nestle india financial analysts meet

8/9/2019 Nestle India Financial Analysts Meet

1/48

Nestl India Limited

Financial Analysts Meet

May 17 , 2007


2/48

Agenda

Opening Remarks Martial Rolland

Key Financials Shobinder Duggal

Questions & Answers All


3/48

This presentation may contain statements which reflect

Managements current views and estimates and could be

construed as forward looking statements. The future

involves certain risks and uncertainties that could cause

actual results to differ materially from the current viewsbeing expressed. Potential risks and uncertainties

include factors such as general economic conditions,

availability and prices of commodities, competitive

products and pricing pressures and regulatorydevelopments etc.

Responses can only be given to questions, which are not

price sensitive.

Disclaimer


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Opening Remarks


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Over to SHD


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Key Financials


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Q1 07

Q1 06

R I G O G E B I T

m a r g i n

G r o s s S a l e s

I N R 9 . 0 B i o

I N R 7 . 2 B i o

+ 24.7% +150bp

1 7 . 9 %

1 6 . 4 %

Strong

on-goinggrowth

1 7 . 9 %

2 2 . 0 %

1 2 . 4 %

9 . 3 %

E B I T

+ 36.2%

I N R 1 . 6 B i o

I N R 1 . 2 B i o

Snap shot of the quarter

All calculations are based on non-rounded figures

PAT crosses INR 1 Billion milestone


8/48

Our Business

We manage a diversified food & beverages business

addressing different need states having a complex

value chain with focus on value drivers to enhance

total shareholders return.

We maintain a high standard of Corporate

Governance and are a responsible corporate citizen.


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Our Structure

A Multi-focal Organization with an agile fleet of businesses


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The Good Food Good Life Portfolio

Convenience, Pleasure, Nutrition, Health, Wellness

Purc

hasingPowe

r


11/48

Complex Value Chain

Some Examples

Number of Stock Keeping Units 390

Number of Product Recipes 400

Number of Ingredients 330

Number of Packing Materials 800

Number of Quality Tests Performed 190


12/48

Driving Total Shareholders Return

1. Sales Growth

2. Profit Margin

3. Working Capital Intensity

4. Fixed Capital Intensity

5. Income Tax Rate

6. Cost Of Capital

7. Value Growth Duration

The Value Drivers


13/48

SALES GROWTH (1)


14/48

2 0 . 6

2 2 . 9

2 3 . 9

2 6 . 7

2 9 . 7

7 . 3

9 . 1

1 7 . 9

2 2 . 0

1 1 . 3

1 0 . 4

7 . 9

9 . 7

9 . 3

4 . 4

6 . 3

1 1 . 5

1 2 . 1

1 1 . 4

1 2 . 4

1 2 . 1

5 . 0

1 0 . 0

1 5 . 0

2 0 . 0

2 5 . 0

3 0 . 0

2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 Q 1 0 6 Q 1 0 7

G

r

o

s

s

S

a

l

e

s

i

n

I

N

R

B

i

o

4

8

1 2

1 6

2 0

2 4

(

%

)

R

I

G

&

O

G

G r o s s S a l e s I N R B i o R e a l I n t e r n a l G r o w t h ( % ) O r g a n i c G r o w t h ( % )

Sales Evolution

Basis Nestle Internal Reporting Standards


15/48

6 . 2 5 . 4 6 . 0 6 . 1 6 . 6 6 . 5 6 . 7 6 . 7 7 . 2 7 . 0 7 . 5 7 . 7 9 . 0

4 . 5

6 . 0

7 . 5

9 . 0

Q 1 - 0 4 Q 2 - 0 4 Q 3 - 0 4 Q 4 - 0 4 Q 1 - 0 5 Q 2 - 0 5 Q 3 - 0 5 Q 4 - 0 5 Q 1 - 0 6 Q 2 - 0 6 Q 3 - 0 6 Q 4 - 0 6 Q 1 - 0 7

Consistently grown over the quarters

Gross sales including excise duty

Sales

i

n

I

N

R

B

i

o


16/48

V o l u m e ( 0 0 0 T o n s ) V a l u e

@

( I N R B i o )

