Nestl India Limited

23rd Financial Analysts Meet

Gurgaon 31st March 2014

Disclaimer
This presentation may contain statements which reflect
Managements current views and estimates and could be
construed as forward looking statements. The future involves
certain uncertainties and risks that could cause actual results to
differ materially from the current views being expressed.
Potential uncertainties and risks include factors such 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 Nestl
Internal Reporting Standards.
Figures have been regrouped / reclassified to make them comparable to current period.

Slide 2

The Strategic Direction

Consumer-centric
NHW Leadership

Big Ambition

Slide 3

We continue to focus on..

Strengthening portfolio

Allocating resources

Slide 4

Strengthening Portfolio

Criteria

Scope

SKUs
Products
Customers
Geography

Strategic fit
Profitable
growth
Resource
intensity

Decisions

Invest ?
Fix ?
Divest ?

Drive
Returns

Slide 5

Allocating Resources
Portfolio

Resources
Capex

M&A
Talent

Time

Growth

Marketing Expenditure

Sales resources
Structure

Return
Slide 6

Brand Equity - Most Trusted Brands 2013

5 Nestl Brands in top 100

MAGGI as no. 1 food brand

MUNCH, KIT-KAT & NESTL

MILK CHOCOLATE amongst top

5 Chocolate brands.
NESCAF is amongst the Top 5
brands in Hot Beverages

Economic Times 18th December 2013

Slide 7

2013 highlights
INR 90.6 Bio

INR 16.4 Bio

7.1

INR 11.2 Bio

INR 115.9

6.8
18.1% *

12.3% *

2013
+ INR 7.6 Bio
+ 9.1%

Weighted
Volumes
& Prices

INR 83.0 Bio

+ INR 1.0 Bio

- 45 bps

INR 15.4 Bio

12.5

+ INR 0.5 Bio

+ INR 5.1

- 55 bps

+4.6%

INR 10.8 Bio

INR 110.8

9.2
18.5%*

2012

Net Sales

OG
RIG%
Third Party Sales

OPBIT

Includes figures from Nestl Internal Reporting Standards

12.9% *

Net Profit

EPS

* % of Net Sales

Slide 8

Quarterly evolution of sales & operating profit

% YoY 22.3 20.2 19.9
17.0
growth
74.9 Bio = 19.8%

NET SALES

13.1

12.7

7.8

Q1

10.1

9.8

11.4

Q2

11.0

83.0 Bio = 10.8%

90.6 Bio = 9.1%

2012

2013

Q3

Q4

4.6

INR Bio

2011
% of
Net
Sales

19.3

17.4

18.9

13.8 Bio = 18.5%

18.2

19.5

OPBIT

18.3

17.5

15.4 Bio = 18.5%

18.8

19.8

18.0

17.5

17.1

16.4 Bio = 18.1%

INR Bio
Slide 9

Full year Sales Growth:

Domestic Sales
+0.8%
+7.1%

432.3

435.9

Volume (000 Tons)

78.8

2012

84.4

Value (INR Bio)

2013

Exports Affiliates + Third parties)

+35.1%

14.6

+47.1%

19.7

4.3

6.3

Slide 10

% Contribution to Domestic Sales

47.3

Milk Products
& Nutrition

29.5

Prepared Dishes
& Cooking Aids

30.8

13.3

Chocolate &
Confectionery

13.6

9.9

Beverages

10.4

2012

45.2

2013
Slide 11

Milk Products & Nutrition

Innovation & Renovation

SUPER BABY CAMPAIGN to promote Breast Feeding

Market Position (Value)

No. 1 in Baby Foods
500,000 pledges
1,000,000 videos views on You Tube

No. 1 in Infant Formula

No. 1 in Dairy Whitener &
Sweetened Condensed Milk

Slide 12

Milk Products & Nutrition Domestic

45.2%

-3.5%
+2.4%

137

37.3

132

Volume (000 Tons)

2012

2013

38.2

Value (INR Bio)

Growth impacted by portfolio review & challenges in certain products.

