Nestlé India Limited 20 th Financial Analysts Meet - Gurgaon 30 th November 2011
Disclaimer This presentation may contain statements which reflect Management s current views and estimates and could be construed as forward looking statements. The future involves certain risks and uncertainties that could cause actual results to differ materially from the current views being expressed. Potential risks and uncertainties include such factors as general economic conditions, commodities and currency fluctuations, competitive product and pricing pressures, industrial relations and regulatory developments. Responses can be given to questions, which are not price sensitive. Calculations in this presentation are based on non-rounded figures. Real Internal Growth (RIG) and Organic Growth (OG) are basis Nestlé Internal Reporting Standards in relation to third party sales only.
Jan - Sep highlights Jan-Sep 2011 INR 55.4 Bio 15.5 21.5 INR 10.3 Bio 18.6% * INR 7.3 Bio 13.2% * + INR 9.5 Bio Weighted Volumes + INR 1.8 Bio + 20.8% & Prices + 20 bps + INR 1.2 Bio - 20 bps INR 45.8 Bio 16.3 21.1 INR 8.4 Bio INR 6.2 Bio Jan-Sep 2010 Net Sales RIG OG% Third Party Sales OPBIT 18.4% * Net Profit 13.4% * Includes figures from Nestlé Internal Reporting Standards * % of Net Sales
% YoY growth Sustained successive quarters of double digit growth and profitability NET SALES Q1 Q2 Q3 Q4 16.0 16.8 17.6 24.0 16.9 21.3 25.7 23.6 22.3 20.2 19.9 51.3 Bio = 18.6% 62.5 Bio = 21.9% 55.4 Bio = 20.8% INR Bio % of Net Sales 12.7 12.1 13.0 13.5 14.8 14.7 16.4 16.7 18.1 17.6 19.6 2009 2010 2011 OPBIT 22.0 18.6 18.8 12.5 19.2 17.8 18.3 17.6 19.3 17.4 18.9 9.2 Bio = 17.9% 11.4 Bio = 18.2% 10.3 Bio = 18.6% INR Bio 2.8 2.2 2.4 1.7 2.8 2.6 3.0 2.9 3.5 3.1 3.7
Contributors & diluters to Net Sales 5.4 0.7 Channel mix 0.2 0.1 Product mix Government regulations 5.2 Price & mix 55.4 Volume 45.8 Jan-Sep 10 Jan-Sep 11 All figures are in INR Bio
Sales growth negatively impacted by... Volume 160 30 220 12.8% 8.7% Jan-Sep 11 Reported Channel mix Product mix Government regulations Jan-Sep 11 Restated Value 200 120 40 24.4% 20.8% Impacts computed basis stripping out discontinued/curtailed business from both periods Figures in boxes represent basis points
Underlying factors of Sales growth Price increase & Sales Mix Aggregate of Volume growth as reported Discontinued / curtailed business volumes * Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 * Impacts computed basis stripping out discontinued/curtailed business from both periods
Volume, Price & Mix led growth Volume (000 Tons) Domestic Value (INR Bio) +9.5% +21.5% 297.8 326.1 43.0 52.3 Volume (000 Tons) Exports Value (INR Bio) -10.2% +8.9% 12.8 11.5 Jan-Sep 10 Jan-Sep 11 2.8 3.0 Jan-Sep 10 Jan-Sep 11
Contribution of Product categories to Net Sales % Share % Share Milk Products & 44.7 45.0 Nutrition 28.5 Prepared Dishes & Cooking Aids 27.1 13.9 Chocolate & Confectionery 14.6 12.9 Beverages 13.3 Jan-Sep 11 Jan-Sep 10
