Nestl India Limited

20th Financial Analysts Meet - Gurgaon 30th November 2011

Disclaimer
This presentation may contain statements which reflect Managements current views and estimates and could be construed as forward looking statements. The future involves certain risks and uncertainties that could cause actual results to differ materially from the current views being expressed. Potential risks and uncertainties include such factors 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 Nestl Internal Reporting Standards in relation to third party sales only.

Jan - Sep highlights

INR 55.4 Bio 21.5 15.5 18.6% * INR 10.3 Bio INR 7.3 Bio 13.2% *

Jan-Sep 2011
Weighted Volumes & Prices

+ INR 9.5 Bio + 20.8%

+ INR 1.8 Bio + 20 bps

+ INR 1.2 Bio - 20 bps

INR 45.8 Bio 16.3

21.1

INR 8.4 Bio 18.4% *

INR 6.2 Bio 13.4% * Net Profit * % of Net Sales

Jan-Sep 2010

Net Sales

RIG OG% Third Party Sales

OPBIT

Includes figures from Nestl Internal Reporting Standards

Sustained successive quarters of double digit growth and profitability

% YoY 16.0 growth

NET SALES
16.8 17.6 24.0 16.9 21.3 25.7 23.6 22.3 51.3 Bio = 18.6% 62.5 Bio = 21.9%

Q1

Q2

Q3

Q4

20.2

19.9

55.4 Bio = 20.8%

INR Bio 12.7

12.1

13.0

13.5

14.8

14.7

16.4

16.7

18.1

17.6

19.6

2009
% of Net Sales

2010 12.5 19.2

2011 17.6 19.3 17.4 18.9

22.0

18.6

18.8

OPBIT

17.8

18.3

9.2 Bio = 17.9%

11.4 Bio = 18.2%

10.3 Bio = 18.6%

INR Bio 2.8

2.2

2.4

1.7

2.8

2.6

3.0

2.9

3.5

3.1

3.7

Contributors & diluters to Net Sales

0.7 Channel mix

0.2
Product mix

0.1 Government regulations

5.4

Price & mix 5.2

55.4

Volume

45.8

Jan-Sep 10
All figures are in INR Bio

Jan-Sep 11

Sales growth negatively impacted by...

Volume
160
220 30

12.8%

8.7% Jan-Sep 11 Reported

Channel mix Product mix Government regulations

Jan-Sep 11 Restated

Value
120 200 40

24.4% 20.8%

Impacts computed basis stripping out discontinued/curtailed business from both periods Figures in boxes represent basis points

Underlying factors of Sales growth

Price increase & Sales Mix Aggregate of Volume growth as reported Discontinued / curtailed business volumes *

Q1 10

Q2 10

Q3 10

Q4 10

Q1 11

Q2 11

Q3 11

* Impacts computed basis stripping out discontinued/curtailed business from both periods

Volume, Price & Mix led growth

Domestic
Volume (000 Tons) +9.5% Value (INR Bio) +21.5%

297.8

326.1

43.0

52.3

Exports
Volume (000 Tons) -10.2% Value (INR Bio) +8.9%

12.8

11.5

2.8 Jan-Sep 10

3.0 Jan-Sep 11

Jan-Sep 10

Jan-Sep 11

Contribution of Product categories to Net Sales

% Share
% Share

44.7

Milk Products & Nutrition

45.0

28.5

Prepared Dishes & Cooking Aids Chocolate & Confectionery Beverages

27.1

13.9
12.9 Jan-Sep 11

14.6
13.3 Jan-Sep 10

All Product categories grow

32

x = 8.7
Milk Products & Nutrition

15.8
x = 20.8
Prepared Dishes & Cooking Aids

Value Growth (%)

24

Beverages

24.7 7.7

7.1

Chocolate & 8 Confectionery

-5

10

20

Volume Growth (%)

Bubble shows Net Sales (INR Bio)

Jan-Sep 11

Weeded out non-strategic part of portfolio

Innovation & Renovation

Milk Products & Nutrition

Sales (000 tons)

+11.7%

Sales (INR Bio)

+26.4%

Market Position (Value)

No. 1 in Baby Foods & Infant Formula No. 1 in Dairy Whitener & Sweetened Condensed Milk

+4.4%

+19.9%

108.9

113.8

20.6

24.7

Jan-Sep 10

Jan-Sep 11

Jan-Sep 10

Jan-Sep 11

Contribution 44.7%

Prepared Dishes & Cooking Aids

Recent gains in market shares
Innovation & Renovation

Sales (000 tons)

+15.4%

Sales (INR Bio)

+27.1%

Market Position (Value)

No. 1 in Instant Noodles, Sauces & Pasta No. 2 in Healthy Soups

140.8

162.4

12.4

15.8

Jan-Sep 10

Jan-Sep 11

Jan-Sep 10

Jan-Sep 11

Contribution 28.5%

Chocolate & Confectionery

Capped non-strategic part of portfolio
Innovation & Renovation

Sales (000 tons)

+15.1%

Sales (INR Bio)

+22.9%

Market Position (Value)

No. 1 in Wafers and Whites Leading player in clairs

+1.5%
40.7
Jan-Sep 10

+15.1%

41.3
Jan-Sep 11

6.7 Jan-Sep 10

7.7 Jan-Sep 11

Contribution 13.9%

Exports depress overall volume growth

Innovation & Renovation

Beverages

Sales (000 tons)

-0.5%

Sales (INR Bio)

+17.2%

Market Position (Value)

No. 1 in Instant Coffee Very strong presence in Vending

20.1 Jan-Sep 10

20.0 Jan-Sep 11

6.1 Jan-Sep 10

7.1 Jan-Sep 11

Contribution 12.9%

Our Cost Structure

48.8 49.3

Jan-Sep 11

Jan-Sep 10

% Net Sales

7.2 6.9 4.8 4.9

4.2

4.5

3.8
3.5

2.0
INR Bio 27.0 22.6
Materials

2.0

4.0

3.2

2.7

2.3

2.3

2.1

2.1

1.6

1.1

0.9

Employees cost

Distribution

A&SP

Power & Fuel Depreciation

Figures have been regrouped / reclassified to make them comparable.

