2009 full year results - nestlé 19 february 2010 2009 full year results 2009 full year results...
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2009 full year results1 19 February 2010
2009 Full Year Results
2009 Full Year Results Roadshow23 February 2010
2009 full year results2 19 February 2010
2009 Full Year ResultsJames Singh
Chief Financial Officer
2009 Full Year Results Roadshow23 February 2010
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.
Disclaimer
Agenda
19 February 2010 2009 Full Year Results Roadshow4
2009 Business EnvironmentHow we managed the business in 2009What we achieved in 20092010 Business Environment Making progress in 2010M&A updateUse of cash
23 February
2010 2009 Full Year Results Roadshow
The Economic Dashboard as it looked going into 2009
23 February 20105 2009 Full Year Results Roadshow
Market uncertainty
Access to capital Sales volume and prices under pressure
Gaining market shares
Leverage market opportunities
Protect financial performance
Optimise business performance
Drive profitable growth
Managing the downsides Exploiting the upsides
Six Levers to Manage Downsides & Exploit Upsides
23 February 20106 2009 Full Year Results Roadshow
Market uncertainty
Access to capital Sales volume and prices under pressure
Gaining market shares
Leverage market opportunities
SCENARIO PLANNING
Improved forecast accuracy
Manage risks to targets
Revisit major expenditures
CAPITAL DISCIPLINE
Tight cash flow management
Reduce trade net working capital
Maintain high credit quality
OPERATIONAL EXCELLENCE
NCE
Drive customer improvement
SKU reduction
Overhead growth below OG
Manage input cost volatility
PRODUCT OPTIMISATION
Accelerate:I&R process 60/40+ PPP
Consumer value-added: Premium-isation
R&D EXCELLENCE& MARKETING
EFFECTIVENESS
Maximise marketing effectiveness ̶improve competitiveness
Enhance Consumer Comms with nutritional messaging
PORTFOLIO ENHANCEMENT
GeographicProduct &Category
Optimise Product offering
Eliminate worst loss Makers
Bolt-on M&A
Protect financial performance
Optimise business performance
Drive profitable growth
Managing the downsides Exploiting the upsides
Six Levers to Manage Downsides & Exploit Upsides
23 February 20107 2009 Full Year Results Roadshow
2009 Full Year Highlights
4.1% OG outperformed industry: again an excellent broad-based performance building on momentum throughout the year
EBIT margin increased 40 basis points (CC) whilst increasing investment in growth
Nestlé Continuous Excellence: over CHF 1.5 billion efficiencies
In an uncertain economic environment we propose a:Dividend increase of 14.3% to CHF 1.60 per shareDividend pay-out ratio up from 49.6% to 51.8% of underlying EPSDividend yield of 3.2% on 31.12.09 share price
CHF 10 billion share buy-back in 2010In the period 2005-'09 returned CHF 44 billion to shareholders through dividend and share buy-back
Credit rating remains "Gold Standard" in the industry
23 February 20108 2009 Full Year Results Roadshow
►
GLOBE enabling efficiencies, transparency, accelerated decision-making
►
GNBS: significant improvements in Employee, Financial and Facilities Services. Strong contribution from Procurement
►
NCE: driving operational performance along the value chain: Operational Efficiencies: CHF 1.5 bn
Total Performance FrameworkDRIVING PERFORMANCE ACHIEVING SIMPLICITY
