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Half Year Results 2005 - roadshow - August 2005 Name of chairman2
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
Half Year Results 2005 - roadshow - August 2005 Name of chairman3
Roadshow agenda
• Summary financials
• Observations/outlook
• GLOBE update
• The Nestlé Model
• Zone Americas
Half Year Results 2005 - roadshow - August 2005 Name of chairman4
A strong start to 2005
• Organic growth accelerates to 5.2%
• Reported EBITA margin up 10 basis points
• Constant currency EBITA margin up 30 bps*
• Underlying EPS up 11.2%
* 2004 restated for comparable share-based payment cost
Half Year Results 2005 - roadshow - August 2005 Name of chairman5
EBITA: Sustainable improvement in margin
H1 2004 H1 2005 Diff. basis pointsAs % of sales Restated (rounded)
Cost of goods sold (41.2) (41.5) (30)Distribution (8.7) (8.2) 50Marketing & Admin (36.6) (36.7) (10)R & D (1.6) (1.6) 0
EBITA 11.9 12.0 10EBITA improvement at constant currency 30*EBITDA 15.1 15.1 -
Sales (CHF million) 42,454 43,474100 100
* 2004 restated for comparable share-based payment cost
Half Year Results 2005 - roadshow - August 2005 Name of chairman6
EBITA margin improvement H1 2004 - H1 2005
* H1 2004 costs of share-based payments adjusted to make them comparable with H1 2005
11.9%
H1 2004Restated
-10 bp*Share-based
paymentscomparability
+ 40 bpProduct &
marketMix
+ 20 bp
+ 10 bpDivestitures
+ 30 bp
- 10 bpFX Rates 12.0%
H1 2005Reported
11.8%
Savings
LESS
Growth
Reinvestment
Input cost
Margin improvement:constant currency*
H1 2004 EBITA withcomparable share-
based payments
Half Year Results 2005 - roadshow - August 2005 Name of chairman7
EBITA to net profit: underlying EPS up 11.2%
EBITA 11.9 12.0 10Net other income/expenses (0.2) (0.7) (50)Amortisation of goodwill (1.9) (0.0) 190Net financing cost (0.8) (0.5) 30Taxes (2.8) (2.6) 20Share of results of associates 0.9 0.9 0
Profit for the period - of whichattributable to minority interest 0.5 0.6 10attributable to the Group (Net profit) 6.6 8.5 190
Underlying net profit 8.2* 8.9 70
Underlying net profit per share (in CHF) 8.95* 9.95 + 11.2%Basic earnings per share (in CHF) 7.16 9.48 + 32.4%
H1 2004 H1 2005 Diff. As % of sales Jan-June % Jan-June % basis points
Restated (rounded)
* 2004 restated for comparable share-based payment cost
Half Year Results 2005 - roadshow - August 2005 Name of chairman8
Raw material, packaging and energy price index
Nestle Weighted Average RMPE Indices in USD and CHFJan 1998=100
50.0
70.0
90.0
110.0
130.0
150.0
170.0
Jan-89
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Pric
e In
dice
s
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
CH
F/U
SD R
ate
RMPE in USD terms RMPE in CHF terms CHF/USD EX Rate
Half Year Results 2005 - roadshow - August 2005 Name of chairman9
Raw material, packaging & energy price index: 2004 v 2005 (CHF)
Inde
x C
HF
(Jan
199
8=10
0)
150
90
100
110
120
130
140
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2004 CHF Index 2005 CHF Index
Half Year Results 2005 - roadshow - August 2005 Name of chairman10
2005 outlook: Europe, The Americas
• Zone Europe - Prioritised growth over margin in H1- Potential to improve margin in H2, but- Chilled Dairy to be a drag on profitability
• Zone Americas- Excellent performance: sales & margin- USA's annual margin performance less H2 weighted than historically
Half Year Results 2005 - roadshow - August 2005 Name of chairman11
2005 outlook: Zone AOA, Nestlé Waters
• Zone AOA- Specific problems held back H1 margin - H2 likely to improve
• Nestlé Waters- North America driving growth- H1 impacted dramatically by PET & distribution costs
- Cost pressure to remain in H2
Half Year Results 2005 - roadshow - August 2005 Name of chairman12
Observations & outlook
• Constant currency EBITA margin up 30 bps*
• Nestlé Food & Beverage contributed to the constant currency earnings improvement
• Input costs a challenge for 2005, but efficiency programmes on target
