May 19, 2006

Nestle India Limited

Financial Analysts’ Meet - May 19, 2006

Nestlé India Limited

Financial Analysts’ Meet

May 19, 2006

May 19, 2006

Agenda

Introduction & Overview Martial Rolland

Financials Shobinder Duggal

Chocolates & Confectionery Stewart Dryburgh

Business

Questions & answers ALL

May 19, 2006

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.

May 19, 2006

INTRODUCTION &OVERVIEW

May 19, 2006

Few key and “recent” “environmental changes”

May 19, 2006

22,499 24,77327,758

31,198 33,298

5.24.6

8.3

6.2

7.9

-

10,000

20,000

30,000

40,000

50,000

2001 2002 2003 2004 2005 2006

-

2.0

4.0

6.0

8.0

10.0

GDP at current prices Real GDP growth

Past FutureINR Billion %

7.5 – 8.0

Overview of India’s GDP

A period of greater wealth creation…..

Source: EIU, RBI Forecast

May 19, 2006

3,9723,457 3,262 3,245 3,377 3,607

5,839

4,795

6,6037,194

9,398

12,043

0

2,500

5,000

7,500

10,000

12,500

Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Apr-06

Sensex

-7.8 % +39.8 % +57.1 %CAGR

2,645 points increase from Dec 05 to Apr 06!

Performance of Sensex

…reflected in greater optimism…

May 19, 2006

USD

28.5 27.6

19.3

25.5

29.4 30.7 32.2

38.0

43.3

56.359.4

62.9

10

20

30

40

50

60

70

Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Mar-06

Crude Oil prices

Monthly average rates per barrel

Source: Dow Jones & Company

…however with its share of issues….

May 19, 2006

8,381

33,878

1,222

5,320

18,083

2,218

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

FMCG Companies Brands Skus

2001 2005

Numbers

Source: A.C.Nielsen

87%

58%

82%

Increasing FMCG clutter

… and challenges….

May 19, 2006

So there are challenges but overall

environment seems positive

and there are strong opportunities

for our Company

May 19, 2006

� 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.

Directionally we will

May 19, 2006

Over to SHDOver to SHD

May 19, 2006

FINANCIALS

May 19, 2006

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

May 19, 2006

SALES GROWTH

May 19, 2006

Sales Evolution

16.7 18.7 20.9 22.2

1.8

1.91.5

24.7

1.7

2.5

12.2

11.3

10.4

4.4

7.9

0

5

10

15

20

25

30

2001 2002 2003 2004 2005

Gross Sales (INR Bio) .

0

2

4

6

8

10

12

14

RIG (%) .

Third Party Sales Affiliated Exports RIG

20.5

22.823.7

26.4

19.2

(RIG in relation to 3rd Party sales basis international accounting standards)

May 19, 2006

Sales Evolution (contd.)

6.1 6.9

0.3

0.4

3.7

9.3

4

5

6

7

8

Q1-05 Q1-06

Gross Sales (INR Bio) .

0

2

4

6

8

10

RIG (%) .

Third Party Sales Affiliated Exports RIG

7.26.5

(RIG in relation to 3rd Party sales basis international accounting standards)

May 19, 2006

Sales Decomposition

Sales Growth:

Selling prices = 3.1%

RIG = 9.3 %

Q1’06

(Basis international accounting standards)

Selling prices = 2.1%

RIG = 3.7 %

Q1’05

+5.8% +12.4%

May 19, 2006

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

Channel-wise Sales

@ Gross Sales including excise duty

May 19, 2006

1,226 1,043

1,088

1,472 1,468

1,320

2,9543,193

Q1 06 Q1 05

Choc./Conf. Prep. Dishes & Cooking Aids

Beverages Milks/Nutrition

INR Mio. 7,210 6,554

44.3% 45.1%

18.3%

22.4%20.4%

16.6%

17.0% 15.9%

Gross Sales including excise duty

A Balanced Portfolio

Contribution Contribution

May 19, 2006

Brand Volume (Tons) – Q1 Value@ (INR Mio.) – Q1

2006 2005 Var % 2006 2005 Var %

Milk Products & Nutrition

26,004 25,318 2.7 3,193 2,954 8.1

Beverages

5,525 6,415 -13.9 1,472 1,468 0.3

Prepared Dishes & Cooking Aids

16,917 14,571 16.1 1,320 1,089 21.2

Chocolate & Confectionary

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

Sales by Product Categories

@ Gross Sales including excise duty

May 19, 2006

OPERATING MARGINS

May 19, 2006

3.1

4.04.4

5.2

4.5

16.4

19.519.5

19.719.0

14.1

17.117.5

16.9

17.6

0.0

1.5

3.0

4.5

6.0

2001 2002 2003 2004 2005

8

10

12

14

16

18

20

Percentage (%) .

EBITDA EBITDA as % of Gross Sales EBITA as % of Gross Sales

Evolution of Operating Margins

INR Bio.

May 19, 2006

1.4 1.4

21.2

18.919.2

16.8

0.0

0.3

0.6

0.9

1.2

1.5

Q1 05 Q1 06

10

12

14

16

18

20

22

Percentage (%) .

EBITDA EBITDA as % of Gross Sales EBITA as % of Gross Sales

INR Bio.

Evolution of Operating Margins (contd.)

May 19, 2006

INR Mio.