INVESTMENT FOR GROWTHSCALE BENEFITS
►
Divested businesses, annualised
sales > CHF 0.8 bn
►
SKU Rationalisation: reduced by -16%
►
Factories: -7 from 456 to 449
►
Legal entities: reduced by -4%
►
Acquisitions of businesses with annualised
sales > CHF 2.3 bn inc. Kraft Pizza
►
Capital Expenditure: CHF 4.6 bn / 4.3%
►
R&D expenses: CHF 2.0 bn / F&B. CHF 1.3 bn
►
Consumer facing marketing: +10.1% constant currencies
TotalPerformanceFramework
23 February 20109 2009 Full Year Results Roadshow
►
Organic Growth 4.1%; F&B 3.9%
►
PPP: CHF 8.8 bn (OG +12.7%)
►
Growth with Top Ten Customers
►
Admin Costs: +30 bps (Pensions, FX)
►
Net Trade Working Capital: -30 bps
►
EBIT: Group and F&B up 40 bps CC
►
Underlying EPS up 16.3% CC TotalPerformanceFramework
TotalPerformanceFramework
The Economic Dashboard at year-end 2009: composite leading indicators show signs of improvement in most OECD countries
23 February 201010 2009 Full Year Results Roadshow
Big Government at centre stage
Regulations and regulatory environment
Taxation and revenue sourcing
International trade / protectionism
Tensions between “Growth-haves” and “Growth-have-nots”
Anti-trust
23 February 201011 2009 Full Year Results Roadshow
Savings ratios remain mixed around the world but in reasonably good shape
-5.0
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
France Germany Japan USA UK Brazil Russia India China
2005 2009
% of disposable income
23 February 201012 2009 Full Year Results Roadshow
Jan 2005 Jul 2007 Jan 2009 Jan 2010
Source: Eurostat, Federal Reserve Bank of St. Louis
Consumer confidence is coming back but USA lagging other countries
23 February 201013 2009 Full Year Results Roadshow
The World Economy is stabilising but recovery is expected to be slow
The outlook for GDP is positive but growth will be slow
Underlying economic conditions remain weakHigh levels of unemploymentLarge fiscal deficits leading to emerging sovereign risk
2009 World Bank ForecastsNov ’08 Jan ‘10
2010
GDP growth % 3.0 1.1 0.9 -1.7 -2.2 2.7
Recession
Inflation % 1.5 –
2.5 2.4 0 – 0.5 2.0 –
3.0
Source: World Bank
Moderate Severe Crisis Moderate
23 February 201014 2009 Full Year Results Roadshow
Government support programs are expiring
Source: Federal Reserve, as of 12/31/09
Sep-09 Dec-09 Mar-10 Jun-10
Sep 18 ’09 MMFTG Guarantee
Mar 31 ’10TALF (ABS)
Oct 30 ’09MMIFF Guarantee
Feb 1 ’10CPFFPDCFAMLFTSLF Jun 30 ’10 TALF
(CMBS)
Jan 27 ’10Federal Reserve
Meeting
Mar 16 ’10Federal Reserve
Meeting
Apr 28 ’10Federal Reserve
Meeting
Nestlé
SA % of total debt
Commercial Paper 45%
23 February 201015 2009 Full Year Results Roadshow
1'113839 704 569 451
405 797714
579603
140153
181
15495
-
500
1'000
1'500
2'000
Dec-06 Dec-07 Dec-08 Jun-09 Dec.09
ABPC Financials Industrials
Industrial Segment Liquidity Mix change in favour of longer term maturities
The Nestlé
Group had $9bn in USCP as at
31st Dec 2009 which represents 9.5% of
Non-Financial Issuers.
80
95110
125
140155
170
185200
215
Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09
Out
stan
ding
s ($
Billio
ns)
Non-Financial
Down 50% vs.
Dec 2008
Most borrowers have reduced short term
maturities in favour of longer term debt as a
precautionary measure. Nestlé
remains short term oriented; after
Alcon, we will revisit our maturity mix.