• Organic growth to be within 5 - 6% range and constant currency margin to improve in 2005
• Nestlé's ability to deliver savings will endure beyond cyclical cost issues
* 2004 restated for comparable share-based payment cost
Half Year Results 2005 - roadshow - August 2005 Name of chairman13
2005 Major GLOBE "Go-Lives"
• South Africa (completed)
• Austria (completed)
• Pakistan (completed)
• The Center (completed)
• Russia (completed)
• Germany (completed)
• India (completed)
• Nestlé Waters HOD UK (completed)
• Mexico (completed)
• UK/Ireland (completed)
• Oceania
Half Year Results 2005 - roadshow - August 2005 Name of chairman14
"Live" Markets - August 2005
20 countries
• Approx. CHF 22.6 billion in sales
• Approx. 61,000 users
• 222 factories (113 Nestlé, 109 Co-Packers)
• 270 distribution centers
• 202 sales offices
Half Year Results 2005 - roadshow - August 2005 Name of chairman15
The Nestlé model
On-going organic growth target of 5 - 6 %
Continued year after year improvement of EBITA margin
Improving capital efficiency / ROIC
Resulting in an industry outperforming, long term total shareholder return
Half Year Results 2005 - roadshow - August 2005 Name of chairman17
Zone Americas: A strong first half performance
Zone Americas + 4.9 + 7.2North America 65 + 5.6 + 6.9
United States + 3.5 + 5.0NPPNA (PetCare) + 7.3 + 8.6Dreyer's + 9.2 + 8.7Canada + 5.0 + 8.0
Latin America and Caribbean 35 + 3.7 + 7.6Brazil + 4.3 + 2.4Mexico + 5.8 + 11.2
H1 2005 Sales split RIG OG% % %
EBITA 12.8% 13.6% + 80 bps
H1 2004 H1 2005restated
Half Year Results 2005 - roadshow - August 2005 Name of chairman18
Overview of Zone Americas
45 Countries (incl. Caribbean Islands) 4 Markets
(USA, Mexico, Brazil & Canada) 4 Regions
(Austral-America, Bolivarian, Caribbean and Central American)
860 million people 70,000 employees (approx.) 4 major languages
(English, Spanish, Portuguese and French) 7 time zones
Half Year Results 2005 - roadshow - August 2005 Name of chairman19
Nestlé in the Americas Over 100 years manufacturing in USA Over 80 years manufacturing in Latin America
(Brazil) Strong management and in-depth knowledge of
each country
Nestlé has Leadership & Scale 8 Brands over CHF 1 Billion : Nestlé, Nido,
Nescafé, Nestlé Chocolate, Stouffer's, Lean Cuisine, Hot Pockets, Purina
Nestlé #1 Brands have on average a Market Share 4X bigger than the nearest competitor
Overview of Zone AmericasStrong position and proud tradition in the Americas
Half Year Results 2005 - roadshow - August 2005 Name of chairman20
Diversity and Potential
• GDP per capita (year 2004)– USA US$ 39'752 vs. Haiti US$ 411
• Large population and growing– North America: 320 million people, 0.9% growth rate– Latin America & Caribbean: 540 million people, 1.4%
growth rate
• Young population– North America: Median age of 36 years– Latin America & Caribbean: Median age of 24 years
Source: Worldbank-2005 World Development Indicators
Half Year Results 2005 - roadshow - August 2005 Name of chairman21
Zone Americas
"Becoming a respected, trustworthy Food, Nutrition,
Health & Wellness Company."
VisionAccretive to the Group's vision:
Half Year Results 2005 - roadshow - August 2005 Name of chairman22
Nestlé's Four Strategic Pillars
• Growth• EBITA• Market Share
Speed...
Half Year Results 2005 - roadshow - August 2005 Name of chairman23
Operational Efficiency
Striving to continue to be the low cost operator
• Operation EXCELLENCE 2007 and FitNes • Optimized production infrastructure• Shared Service Centers (North America,
LATAM)• Common purchasing with networked
organizations• Aggressive GLOBE implementation
Half Year Results 2005 - roadshow - August 2005 Name of chairman24
Cost efficient and service-driven backline operations enable our frontline businesses to
remain focused on driving the business.
Operational Efficiency
Half Year Results 2005 - roadshow - August 2005 Name of chairman25
North America is leading the way with front-line focused Operating Companies and back-office shared support structures.
