Nestlé India Limited Nestle India Limited Financial Analysts Meet Financial Analysts Meet -
Agenda Introduction & Overview Martial Rolland Financials Shobinder Duggal Chocolates & Confectionery Stewart Dryburgh Business Questions & answers ALL
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.
INTRODUCTION & OVERVIEW
Few key and recent environmental changes
A period of greater wealth creation.. 50,000 40,000 INR Billion Overview of India s GDP 8.3 7.9 Past Future 7.5 8.0 % 10.0 8.0 6.2 30,000 5.2 4.6 6.0 20,000 10,000 22,499 24,773 27,758 31,198 33,298 4.0 2.0-2001 2002 2003 2004 2005 2006 - GDP at current prices Real GDP growth 6RXUFH(,85%,)RUHFDVW
reflected in greater optimism 12,500 10,000 Performance of Sensex 9,398 12,043 7,500 5,000 3,972 3,457 3,262 3,245 3,377 3,607 5,839 4,795 6,603 7,194 2,645 points increase from Dec 05 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 A pr-06 Sensex CAGR -7.8 % +39.8 % +57.1 %
however with its share of issues. 70 60 USD Crude Oil prices Monthly average rates per barrel 56.3 59.4 62.9 50 40 30 28.5 27.6 19.3 25.5 29.4 30.7 32.2 38.0 43.3 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 6RXUFH'RZ-RQHV &RPSDQ\
and challenges. 40,000 35,000 30,000 Numbers Increasing FMCG clutter 87% 33,878 25,000 20,000 15,000 10,000 5,000-18,083 58% 82% 8,381 2,218 5,320 1,222 FMCG Companies Brands Skus 2001 2005 6RXUFH$&1LHOVHQ
So there are challenges but overall environment seems positive and there are strong opportunities for our Company
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 Drive few but big innovations Work towards improving further availability Maintain focus on cost efficiency and effectiveness Move with greater speed.
Over to SHD Over to SHD
FINANCIALS
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
SALES GROWTH
Sales Evolution 30. ) 25 io B R20 N (I s15 le a S10 s ro G 5 0 Third Party Sales Affiliated Exports RIG 12.2 26.4 1.7 11.3 22.8 23.7 1.5 20.5 1.9 10.4 19.2 1.8 2.5 4.4 16.7 18.7 20.9 22.2 24.7 2001 2002 2003 2004 2005 7.9 14 12 10 8 6 4 2 0. ) (% I G R (RIG in relation to 3 rd Party sales basis international accounting standards)
Sales Evolution (contd.) Third Party Sales Affiliated Exports RIG. ) io B R (IN s a le S s ro G 8 7 6 5 4 6.5 9.3 0.3 0.4 3.7 7.2 6.1 6.9 10 8 6 4 2 0. ) (% IG R Q1-05 Q1-06 (RIG in relation to 3 rd Party sales basis international accounting standards)
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)
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
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
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 & Cooking Aids Chocolate & Confectionary 16,917 14,571 16.1 1,320 1,089 21.2 8,332 6,941 20.0 1,226 1,043 17.5 Total 56,777 53,245 6.6 7,210 6,554 10.0 @ Gross Sales including excise duty
OPERATING MARGINS
Evolution of Operating Margins 6.0 INR Bio. 19.5 19.5 19.0 19.7 20 4.5 3.0 1.5 16.4 14.1 3.1 17.1 4.0 17.5 4.4 16.9 4.5 17.6 5.2 18 16 14 12 10. ) (% e g ta n e rc e P 0.0 2001 2002 2003 2004 2005 8 EBITDA EBITDA as % of Gross Sales EBITA as % of Gross Sales
Evolution of Operating Margins (contd.) INR Bio. 1.5 21.2 22 1.2 0.9 0.6 0.3 0.0 19.2 18.9 16.8 1.4 1.4 Q1 05 Q1 06 EBITDA EBITDA as % of Gross Sales EBITA as % of Gross Sales 20 18 16 14 12 10. ) (% e g ta n e rc e P
Total Expenditure INR Mio. Description Q1 06 % Net Sales Q1 05 % Net Sales Var. % 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 4.1 246 4.0 13.8