Slide 13

Prepared Dishes & Cooking Aids

Innovation & Renovation

Market Position (Value)

No. 1 in Instant Noodles,
Sauces & Pasta
No. 2 in Soups

Slide 14

Prepared Dishes & Cooking Aids Domestic

Recent gains in market shares

+3.8%

230
Volume (000 Tons)

30.8%

+11.8%

239

23.2
2012

2013

26.0

Value (INR Bio)

Increasing the value up part of portfolio.

Slide 15

Chocolate & Confectionery

Innovation & Renovation

Market Position (Value)

No. 1 in Wafers and Whites

Slide 16

Chocolate & Confectionery - Domestic

-2.2%

47.0

13.6%

+9.3%

45.9

Volume (000 Tons)

10.5

2012

2013

11.4

Value (INR Bio)

Growth impacted by portfolio review & challenges in certain products.

Slide 17

Beverages

Exports depress overall volume growth

Innovation & Renovation

Market Position (Value)

No. 1 in Instant Coffee
Strong presence in Vending

Slide 18

Beverages - Domestic

+3.0%

18.5
Volume (000 Tons)

10.4%

+12.9%

19.1
2012

7.8

2013

8.8
Value (INR Bio)

Growth impacted by portfolio review.

Increasing the value up part of portfolio.
Slide 19

Key Cost Elements

45.5

45.5
% Net Sales

8.0

2012

2013

8.2

4.6

4.8

4.3 4.4

4.5 4.3
3.3

41.2 37.8 6.6 7.4

Materials

3.8 4.4

Employees
Selling &
cost
Distribution

Height of bars: INR Bio

3.6

3.6 4.0

3.7 3.9

2.8 3.3

A&SP

Power &
Fuel

Depreciation

Not to scale

Slide 20

Profit from Operations

Commodity Prices:
Milk/Wheat etc.
Selling Prices
/ Realizations
Product Mix
Channel Mix
SHARK

Contingency
Project Related
Costs

15 bps

30 bps

20 bps

20 bps

10 bps

220 bps
175 bps
60 bps
40 bps
30 bps

20 bps
-

18.5%

18.1%

Negative

2012

Non
Depreciation Employee Selling & Advt. &
Routine LY & Impairment
Cost
Distribution Sales
Promotion

% are with reference to Net sales

Positive
Others

Materials

2013
Slide 21

Income Tax
Increase in effective tax rate:
Surcharge up from 5 to 10%:
Current Tax
Deferred Tax revaluation
One offs in 2012 & timing difference

: 110 bps
: 50 bps
: 60 bps

33.6

32.5

33.4

31.2

4.8

5.6

2012

2013

Tax Expense (INR Bio)

Marginal Tax Rate (%)

Effective Tax Rate (%)

Slide 22

Key factors impacting Profit after tax

12.9%

35 bps

30 bps

10 bps

30 bps

30 bps

INR 10.7 Billion

INR 11.2 Billion

12.3%

2012

Contingency

% is in reference to sales

Treasury
Income

Exceptional Profit from

Operations
Item

Income
Taxes

2013

Slide 23

Evolution of basic earnings per share

110.8

115.9

EPS (INR)

99.7
84.9
67.9

55.4

32.1

32.7

2005

2006

42.9

2013

2012

2011

2010

2009

2008

2007

2004

26.1

Slide 24

Average Trade Net Working Capital (ATNWC)

6.0

Exceptions lower the:

Inventory
: 140 bps
Trade Payables : 50 bps

4.1

5.0

3.7

2012

2013

ATNWC (INR Bio)

% of Net Sales

ATNWC : Basis 12 Months Average (Nestl Internal Reporting Standards)

: Inventories + Debtors Trade Payables (except Staff Costs, Contingencies,
Capex & Taxes)
Slide 25