Q 1 0 7 Q 1 0 6 V a r % Q 1 0 7 Q 1 0 6 V a r %

D o m e s t i c

6 1 . 9 5 3 . 4 1 6 . 0 8 . 1 6 . 7 2 1 . 3 #

E x p o r t s

4 . 7 3 . 4 3 6 . 0 0 . 9 0 . 5 6 9 . 9

T o t a l

6 6 . 6 5 6 . 8 1 7 . 2 9 . 0 7 . 2 2 4 . 7

D o m e s t i c

C o n t r . %

9 3 . 0 9 3 . 9 ( 0 . 9 ) 9 0 . 4 % 9 3 . 0 % ( 2 . 6 )

E x p o r t s

C o n t r . %

7 . 0 6 . 1 0 . 9 9 . 6 % 7 . 0 % 2 . 6

Channel-wise Sales

@ Gross Sales including excise duty# Net Domestic Sales up 24.3%

All calculations are based on non-rounded figures


17/48

Balancing Export Portfolio

INR Bio

7 2

6 7

4 8

4 4

3 2

3 5

2 9

2 8

3 3

5 2

5 6

6 8

6 5

7 1

2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 Q 1 0 6 Q 1 0 7

E x p o r t s t o R u s s i a O t h e r s

2 . 62 . 42 . 6 2 . 8 2 . 4 0 . 5

Contr.

(%)

0 . 9


18/48

3,801 3,193

1,472

1,798 1,320

1,900

1,2261,495

Q1 07 Q1 06

Milk Products and Nutrition Beverages

Prepared Dishes and Cooking Aids Chocolate and Confectionery

7,2108,994 INR Mio.

42.3%

20.0%

21.1%

16.6%

44.3%

20.4%

18.3%

17.0%

G r o s s S a l e s i n c l u d i n g e x c i s e d u t y

A Balanced Product Portfolio


19/48

Product Categories: Jan - Mar 2007

1 . 5

9 . 0

3 . 8

1 . 8

1 . 9

1 5

2 0

2 5

3 0

3 5

4 0

6 1 2 1 8 2 4 3 0 3 6

V o l u m e G r o w t h ( % )

O

r

g

a

n

i

c

G

r

o

w

t

h

(

%

)

T o t a l

C h o c o l a t e &

C o n f e c t i o n e r y

M i l k P r o d u c t s &

N u t r i t i o n

B e v e r a g e s

P r e p a r e d D i s h e s &

C o o k i n g A i d s

B u b b l e s i z e r e p r e s e n t s G r o s s S a l e s ( I N R B i o )


20/48

2 1 . 1

2 0 . 0

1 6 . 6

4 2 . 3

2 6 . 0

2 8 . 1

2 0 . 0

2 2 . 0

2 4 . 0

2 6 . 0

2 8 . 0

3 0 . 0

Q 1 0 6 Q 1 0 7

3 . 2

3 . 8

3 . 0

3 . 5

4 . 0

Q 1 0 6 Q 1 0 7

Milk Products & Nutrition

S a l e s V o l u m e ( 0 0 0 t o n s )

8 . 0 %

S a l e s ( I N R B i o )