Evolution Milk Solid Prices 125 ) 120 d e x e d n115 I ( G K r 110 e P. s R 105 120 114 2006 106 Current 118 113 107 124 115 113 117 120 117 109 2003 2005 2004 100 100 Q 1 Q2 Q3 Q4 Period
Evolution - Milk Fat Prices Indexed Price per kg. 130 120 110 100 90 124 120 120 117 117 115 113 113 114 110 107 106 100 2003 2004 2005 2006 Q1 Q2 Q3 Q4
Evolution Green Coffee Prices 180 Current 180 160 ) d e x e d140 n I ( G K r 120 e p s R 100 157 151 152 2006 113 120 100 99 100 100 100 100 100 100 2005 2004 2003 80 Q 1 Q2 Q3 Q4 Period
Evolution - HVF Prices 120 116 115 ) d e x e110 d n I ( 105 G K r e 102 P100. s 100 R 95 110 103 Current 2006 105 100 96 112 98 96 108 96 96 2004 2005 2003 90 Q 1 Q2 Q3 Q4 Period
Evolution - Sugar Prices 170 160 150 ) d e x140 e d n I 130 ( G K120 r e p 110 s R 100 2006 158 145 112 Current 168 144 124 148 127 106 150 129 110 2005 2004 2003 90 100 99 80 Q 1 Q2 Q3 Q4 Period
Evolution Wheat Flour Prices 130 125 2006 128 Current 126 ) d e120 x e d n115 I ( G K110 r e p s 105 R 112 111 108 107 109 108 116 116 108 2005 2004 2003 100 95 100 100 101 Q 1 Q2 Q3 Q4 Period
NET PROFIT MARGIN
Evolution of Net Profit Margins INR Bio. Amount % of Gross Sales 3.5 11.4 11.7 12 3.0 2.5 2.0 8.9 9.7 10.6 11 10 9 Percentage (%). 1.5 1.7 2.0 2.6 2.5 3.1 2001 2002 2003 2004 2005 8
Evolution of Net Profit Margins (contd.) INR Bio. Amount % of Gross Sales 1.0 11.9 12.3 13 11 Percentage (%). 0.5 0.8 0.9 Q1 05 Q1 06 9
WORKING CAPITAL INTENSITY
Operating Working Capital Trade receivables Inventories Less: Trade Payables # Net capital tied up As % of Gross Sales 31-Mar 2006 462 3,163 1,806 1,819 6.2% 31-Mar 2005 500 2,589 1,820 1,268 4.8% INR Mio Basis International Accounting Standards # Excludes any exceptional payable, if any
Rotation of Operating Working Capital Times 36 34.8 32 28 24 20 18.5 21.8 25.2 27.7 28.0 Adjusted 16 12 8 4 2001 2002 2003 2004 2005 Basis International Accounting Standards & average of two period ends
Rotation of Operating Working Capital Times 28 26 24.8 24 23.5 22 20 Q1 05 Q1 06 Basis International Accounting Standards & average of two period ends
FIXED CAPITAL INTENSITY
Investment in Tangible Fixed Assets INR mio. % of Gross Sales 1000 4.0 800 600 589 596 681 742 823 3.6 400 3.1 2.9 3.0 3.1 3.1 257 3.0 200 0 2001 2002 2003 2004 2005 Q1 06 Dep. 435 494 463 491 498 131 2.0
Rotation of Tangible Fixed Assets Times 6.8 6.4 6.0 6.2 6.3 6.6 5.6 5.4 5.2 4.9 4.8 4.4 4.0 2001 2002 2003 2004 2005 Basis International Accounting Standards & average of two period ends
Rotation of Tangible Fixed Assets Times 7.2 7.1 7.0 6.9 6.8 6.7 6.6 6.5 6.4 6.8 7.0 Q1 05 Q1 06 Basis International Accounting Standards & average of two period ends
INCOME TAX RATE
Evolution of Tax (as % of pre-tax profit) 38 36 36.8 35.7 35.9 36.6 34.5 34 34.7 34.4 35.0 32 32.9 33.3 30 2001 2002 2003 2004 2005 Marginal Rate Effective Rate
Evolution of Tax (as % of pre-tax profit) 40 38 37.9 36 36.6 35.3 34 32 33.7 Q1 05 Q1 06 Marginal Rate Effective Rate
COST OF CAPITAL
Evolution of WACC - % 18.0 16.0 WACC Risk Free Bond Rate 15.0 14.2 12.0 10.5 9.4 9.7 9.0 6.0 3.0 11.0 9.0 7.2 5.3 6.6 0.0 2001 2002 2003 2004 2005 Basis International Accounting Standards
Evolution of WACC - % WACC Risk Free Bond Rate 12 10 8 6 9.6 6.6 10.8 7.2 4 Q1 05 Q1 06
VALUE GROWTH DURATION
Value Growth Duration Nutrition,Health,Wellness for all ages Innovation and Renovation Availability Effective & Efficient Operations Consumer Communications People Structure GLOBE
QUESTIONS Thank You