Nestle India Ltd. · NSE:NESTLEIND

Nestle India — Investor Presentation (May 2006)

51 slides from Nestle India's investor presentation, May 19, 2006

  1. Slide 1: Financial Analysts' Meet

    Nestlé India Nestle India Limited Limited Financial Analysts’ Meet May 19, 2006 Financial Analysts’ Meet - May 19, 2006 May 19, 2006

  2. Slide 2: Agenda

    Agenda Introduction & Overview Martial Rolland Financials Shobinder Duggal Chocolates & Confectionery Stewart Dryburgh Business Questions & answers ALL May 19, 2006

  3. Slide 3: May 19, 2006

    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 gi

  4. Slide 4: Introduction & Overview

    INTRODUCTION & OVERVIEW May 19, 2006

  5. Slide 5: Few key and recent environmental changes

    Few key and “recent” “environmental changes” May 19, 2006

  6. Slide 6: A period of greater wealth creation

    A period of greater wealth creation….. INR Billion Overview of India’s GDP Past Future % 50,000 10.0 8.3 40,000 7.9 7.5 – 8.0 8.0 6.2 30,000 5.2 6.0 4.6 20,000 4.0 33,298 31,198 27,758 24,773 22,499 10,000 2.0 - - 2001 2002 2003 2004 2005 2006 GDP at current prices Real GDP growth Source: EIU, RBI F

  7. Slide 7: Reflected in greater optimism

    …reflected in greater optimism… 12,500 Performance of Sensex 12,043 9,398 10,000 7,194 7,500 5,839 6,603 2,645 points increase 3,972 4,795 from Dec 05 5,000 3,457 3,262 3,245 3,377 3,607 to Apr 06! 2,500 0 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Apr-06 Sensex CAG

  8. Slide 8: However with its share of issues

    …however with its share of issues…. USD Crude Oil prices 70 62.9 Monthly average rates per barrel 59.4 60 56.3 50 43.3 38.0 40 32.2 29.4 30.7 28.5 27.6 30 25.5 19.3 20 10 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Mar-06 Source: Dow Jones & Company May 19, 2006

  9. Slide 9: And challenges

    … and challenges…. Numbers 40,000 Increasing FMCG clutter 87% 33,878 35,000 30,000 25,000 18,083 20,000 58% 15,000 82% 8,381 10,000 2,218 5,320 5,000 1,222 - FMCG Companies Brands Skus 2001 2005 Source: A.C.Nielsen May 19, 2006

  10. Slide 10: Challenges but positive environment and strong opportunities

    So there are challenges but overall environment seems positive and there are strong opportunities for our Company May 19, 2006

  11. Slide 11: Directionally we will

    Directionally we will Maintain our strategic focus towards leadership in Nutrition, Health and Wellness. Leverage our strong brands and drive harder our superior research-based concept/product delivery. Leverage our new organisational structure Leverage our greater consumer and customer intimacy Dri

  12. Slide 12: Over to SHD

    Over to SHD Over to SHD May 19, 2006

  13. Slide 13: Financials

    UNLEASHING Nestlé May 19, 2006 POTENTIAI

  14. Slide 14: Continued focus on the value drivers

    Continued focus on the 7 value drivers VALUE DRIVERS 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 May 19, 2006

  15. Slide 15: Sales Growth

    SALES GROWTH Nestlé May 19, 2006

  16. Slide 16: Sales Evolution

    Sales Evolution Third Party Sales Affiliated Exports RIG 30 14 26.4 12 12.2 . ) 25 11.3 22.8 23.7 1.7 o i 1.5 B 20.5 1.9 10.4 10 R20 19.2 . 1.8 8 N 2.5 ) I 7.9 15 ( % s ( e l a 6 G I S 10 R s s 4.4 4 o r G 5 2 16.7 18.7 20.9 22.2 24.7 0 0 2001 2002 2003 2004 2005 (RIG in relation to 3rd Party sales

  17. Slide 17: Sales Evolution (contd.)

    Sales Evolution (contd.) Third Party Sales Affiliated Exports RIG 8 10 . 8 ) 9.3 o 7 i B 0.3 R . N I 0.4 6 ) 6 ( s % ( e l a 4 G I S R 6.5 7.2 5 s 3.7 s o r 2 G 6.1 6.9 4 0 Q1-05 Q1-06 (RIG in relation to 3rd Party sales basis international accounting standards) May 19, 2006

  18. Slide 18: Sales Decomposition

    Sales Decomposition Sales Growth: +5.8% +12.4% Selling prices = 3.1% Selling prices = 2.1% RIG = 9.3 % RIG = 3.7 % Q1’05 Q1’06 (Basis international accounting standards) May 19, 2006

  19. Slide 19: Channel-wise Sales

    Channel-wise Sales Volume (Tons) – Q1 Value@ (Mio) – Q1 2006 2005 Var% 2006 2005 Var% Domestic 53,337 48,708 9.5 6,703 5,906 13.5 Exports 3,440 4,537 -24.2 508 648 -21.7 Total 56,777 53,245 6.6 7,210 6,554 10.0 @ Gross Sales including excise duty May 19, 2006