Description Q1 06 % Net Sales

Q1 05 % Net Sales

Var. %

Tot. Expenses -of which

5,394 79.8 4,748 77.4 13.6

Materials 3,098 45.8 2,711 44.2 14.3

Staff Cost 516 7.6 444 7.2 16.2

Advt + sales Promotion

391 5.8 348 5.7 12.3

Distribution 306 4.5 285 4.6 7.7

Power & Fuel 279 4.1 246 4.0 13.8

Total Expenditure

May 19, 2006

113

117

100

113

120

107

124

120

115

109

106

117

114

100

105

110

115

120

125

Q 1 Q2 Q3 Q4

Period

Rs. Per KG (Indexed)

2004

118

Current

2005

Evolution – Milk Solid Prices

2006

2003

May 19, 2006

100

120

106

114

107

124

113113115

117

120

110

117

90

100

110

120

130

2003 2004 2005 2006

Ind

ex

ed

Pri

ce p

er

kg

.

Q1 Q2 Q3 Q4

Evolution - Milk Fat Prices

May 19, 2006

157 152

120113

151

10099 100 100100 100 100 100

80

100

120

140

160

180

Q 1 Q2 Q3 Q4

Period

Rs per KG (Indexed)

180

Current

Evolution – Green Coffee Prices

2003

2004

20052006

May 19, 2006

Evolution - HVF Prices

96

100

9696

100

108

112110

116

98102

96

103

90

95

100

105

110

115

120

Q 1 Q2 Q3 Q4

Period

Rs. Per KG (Indexed)

2004

2005

2003

2006 105

Current

May 19, 2006

144148 150

158

100 99

110106

112

124127 129

145

80

90

100

110

120

130

140

150

160

170

Q 1 Q2 Q3 Q4

Period

Rs per KG (Indexed)

2004

168

Current

2003

Evolution - Sugar Prices

2006

2005

May 19, 2006

108109

116

128

101

108

100100

108

116

107

112

111

95

100

105

110

115

120

125

130

Q 1 Q2 Q3 Q4Period

Rs per KG (Indexed)

2004

Current2006

2003

Evolution – Wheat Flour Prices

2005

126

May 19, 2006

NET PROFIT MARGIN

May 19, 2006

1.7 2.0 2.6 2.5 3.1

10.6

11.7

11.4

9.7

8.9

1.5

2.0

2.5

3.0

3.5

2001 2002 2003 2004 2005

8

9

10

11

12

Perc

en

tag

e (

%)

.

Amount % of Gross Sales

Evolution of Net Profit Margins

INR Bio.

May 19, 2006

0.8 0.9

12.3

11.9

0.5

1.0

Q1 05 Q1 06

9

11

13

Perc

en

tag

e (

%)

.

Amount % of Gross Sales

Evolution of Net Profit Margins (contd.)

INR Bio.

May 19, 2006

WORKING CAPITAL INTENSITY

May 19, 2006

Operating Working Capital

INR Mio

4.8%6.2%As % of Gross Sales

1,2681,819Net capital tied up

1,8201,806Less: Trade Payables #

2,5893,163Inventories

500462Trade receivables

31-Mar 2005

31-Mar 2006

Basis International Accounting Standards

# Excludes any exceptional payable, if any

May 19, 2006

21.8

25.2

27.7

34.8

18.5

28.0

4

8

12

16

20

24

28

32

36

2001 2002 2003 2004 2005

Rotation of Operating Working Capital

Times

Basis International Accounting Standards &

average of two period ends

Adjusted

May 19, 2006

24.8

23.5

20

22

24

26

28

Q1 05 Q1 06

Rotation of Operating Working Capital

Basis International Accounting Standards &

average of two period ends

Times

May 19, 2006

FIXED CAPITAL INTENSITY

May 19, 2006

INR mio. % of Gross Sales

589 596

681742

823

257

3.12.9

3.03.1 3.1

3.6

0

200

400

600

800

1000

2001 2002 2003 2004 2005 Q1 06

2.0

3.0

4.0

Dep. 435 494 463 491 498 131

Investment in Tangible Fixed Assets

May 19, 2006

5.4

6.26.3

6.6

4.9

4.0

4.4

4.8

5.2

5.6

6.0

6.4

6.8

2001 2002 2003 2004 2005

Rotation of Tangible Fixed Assets

Times

Basis International Accounting Standards &

average of two period ends

May 19, 2006

6.8

7.0

6.4

6.5

6.6

6.7

6.8

6.9

7.0

7.1

7.2

Q1 05 Q1 06

Rotation of Tangible Fixed Assets

Basis International Accounting Standards &

average of two period ends

Times

May 19, 2006

INCOME TAX RATE

May 19, 2006

35.7 35.9

36.6

32.9

34.734.4

35.0

33.3

34.5

36.8

30

32

34

36

38

2001 2002 2003 2004 2005

Marginal Rate Effective Rate

Evolution of Tax(as % of pre-tax profit)

May 19, 2006

36.6

37.9

35.3

33.7

32

34

36

38

40

Q1 05 Q1 06

Marginal Rate Effective Rate

Evolution of Tax(as % of pre-tax profit)

May 19, 2006

COST OF CAPITAL

May 19, 2006

10.59.4 9.7

9.0

7.2

5.3

6.6

14.2

16.0

11.0

0.0

3.0

6.0

9.0

12.0

15.0

18.0

2001 2002 2003 2004 2005

WACC Risk Free Bond Rate

Evolution of WACC - %

Basis International Accounting Standards

May 19, 2006

9.6

6.6

7.2

10.8

4

6

8

10

12

Q1 05 Q1 06

WACC Risk Free Bond Rate

Evolution of WACC - %

May 19, 2006

VALUE GROWTH DURATION

May 19, 2006

Value Growth Duration

Effective & Efficient Operations

People

Availability

Innovation and Renovation

Consumer Communications

GLOBEStructure

Nu

trit

ion

,He

alt

h,W

ell

ne

ss

for

all

ag

es

May 19, 2006

QUESTIONS

Thank You