2007 half year results roadshow

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Kevin Butler
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1 2007 half year results roadshow 2007 half year results roadshow - August 2007

2 Disclaimer 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 half year results roadshow -August 2007

3 2007 First Half Highlights Strong performance across key metrics Improvement H1 07 v H1 06 H1 07 total Sales total +8.4% + CHF 4.0 bio CHF 51.1 bio Organic growth + 7.4% EBIT % + CHF 0.9 bio CHF 6.9 bio EBIT margin + 60 bps 13.5% Net profit % + CHF 0.8 bio CHF 4.9 bio Net profit margin + 80 bps 9.6% Working capital + 20 bps + CHF 0.1 bio 8.8% Operating cash flow % + CHF 1.0 bio CHF 4.3 bio bps half year results roadshow -August 2007

4 Creating shareholder value through profitable growth Growing the business: Nutrition, Health & Wellness Generating sales growth Growing market shares Enhancing mix Driving margin Driving efficiencies: improving performance Drive simplicity across the businesses Leverage scale for competitive advantage Tackle underperformers Increase discipline/ execution in all we do half year results roadshow -August 2007

5 H Performance of major brands Key brands above market growth Organic Growth BAB's: half year results roadshow -August 2007

6 Powdered & Liquid Beverages Strong performance by all categories Performance H1 Sales CHF: 8.4 bio OG: 9.2% Mkt share*: H1 EBIT +60 bps 22.7% 22.1% Highlights Strong growth in all categories Nespresso organic growth of 40% MILO renovation a catalyst for 10%+ growth Nesquik performing well due to less/no sugar variants EBIT strong volume, pricing, cost management 1.7 bio 1.9 bio * Billionaire Brands half year results roadshow -August 2007

7 Winning innovation Nescafé Dolce Gusto off to good start Nescafé a Billionaire Brand, organic growth of 6.9% Nescafé Dolce Gusto: Extremely high consumer satisfaction & recommendations 229,000 machines sold to consumers; 84 million capsules sold to trade CHF 25 million in sales: 1pt RIG to Soluble Coffee Europe Launched in Oct Germany, UK, CH half year results roadshow -August 2007

increase Same great Milo taste Malaysia relaunch success Mkt share (Powder) from 90.8% to 92.3% Mkt share (UHT) from 40.

8 Winning innovation Milo renovation in 2006 A Billionaire Brand, organic growth of 10.6% The Renovation - Nutrition Health & Wellness Improved mix of carbohydrates to claim "Go Further" No manufacturing cost increase Same great Milo taste Malaysia relaunch success Mkt share (Powder) from 90.8% to 92.3% Mkt share (UHT) from 40.4% to 43.8% H1 '07 Organic growth 17.7% EBIT margin +270 bps Enhancing the mix/efficiencies Fuze range adding volumes with better margins half year results roadshow -August 2007

Nestlé Waters Double digit growth & margin improvement Performance H1 Sales CHF: 5.

2% Highlights Billionaire Brands, Pure Life and Poland Spring, achieve double digit

Pellegrino & Perrier, Nestlé Aquarel also double digit Five factories sold/closed in

9 Nestlé Waters Double digit growth & margin improvement Performance H1 Sales CHF: 5.4 bio OG: 10.3% Mkt share*: H1 EBIT +10 bps 9.3% 9.2% Highlights Billionaire Brands, Pure Life and Poland Spring, achieve double digit growth S. Pellegrino & Perrier, Nestlé Aquarel also double digit Five factories sold/closed in Europe EBIT benefited from growth, but impacted by cost pressures and fixed cost investment for growth 0.4 bio 0.5 bio * Billionaire Brands half year results roadshow -August 2007

10 Focus & differentiation driving growth STATUS FUNCTIONAL BASIC NUTRITION half year results roadshow -August 2007

Dairy Products Strong growth and margin improvement Performance H1 Sales CHF: 10.1 bio OG: 7.1% Mkt share* (MP): Mkt share* (IC): H1 EBIT +160 bps 10.5% 8.9% 0.8 bio 1.

11 Dairy Products Strong growth and margin improvement Performance H1 Sales CHF: 10.1 bio OG: 7.1% Mkt share* (MP): Mkt share* (IC): H1 EBIT +160 bps 10.5% 8.9% 0.8 bio 1.1 bio Highlights Milk products Billionaire brands achieve double digit growth Dairy achieves 5%+ pricing but less RIG Value added portfolio beneficial in inflationary environment CoffeeMate's global roll-out on track Ice cream Performance benefits from strong innovation platform super-premium & health EBIT Both categories improved Benefited from pricing ahead of cost pressures * Billionaire Brands half year results roadshow -August 2007

Dairy Products Response to input cost challenge Strong brands allowed early action on prices (as much as 15%), with more to come Operation Excellence 2007; SKU rationalisation Pack size reduction and

