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Name of chairman Nestle India Limited Financial Analysts’ Meet - December 7, 2005

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Name of chairman

Nestle India Limited

Financial Analysts’ Meet - December 7, 2005

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Agenda

Introduction & Overview Martial Rolland

Financials Shobinder Duggal

Food Business Shivani Hegde

Social Responsibility Dr. Raj Singh

Questions & answers ALL

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This presentation may contain statements reflecting Management’s current views and estimates, that may be construed as forward looking statements. Actual results might differ materially from those either expressed or implied in the statements, depending on the circumstances.

Responses can only be given to questions, which are not price sensitive.

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INTRODUCTION &OVERVIEW

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Economy

EconomySteady growth – exceeding 7%Monday 28 November 2005 Sensex @ 9000High consumer confidence

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Growing Urbanization-Urban up from 17% in1950 to 28% now

Rising Aspirations- Durable ownership doubled in last decade - 8 Mio Cars, 45 Mio Two wheelers(+20% vs LY)-45 Mio Mobile phones(+25% vs LY)

Greater use of Credit-Easy availability of low interest credit-Housing Loans at US $ 10 Bio (+30% vs LY)-25 Mio credit & debit cards issued (+20% vs LY)-85% cars purchased on credit

ConsumerChanging Lifestyles & Rising Aspirations

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-Out of home consumption (+10% vs LY)– 70% of Urban Metro Indians eatfast food OOH at least once/month

Search for Convenience

ConsumerChanging Lifestyles & Rising Aspirations

Rising Education and Working Women

-Literacy has gone up from52% to 66%(1991-04) -1 Mio graduates pa-Urban working women up from 14% to 20% (1991-04)

Growing Exposure-Media,TravelEating out on the rise

-Pressure Cooker urban penetration 65%-Ready to eat category small but fast growing

-108 Mio TV households (+10% vs LY)-Cable TV in 53% urban homes(x 2 in 5 yrs)-8 Mio traveled abroad in 2004 (x2 vs 2001)

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BUSINESS

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Strategic Focus

Efficiency: Low–Cost Operator

People

Availability

Innovation and Renovation

Consumer Communications

GLOBEStructure

Nu

trit

ion

,Hea

lth

,Wel

lnes

sfo

r al

l age

s

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Innovation & Renovation

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Availability

CustomerBusiness

Teams

CustomerNeeds

ChannelStrategy

Consumer Marketing

Team

CategoryOpportunities

Brand Plan

CCSD• Shopper Expertise

Market intelligenceChannel strategy & planningPOP drivers strategy & planningPre/post evaluation analysis

Customer & Channel Sales Development (CCSD)

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Front ViewSeparate entry for Material & People

Pant Nagar Factory

• Total CAPEX INR 100 crores

Finished goods –loading bay view

Efficiency: Low-Cost Operator

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Consumer Communication

Support overall strategyConsumers Insight drivenCreate clear product differentiationHighly impactful

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Nutrition,Health,Wellness

Evolution of Need States in Food

Sustenance Enjoyment

Good Food

Taste/PleasureVariety/BalanceSafety/Quality

For all + +

Health/ Nutrition

Health & Wellness

PerceivedNutritional

value

Psychological Contentment

Wellbeing

Feeling Good Taking Control

EquilibriumBody & Mind

GOOD FOOD, GOOD LIFEGOOD FOOD

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Structure

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Globe

• Considered best implementation yet within the Nestle Group

• On time • Smooth transition

FUTURE

• Leverage• Yield synergies

ObjectivesHarmonization of Nestle Business Excellence Best PracticesStandardization of Internal and External Master Data allowing Data to be managed as a corporate assetStandardization of Information Systems and technology

PRESENT

PAST

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Benchmarked Performance

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Growth in Consumer Off-take

95.0%

100.0%

105.0%

110.0%

115.0%

120.0%

125.0%

130.0%

2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005

Cu

mm

ula

tive G

row

th

FMCG Industry NestléSource: A C Nielsen

Top line against Industry

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Source: Annual Reports & www.sebiedifar.nic.in

Bottom line against Competitors

EBITDA MARGIN (Competition Comparable)

16%

20% 20% 19%

21%

17% 17%

14% 14%15%

10%

12%

14%

16%

18%

20%

22%

2001 2002 2003 2004 JAN-SEP 05

Nestle Industry

Industry includes Nestle, HLL, P&G, GSK & Britannia

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Share Price against Indices

50

100

150

200

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Rela

tive S

cale

Nestle BSE FMCG Index BSE SENSEX

.

Dec-05

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Over to SHD

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FINANCIALS

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Business Framework

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Result of focus on Value Drivers

50

100

150

200

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Rela

tive S

cale

Nestle BSE FMCG Index BSE SENSEX

.

Dec-05

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Evolution of Dividend

1.4 1.9 1.9 2.21.7

180200 200

140

230

0.0

0.4

0.8

1.2

1.6

2.0

2.4

2001 2002 2003 2004 20050

50

100

150

200

250

Per

cen

tag

e (%

) .