Operating Cash Flow

INR (Mio)
362

707

332

43

19.8 %*

392

20.4 %*

694

17,964
16,934

2012

PBIT

* % of Net Sales

Depreciation Total Working Contingency Current

Capital Changes
&
Income Tax
Impairment

Others

2013

Slide 26

Sources and Utilisation of Cash

Operating
Cash Flow
Net Borrowings

16.9

18.0

3.2

Nil

2.1

1.9

INR Bio

2.9
7.3

5.4

5.5
9.7
2.8
2012
Fixed Assets

Dividends

2013
Repayment

Cash movement

LT Investments
Slide 27

Capital Efficiency and Value Creation

34

32

22
20

33.2

6.5

2012
Invested Capital (INR Bio)
ACC %

34.3

7.5

2013
Economic Profit (INR Bio)

12.7

11.8

Risk Free rate %

8.3

8.2

Group risk
Premium %

3.5

3.5

Invested capital : basis average of 5 quarter end (Nestl Internal Reporting Standards)

Slide 28

Return on Equity
Debt : Equity

37 : 63

33 : 67
115.9

110.8

70

AAA Rating
reaffirmed by
CRISIL
54

48.5

48.5

18.0

23.7

2012

2013

Period end Shareholders fund (INR Bio)

Avg. Share
Price (INR)

4,541

DPS (INR)

EPS (INR)

ROE %

5,032
Slide 29

Excerpts from Nov10 Analysts Meet

Nestl has generated strong cash flows.

Annualized return to the shareholders has been over 35%.

Current capacity utilizations are at all time high

India growth story is compelling

CAPEX is being stepped up across most locations & products

Financing is foreseen through a judicious mix of Internal

Accruals and Debt

Following elements will be key to the financing strategy:

Dividend Payout
Debt :Equity
Local and foreign currency debt.
Credit Ratings : Nestl India (locally AAA); Nestl SA (AA)

Linked Slides

Slide 31

Nestl Indias Commodity Basket

140
135
3.7%

126
7.1%

112
12.5%
100

102
9.8%

2008

2009

2010

2011

2012

2013

Slide 32

Milks: 7% Increase over 2012

30.0%

Current
135

135
127
118

119

118

118

117
113

111

112

106
100
Q1

Q2

Q3
2011

Indexed with base Q1-11

2012

Q4

2013
Slide 33

Current
195

MSK: 28% Increase over 2012

6.8%

122
112

153

124

123

127

121

113

114

111

118

100
Q1

Q2

Q3
2011

Indexed with base Q1-11

2012

Q4

2013

Slide 34

Wheat Flour: 17 % Increase over 2012

12.4%

Current
123
121

123

122

116
119
106
100
94
93

93

Q1

Q2
2011

Indexed with base Q1-11

2012

94

93

Q3

Q4

2013
Slide 35

Green Coffee: 5% decrease over 2012

Current
158

11.0%

148
137

133

126

126
119
119

119

113

104

105

Q2

Q3

100

Q1

2011
Indexed with base Q1-11

2012

Q4

2013
Slide 36

Palm Oil: Neutral over 2012

9.7%

Current
127

128
119

118

117

116

119

111

112

112

105
104
100
Q1

Q2

Q3
2011

Indexed with base Q1-11

2012

Q4

2013
Slide 37

Sugar: 1% Decrease Over 2012

6.0%

122

113

114
112

Current

107

104
102

102

101

100

100

Q1

95

95

Q2

Q3
2011

Indexed with base Q1-11

2012

Q4

2013
Slide 38

Robusta
London Exchange

Slide 39

Arabica
New York Exchange

Slide 40

Sugar
New York Exchange

Slide 41

Palm Oil
Malaysia Exchange

Slide 42

Brent

Slide 43

Employee Base

7,159

7,008

2012

No. of Employees

2013
Slide 44

Thank You

Slide 45