12 Dairy Products Response to input cost challenge Strong brands allowed early action on prices (as much as 15%), with more to come Operation Excellence 2007; SKU rationalisation Pack size reduction and reduced-cost packaging Reduction of demand generation activities as lack of supply means demand would not be satisfied Strategy of premiumisation (Nido 1+ etc) beneficial: increased added value = input costs smaller % of sales Margin impact to be greater in H half year results roadshow -August 2007

Winning innovation in Ice cream Nutrition,

added" and "yoghurt" ice cream variants "No

With 6x normal milk content launched in Chile

expectations Yoghurt ice cream with 4% fat

13 Winning innovation in Ice cream Nutrition, Health & Wellness LTF in "standard", "no sugar added" and "yoghurt" ice cream variants "No sugar added" for diabetics & weight conscious With 6x normal milk content launched in Chile "Lactose-free" in Finland sales twice expectations Yoghurt ice cream with 4% fat from Mövenpick half year results roadshow -August 2007

Dreyer s Grand Ice Cream A more profitable future Higher

30% price premium to standard Häagen-Dazs Optimizing pricing

"hyper-efficient" manufacturing & DSD systems Profitability

14 Dreyer s Grand Ice Cream A more profitable future Higher margins through innovation, such as Häagen-Dazs Reserve, with 30% price premium to standard Häagen-Dazs Optimizing pricing & trade promotion DSD Brands High Margins Innovation Creating "hyper-efficient" manufacturing & DSD systems Profitability to improve versus half year results roadshow -August 2007

15 Nestlé Nutrition Double digit growth & positive EBIT trend Performance H1 Sales CHF: 3.4 bio OG: 10.5% Mkt share: H1 EBIT -20 bps 18.7% 18.9% Highlights Strong growth in Infant & Healthcare Billionaire brand, NAN, grows double digit Growth is benefiting mix premium etc EBIT margin of base business improves Jenny Craig dilutive Acquisition of Healthcare approved, Gerber pending With Gerber, the global leader with CHF10 bio + sales Mid term targets of 20% EBIT, 10% Organic growth 0.5 bio 0.6 bio half year results roadshow -August 2007

Winning innovation in Nestlé Nutrition Project Bullet: Value enhancing growth 1400 1300 1200 Generating Top Line Growth on our Super-Premium and Premium Products* 1.130 1.220 1.

16 Winning innovation in Nestlé Nutrition Project Bullet: Value enhancing growth Generating Top Line Growth on our Super-Premium and Premium Products* NPS (mio CHF) *only the markets which introduced "Bullet" (eff. 05) (eff. 06) (Est.) (Est.) half year results roadshow -August 2007

17 Nestlé Nutrition: CHF10 billion sales in a high growth, high margin business Acquisition of Novartis Medical Nestlé Nutrition & Novartis Medical (8% CAGR*) -Number 2 globally in an attractive category Acquisition of Gerber Nestlé Nutrition & Gerber (7% CAGR*) -Leadership in key markets * 3 year CAGR for Gerber & Novartis Medical Nutrition half year results roadshow -August 2007

18 Prepared dishes and cooking aids AOA and Americas deliver high growth Performance H1 Sales CHF: 8.8 bio OG: 3.1% Mkt share*: H1 EBIT - 40 bps 12.5% 12.1% c Highlights Maggi dynamic in AOA Product group generally weak in Europe Slow start for Frozen in US except Lean Cuisine acceleration expected Hot Pockets yet to regain momentum Chilled Buitoni continues strong in the US EBIT impacted by competitive environment and realignment of internal costs 1.1 bio 1.1 bio * Billionaire Brands half year results roadshow -August 2007

Prepared dishes and cooking aids Nutrition, Health and

nutritional reassurance ENHANCED FEATURES Great taste

Dedicated nutritional solutions for a healthrelated need

19 Prepared dishes and cooking aids Nutrition, Health and Wellness BASIC REASSURANCE Delivering great taste with nutritional reassurance ENHANCED FEATURES Great taste with improved nutritional profile SPECIFIC SOLUTIONS Dedicated nutritional solutions for a healthrelated need of a specific consumer group 2007 half year results roadshow - August 2007

Regionalisation of manufacturing in Europe (York) starting to show benefits Two facilities sold to Barry Callebaut EBIT improvement

20 Confectionery Significant margin improvement Performance H1 Sales CHF: 5.3 bio OG: 4.6% Mkt share: H1 EBIT +120 bps 7.8% 9.0% Highlights Good growth/double digit in emerging markets Slowdown v H1 is normal after early Easter Improving trends in UK and US Regionalisation of manufacturing in Europe (York) starting to show benefits Two facilities sold to Barry Callebaut EBIT improvement reflects growth & restructuring Raw material pressure to increase in H2 / bio 0.5 bio * Billionaire Brands half year results roadshow -August 2007