CENTERS OF EXCELLENCE
ON SHORE
OFF SHORE
OUT SOURCE
NESTLÉ BUSINESS CENTER
Operational Efficiency
Dreyer's
Office of the
Chairman
NestléCanada
NestléWaters
Service Contract
Service Contract
NestléBusinessServices
NestléPrepared
FoodsNestléPurina
PetCare
NestléNutrition Alcon
NestléBrands
NestléMexico
Half Year Results 2005 - roadshow - August 2005 Name of chairman26
Focused NestléOperating
CompaniesLeveraged Nestlé Business Services (NBS)
Onshore / Offshore
In-source/Out-source
Centers of Skill/Centers of Scale
Delivery Options:
Brands
Prepared Foods
Purina PetCare
Nutrition
Canada
Waters
Purchasing – S&IM Purchasing – Direct Retail Sales Execution
HR/Payroll Disbursements General Accounting Operations Accounting
Customer Service Transportation Decision Support Communications Legal Other - All support functions which could be shared
Dreyer's Mexico Alcon•• Other
IT – Application Dev./Maintenance
IT – Data Center Tax Treasury
Operational EfficiencyOpportunities identified to leverage the scale of Nestlé in the North
Scope of First Phase
Half Year Results 2005 - roadshow - August 2005 Name of chairman27
Innovation and RenovationSpeed up consumer relevant Innovation/Renovation
Half Year Results 2005 - roadshow - August 2005 Name of chairman28
Innovation and RenovationRich pipeline of innovation and renovation
Half Year Results 2005 - roadshow - August 2005 Name of chairman29
Innovation and Renovation
Nourishment Moms
NIDO
Benefit: Milk-based Nutrition
Product: Full Cream Milk Powder
NIDO
Enhancement Moms
NIDO 1+, 3+, 6+
NIDO 1+ NIDO 3 NIDO 6+
Benefit: Protection Stimulation Growth
Product: Specialized Milk Powder
Adding nutritional value: NIDO
Half Year Results 2005 - roadshow - August 2005 Name of chairman30
Product AvailabilitySatisfy consumers with our brands/products wherever, whenever, however
Half Year Results 2005 - roadshow - August 2005 Name of chairman31
Product AvailabilityBuilding and controlling proprietary, Routes to Market, with optimal product portfolio
Half Year Results 2005 - roadshow - August 2005 Name of chairman33
Product AvailabilityBringing products to consumers in Brazil
Half Year Results 2005 - roadshow - August 2005 Name of chairman34
Consumer Communications
Insights: Living our consumers' lives
NUTRIMOVIL Nestlé
Plan Conos: Sampling & Merchandising
Insights into Action in Peru
Half Year Results 2005 - roadshow - August 2005 Name of chairman35
Consumer CommunicationMotivating Communications-Nestlé Brazil "Faz Bem"
Corporate Communications & Sponsorships
Strategic Brand Campaigns
Consumer Promotions
Half Year Results 2005 - roadshow - August 2005 Name of chairman36
Consumer CommunicationDirect contact with consumers
Brazil Mexico
Chile
Nestlé Purina Petcare Latin America
USA Colombia
Half Year Results 2005 - roadshow - August 2005 Name of chairman37
Zone Americas
• In summary...
• Performance is on track
• Potential for continued growth is promising
• Aligned organization with a vision and a plan
• Strong management with local expertise
People. Products. Brands.
Half Year Results 2005 - roadshow - August 2005 Name of chairman38
Half Year Results 2005 - Roadshow
Half Year Results 2005 - roadshow - August 2005 Name of chairman39
Cost of goods sold (41.2) (41.5) (30)Distribution (8.7) (8.2) 50Marketing & Admin (36.6) (36.7) (10)R & D (1.6) (1.6) 0EBITA 11.9 12.0 10EBITA improvement at constant currency 30*
Sales (CHF million) 42,454 43,474100 100
* 2004 restated for comparable share-based payment cost
Net other income/expenses 0.2) (0.7) (50)
Amortisation of goodwill (1.9) (0.0) 190
Net financing cost (0.8) (0.5) 30
Taxes (2.8) (2.6) 20
Share of results of associates 0.9 0.9 0
Profit for the period - of which
attributable to minority interest 0.5 0.6 10
attributable to the Group (Net profit) 6.6 8.5 190
Underlying net profit 8.2* 8.9 70
Underlying net profit per share (in CHF) 8.95* 9.95 + 11.2%
Basic earnings per share (in CHF) 7.16 9.48 + 32.4%
Net Income Statement
Half Year Results 2005 - roadshow - August 2005 Name of chairman40* 2004 restated for comparable share-based payment cost
Net Income Statement
NEW IFRS ?
Cost of goods sold (41.2) (41.5) (30)Distribution (8.7) (8.2) 50Marketing & Admin (36.6) (36.7) (10)R & D (1.6) (1.6) 0EBITA 11.9 12.0 10EBITA improvement at constant currency 30*
Sales (CHF million) 42,454 43,474100 100
Net other income/expenses 0.2) (0.7) (50)
Amortisation of goodwill (1.9) (0.0) 190
Net financing cost (0.8) (0.5) 30
Taxes (2.8) (2.6) 20
Share of results of associates 0.9 0.9 0
Profit for the period - of which
attributable to minority interest 0.5 0.6 10
attributable to the Group (Net profit) 6.6 8.5 190
Underlying net profit 8.2* 8.9 70
Underlying net profit per share (in CHF) 8.95* 9.95 + 11.2%
Basic earnings per share (in CHF) 7.16 9.48 + 32.4%
Half Year Results 2005 - roadshow - August 2005 Name of chairman41
IFRS
International Accounting Standards Board30 Cannon Street
UK - London, EC4M 6XH
email: iasb@iasb.org
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