U.S. CP Outstandings (all issuers)
Source: The Federal Reserve
U.S. CP Outstandings (Industrials)$ Bn$ Bn
$ Bn$ Bn
23 February 201016 2009 Full Year Results Roadshow
Inflation and higher Interest Rates are a risk
1.50% 1.25% 1.00% 0.75% 0.50% 0% to 0.25%
0.00%
16-Mar-10 0% to 0.25% 0% 0% 0% 0% 0% 67% 33%
28-Apr-10 0% to 0.25% 0% 0% 0% 0% 1% 66% 32%
23-Jun-10 0% to 0.25% 0% 0% 0% 0% 13% 60% 27%
10-Aug-10 0% to 0.25% 0% 0% 0% 2% 22% 54% 22%
21-Sep-10 0% to 0.25% 0% 0% 0% 10% 34% 42% 14%
3-Nov-10 0% to 0.25% 0% 0% 5% 20% 37% 30% 8%
FOMC DATES
OUR VIEW FED FUNDS
RATES
FUTURES MARKET IS PRICING (in % probability)
Input costs increase–
Commodities that face limited supply are already contributing–
Energy costs will be higher on average vs. last yearLabour rates face increasing pressureProbability of increasing interest rates by end 2010
Inflation is on the rise & will be difficult to suppress
23 February 201017 2009 Full Year Results Roadshow
Making Progress in 2010
Nestlé
Food & Beverage Business
Organic Growth above 2009 level
EBIT margin improvement in constant currencies
23 February 201018 2009 Full Year Results Roadshow
Market uncertainty
Access to capital Sales volume and prices under pressure
Gaining market shares
Leverage market opportunities
SCENARIO PLANNING
Improved forecast accuracyManage risks to targetsRevisit major expenditures
CAPITAL DISCIPLINE
Tight cash flow management Reduce trade net working capitalMaintain high credit quality
OPERATIONAL EXCELLENCE
NCE
Drive customer improvementSKU reductionOverhead growth below OGManage input cost volatility
PRODUCT OPTIMISATION
Accelerate:
I&R process 60/40+ PPP
Consumer value-added: Premium-
isation
R&D EXCELLENCE& MARKETING
EFFECTIVENESS
Maximise marketing effectiveness -
improve competitivenessEnhance Consumer Comms with nutritional messaging
PORTFOLIO ENHANCEMENT
GeographicProduct &
CategoryOptimise Product offeringEliminate worst loss MakersBolt-on M&A
Protect financial performance
Optimise business performance
Drive profitable growth
Managing the downsides Exploiting the upsides
Six Levers to Manage Downsides & Exploit Upsides
TotalPerformanceFramework
DRIVING PERFORMANCE
ACHIEVINGSIMPLICITY
SCALE BENEFITS
INVESTMENT
FOR GROWTH
23 February 201019 2009 Full Year Results Roadshow
Nestlé's M&A strategy
Clear strategic focusFood & BeveragesNutrition, Health & WellnessAdjacencies to existing businessesClear criteria for transactionsEnhancing to key metricsStrong market positions, brands, capabilitiesEase of integration (culture) Global scope but focus on bolts-ons Both emerging & developed markets M&A reinforces the Nestlé Roadmap: our strategy is in place and does not require transformational deals
23 February 201020 2009 Full Year Results Roadshow
Acquisitions have been in developed & emerging markets
19 February 2010 2009 Full Year Results Roadshow21 19 February 2010 2009 Full Year Results Roadshow21
2007* 2008* 2009*
Emerging
23% Emerging
62%
Emerging
47%Developed
77%
Developed
38% Developed
53%
Developed market transactions are often multi-market
Emerging market deals are generally local and therefore smaller, but very quickly integrated into existing operations
*Number of deals
23 February 201021 2009 Full Year Results Roadshow
Alcon disposal:
Likely deal closure end Q3 2010
F&B will continue to deliver profitable growth
Treasury management & performance
Capital preservation: counter-party & instrument risks
The Share buy-back to have a major positive incremental impact in 2010 and 2011
Growth in underlying earnings – growth in dividend
Increased flexibility and agility
23 February 201022 2009 Full Year Results Roadshow
-0.6
Net debt increased by CHF 3.5bn, mostly due to exclusion of Alcon’s Net position
Dividend Share Buy-back
Acqu. Net
of Divest.
OthersFree
Cash-Flow
FY08 Net debt
FY09 Net debt
Alcon Disc.
