full year results 2001 - nestlé3 05.03.2002/res.2001 agenda review of the financials wolfgang...

FULL YEAR RESULTS 2001FULL YEAR RESULTS 2001

Roadshow, March 2002

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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.

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Agenda

Review of the financialsWolfgang Reichenberger

Ralston Purina integrationJohn Harris

Nestlé Purina North AmericaPat McGinnis

Realising opportunitiesPeter Brabeck-Letmathe

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Agenda





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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

% %

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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

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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.

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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

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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

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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

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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

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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

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Agenda





GLOBAL LEADER IN PETCARE

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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

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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

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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

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$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

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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

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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

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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

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Agenda





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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

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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.


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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


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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

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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


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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


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Agenda





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Realising opportunities

Generating efficiencies

Perrier Vittel - the growth leader

Nutrition - meeting objectives

Ice cream - improving performance

CPW - building market share

Key objectives 2002

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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

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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.

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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

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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

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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

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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

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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 %

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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 ...

%

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CPW - summary

A successful joint venture

Global category with positive growth outlook

CPW will achieve strong volume, share and profit growth

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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

full year results 2001 - nestlé3 05.03.2002/res.2001 agenda review of the financials wolfgang...

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