world* +3.3bn 34 billion North America +0.15bn 29 billion Europe -0.05bn 38 billion Source for population growth: *Developing does not include Eastern Europe. 50

51 Beyond 2008: The Four growth areas Nutrition, Health & Wellness Emerging markets & PPP Leadership in "out of home" Nestlé Professional Premiumisation 51

52 Demographics: A $240 billion opportunity PPP = Popularly Positioned Products Growth scenario ( ) + US$ 170bn 5.9% p.a. "Premiumisation" Consumption of food manufacturing value-added actual US$, per capita Convenience Sustenance Growth scenario ( ) + US$ 70bn 6.9% p.a. Pleasure and diversity Nestlé per capita sales Nutrition WellBeing PPP Per-capita income US$ 1,500 5,000 13,000 22,000 28, Sources: UNIDO (value-added), WIDER and World Bank; Nestlé

53 Grow in emerging markets CHF1.3 trillion: Value of 'traditional trade' grocery sales in our Top 10 emerging markets Source: Planet Retail, Europanel, Market Data, SGDU Estimate 53

54 Emerging markets and PPP A $70 billion opportunity 54

55 Moving up on the escalator: World population by income bracket '000 People, mn > 28'000 6'000 5'000 4' '000-28'000 PPP$ 13'000-22'000 PPP$ 3' '000-13'000 PPP$ 2' PPP$ 1' <1500 PPP$ Sources: UN WIDER and World Bank (also for outlook on economic growth ); 55

56 Premiumisation 2. Strong Emotional Affiliation 1. True Product Differentiation 4. Own the Expert Client Community 3. Own Retail Outlets Boutiques & Bars Gift boxes 56

57 Beyond 2008: The Four Pillar Strategy Operational efficiency Innovation & Renovation Consumer communication Whenever, wherever, however 57

58 Out of home (OOH) A growing trend & a $400 billion market Due to shifts in demographics and socio-economic factors foodservice represents an increasingly important consumer option Consumer demand for convenience, taste & nutrition is driving foodservice growth in all markets In mature economies, OOH spend today accounts for 30-50% of consumer food & beverage purchases The trend is for further long term growth in OOH consumption 58

59 The global leader in branded hot and cold non-carbonated Beverage solutions The localandregional leader in strategic food product solutions 59

60 Grow with our Top 10 Customers Sales growth '00-'06 Top 10 Customers + 41% Nestlé sales in Top % Source: Nestlé & Planet retail 60

61 Top 10 forecast their growth to be 57% between '06 and '12 +57% Top 10 Top 10 Rest Top % Rest Top Source: Planet Retail

62 Top 10 forecast their growth to be 57% between '06 and '12 CHF10bn with no out-performance +57% Top 10 Top 10 Rest Top % Rest Top Source: Planet Retail

63 Summary We intend to make Nestlé the reference for both Nutrition, Health & Wellness and for Financial Performance

64 Beyond 2008: Building on momentum to drive performance Deliver the strategy continuity Nutrition, Health & Wellness higher margin/growth categories Organisational Transformation structural efficiencies & growth Key growth opportunities above market growth Build on the Competitive advantages to higher levels Brand, presence, people, R&D Profitable growth Leverage GLOBE, GNBS Nestlé Continuous Excellence Discipline & accountability swift, flawless execution "The Result" enhanced financial performance Achieve "the Nestlé Model" with greater capital efficiency 64

65 The Nestlé Investment Proposition The Nestlé Model 1. Long-Term Organic Growth Target 5-6% 2. Continued year after year improvement of EBIT margin 3. Improving Capital efficiency / Business ROIC / Cash returns to shareholders Sales EBIT Resulting in an industry outperforming, long-term total shareholder return 65

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