roadshow, march 2003 new york...tunisia france east.europe brazil thailand italy germany nordic...

Full Year Results 2002 Name of chairman

Full Year Results 2002

Roadshow, March 2003New York


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.


2002: A record performance by Nestlé

+5.3

Sale

s

EBIT

A

EBIT

AM

argi

n

Net

pro

fit/E

PS

Ope

ratin

gca

sh fl

ow

Net

deb

t

Cas

h co

nver

sion

cycl

e (d

ays)

Free

cash

flow

+9.5

+50bp

+13

+19

+27.1

-23

-10

+13

+19

+60bp

+19

Constant currencyReported

%


Key figures* in US Dollars

% %mio CHF change USD change

Sales 89'160 + 5.3 57'560 + 14

EBITA 10'940 + 9.5 7'063 + 19

Net profit 7'564 + 13.2 4'883 + 23

EPS 19.51 + 13.1 12.60 + 23

Market cap. 113'368 - 17.4 81'560 +/- 0

*Illustrative only. P&L at average rates; balance sheet at year end rates.


target 2004+ mktg

+130 -40petcare Schöller

admin and NICCdistrib +50 -20 FX

-10 target 2004+ pensions-40 EBITA retained -10 IS/IT

R&D improvement at EBITA -10 EBITA-10 improvement

+10 +50 +50 +50

data in basis points data in basis points

FROM COGS TO EBITA IMPACT AT EBITA LEVEL

Operating efficiencies drive EBITA improvement


2002: An excellent year in Food and Beverage

0

5

10

15

20

8.4 9.0

0.701 02

11.0 12.013.5 14.3

17.2 17.2

3.4 2.64.201 01 0201 0202

Primary Reporting: EBITA Margin

+ 100 bp+ 80 bp

+ 60 bp

Waters: Profitable growth

Europe:Efficiencies

AMS:Integration

AOA:Resilient high margins

EBITA '02CHF bn


Europe and AMS main contributors to Group EBITA improvement

in basis pointsEBITA

changeContribution to

Group EBITA

Z-EUR + 100 + 24

Z-AMS + 80 + 28

Z-AOA 0 - 4

Nestlé Waters + 60 + 3

Other Activities - 40 - 1

Total Group + 50


Profitability improvements by product group

Beverages 17.7% 4.07 17.5% (20)Milk products, nutrition& ice cream 11.2% 2.76 11.8% 60Prepared dishes &cooking aids 10.4% 1.71 10.8% 40Chocolate, confectionery& biscuits 11.0% 1.18 11.0% -

Petcare 7.3% 1.42 13.2% 590

Pharma 24.7% 1.27 24.7% -

2001 2002 marginCHF bio Margin* EBITA Margin* improv

bps

* calculation based on non-rounded figures for sales


Other income (expenses): The numbers

Total expenses: CHF 3.3 billion

• Impairment of property, p&e: CHF 1.3 billion• Restructuring costs: CHF 1.1 billion

Total goodwill impairments: CHF 0.8 billion

Future restructuring costs to be around 0.5% of sales per year


Impairments: Fixed assets

• Economies of scale and asset utilisation are critical to improving the Group ROIC

• As an investment, these impairments will be closely monitored to ensure that the returns meet our expectations, within the timeframe established

This reflects our commitment to optimise regional and global manufacturing performance


Food and beverage efficiency initiativesIncremental (CHF mio)

ROLLINGTOTAL

20062005200420032002Functional

Owner

*Part to be enabled by GLOBE 200 400 800 1,600 3,000

Original targeted annual savings*

Savings achieved to date

6,000+

3. Other GLOBE benefits

1. Target 2004+ 2,000+Technical

4. Project FitNes 1,000

2. GLOBE /Op. efficiencies 2,000

1,000

Technical /distribution

Supplychain / IT

Finance and control

500 1,6001,100700 1,6001,200

-


Return on invested capital* improves in 2002

*EBITA on segment assets (** plus gross goodwill on balance sheet) - taxes at 30%

14.015.6

17.3 17.5 18.9

0

5

10

15

20

1998 1999 2000 2001 2002

%

ROIC including goodwill** dipped in 2002 to 11% from 13.8%, due mainly to acquisition of Ralston Purina


Nestlé WatersNestlé Waters• Excellent efficiency gains• Good year in Europe:

East/West/HOD• Asia/Middle East 23% RIG• Pure Life volume doubled• 2003: continued improved

performance; integration of HOD

+ 70bp

+ 16%

+ 4%pts

Margin RIG Marketshare

Nestlé Waters USA


Profitable market leader

EUR15%

AMS16%

AOA10%

SpainSwitzerlandRussia

Strong no. 2(growing & improving EBITA)Improvement needed(Share + EBITA)