  20. Slide 20: A Balanced Portfolio

    A Balanced Portfolio INR Mio. 7,210 6,554 Contribution Contribution 3,193 44.3% 2,954 45.1% 1,472 20.4% 1,468 22.4% 1,320 18.3% 1,088 16.6% 1,226 17.0% 1,043 15.9% Q1 06 Q1 05 Choc./Conf. Prep. Dishes & Cooking Aids Beverages Milks/Nutrition Gross Sales including excise duty May 19, 2006

  21. Slide 21: Sales by Product Categories

    Sales by Product Categories Brand Volume (Tons) – Q1 Value@ (INR Mio.) – Q1 2006 2005 Var % 2006 2005 Var % Milk Products & 26,004 25,318 2.7 3,193 2,954 8.1 Nutrition Beverages 5,525 6,415 -13.9 1,472 1,468 0.3 Prepared Dishes 16,917 14,571 16.1 1,320 1,089 21.2 & Cooking Aids Chocolate & 8,332 6,9

  22. Slide 22: Operating Margins

    OPERATING MARGINS May 19, 2006

  23. Slide 23: Evolution of Operating Margins

    Evolution of Operating Margins INR Bio. 19.5 19.7 19.5 19.0 6.0 20 17.5 17.6 17.1 18 16.9 16.4 . 4.5 ) 16 % ( 14.1 e g 3.0 14 a 5.2 t n 4.4 4.5 e 4.0 12 c r 1.5 3.1 e P 10 0.0 8 2001 2002 2003 2004 2005 EBITDA EBITDA as % of Gross Sales EBITA as % of Gross Sales May 19, 2006

  24. Slide 24: Evolution of Operating Margins (contd.)

    Evolution of Operating Margins (contd.) INR Bio. 1.5 21.2 22 19.2 18.9 20 1.2 . ) 16.8 18 % ( 0.9 e g 16 a t n 0.6 e c 14 r e P 0.3 12 1.4 1.4 0.0 10 Q1 05 Q1 06 EBITDA EBITDA as % of Gross Sales EBITA as % of Gross Sales May 19, 2006

  25. Slide 25: Total Expenditure

    Total Expenditure INR Mio. Description Q1 06 % Net Q1 05 % Net Var. Sales Sales % Tot. Expenses 5,394 79.8 4,748 77.4 13.6 -of which Materials 3,098 45.8 2,711 44.2 14.3 Staff Cost 516 7.6 444 7.2 16.2 Advt + sales 391 5.8 348 5.7 12.3 Promotion Distribution 306 4.5 285 4.6 7.7 Power & Fuel 279 4.1

  26. Slide 26: Evolution – Milk Solid Prices

    Evolution – Milk Solid Prices 125 124 120 Current 120 ) 120 d 2003 e 118 x e 2005 d 117 n115 117 I 115 ( 114 G K 2006 113 113 r 110 e 2004 P 109 . s R 106 107 105 100 100 Q 1 Q2 Q3 Q4 Period May 19, 2006

  27. Slide 27: Evolution – Milk Fat Prices

    Evolution - Milk Fat Prices 130 Indexed Price per kg. 124 120 120 120 117 117 115 114 113 113 110 110 107 106 100 100 90 2003 2004 2005 2006 Q1 Q2 Q3 Q4 May 19, 2006

  28. Slide 28: Evolution – Green Coffee Prices

    Evolution – Green Coffee Prices Current 180 180 160 152 ) d 157 151 e x 2005 e 2006 d140 n I ( G 120 K 113 r 120 e p s 2004 R 99 100 100 100 100 100 100 100 100 2003 80 Q 1 Q2 Q3 Q4 Period May 19, 2006

  29. Slide 29: Evolution – HVF Prices

    Evolution - HVF Prices 120 116 115 ) d 110 e 112 x e110 d Current 2004 n I 108 ( 105 2006 105 G K 103 r 102 100 e P100 98 . s 100 96 96 2005 R 95 2003 96 96 90 Q 1 Q2 Q3 Q4 Period May 19, 2006

  30. Slide 30: Evolution – Sugar Prices

    Evolution - Sugar Prices Current 170 168 160 2006 158 150 148 150 144 2005 ) d e 145 x 140 e d 127 129 n 130 I 124 2004 ( G K120 112 r e p s 110 2003 R 110 100 106 100 99 90 80 Q 1 Q2 Q3 Q4 Period May 19, 2006

  31. Slide 31: Evolution – Wheat Flour Prices

    Evolution – Wheat Flour Prices 130 2006 Current 128 126 125 ) d e 120 x e 116 2005 d n115 I ( 112 116 2004 G K110 108 109 r e 111 2003 p 108 s 105 107 108 R 100 100 100 101 95 Q 1 Q2 Q3 Q4 Period May 19, 2006