21 Confectionery Nutrition, health and wellness Strengthened dark chocolate offerings Continued extension of dark chocolate ranges Portion control Extended range, leveraging existing brands Popularly positioned products Extending range, both leveraging existing products and through innovation 2007 half year results roadshow - August 2007

22 PetCare Good growth and margin improvement Performance H1 Sales CHF: 5.9 bio OG: 7.2% Mkt share: H1 EBIT +20 bps 14.9% 14.7% Highlights Strong performance continues in all regions Profitability helped by mix (Super-premium, dry and single serve performing well) 17 new items launched in the US Successful US roll-out of European concept: Fancy Feast Elegant Medleys at 40% premium to standard Fancy Feast EBIT helped by pricing & growth, but impacted by input cost pressures 0.8 bio 0.9 bio * Billionaire Brands half year results roadshow -August 2007

23 PetCare Innovation driving mix Science-Based Targeted Nutrition Addressing specific needs puppies' immune systems, extended life, probiotics (Longevis & OptiStart BAB s ) Hyper-Premium Segment Ultimate taste & cosmetics to create human like recipes Florentine, soufflés etc Natural Segment Capitalise on Natural trend whole grains, natural colours, etc half year results roadshow -August 2007

24 Nutrition, Health & Wellness In Nestlé Nutrition Three acquisitions in last 12 months have created a global leader with over CHF10 billion of sales Targets of 10% organic growth and 20% margins In other Food and Beverage categories Differentiation from competitors and share gains in key categories Stronger brands delivering higher growth and improved EBIT margin half year results roadshow -August 2007

25 Creating shareholder value through profitable growth Growing the business: Nutrition, Health & Wellness Generating sales growth Growing market shares Enhancing mix Improving F&B margin Driving efficiencies: improving performance Drive simplicity across the businesses Leverage scale for competitive advantage Tackle underperformers Increase discipline/ execution in all we do half year results roadshow -August 2007

26 Improving performance of Nestlé F&B Focus areas 1. Drive simplicity across the businesses E.g. SKUs, structures, reporting 2. Leverage scale for competitive advantage E.g. GLOBE, Shared services, procurement 3. Tackle underperformers Investment phase, core, non-core, 4. Increase discipline/ execution in all we do E.g. Dynamic forecast, real time data, project tracking half year results roadshow -August 2007

27 Drive simplicity across the businesses SKU reduction Nestlé Waters NA: 20% targeted for deletion Zone AOA: 10% reduction per year Zone Europe: 9% reduction at H1 Reduction in legal entities Nestlé Waters: 50% liquidated by end '08 Zone AOA: 20% liquidated by end '08 half done Zone Europe: 50% liquidated by end '08 half done half year results roadshow -August 2007

28 Leveraging Scale Nestlé Retail Operations Center Creating competitive advantage at the moment of choice Leverage retail sales execution for Nestlé in the USA Cross-channel initiative Improve speed to shelf & share of shelf space Reduce out-of-stocks Generate over CHF 150 million incremental sales half year results roadshow -August 2007

Tackle underperformers Nestlé Waters: Reduction of five factories in H1 2007 Dairy: disposals in Asia Canned Liquid Milks, etc Chocolate: Sale to Barry Callebaut of two

29 Tackle underperformers Nestlé Waters: Reduction of five factories in H Dairy: disposals in Asia Canned Liquid Milks, etc Chocolate: Sale to Barry Callebaut of two facilities Performance Nutrition: repositioning on track EBIT margin: Zone Europe, UK Confectionery, Dreyer's trending better half year results roadshow -August 2007

30 Value creation at Nestlé: share buyback A 3-year CHF 25 billion share buyback programme An efficient capital structure that should provide enhanced returns whilst retaining flexibility Appropriate in view of acquisition strategy following Gerber Demonstrates the Board's confidence in the business performance & its view of the company's valuation Nestlé's credit rating will remain the "Gold Standard" for the industry The Nestlé Model: The right focus for a strong earnings-enhancing growth and the right capital structure to enhance shareholder returns half year results roadshow -August 2007

31 Conclusion The Nestlé Model reconfirmed for 2007 The Nestlé Model reconfirmed for 2007: Above target organic growth driven by key brands EBIT margin to improve despite increased cost pressures to increase in H2 Continued progress on working capital expected Share buy-back programme announced Three year, CHF 25 billion half year results roadshow -August 2007

32 2007 half year results roadshow 2007 half year results roadshow - August 2007

Press release. Strong performance by Nestlé in 2008

Press release. Strong performance by Nestlé in 2008 Press release Strong performance by Nestlé in 2008 Change vs. 2007 CHF Millions Reported 2008 Reported Organic Growth Constant Currencies Sales Group 109 908 + 2.2% + 8.3% + 10.0% Food & Beverages 102