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FULL YEAR RESULTS 2001FULL YEAR RESULTS 2001
Roadshow, March 2002
205.03.2002/res.2001
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.
305.03.2002/res.2001
Agenda
Review of the financialsWolfgang Reichenberger
Ralston Purina integrationJohn Harris
Nestlé Purina North AmericaPat McGinnis
Realising opportunitiesPeter Brabeck-Letmathe
405.03.2002/res.2001
Agenda
Review of the financialsWolfgang Reichenberger
Ralston Purina integrationJohn Harris
Nestlé Purina North AmericaPat McGinnis
Realising opportunitiesPeter Brabeck-Letmathe
505.03.2002/res.2001
Key achievements 2001
Strong sales growth+ 4.4% RIG+ 6.4 % organic+ 9.7% comparable structure & constant FX
Profit performanceStable EBIT margin of 11.3% on comparable basis; 10.9% after TTS review and GLOBEExcellent net profit growth of 15.9% EPS rises 15.7%
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Key figures 2000 and 2001
* adjusted for share split . TTS figures are illustrative.
ChangeCHF mio. 2000 % 2001 % %
Sales 81'422 100 84'698 100 4.0 EBITDA 12'516 15.4 12'444 14.7 (0.6)
ex TTS - - - 15.2EBITA 9'600 11.8 9'713 11.5 1.2
ex TTS - - - 11.9Trading profit (EBIT) 9'186 11.3 9'218 10.9 0.4
ex TTS - - - 11.3Net profit 5'763 7.1 6'681 7.9 15.9
ex TTS - - - 8.2Earnings per share (CHF) 14.91* 17.25 15.7
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Drivers of sales growthJanuary - December 2001 : CHF 84.7 billion
Sales growth at comparable structure and constant exchange rates: + 9.7%
REAL INTERNAL GROWTH (RIG)
Selling price increases and others
Acquisitions minus divestitures
Variation of exchange rates- 4.7%
5.3%
- 1.0%
4.4%
+ 4.0%
TTS 0
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Sales and profitability by management responsibilities and geographic area
FoodEurope 26.3 2.75 10.5 26.7 2.78 10.4 2.1Americas 25.5 3.50 13.7 26.6 3.53 13.3 3.9AOA 15.7 2.67 17.0 15.5 2.60 16.8 5.6
Other 13.9 2.02 14.5 15.9 2.15 13.5 .0
* Calculation based on non-rounded figures for sales. The % variations are influenced not only by thevolution of sales volumes, but also by acquisitions and divestitures, exchange rate fluctuations,and changes in selling prices.
# 2001 %margin negatively impacted by TTS review
2000 2001CHF bio. Sales Profit Margin* Sales Profit Margin* # RIG
% %
905.03.2002/res.2001
Sales and profitability by product group
Beverages 23.0 4.32 18.7 24.0 4.26 17.75.8
Milk products, 22.0 2.62 11.9 23.0 2.57 11.2 3.5nutrition, ice cream
Prep. dishes... 20.6 1.95 9.4 21.3 2.03 9.5 2.9& petcare
Chocolate, 11.0 1.17 10.6 11.2 1.23 11.0 3.7confect. & bisc.
Pharmaceutical 4.8 1.21 25.3 5.2 1.26 24.4 9.2
2000 2001CHFbio. Sales Profit Margin* Sales Profit Margin* # RIG
% %
* Calculation based on non-rounded figures for sales. The % variations are influenced not only by theevolution of sales volumes, but also by acquisitions and divestitures, exchange rate fluctuations, and changes in selling prices.
# 2001 %margin negatively impacted by TTS review
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Sales (CHF million) 81'422 84'698 -100 100 100
Cost of goods sold (46.8) (44.5) +230 (46.1) +70Distribution (7.2) (7.6) -40 (7.8) -60Marketing and (32.5) (34.7) -220 (32.4) +10
administrationR&D (1.3) (1.4) -10 (1.5) -20Restructuring (0.4) (0.3) +10 (0.3) +10Amortisation of goodwill (0.5) (0.6) -10 (0.6) -10
Trading profit (EBIT) 11.3 10.9 -40 11.3 0
EBIT margin maintained despite investing in the future
Diff. basis Diff. basis (% of sales) 2000 2001 points 2001 (ex TTS) points
TTS review figures are illustrative.