1 9 . 0 %

M a r k e t L e a d e r i n B a b y F o o d s a n d

S w e e t e n e d C o n d e n s e d M i l k

V e r y c l o s e t o m a r k e t l e a d e r i n

I n f a n t F o r m u l a

N o . 2 i n D a i r y W h i t e n e r

G r o w i n g p r e s e n c e i n F r e s h D a i r y

C o n t r i b u t i o n t o T o t a l S a l e s

Q 1 0 7


21/48

2 0 . 0

1 6 . 6

2 1 . 1

4 2 . 3


Q 1 0 7

5 . 5

6 . 5

5

6

7

Q 1 0 6 Q 1 0 7


1 . 5

1 . 9

1 . 0

1 . 5

2 . 0

Q 1 0 6 Q 1 0 7

2 9 . 1 %

1 6 . 8 %

Beverages


M a r k e t L e a d e r i n I n s t a n t C o f f e e


22/48

4 2 . 3

2 1 . 1

1 6 . 6

2 0 . 0


Q 1 0 7

1 . 3

1 . 8

1 . 0

1 . 5

2 . 0

Q 1 0 6 Q 1 0 7

3 6 . 3 %

1 6 . 9

2 2 . 5

1 5 . 0

1 7 . 0

1 9 . 0

2 1 . 0

2 3 . 0

Q 1 0 6 Q 1 0 7


Prepared Dishes & Cooking Aids

3 3 . 1 %


M a r k e t L e a d e r i n i n s t a n t N o o d l e s

a n d K e t c h u p s

N o . 2 i n H e a l t h y S o u p s


23/48

4 2 . 3

2 1 . 1

2 0 . 0

1 6 . 6


Q 1 0 7

1 . 2

1 . 5

0 . 8

1 . 2

1 . 6

Q 1 0 6 Q 1 0 7

8 . 3

9 . 5

7

8

9

1 0

Q 1 0 6 Q 1 0 7

Chocolate & Confectionery

S a l e s V o l u m e s ( 0 0 0 t o n s )

1 4 . 3 %


2 2 . 0 %

M a r k e t L e a d e r i n W a f e r s a n d

w h i t e c h o c o l a t e s

N o . 2 i n C h o c o l a t e s

M a r k e t L e a d e r i n E c l a i r s w i t h

3 2 . 4 % v o l u m e s h a r e .


24/48

PROFIT MARGINS (2)

l i f O i i


25/48

4 . 0 4 . 5 1 . 8 4 . 7 1 . 2 1 . 6 4 . 4 5 . 4 5 . 2 1 . 4 3 . 5 4 . 6 4 . 03 . 9

1 9 . 9

1 8 . 6

1 8 . 3

1 9 . 7

1 9 . 0

1 9 . 5 1 9 . 5

1 7 . 9

1 7 . 1

1 7 . 5

1 6 . 9

1 7 . 6

1 6 . 4

1 6 . 0

0 . 0

1 . 0

2 . 0

3 . 0

4 . 0

5 . 0

6 . 0

2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 Q 1 0 6 Q 1 0 7

3

6

9

1 2

1 5

1 8

2 1

E B I T D - I N R . B i o E B I T - I N R . B i o E B I T D % o f G r o s s S a l e s E B I T % o f G r o s s S a l e s

Evolution of Operating Margins

I N R B i o .


26/48

I N R M i o .

Description Q1 07 % NetSales

Q1 06 % NetSales

Var.%

Tot. Expenses - of

which 6,843 79.3 5,421 80.2 26.2Materials

4,149 48.1 3,098 45.8 33.9

Staff Cost646 7.5 543 8.0 19.0

Advt. + salesPromotion

399 4.6 391 5.8 1.9

Distribution 385 4.5 306 4.5 25.6

Power & Fuel 313 3.6 279 4.1 12.1

Total Expenditure

P r e v i o u s p e r i o d f i g u r e s h a v e b e e n r e g r o u p e d / r e c l a s s i f i e d t o m a k e t h e m c o m p a r a b l e .

l lk


27/48

9 7

1 0 9

1 1 6

1 0 3

9 1

9 5

1 0 0

9 7

8 8

9 4

9 7

1 0 6

9 5

8 0

9 0

1 0 0

1 1 0

1 2 0

1 3 0

Q 1 Q 2 Q 3 Q 4

Period

Indexe

d

price

Per

Kg

Evolution Milk Fat Prices

122

Current

Indexed with base Q1-04

2004

2005

2006

2007

E l i Milk F P i


28/48

1 0 0

8 8

9 5

1 1 6

1 0 3

9 4

9 7

9 5

9 7

1 0 6

9 1

9 7

1 0 9

8 0

9 0

1 0 0

1 1 0

1 2 0

2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7

Q 1 Q 2 Q 3 Q 4

Indexed Price per kg

Evolution - Milk Fat Prices


E l ti G C ff P i


29/48

1 0 1

1 2 1

1 5 2

1 5 3

2 3 8

1 0 0

1 0 0

1 0 1

1 1 4

1 8 7

1 7 0

1 7 4

1 5 8

9 0

1 1 0

1 3 0

1 5 0

1 7 0

1 9 0

2 1 0

2 3 0

2 5 0

Q 1 Q 2 Q 3 Q 4

Period

Indexedp

rice

perKG

236 Current

Evolution Green Coffee Prices


2004

2005

2006

2007

E l ti HVF P i


30/48

9 8

8 8

9 0

8 7

108

1 0 2

1 0 0

1 0 6

9 3

9 4

9 6

1 0 1

1 0 3

8 0

9 0

1 0 0

1 1 0

Q 1 Q 2 Q 3 Q 4

Period

Indexed

pr

ice

perKG

108

Current

Evolution HVF Prices( 3 2 9 m i o , 1 2 % o f R M c o s t s , 5 % o f N e t S a l e s )