Dividend in INR bio. % of Equity Capital

INR Bio Returned Share capital almost 10 Returned Share capital almost 10 times in the last 5 yearstimes in the last 5 years

2004 - Excludes special dividend of Rs 4.5/Share. 2005 – Represents two interim dividends.

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2.6 3.4 3.6 3.63.7 2.3

13.8

16.415.7

18.0

15.4

13.213.8

16.3

14.715.1

12.9

15.7

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2001 2002 2003 2004 09/2005 09/200410

12

14

16

18

20

Per

cen

tage

(%

) .

AmountOp Cash Flow as % of NPSAdjusted op. cash flow as % of NPS

Evolution of Operating Cash Flow

INR Bio.

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SALES GROWTH

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Gross Sales Evolution

16.318.3

20.5 21.7

16.4

2.2

2.32.1

1.4

1.2

18.4

2.9

3.9

12.211.3

10.2

4.4

8.5

0

4

8

12

16

20

24

2001 2002 2003 2004 09/2005 09/2004

Sale

s (I

NR

Bio)

.

0

3

6

9

12

15

RIG

(%

) .

Third Party Sales Affiliated Exports RIG

19.819.2

20.5

22.823.7

17.6

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Decomposition

Jan-Sep 2005 Sales

(Basis international accounting standards)

Sales growth: 12.2%

RIG: 8.7%

Price increases: 3.5%

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Volume (000’Tons) Value@ (INR Bio)

2005 2004 Var% 2005 2004 Var%

Domestic 149.1 140.3 6.3 17.8 15.8 12.3

Exports 13.8 13.7 0.6 2.0 1.8 11.2

Total 162.9 154.0 5.8 19.8 17.6 12.2

Channel-wise Sales (Jan-Sep)

@ Gross Sales including excise dutyAforesaid percentages have been calculated on base values

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Brand Volume (000’ Tons) Value@ (INR Bio.)

2005 2004 Var % 2005 2004 Var %Milk Products & Nutrition

76.1 73.0 4.2 9.0 8.1 10.4

Beverages 18.7 18.8 -0.2 4.2 3.8 10.0

Prepared Dishes & Cooking Aids

48.3 45.0 7.5 3.7 3.1 17.5

Chocolate & Confectionary

19.8 17.2 14.8 2.9 2.5 14.8

Total 162.9 154.0 5.8 19.8 17.6 12.2

Sales by Product Categories(Jan-Sep)

@ Gross Sales including excise dutyAforesaid percentages have been calculated on base values

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Balancing Export Portfolio

2.42.62.43.1

INRBio.

74 72 67

48 46 51

26 28 33

52 54 49

0

10

20

30

40

50

60

70

80

90

100

2001 2002 2003 2004 09/2005 09/2004

Perc

enta

ge (%

) .

Exports to Russia Others

2.0 1.8

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EBITDA MARGIN

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3.1

4.0

4.44.0

4.5

3.2

16.4

19.5 19.5

20.5

19.0

18.0

14.1

17.1 17.516.9

15.9

18.3

2.4

2.8

3.2

3.6

4.0

4.4

4.8

2001 2002 2003 2004 09/2005 09/200410

12

14

16

18

20

22

Perc

enta

ge (

%)

.

EBITDA EBITDA as % of Gross Sales EBITA as % of Gross Sales

INR Bio.

Evolution of EBITDA

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2005 2004Difference

(Basis points)

EBITDA(% of Gross Sales)

20.5 18.0 250

EBITDA Margins (Jan-Sep)

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INR Mio.

Description 2005 % of Net

Sales

2004 % of Net

Sales

Var. %

Total Expenses -of which

14,496 78.2 13,379 80.8 8.3

Materials 8,435 45.5 7,840 47.4 7.6

Staff Cost 1,392 7.5 1,215 7.3 14.6

Advt + sales Promotion

911 4.9 988 6.0 -7.8

Distribution 863 4.7 800 4.8 7.9

Power & Fuel 750 4.0 613 3.7 22.4

Aforesaid percentages have been calculated on base values

Total Expenditure (Jan-Sep)

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6.5

1.70.2

RMPMBought Out

Total = INR 8.4 Bio.78%

20%2%

Break up of Materials Consumed(Jan-Sep 2005)

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3.3

1.0

0.40.9

0.4

0.5

MilkCoffeeSugarFatsW.FlourOthers

INR Mio.

Total = INR 6.5 Bio.

15%

51%

14%

8%

6%

6%

Basis International Accounting Standards

Key Raw Materials

(Jan-Sep)

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100

113

120

107

124120

115

109

106

113

117

100

105

110

115

120

125

Q 1 Q2 Q3 Q4

Period

Rs.

Per

KG

(Ind

exed

) 2003

115 Current

2004

2005

Evolution – Milk Solid Prices(INR 3,301 mio, 51% of raw materials)

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100

120

106107

124

113113115

117120

110

90

100

110

120

130

2003 2004 2005

Ind

exed

Pri

ce p

er

kg

.