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Marketing investment continues -administrative costs fall
ActualCHF bio. % change %of sales
2000 2001 2000 2001
Marketing expenses 19.5 22.7 16.4 23.9 26.8
excl. TTS review 19.5 19.9 2.0 23.9 24.2
Administration 7.0 6.7 (4.1) 8.6 7.9
TTS review figures are illustrative. Calculations based on non-rounded figures.
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Distribution costs: Customer proximity
Growth in Perrier Vittel Group sales– Home & office is distribution intensive
Whenever, wherever, however
Ice cream and Confectionery
High Q1 oil costs
1305.03.2002/res.2001
Net profit - major improvement
Trading profit (EBIT) 11.3 10.9 -40 11.3 0
Net financing cost (0.9) (0.5) +40 (0.5) +40Net non-trading expenses (0.1) (0.1) (0.1)Taxes (3.4) (2.8) +60 (3.0) +40Outside interests (0.3) (0.2) +10 (0.2) +10Associated companies 0.5 0.6 +10 0.7 +20Net profit 7.1 7.9 +80 8.2 +110
Tax as % of pre-tax profit 33.1 27.7 +540
Diff. basis points Diff.basis points (%of sales)
2000 2001 2001 (ex TTS)
TTS review figures are illustrative. Calculations based on non-rounded figures.
1405.03.2002/res.2001
Capital gain on partial IPO of Alcon (no material impact on taxes expected)
Realignment of the Group's Petcare assets to realise announced synergies, including US Distribution Network
Rationalisation of asset base triggered by increased globalisation and regionalisation of our businesses and implementation of Globe
Treatment of goodwill amortisation currently under review by IAS
Non recurring events anticipated for 2002
1505.03.2002/res.2001
Improved from half-year increase of CHF 2'562 mio. to increase of CHF 870 mio.
Key reasons for movement in 2001- Excellent sales development- Emphasis on higher value-added products- Move to regional manufacturing- Strong last quarter
Monitored at Centre monthly
Working capital - returning to appropriate level
1605.03.2002/res.2001
Healthy cash flow
9172691 4390 3706
5501 5599 4938
0
2000
4000
6000
8000
10000
1995 1996 1997 1998 1999 2000 2001
Free cash flow Operating Cash Flow (OCF)
CHF mio.
3839
5633
74016372
81878851 8614
1705.03.2002/res.2001
Net indebtedness* up"AAA" maintained
* Total financial liabilities minus liquid assets.Liquid assets do not include the carrying value of treasury shares(CHF 2.8 bio. at year-end 2001)
CHF billion
H1 H2 H1 H2 H1 H2 H1 H21998 1999 2000 2001
6.03.0
6.69.5
6.2 5.2
19.4
9.1
0
4
8
12
16
20
24
1805.03.2002/res.2001
The Ralston Purina transaction
Has added net debt of USD 10.3 bio. (CHF 17.3 bio. at 1.68 CHF vs. USD)
Favourable impact on WACC
1905.03.2002/res.2001
Agenda
Review of the financialsWolfgang Reichenberger
Ralston Purina integrationJohn Harris
Nestlé Purina North AmericaPat McGinnis
Realising opportunitiesPeter Brabeck-Letmathe
GLOBAL LEADER IN PETCARE
2105.03.2002/res.2001
Nestlé Purina PetCare
World class petcare brand portfolio -with brands that can be made truly global
Strong positions in key segments and regions
Low cost global supply base
Strong management with proven records
Significant financial upside
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Strong brand equity in dog food...
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...and in cat food...