  32. Slide 32: Net Profit Margin

    NET PROFIT MARGIN May 19, 2006

  33. Slide 33: Evolution of Net Profit Margins

    Evolution of Net Profit Margins INR Bio. Amount % of Gross Sales 3.5 11.7 12 11.4 3.0 11 Percentage (%) . 10.6 2.5 9.7 10 8.9 2.0 9 1.7 2.0 2.6 2.5 3.1 1.5 8 2001 2002 2003 2004 2005 May 19, 2006

  34. Slide 34: Evolution of Net Profit Margins (contd.)

    Evolution of Net Profit Margins (contd.) INR Bio. Amount % of Gross Sales 1.0 13 12.3 11.9 Percentage (%) . 11 0.8 0.9 0.5 9 Q1 05 Q1 06 May 19, 2006

  35. Slide 35: Working Capital Intensity

    WORKING CAPITAL INTENSITY May 19, 2006

  36. Slide 36: Operating Working Capital

    Operating Working Capital INR Mio 31-Mar 31-Mar 2006 2005 Trade receivables 462 500 Inventories 3,163 2,589 Less: Trade Payables # 1,806 1,820 Net capital tied up 1,819 1,268 As % of Gross Sales 6.2% 4.8% Basis International Accounting Standards # Excludes any exceptional payable, if any May 19, 200

  37. Slide 37: Rotation of Operating Working Capital

    Rotation of Operating Working Capital Times 34.8 36 32 27.7 28.0 28 25.2 24 21.8 Adjusted 18.5 20 16 12 8 4 2001 2002 2003 2004 2005 Basis International Accounting Standards & May 19, 2006 average of two period ends

  38. Slide 38: Rotation of Operating Working Capital

    Rotation of Operating Working Capital Times 28 26 24.8 24 23.5 22 20 Q1 05 Q1 06 Basis International Accounting Standards & May 19, 2006 average of two period ends

  39. Slide 39: Fixed Capital Intensity

    FIXED CAPITAL INTENSITY May 19, 2006

  40. Slide 40: Investment in Tangible Fixed Assets

    Investment in Tangible Fixed Assets INR mio. % of Gross Sales 1000 4.0 823 800 742 681 3.6 589 596 600 3.0 3.1 3.1 3.1 400 3.0 2.9 257 200 0 2.0 2001 2002 2003 2004 2005 Q1 06 Dep. 435 494 463 491 498 131 May 19, 2006

  41. Slide 41: Rotation of Tangible Fixed Assets

    Rotation of Tangible Fixed Assets Times 6.8 6.6 6.3 6.4 6.2 6.0 5.6 5.4 5.2 4.9 4.8 4.4 4.0 2001 2002 2003 2004 2005 Basis International Accounting Standards & May 19, 2006 average of two period ends

  42. Slide 42: Rotation of Tangible Fixed Assets

    Rotation of Tangible Fixed Assets Times 7.2 7.1 7.0 7.0 6.9 6.8 6.8 6.7 6.6 6.5 6.4 Q1 05 Q1 06 Basis International Accounting Standards & May 19, 2006 average of two period ends

  43. Slide 43: Income Tax Rate

    INCOME TAX RATE UNLEASHING oi 100% Nestlé May 19, 2006 POTENTIAI

  44. Slide 44: Evolution of Tax

    Evolution of Tax (as % of pre-tax profit) 38 36.8 36.6 35.7 35.9 36 34.5 35.0 34 34.7 34.4 33.3 32 32.9 30 2001 2002 2003 2004 2005 Marginal Rate Effective Rate May 19, 2006

  45. Slide 45: Evolution of Tax

    Evolution of Tax (as % of pre-tax profit) 40 37.9 38 36 36.6 35.3 34 33.7 32 Q1 05 Q1 06 Marginal Rate Effective Rate May 19, 2006

  46. Slide 46: Cost of Capital

    COST OF CAPITAL Es) Nestlé May 19, 2006

  47. Slide 47: Evolution of WACC - %

    Evolution of WACC - % WACC Risk Free Bond Rate 18.0 16.0 15.0 14.2 12.0 10.5 9.7 9.4 9.0 11.0 9.0 6.0 7.2 6.6 5.3 3.0 0.0 2001 2002 2003 2004 2005 Basis International Accounting Standards May 19, 2006

  48. Slide 48: Evolution of WACC - %

    Evolution of WACC - % WACC Risk Free Bond Rate 12 10 10.8 9.6 8 7.2 6.6 6 4 Q1 05 Q1 06 May 19, 2006

  49. Slide 49: Value Growth Duration

    VALUE GROWTH DURATION May 19, 2006

  50. Slide 50: Value Growth Duration

    Value Growth Duration Nutrition,Health,Wellness Innovation and Renovation Availability for all ages Effective & Efficient Operations Consumer Communications People Structure GLOBE May 19, 2006

  51. Slide 51: Thank You

    QUESTIONS Thank You May 19, 2006

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