All numbers in CHF billions
-2.914.6 -7.0
-5.0
+12.1
-0.1
18.1FY09
Net debtexcl. Alcon
cash balance
15.2
Decline in Working Capital contributed CHF 4.8bn
23 February 201023 2009 Full Year Results Roadshow
Net Debt Outlook (CHF bn)
Net Cash Net debt
15.2
2009 with Alcon
2009 Alcon
Discontinued
2010 2012/2013
18.1
Net debt
Gold Standard Credit Quality
Already announced:Alcon +CHF28bnKraft Pizza -CHF4bn Dividend -CHF5.6bn Share Buy-back -CHF10bn
XX.X
23 February 201024 2009 Full Year Results Roadshow
Priorities for use of cash
19 February 2010 2009 Full Year Results Roadshow25
Capital expenditure & support for RIG
M&A ‒– Kraft Pizza: CHF 4 billion‒– Bolt-ons
Dividend2010: CHF 5.6 billion
Share buy-backsCHF 10 billion 2010, CHF 5 billion 2011
Net debt could be 2009 level by end 2012
23 February 201025 2009 Full Year Results Roadshow
Dividends
At 51.8% of underlying EPS, Nestlé is sharing a significant part of its returns from its progress with its shareholders
This pattern is consistent:
CHF
2005
2006
2007
2008
2009Underlying EPS
2.15
2.41
2.80
2.82
3.09Dividend
0.90
1.04
1.22
1.40
1.60Payout ratio
41.9%
43.2%
43.6%
49.6%
51.8%
Principle: Dividends consistently distributed on the basis of the underlining performance of the business
23 February 201026 2009 Full Year Results Roadshow
Conclusion
Broad-based performanceAll operating segments contributedNestlé continuous Excellence exceeds targets
Total Performance FrameworkEBIT margin improvement; increased brand investmentsUnderlying Net Profit, ROIC, CF improvement
Performance improvement shared with shareholders14.3% dividend increaseCHF10bn of share buy-back
Further improvement in performance
2009
2010
23 February 201027 2009 Full Year Results Roadshow
2009 Full Year Results Roadshow2009 full year results28 19 February 2010
Nestlé: Opportunities for growth for years to come
Paul Bulcke
Chief Executive Officer
23 February 2010
... captures the very essence of Nestlé
and the promise
we commit ourselves to everyday, everywhere as the leading Nutrition, Health and Wellness Company
23 February 201030 2009 Full Year Results Roadshow
Nutrition: three dimensions
Pleasure Balance
Understanding
23 February 201034 2009 Full Year Results Roadshow
Good Food, Good Life Across categories, with R&D driven innovation
23 February 201035 2009 Full Year Results Roadshow
2010
World population
1700 19001300
Population, in million
170360 350 610
900
1620
6800
0
2000
4000
6000
1 2 3 4 5 6 7 8 9 0 1 1 1 2 3 4 1 5 1 6 7 1 8 1 9
Year
23 February 201036 2009 Full Year Results Roadshow
Growing prosperity: income groups in world population 1998 –
2008 –
2018
+ 412
+ 148
+ 905
+ 310
+ 981
Income groups
in PPP US$ per capita
Number of persons, million
Sources: UN WIDER and World Bank (also for outlook on economic growth 2008-2018); analysis EIR
23 February 201037 2009 Full Year Results Roadshow
Sustenance Pleasure andPleasure anddiversitydiversity
ConvenienceConvenience Nutrition
Health andwellness
Well-being
US$ 2,700 US$ 14,000 US$ 22,000
Per-capita income
US$ 30,000
Manufacturing value-added in food consumptionactual US$, per capita
$ 800
Higher incomes lead to higher added-value
Sources: UNIDO (value-added), World Bank; analysis Nestlé
EIR
23 February 201038 2009 Full Year Results Roadshow
The trends are positive for Nestlé
Populations are growing– more consumers, increased consumption
Incomes are growing– greater potential from PPP to Premium
And people increasingly care about what they eat– greater potential for added-value & Nutrition, Health & Wellness
Nestlé's opportunity: to grow by staying ahead of the trends
23 February 201039 2009 Full Year Results Roadshow
The Developed World Nestlé
is accelerating its innovation
All markets have growth potential...... through insightful innovation
that excites consumers... through mastering distribution & customer service:
traditional, discounters, speciality, OOH, on-line, ethnic...