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...as well as being the leader in US litter products
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Highly complementary, benefiting from:
– marketing and R&D
– industrial efficiency
– global market growth opportunities
– a broad product range for customers
– distribution strength in different channels
Well positioned to succeed
2605.03.2002/res.2001
Superior R&D expertise
Friskies Purina Shared expertise
Wet food
Human food technology and nutrition expertise
Dry food and treats
Heska alliance for functional foods
Pet nutrition
Palatability / flavours
Assures long term, proprietary product innovation
2705.03.2002/res.2001
Fast track integration
Worldwide integration officer reporting to Group CEO
St. Louis is HQ for N. America (US + Canada)
Combined North America management team committed to business objectives
International operations being integrated into new regional focused petcare structure - L.A., Europe, AOA
2805.03.2002/res.2001
$260 million synergy potential
Minimum $260 million annual savings as of 2004
“Soft” synergies include brand extensions, transfer of know-how, patents and R&D expertise
Revenue synergies from sales expansion outside North America
2905.03.2002/res.2001
Apply Purina's supply matrix to Friskies (10%)– Procurement– Distribution
Consolidate factories (15%)
Overheads (75%)– Warehousing– Sales and marketing– R&D– Administration
Costs estimated at $250 million over 2 years
Identified savings opportunities
3005.03.2002/res.2001
Integration timetable
$0
$50
$100
$150
$200
$250
$300
Savings $59 $125 $263 $270 $277
Cost to Attain $120 $130
2002 2003 2004 2005 2006
3105.03.2002/res.2001
Progress to date
Management teams named throughout the world
Integration teams in place
Synergy accountability established
Synergy attainment program fully underway
- Supply chain synergy plans confirmed
- Overhead synergies confirmed; staff reductions occurring
Service sharing with Nestlé underway
Program to seek further synergies in place
3205.03.2002/res.2001
Agenda
Review of the financialsWolfgang Reichenberger
Ralston Purina integrationJohn Harris
Nestlé Purina North AmericaPat McGinnis
Realising opportunitiesPeter Brabeck-Letmathe
3305.03.2002/res.2001
Pet Care – Total market view
Sales ($B) Chg. v. YA
Pet Food $ 11.6 +8%
Supplies 5.6 +5%
Litter 1.2 +8%
Total $ 18.4 +7%Source: NPPC estimate of 12 Mos. ending 9/30/01 based on IRI (through 1/27/02), Audits & Surveys (through 9/30/01), Market
Master, ACNielsen, and NPPC shipment history.Nestlé Purina PetCare
3405.03.2002/res.2001
Category $B/Yr GrowthDry Dog $5.1 5%Dry Cat $2.3 7%Wet Dog $1.4 2%Wet Cat $1.7 1%Dog Snacks $1.0 7%Cat Snacks $0.1 11% Litter $1.2 8%
Pet Care – Segment view
Overall growth driven by Dry Pet food, but all segments showing growth vs. YAG.
Source: NPPC estimate of 12 Mos. ending 9/30/01 based on IRI (through 1/27/02), Audits & Surveys (through 9/30/01), Market
Master, ACNielsen, and NPPC shipment history.
Nestlé Purina PetCare
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Nestlé Purina North America is a unique operating company in a high growth market
Sharply focused on PetCare
Significant scale and the resulting efficiencies
Nestlé Purina PetCare
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NPPC share leadership – Ttl. Pet Food
Source: IRI and Audits & Surveys, data through Sept. ‘01Nestlé Purina PetCare
NPPC32%
Mars10%
P&G12%
Pr. Label12%
Hills13%
Heinz8%
Nutro4%
All other9%NPPC has top
share position in Total U.S. Pet
food
Total Pet food & Sales by vendorFood, Drug, Mass, Pet speciality
3705.03.2002/res.2001
NPPC share leadership – by category
Source: 52 Weeks Ending 1/27/02; IRI; Food, Drug &
Mass (including W-M). Litter data period ends 8/12/01
In Food/Drug/Mass, NPPC holds the top share position in 6 of 7 categories:
Category Share PositionDry Dog # 1Dry Cat # 1Wet Dog # 2Wet Cat # 1Soft Dog Snacks # 1Cat Snacks # 1Litter # 1