2004

2005

2006

2007

Evolution Sugar Prices


31/48

1 1 6

1 2 8

1 3 2

1 2 0

1 1 1

1 0 0

1 1 3

1 3 4

1 3 0

1 3 8

1 4 5

1 4 6

1 4 1

100

110

120

130

140

150

Q 1 Q2 Q3 Q4Period

Indexed

price

perKG

117

Current

Evolution Sugar Prices( 3 2 9 m i o , 1 2 % o f R M c o s t s , 5 % o f N e t S a l e s )


2004

2005

2006

2007

Evolution Wheat Flour Prices


32/48

1 0 4

9 6

9 7

1 0 4

1 3 9

9 6

1 0 0

9 5

9 9

1 1 5

1 1 6

1 1 8

1 3 5

9 0

1 0 0

1 1 0

1 2 0

1 3 0

1 4 0

Q 1 Q 2 Q 3 Q 4

Period

Indexedp

rice

perKG

127 Current

Evolution Wheat Flour Prices( 3 2 9 m i o , 1 2 % o f R M c o s t s , 5 % o f N e t S a l e s )

2004

2005

2006


2007

Evolution of Net Profit Margins


33/48

1.12.0 2.6 2.5 3.1 3.2 0.9

9.8

11.5

10.6

11.7

10.7

12.3 12.1

0 . 5

1

1 . 5

2

2 . 5

3

3 . 5

2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 Q 1 0 6 Q 1 0 7

0

2

4

6

8

10

12

14

A m o u n t % o f G r o s s S a l e s

Evolution of Net Profit Margins

INR Bio.


34/48

WORKING CAPITAL INTENSITY (3)

Operating Working Capital


35/48

Operating Working Capital

INR Mio

5.8%6.5%As % of Gross Sales

1,6912,356Operating Capital tied up

1,9342,424Less: Payables

3,1634,094Inventories

462686Receivables from Customers

31s t Mar

2006

31s t Mar

2007


P a y a b l e s e x c l u d e a m o u n t s p a y a b l e o n a c c o u n t o f t a x e s , S t a f f C o s t s , C a p i t a l E x p e n d i t u r e , r e l a t e d

p r o v i s i o n s e t c .

Rotation of Average Operating Working Capital


36/48

Rotation of Average Operating Working Capital

Times

2 5 . 2

2 7 . 7

3 4 . 8

3 6 . 2

2 3 . 5

2 1 . 8

2 1 . 8

1 6

2 0

2 4

2 8

3 2

3 6

4 0

2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 Q 1 0 6 Q 1 0 7

A d j u s t e d

2 8 . 0

Basis Nestle Internal Reporting Standards andaverage of two period ends

2 9 . 5

2 1 . 4

Investment in Fixed Assets


37/48

6 8 1 7 4 2 7 8 1 1 , 5 2 2 1 5 5 5 9 6 2 5 7

3 . 0

3 . 1

3 . 0

5 . 2

2 . 9

1 . 7

3 . 6

0

2 0 0

4 0 0

6 0 0

8 0 0

1 0 0 0

1 2 0 0

1 4 0 0

1 6 0 0

2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 Q 1 0 6 Q 1 0 7

1 . 0

3 . 0

5 . 0

7 . 0

A m o u n t % o f G r o s s s a l e s

INR mio. % of Gross sales

D e p . 4 9 4 4 6 3 4 9 1 4 9 8 5 5 5 1 3 1 1 5 3

Investment in Fixed Assets

Rotation of Average Tangible Fixed Assets


38/48

6.26.3

6.56.6

7.0

7.2

5.4

4.4

4.8

5.2

5.6

6.0

6.4

6.8

7.2

2002 2003 2004 2005 2006 Q1 06 Q1 07

Rotation of Average Tangible Fixed Assets

T i m e s



39/48

INCOME TAX RATE (5)