Q1 Q2 Q3 Q4

Milk Fat Prices(INR 3,301 mio, 51% of raw materials)

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120113

151

10099 100 100100 100 100 100

80

100

120

140

160

180

Q 1 Q2 Q3 Q4Period

Rs

per

KG

(In

dex

ed)

174 Current

(INR 961 mio, 15% of raw materials)

2003

2004

2005

Evolution – Green Coffee Prices

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112

9696

100

100

108110

116

98

102

96

90

95

100

105

110

115

120

Q 1 Q2 Q3 Q4Period

Rs

per K

G (I

ndex

ed)

97Current

2005

2003

2004

Evolution – Vegetable Oil Prices(INR 396 mio, 6% of raw materials)

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144148

100 99 110106

112

124127 129

145

80

90

100

110

120

130

140

150

160

Q 1 Q2 Q3 Q4Period

Rs

per K

G (I

ndex

ed)

2003

152

Current

2004

2005

Evolution - Sugar Prices(INR 504 mio, 8% of raw materials)

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108 109

100 100

108

101

112

107

116

108111

95

100

105

110

115

120

125

Q 1 Q2 Q3 Q4Period

Rs

per K

G (I

ndex

ed)

2003

121Current

2004

2005

Evolution – Wheat Flour Prices(INR 395 mio, 6% of raw materials)

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NET PROFIT MARGIN

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1.72.0

2.6

1.8

2.52.4

10.0

10.6

11.911.4

9.7

8.9

1.0

1.3

1.6

1.9

2.2

2.5

2.8

2001 2002 2003 2004 09/2005 09/20046

7

8

9

10

11

12

Perc

enta

ge (

%)

.

Amount % of Gross Sales

INR Bio.

Evolution of Net Profit Margins

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Net Profit Margins (Jan-Sep)

% of Gross Sales 2005 2004Difference

(Basis points)

EBITDA 20.5 18.0 250

NET PROFIT 11.9 10.0 190

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WORKING CAPITAL INTENSITY

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Operating Working Capital

INR Mio

30-Sep2005

30-Sep2004

Trade receivables 419 414

Inventories 2,142 2,188

Less: Trade Payables # 1,715 1,513

Net capital tied up 846 1,089

As % of Gross Sales 4.2% 4.6%

Basis International Accounting Standards & Average of two period ends

# Excludes any exceptional payable, if any

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21.8

25.227.7

31.4

21.718.5

8

16

24

32

40

2001 2002 2003 2004 09/2005 09/2004Basis International Accounting Standards & Average of two period ends

* In relation to total sales

Times

Rotation of Operating Working Capital*

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3632

2725

18

28

0

5

10

15

20

25

30

35

40

45

2001 2002 2003 2004 09/2005 09/2004

Days

(Avg trade receivables/sales*365)+(Avg inventory/COGS*365)-(AVG trade payables/COGS*365)

Cash Conversion Cycle

Basis International Accounting Standards

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FIXED CAPITAL INTENSITY

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INR mio. % of Net sales

458742596589 681 477

3.33.03.1

2.9

2.3

2.8

0

100

200

300

400

500

600

700

800

2001 2002 2003 2004 09/2005 09/20040.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Dep. 435 494 463 491 385 365

Investment in Tangible Fixed Assets

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5.4

6.2 6.3

6.8

6.3

4.9

4

4.4

4.8

5.2

5.6

6

6.4

6.8

2001 2002 2003 2004 09/2005 09/2004

Times

Rotation of Tangible Fixed Assets

Basis International Accounting Standards & average of two period ends

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INCOME TAX RATE

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35.7 35.936.6

32.9

34.7 34.435.0 34.9

36.3

36.8

34.7

36.2

30

32

34

36

38

40

2001 2002 2003 2004 '09/2005 '09/2004

Marginal Rate Effective Rate

Evolution of Tax(as % of pre-tax profit)

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COST OF CAPITAL

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10.59.4 9.7 9.3

9.0

7.2

5.36.6

5.3

14.2

16.0

11.0

0.0

3.0

6.0

9.0

12.0

15.0

18.0

2001 2002 2003 2004 09/2005 09/2004

WACC Risk Free Bond Rate

Evolution of WACC - %

Basis International Accounting Standards

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VALUE GROWTH DURATION

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Value Growth Duration

Effective & Efficient Operations

People

Availability

Innovation and Renovation

Consumer Communications

GLOBEStructure

Nu

trit

ion

,Hea

lth

,Wel

lnes

sfo

r al

l age

s

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Food Business

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Social Responsibility

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QUESTIONS

Thank You

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ROBUSTA COFFEE

2000 2001 2002 2003 2004 2005

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ARABICA COFFEE

2000 2001 2002 2003 2004 2005

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PALM OIL

2000 2001 2002 2003 2004 2005