CanadaUSAChilePeruArgentina

AustraliaPhilippinesMalaysiaSouth AfricaEgyptHong KongTunisia

FranceEast.Europe Brazil Thailand

ItalyGermanyNordic

CaribbeanMexico

ChinaIsrael

Leadership achieved 2001-2002 Leadership through Dreyer's transaction

% Share

Ice cream: Continued improvement

Gaining share around the world


Frozen Food in the US: A great success story

• market size ($ billion ) 5.6 6.8 1.1

• market growth (%) - + 6.2* + 11.8**

• market share Nestlé (%) 27.0 30.6 52.3• market share nr 2 (%) 25.5 21.6 4.9

• * 3yr average; **2002

Stouffer'sprepared dishes

Chef Americahandheld snacks

1999 2002 2002

A CHF 4 billion, high growth, high margin business

USA Frozen Food


Nestlé acquisition criteria (1)

Strategic criteria• To create category No.1 or strong No.2

• Focused approach on value-added growth categories

• Strong brands in leadership positions

Integration• High degree of certainty of successful

integration- Business fit / management commitment /existing know-how / culture


Nestlé acquisition criteria (2)

Financial criteria• RIG, cash flow and earnings enhancing

- Either pre-acquisition or due to potential for improvement

• Generate value- IRR (conservative scenario) > WACC - Normally ROIC greater than WACC in planning horizon - Quantifiable and measurable synergies

• Post-measurement for all acquisitions


Powwow meets acquisition criteriaOn strategy• Fast growing market• Delivers pan-European leadership• Opportunity for strong branded presence

Integration• Management retained• Good cultural fit• Benefit from Nestlé Waters USA expertise

Financial• RIG of 15-20%• Synergies to exceed 10% of sales in 18 months• HOD significantly higher margin than retail


2003 outlookPositives• Efficiency gains: Target 2004+, GLOBE, FitNes• Soluble coffee and Nutrition• Purina, Schöller and Chef America synergies• China, Russia, India, Mexico...

Possible issues• Easter is late: Q1• Petcare USA RIG impact (Hi-lo/EDLP)• Dreyer's merger process• Japan


Agenda

Peter Brabeck:• 2002 objectives and achievements• Accelerating, reshaping and delivering • 2003 objectives


Nestlé: Key objectives in 2002Drive profitability through efficiency programmes

Continue to deliver 4 % RIG

Continued improvement in Ice cream

Improve performance of Chilled dairy and Petcare

Integration of Ralston Purina, Ice cream Partners, Schöller

Conclude partial IPO of Alcon


Nestlé: Key achievements in 2002Drive profitability through efficiency programmes Good performance by Target 2004+, GLOBE on track, FitNes establishedContinue to deliver 4 % RIGBelow trend target but quality of sales improvedContinued improvement in Ice creamPositive RIG and 110 basis point improvement in marginsImprove performance of Chilled dairy and PetcareChilled dairy margins improved 240 basis points Petcare performed well, with integration ahead of planIntegration of Ralston Purina, Ice cream Partners, SchöllerPurina ahead of schedule, ICP & Schöller on trackConclude partial IPO of AlconSuccessfully floated in March 2002


Three businesses reach sales of CHF 1 billion

• People's Republic of China(Greater China exceeds CHF1.4 billion)

• Russia• Products used as carriers for branded active

ingredients• Also, our food joint ventures, CPW and BPW,

now contribute combined sales in excess of CHF 1 billion


Accelerating

'92-'96 '97-'02

Average RIG +2.68% +3.72%EBITA margin +30bps +200bpsEPS improvement +37% +114%Operating cash flow CHF 24bio CHF 50bio

Average RIG 2000 to 2002 is above 4%


Reshaping

• The products- From basic foodstuffs to R&D based products- From sustaining life to enhancing well-being

• The organisation- From multi-national to multi-focal- From complexity = cost to efficiency in complexity

• The business model- An open, asset efficient network organisation- From volume growth to value growth


Delivering

• Real, measurable organic growth• Ongoing efficiencies across admin & factories• Increasing EBITA margins• Improving returns on invested capital

Sustainable, capital efficient and profitablelong term growth


Nestlé: Key objectives 2003

• Maintenance of 4% RIG trend target as foundation for organic growth

• Continued margin improvement• Continued improvement in ROIC• Continued improvement in Ice cream and

Chilled dairy• Continued successful integration of

acquisitions and GLOBE• First gains from the fixed asset impairments


Full Year Results 2002

roadshow, march 2003 new york...tunisia france east.europe brazil thailand italy germany nordic...

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