Evolution of Tax Rate


40/48

3 6 . 8

3 6 . 6

3 4 . 5

3 3 . 7

3 4 . 7

3 4 . 4

3 5 . 0

3 3 . 3

3 3 . 7

3 5 . 9

3 3 . 7

3 5 . 3

3 3 . 5

3 3 . 6

3 0

3 2

3 4

3 6

3 8

2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 Q 1 0 6 Q 1 0 7

M a r g i n a l R a t e % E f f e c t i v e R a t e %

( r a t e s a r e a % o f p r e - t a x p r o f i t e x c l u d i n g F B T )

%


41/48

COST OF CAPITAL (6)

Evolution Cost of Capital


42/48

9 . 4

9 . 7

1 0 . 8 1 0 . 8

1 1 . 2

7 . 2

5 . 3

6 . 6

7 . 2 7 . 2

7 . 7

1 0 . 5

1 4 . 2

9 . 0

0 . 0

3 . 0

6 . 0

9 . 0

1 2 . 0

1 5 . 0

2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 Q 1 0 6 Q 1 0 7

WACC Risk Free Rate

p



43/48

VALUE GROWTH DURATION (7)

Value Growth Duration


44/48

TSR of 94% over the last 13 quarters.

Market Capitalization increased by 75% overlast 13 quarters - INR 63 Bio. to INR 110 Bio.

Top performer on Return on Capital employed

Amongst top performers on Return on Equity

Performance since last Analyst Meet


45/48

7 5

8 0

8 5

9 0

9 5

1 0 0

1 0 5

1 1 0

D e c - 0 6 J a n - 0 7 F e b - 0 7 M a r - 0 7 A p r - 0 7 M a y - 0 7

N e s t l e B S E F M C G I n d e x B S E S E N S E X

1 4 , 1 2 7

1 , 1 2 4

1 , 8 3 9

Returning cash to Shareholders


46/48

1 8 . 0

2 0 . 0 2 0 . 0

2 5 . 0

2 5 . 5

2 0 . 9 2 7 . 3 2 6 . 1 3 2 . 1 3 2 . 7 9 . 2 1 1 . 3

2 0 0 2 0 0

2 5 5

1 8 0

2 5 0

0

5

1 0

1 5

2 0

2 5

3 0

3 5

2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 Q 1 0 6 Q 1 0 7

1 0 0

3 0 0

D P S E P S %

I

N

R

/

S

h

a

r

e

2 0 0 4 - E x c l u d e s s p e c i a l d i v i d e n d o f I N R 4 . 5 / S h a r e

1 . 7 1 . 9 1 . 9 2 . 4 2 . 5

D i v i d e n d

( I N R B i o )

D

i

v

i

d

e

n

d

a

s

a

%

o

f

S

h

a

r

e

C

a

p

i

t

a

l

2 0 0 6 1 s t i n t e r i m 6 0 % M a y 0 6

2 0 0 7 1 s t i n t e r i m 6 5 % M a r 0 7

Creating Shareholder Wealth


47/48

1 . 8 2 . 3 2 . 2 2 . 7 2 . 7 0 . 8 1 . 0

1 0 1 . 9

6 9 . 7

7 8 . 5

8 7 . 4

8 1 . 0

8 0 . 1

7 8 . 9

8 2 . 1

5 4 . 0

4 9 . 0

6 0 . 0

6 1 . 1

7 9 . 0

5 9 . 4

0 . 5

1 . 0

1 . 5

2 . 0

2 . 5

3 . 0

2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 Q 1 0 6 Q 1 0 7

E

P

(

E

c

o

n

o

m

i

c

P

r

o

f

i

t

a

b

i

l

i

t

y

)

i

n

I

N

R

B

i

o

-

4 0 . 0

8 0 . 0

1 2 0 . 0

( % )

E c o n o m i c P r o f i t I N R B i o R e t u r n o n E q u i t y ( % ) E c o n o m i c P r o f i t a b i l i t y ( % )

EP - Basis Nestle Internal Reporting Standards

QUESTIONS


48/48

Thank You

nestle india financial analysts meet

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