Value Growth (%) All Product categories grow 32 x = 8.7 Milk Products & Nutrition 15.8 24 Beverages 7.1 7.7 24.7 Prepared Dishes & Cooking Aids x = 20.8 8 Chocolate & Confectionery -5 0 10 20 Bubble shows Net Sales (INR Bio) Volume Growth (%) Jan-Sep 11
Milk Products & Nutrition Weeded out non-strategic part of portfolio Innovation & Renovation Sales (000 tons) Sales (INR Bio) Market Position (Value) +4.4% +11.7% +19.9% +26.4% No. 1 in Baby Foods & Infant Formula No. 1 in Dairy Whitener & Sweetened Condensed Milk 108.9 113.8 Jan-Sep 10 Jan-Sep 11 20.6 24.7 Jan-Sep 10 Jan-Sep 11 Contribution 44.7%
Prepared Dishes & Cooking Aids Recent gains in market shares Innovation & Renovation Sales (000 tons) +15.4% 140.8 162.4 Sales (INR Bio) +27.1% 12.4 15.8 Market Position (Value) No. 1 in Instant Noodles, Sauces & Pasta No. 2 in Healthy Soups Jan-Sep 10 Jan-Sep 11 Jan-Sep 10 Jan-Sep 11 Contribution 28.5%
Chocolate & Confectionery Capped non-strategic part of portfolio Innovation & Renovation Sales (000 tons) Sales (INR Bio) +15.1% +22.9% +1.5% +15.1% Market Position (Value) No. 1 in Wafers and Whites Leading player in Éclairs 40.7 41.3 6.7 7.7 Jan-Sep 10 Jan-Sep 11 Jan-Sep 10 Jan-Sep 11 Contribution 13.9%
Beverages Exports depress overall volume growth Innovation & Renovation Sales (000 tons) -0.5% 20.1 20.0 Jan-Sep 10 Jan-Sep 11 Sales (INR Bio) +17.2% 6.1 7.1 Jan-Sep 10 Jan-Sep 11 Market Position (Value) No. 1 in Instant Coffee Very strong presence in Vending Contribution 12.9%
Our Cost Structure 48.8 Jan-Sep 11 Jan-Sep 10 % Net Sales 49.3 7.2 6.9 4.8 4.9 4.2 4.5 3.8 3.5 2.0 2.0 INR Bio 27.0 22.6 4.0 3.2 2.7 2.3 2.3 2.1 2.1 1.6 1.1 0.9 Materials Employees cost Distribution A&SP Power & Fuel Depreciation Figures have been regrouped / reclassified to make them comparable. Not to scale
Margins remain within band 17.6 17.9 18.2 18.4 18.6 7.6 9.2 11.4 8.4 10.3 2008 2009 2010 Jan-Sep 10 Jan-Sep 11 OPBIT (INR Bio) OPBIT % of Net Sales 17
Contributors & diluters to OPBIT% 40 40 Contingencies & Exceptions Commodities 50 30 40 30 Employees cost 30 Scale* 18.4% Sales Mix Cost of Materials Power & Fuel 10 Exchange loss 30 A&SP 18.6% Jan-Sep 2010 % & basis points in boxes are with reference to Net sales Jan-Sep 2011 *w/o Employees cost
34.0 34.0 Effective tax rate 33.4 33.5 100% tax holiday drops to 30% from 1 Apr 2011 for 5 years at PANTNAGAR FACTORY 32.7 29.8 29.9 28.4 28.5 28.1 2.3 2.6 3.3 2.4 3.1 2008 2009 2010 Jan-Sep 10 Jan-Sep 11 Tax Expense (INR Bio) Marginal Tax Rate (%) Effective Tax Rate (%) Excludes Fringe Benefit & Dividend Distribution Tax
Net profit Tax Holiday 12.4 12.8 13.1 13.4 13.2 5.3 6.6 8.2 6.2 7.3 2008 2009 2010 Jan-Sep 10 Jan-Sep 11 Net Profit (INR Bio) % of Net Sales
Contributors & diluters to PAT% 15 OPBIT * 50 15 13.4% Tax holiday Marginal Tax rate 13.2% Jan-Sep 10 Jan-Sep 11 * Net of tax % & basis points in boxes are with reference to Net sales
