Nestlé India Limited
23rd Financial Analysts’ Meet
Gurgaon 31st March 2014
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 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 Nestlé
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
•
•
•
•
SKU’s
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 Nestlé Brands in top 100
• MAGGI as no. 1 food brand
• MUNCH, KIT-KAT & NESTLÉ
MILK CHOCOLATE amongst top
5 Chocolate brands.
• NESCAFÉ 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 Nestlé 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 (Nestlé 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 (Nestlé 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 Nov’10 Analysts’ Meet
•
Nestlé 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 : Nestlé India (locally AAA); Nestlé SA (AA)
Linked Slides
Slide 31
Nestlé India’s 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