Nestle SA ( NSRGY.PK)

Nine Months Sales Call

October 20, 2011 09:30 am ET


Roddy Child-Villiers - IR


David Hayes - Nomura

Alain Oberhuber - MainFirst Bank

James Edwards Jones - RBS

Susanne Seibel - Barclays Capital

Patrik Schwendimann - Zurcher Kantonalbank

Jeremy Fialko - Redburn Partners

Robert Waldschmidt - Bank of America - Merrill Lynch

Warren Ackerman - Société Générale

Jeff Stent - Exane BNP Paribas

Thomas Russo - Gardner Russo & Gardner

Pierre Tegner - Natixis Securities

Simon Marshall - Lockyer Jefferies & Company

Jon Cox - Kepler


Roddy Child-Villiers

Good morning everyone. Welcome to the Nestlé nine months sales call. My presentation will be short as I think you are all aware of the trends in our business. I will start by taking the Safe Harbor is read. As you have seen from our press release, our top-line growth remains solid. We've seen a continued pick up in pricing and an easing in our real internal growth or volume as we expected.

This Group dynamic between pricing and RIG is repeated in our primary reporting segments and all continued to deliver positive growth. This dynamic is the same also in most product categories, exceptions being Confectionery and PetCare. The RIG for Confectionery was unchanged from H1 and the pricing increased while as PetCare delivered both increased RIG and increased pricing.

Currencies have remained a major headwind on our reported numbers. Our outlook is that we now expect to slightly outperform our long-term 5% to 6% organic growth range and we continue to strive for margin improvement in constant currencies.

Next, the key elements of sales. Organic growth was 7.3% with RIG at 4.1%. Currencies had a negative impact of 15.1% due to the continued strength of the Swiss franc. Also our reported numbers include an impact from the sale of Alcon resulting in a 5.7% reduction from divestitures net of acquisitions.

Looking briefly at the sales development by region, we achieved 5% organic growth in Europe, 5.8% in Americas and 13.1% in Asia, Oceania and Africa. This demonstrates how broad spread is our growth. And it demonstrates our ability to deliver growth even in the most difficult, more constrained markets.

On this next slide, you can see a bit more granularity. As I was just saying, we are delivering growth in more growth constrained markets such as the PIGS with 3.7% organic growth and in the more dynamic market such as the BRICS with 12.3%. Emerging markets as a whole grew by 13.1% and the developed by 4%. Let’s now have a look at the zones and globally managed businesses.

Here is the overview chart and you can see that we have continued to grow in all our operating segments. I will now go into the detail of our performance starting with the Americas. Organic growth was unchanged at 5.6% with increased pricing. Growth in North America picked up, in Latin America it remains above 10%.

Looking at North America first, the biggest category PetCare had a good third quarter as promised. Those categories remain subdued. Market shares have improved, innovations are driving this outperformance. The recently launched ONE beyOnd in particular is going well.

In Ice Cream, the pricing accelerated in the quarter due to the super premium and snacks. Market shares were above flat. Growth [Technical Difficulty] changed although the category has if anything slowed further. That said, our innovation such as snacks for Lean Cuisine, have been well received.

Pizza continues to perform well and gain market share. It is worth noting that the Home Delivery Pizza segment has slowed somewhat. So the players there have increased their promotional activity. In Chocolate, the Skinny Cow launch is doing well with early indicators very positive.

In CoffeeMate, the Natural Bliss launch is exceeding our expectations. This is an important launch as it takes CoffeeMate into dairy creaming rather than being exclusively a non-diary creamer. Diary creaming is about 30% of the coffee cup market which was previously not open to CoffeeMate. The other recently launched CoffeeMate range, Café Collections is also performing well.

Turning to Latin America, we are continuing to achieve double-digit growth in those markets. Categories and brands going double-digit include Nescafé, Chocolate, Maggi, PetCare, and powdered beverages. The biggest category in the region is dairy which is growing high single-digit.

Among brands, I will highlight the rollout of Nestlé Nido liquid milk with probiotics, Nescau powdered beverage in Brazil, Nestea and Nescafé Mexico and Maggi in Venezuela.

Next is Zone Europe. As you would expect, with organic growth of 3.8% for the Zone and positive RIG in all western European markets, our market share performance has been good. The Zone achieved another quarter of positive growth and this was even with the poor ice cream season. Ice cream’s most important month is July, which had its worst weather in 30 years. Our ability to deliver growth in the zone as a whole regardless of the impact from ice cream demonstrates the strength and the sustainability of our growth in Europe.

I think you know well by now the Nestlé theme in Europe, compelling innovation targeted at specific consumer segments. For example, look at the success in Juicy Roasting in the U.K. Maggi is not an established brand in the U.K. So Juicy Roasting’s success there demonstrates the integrity of the concept. Equally in France we are selling [Technical Difficulty]. Juicy Roasting is now rolled out across much of Europe as well as in other markets around the world. It’s interesting to note that Juicy Roasting is the start point for innovation in this category. I look forward to briefing you on the coming innovation in the months and years ahead.

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