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Jan-Sep 10 Jan-Sep 11 EPS (INR) Earnings Per Share growth over 10 years X 4.7 84.9 X 2.6 67.9 63.8 75.8 55.4 42.9 18.0 20.9 27.3 26.1 32.1 32.7 CAGR 21.3%
Operating working capital... FG & RM -50bps Debtors +10bps 5.1 4.6 4.8 5.0 4.6 2.3 2.4 3.1 3.0 3.4 2008 2009 2010 Jan-Sep 10 Jan-Sep 11 Operating working capital (INR Bio) Basis Nestlé Internal Reporting Standards % of Net Proceeds of Sales Operating Working Capital = Inventories + Debtors Trade Payables (excluding Staff Costs, Contingencies, Capex & Taxes) Operating Working capital is average for 5 quarter end data points
15.5 Operating cash flow 18.1 16.6 Working Capital Operating Margin 16.4 16.9 6.7 9.3 10.4 7.5 9.4 2008 # 2009 2010 Jan-Sep 10 Jan-Sep 11 Operating cash flows (INR Bio) % of Net Sales # excludes one off inflows. Reported 16.7%
INR Bio Utilisation of cash generated / borrowed Cash Generated/ 7.2 9.3 10.4 7.5 9.4 Borrowed 4.6 1.0 1.3 0.5 5.4 2.2 1.6 2.4 3.7 5.4 2.4 10.0 2.5 2.6 4.5 2.9 2008 2009 2010 Jan-Sep 10 Jan-Sep 11 Cash retained Dividends Fixed Assets
ROIC is 4 times ACC 62 62 64 51 49 51 66 53 54 41 4.1 4.9 6.2 4.6 5.3 2008 2009 2010 Jan-Sep 10 Jan-Sep 11 Economic Profit (INR Bio) Economic Profitability (%) Return on Invested Capital (%) ACC % 11.6 12.8 12.9 13.0 12.9 Risk Free rate % 7.9 8.5 8.0 8.0 8.0 Group risk 2.5 3.0 3.5 3.5 3.5 Premium% Basis Nestlé Internal Reporting Standards
ROE decreases as earning retained to finance expansion Debt : Equity 0 :100 0 :100 0 :100 0 :100 25 : 75 113 113 96 104 55.4 42.5 67.9 48.5 84.9 48.5 63.8 75.8 66 4.7 5.8 8.6 7.9 14.9 Average Share Price (INR) 2008 2009 2010 Jan-Sep 10 Jan-Sep 11 Period end Shareholders fund (INR Bio) DPS (INR) EPS (INR) ROE % 1544 1987 3021 2831 3953
CAPEX on high trajectory 17.1 6.5 4.7 7.1 3.8 2.8 1.0 2.4 0.7 4.5 7.7 1.7 5.5 9.1 11.4 2008 2009 2010 Jan-Sep 10 Jan-Sep 11 Capex (INR Bio) Commitment Capex as % of Net Sales FA Rotation 5.8 5.6 5.4 5.8 4.0 Dep. 0.82 1.01 1.19 0.87 1.09 (INR Bio) Fixed Assets exclude Intangibles Capex excludes Capital advances which are shown in commitments
External Commercial Borrowing (ECB) for CAPEX Financing Cost for USD 85 Mio Gross cost 421.5 Net cost 399.0 Accounting Treatment 32.2% 421.5 Cost above benchmark Annualised Gross Cost 32.2% Jan-Sep 2011 368.8 52.7 (22.5) Interest cost FX movement Earning 22.8% local borrowing cost benchmark 9.4% 5.4% 4.0% Interest cost 295.0 73.8 52.7 Exchange diff upto benchmark Exchange diff above benchmark Exchange differences capitalised per option given in AS 11 (rev) (amended by NACAS in March 2009) Cost upto benchmark (Per AS 16) Capitalised (INR 88 mio) Expensed off (INR 16 mio), after offsetting income earned on ECB ahead of utilisation ( INR 22.5 mio) INR Mio
53 USD:INR Movement 52 51 50 49 48 47 46 45 44 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2010 2011