Nestlé Purina PetCare
3805.03.2002/res.2001
We will enhance our performance and our market positions by leveraging our brand portfolio with our organizational
strengths
Research and development
Consumer knowledge
Product supply
Customer alliances
Nestlé Purina PetCare
3905.03.2002/res.2001
Agenda
Review of the financialsWolfgang Reichenberger
Ralston Purina integrationJohn Harris
Nestlé Purina North AmericaPat McGinnis
Realising opportunitiesPeter Brabeck-Letmathe
4005.03.2002/res.2001
Realising opportunities
Generating efficiencies
Perrier Vittel - the growth leader
Nutrition - meeting objectives
Ice cream - improving performance
CPW - building market share
Key objectives 2002
4105.03.2002/res.2001
Evolution of Group's factories1997 to 2001
1.1.97 1997-2001 2001
Number of factories 489 479
Acquired /set up +119 +18Sold / closed /other -140 -29
Factories as of 31.12.2001 468
2001 excludes Ralston Purina 29
4205.03.2002/res.2001
MH 97 target savings exceeded
49.3%
51.2%
50.1%
48.1%
46.8%
44.5%
50.7%51.0%
51.9%52.0%
51.8%
44%
45%
46%
47%
48%
49%
50%
51%
52%
53%
1996 1997 1998 1999 2000 2001
CO
GS
in %
of S
ales
Target 2004: savings of at least CHF 500 million per year
Without Improvements
With Improvements
CHF3.1 bio.
CHF0.6 bio.
CHF 2.2 bio.
CHF 1.3 bio.
CHF4.0 bio.
4305.03.2002/res.2001
Future efficiencies to be achieved
Target 2004: at least CHF 1.5 billion by 2004
Project Fitness: savings of 1% of sales by 2004
GLOBE: benefits of CHF 3 billion by 2006
IC3: improving customer and channel contributions
4405.03.2002/res.2001
Perrier Vittel
RIG of 9.1% delivering organic growth of 11.7%No. 1 in US; 16.3% RIG and profit improvementNo. 1 in European Home & office (Aqua Cool)Nestlé Pure Life sold 220m litres in 11 countriesGermany achieved 16.2% volume growthNestlé Aquarel triples volume & is No.1 in German hypermarkets 2002 to see further strong growth
4505.03.2002/res.2001
Nutrition
RIG of 6.1%– Infant 5.5%– Clinical 14.2%– Performance 9.4%
Infant nutrition continued to grow market shareClinical nutrition now in 26 marketsBranded active ingredients now in 35 markets
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PowerBar
Outstanding sales growth in the US and Europe
Good improvement in profitability
Accelerated geographical expansion
R&D effort re-energised
Delivering on expectations pre-acquisition
4705.03.2002/res.2001
Be great advertising campaign
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Pria advertising campaign
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Ice cream
Improvement continues - profitability doubledKey market positions strengthened (US & Ger)UK solution demonstrates pragmatismEuropean industrial structure under reviewPan-European management structure in placeFuture emphasis: innovation and availabilityFocus for 2002: profitable growth
5005.03.2002/res.2001
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Cereal Partners WorldwideRIG of 9.3% drives sales and market
share growth
1.61.51.3
1.21.1
0.90.70.60.6
0.4
2221201918
17161413
12
0.00.20.40.60.81.01.21.41.61.8
1992 1993 1994 1995 1996 1997 1998 1999 2000 20010
5
10
15
20
25CHFbio. in %
5205.03.2002/res.2001
CPW : Top 10 markets
Source: Nielsen
1. UK 24.52. France 25.33. Poland 80.24. Mexico 18.55. Portugal 47.26. Italy 17.77. Germany 4.98. Spain 15.09. Brazil 21.0
10. Chile 59.4
Market Share as at ...
%
5305.03.2002/res.2001
CPW - summary
A successful joint venture
Global category with positive growth outlook
CPW will achieve strong volume, share and profit growth
5405.03.2002/res.2001
Nestlé : Key objectives 2002
Drive profitability through efficiency programmes
Continue to deliver 4% RIG
Continued improvement in Ice cream
Improve performance of Chilled dairy andPetcare
Integration of Ralston Purina, Ice Cream Partners, Schöller
Conclude partial IPO of Alcon
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