Nutrition, Health & Wellness is a proven growth driver – with great taste as the start point
Premiumisation is key in all categories as higher incomes drive more sophisticated choices
PPP is a huge opportunity... and can open up new consumer segments (Hispanic, Asian, African)
23 February 201040 2009 Full Year Results Roadshow
NHW: Specific need-state: Resource Senior Activ: helping older adults regain strength & stay active
Addresses malnutrition amongst older adultsThe first nutritionally complete oral supplement of its kind
Introduced in Switzerland and to be rolled-out in Key European countries
23 February 201041 2009 Full Year Results Roadshow
Ethnic Target Group‘Nostalgic’
African1 million people
Muslim & North African4-5 million people
Asian0.7 million people
NHW: Popularly Positioned Products in Europe: Targeted to specific consumer groups
Ethnic Target Group‘Religious’
23 February 201043 2009 Full Year Results Roadshow
NHW: Another breakthrough innovation in Soluble Coffee: Nescafé Green BlendTrue innovation is big steps, game-changing Its reward is profitable growth for years to comeRenovation is small steps, updating, adapting, extending
It enhances consumer relevance, sharpens competitive edge
Nescafé: an innovation in 1938, renovated ever since
4000 cups drunk every second –
always the consumers' favourite
23 February 201044 2009 Full Year Results Roadshow
Nescafé: Three linked global priorities
Over CHF 10 billion of sales growing over 7% Average consumption of coffee only a quarter a cup per day
Premiumisation Nutrition, Health & Wellness
Popularly Positioned Products
23 February 201045 2009 Full Year Results Roadshow
The emerging markets
Populations are growing, people are becoming wealthier, more health-conscious, more brand-aware
We are well-established with tailored business models, deep distribution, strong market positions, great brand recognition
We are building on those strengths, accelerating our initiatives to further extend our reach – geographically and demographically
23 February 201046 2009 Full Year Results Roadshow
Staying ahead of the trends in emerging markets: Increasing our R&D capabilities to drive growth
2008: China
2009: Côte d'Ivoire
2010: Chile
2012: India
23 February 201047 2009 Full Year Results Roadshow
Investing for growth in emerging markets through increased capital expenditure
19 February 2010 2009 Full Year Results Roadshow48
Expected capital expenditure: 2010-2012
BRIC: CHF 1.5 billion
Asia: CHF 2 billion
Africa: CHF 1 billion
M&A also has a role to enhance growth
23 February 201048 2009 Full Year Results Roadshow
NHW: Energy, activity, Milo (Asia). Strong nutrition credentials & link to youth sports
Contains ACTIGEN-E®, a unique combination of 8 vitamins and 4 minerals: high in magnesium with enriched levels of Vitamins B, Vitamin C & Calcium
Helps optimise the conditions for the release of energy from Carbohydrate, Protein & Fat in a child's food
23 February 201049 2009 Full Year Results Roadshow
NHW: enhanced nutrition in traditional diets Maggi (Africa)
2003-09: cubes sold doubled to 24 billion in Central/West region
10yr CAGR: 11.5%
Over 500,000 outlets in 2012 from 280,000 in 2009
Innovations to come –
will accelerate growth
23 February 201050 2009 Full Year Results Roadshow
51
2005 –
2009 The Philippines
Penetration from 10% –
70%
Market share from 12% –
46%
Volume from 400 tons to 10,000
NHW: balanced diets for low-income families: Maggi Magic Sarap (Asia)
Communication linked to recipes promoting balanced diets
23 February 201051 2009 Full Year Results Roadshow
MexicoQ3-07
ArgentinaQ4 09
CWARQ2-08
NMEQ1-08
MoroccoQ3-09
PakistanQ2-09
MalaysiaQ1-08
BangladeshQ1-09
EARQ3-09
PhilippinesNew Recipe: Q2-08
Indonesia: New Recipe: Q3-07
ColombiaQ1-09
NEARQ3-08
Central AmQ2-08
Sri LankaQ4-08
ChileNew recipe: Q1 09
Ecuador
Brazil
AlgeriaQ2-09Caribbean Reg
Q4-08
China
ZARQ2-09
Pacific IslandsH1-09
MyanmarQ3 09 Vietnam
&Thailand
Markets by end '06: 10 countriesMarkets by end '08: ~40 countriesMarkets by end '09: 67 countries
NHW: Nido: enhanced milks for low-end consumers: International roll-out & driving deeper distribution
CambodiaQ3 09
23 February 201052 2009 Full Year Results Roadshow
6,000 independent saleswomen selling in their own neighbourhoodsSaleswomen sell mixed bags of product, often tailored to individual customers & linked to consumption moments:
Chilled dairyAmbient dairyBiscuitsChocolate
ChocolateCoffeeBeveragesAmbient culinary
NHW: balanced diets for low-income consumers (Brazil) –
driving deeper distribution, creating wealth
23 February 201053 2009 Full Year Results Roadshow
Nestlé's presence all over the world is an unparalleled foundation for growth
The Nestlé Roadmap has laid the building blocks for growth by category and country – global strategy, local execution
We are aligned behind our Roadmap, focused on acceleration in everything that we do
We are investing in R&D capabilities, infrastructure, people andbrands to drive growth
Nestlé: Opportunities for growth for years to come
23 February 201054 2009 Full Year Results Roadshow
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