Nestlé India Limited rankings as given by & November 13, 2011 October 24, 2011 Total Income Net Profit ROCE Mkt Cap EPS Dividend % Tax paid Employee number 100 91 1 34 61 26 53 99
Thank You
July - September Quarter highlights INR 19.6 Bio 15.2 20.6 INR 3.7 Bio 18.9% * INR 2.6 Bio 13.3% * Q3 2011 + INR 3.3 Bio Weighted Volumes + INR 0.7 Bio + 19.9% & Prices + 60 bps + INR 0.4 Bio INR 16.4 Bio 19.5 26.2 INR 3.0 Bio INR 2.2 Bio 18.3% * 13.3% * Q3 2010 Net Sales RIG OG% Third Party Sales OPBIT Net Profit Includes figures from Nestlé Internal Reporting Standards * % of Net Sales
Nestlé India's Commodity Basket Price Index 136 123 +13 110 112 +11 100 +12 2007 2008 2009 2010 YTD 2011
Impact of price change (INR Mio) Sugar 1.4 Key Raw Materials Jan-Sep 11 400 200 2.1 Wheat Flour Cocoa 0.3 represents consumption in (INR Bio) (20) 20 40 60 80 (200) (400) (600) Fresh Milk 7.2 MSK 2.1 2.2 1.4 Palm Oil Green Coffee 1.0 Fats (800) Price indices (%) Total Adverse Price Variance INR 2.3 Bio Impact of price change & Price indices reflect YoY change. Based on production and Internal Accounting Standards
Fresh Milk Fat prices 4.4 % over 2010 156.3 164.1 Current 138.4 137.3 147.0 140.0 139.9 119 137.4 124.9 106.6 100.0 111.1 104.2 106.9 110.2 Q 1 Q2 Q3 Q4 2008 2009 2010 2011 Indexed with base Q1-08
MSK prices 27.2 % over 2010 128.3 137.3 132.5 Current 113.4 108.5 100.0 96.0 99.5 99.1 103.3 100.7 97.3 95.8 87.8 87.8 89.9 Q 1 Q2 Q3 Q4 2008 2009 2010 2011 Indexed with base Q1-08
Green Coffee prices 35.2 % over 2010 Current 140.0 117.6 115.9 100.0 121.5 114.6 104.7 122.8 112.3 102.4 118.0 103.7 91.0 86.7 89.9 95.6 Q 1 Q2 Q3 Q4 Indexed with base Q1-08 2008 2009 2010 2011
Sugar prices 12.6 % over 2010 240.1 Current 218.0 212.1 230.0 214.2 202.0 192.3 191.7 209.2 170.2 157.3 140.6 100.0 104.5 115.5 125.0 Q 1 Q2 Q3 Q4 2008 2009 2010 2011 Indexed with base Q1-08
Wheat Flour prices 1.4% over 2010 126.2 117.7 114.5 118.4 109.8 111.2 115.8 100.0 101.0 104.7 100.7 99.6 102.1 101.4 Current 100.7 101.4 Q 1 Q2 Q3 Q4 2008 2009 2010 2011 Indexed with base Q1-08
Palm Oil prices 40.7 % over 2010 125.3 106.6 112.9 118.0 111.6 Current 118.6 111.1 105.8 99.3 100.0 82.2 81.7 84.7 85.3 81.9 76.4 Q 1 Q2 Q3 Q4 2008 2009 2010 2011 Indexed with base Q1-08 42
COFFEE ROBUSTA [LIFFE] London International Financial Futures Exchange
COFFEE ARABICA [ICE] Inter Continental Exchange
SUGAR [NCX] National Commodity Exchange- Muzafarnagar-Sugar
WHEAT [NCX] National Commodity Exchange- Wheat- Delhi
PALM OIL [BMD] Bursa Malaysia Derivatives
Evolution Crude Oil Prices [NYMEX] X Jan-Sep 11 95.5 USD/Barrel Current 97.1 USD/Barrel + 22.9% X Jan-Sep 10 77.7 USD/Barrel New York Mecantile Exchange
Fuel Oils 38.6 +28.1% 30.1 +8.9% 36.9 33.8 Furnace Oil Price - Rs./ltr HSD Jan-Sep 11 Jan-Sep 10 Share % in total Power & Fuel cost Furnace Oil ~ 55% HSD ~ 10%
Materials Cost as % of Net Sales Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 PY 47.2 47.6 47.8 48.2 49.8 49.03 49.1 CY 49.8 49.0 49.1 47.6 48.8 49.45 48.2 Change bps 260 140 130 60 100 42 90