Not to scale

Margins remain within band

18.4 18.6

17.6

17.9

18.2

7.6 2008

9.2 2009
OPBIT (INR Bio)

11.4 2010

8.4 Jan-Sep 10

10.3 Jan-Sep 11
17

OPBIT % of Net Sales

Contributors & diluters to OPBIT%

40

40
Contingencies & Exceptions Commodities

30 50
Employees cost Sales Mix

40 30 30
Power & Fuel

30

Scale*

10
Exchange loss A&SP

Cost of Materials

18.6%

18.4%

Jan-Sep 2010
% & basis points in boxes are with reference to Net sales

Jan-Sep 2011
*w/o Employees cost

Effective tax rate

34.0 34.0 33.4
33.5

100% tax holiday drops to 30% from 1 Apr 2011 for 5 years at PANTNAGAR FACTORY

32.7

29.8
28.4

29.9 28.5 3.3

2010

28.1 2.4
Jan-Sep 10

2.3
2008

2.6
2009

3.1
Jan-Sep 11

Tax Expense (INR Bio)

Marginal Tax Rate (%)

Effective Tax Rate (%)

Excludes Fringe Benefit & Dividend Distribution Tax

Net profit
Tax Holiday

12.4

12.8

13.1

13.4

13.2

5.3 2008

6.6 2009 Net Profit (INR Bio)

8.2 2010

6.2 Jan-Sep 10

7.3 Jan-Sep 11

% of Net Sales

Contributors & diluters to PAT%

15
OPBIT *

50

15

13.4%

Tax holiday

Marginal Tax rate

13.2%

Jan-Sep 10
* Net of tax

Jan-Sep 11

% & basis points in boxes are with reference to Net sales

Earnings Per Share growth over 10 years

X 4.7 X 2.6
67.9 84.9 75.8 63.8

EPS (INR)

55.4 42.9 27.3 26.1 32.1 32.7

18.0

20.9

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Jan-Sep 10

CAGR 21.3%

Jan-Sep 11

Operating working capital...

FG & RM -50bps Debtors +10bps

5.1

4.6

4.8

5.0

4.6

2.3
2008

2.4
2009

3.1
2010

3.0
Jan-Sep 10

3.4
Jan-Sep 11

Operating working capital (INR Bio)

% of Net Proceeds of Sales

Operating Working Capital = Inventories + Debtors Trade Payables (excluding Staff Costs, Contingencies, Capex & Taxes) Operating Working capital is average for 5 quarter end data points Basis Nestl Internal Reporting Standards

Operating cash flow

Working Capital Operating Margin

18.1 15.5 16.6

16.4

16.9

6.7 2008 #

9.3 2009

10.4 2010

7.5 Jan-Sep 10

9.4 Jan-Sep 11

Operating cash flows (INR Bio)

# excludes one off inflows. Reported 16.7%

% of Net Sales

Utilisation of cash generated / borrowed

Cash Generated/ 7.2 Borrowed

9.3

10.4

7.5

9.4 4.6

1.0 INR Bio

1.3

0.5
2.2

1.6 2.4

5.4
3.7 5.4 2.4 10.0 2.5 4.5 2.6 2.9

2008

2009
Cash retained

2010
Dividends

Jan-Sep 10

Jan-Sep 11

Fixed Assets

ROIC is 4 times ACC

62
51 62 49 64 66 53 54 41

51

4.1
2008
Economic Profit (INR Bio)

4.9
2009

6.2
2010

4.6
Jan-Sep 10

5.3
Jan-Sep 11

Economic Profitability (%)

Return on Invested Capital (%)

ACC % Risk Free rate %

11.6 7.9

12.8 8.5

12.9 8.0

13.0 8.0

12.9 8.0

Group risk Premium%

2.5

3.0

3.5

3.5

3.5

Basis Nestl Internal Reporting Standards

ROE decreases as earning retained to finance expansion

Debt : Equity

0 :100

0 :100

0 :100

0 :100

25 : 75

113

113 96 84.9 67.9

104

55.4 42.5

63.8 48.5

75.8 66

48.5

4.7
2008
Average Share Price (INR)

5.8
2009

8.6
2010

7.9
Jan-Sep 10
DPS (INR)

14.9
Jan-Sep 11
ROE %

Period end Shareholders fund (INR Bio)

EPS (INR)

1544

1987

3021

2831

3953

CAPEX on high trajectory

17.1

6.5
4.7

7.1 3.8

2.8 1.0
2008

2.4 0.7
2009

4.5 7.7
2010

1.7 5.5
Jan-Sep 10

9.1 11.4
Jan-Sep 11

Capex (INR Bio)

FA Rotation 5.8 Dep.

Commitment

Capex as % of Net Sales

5.6 1.01

5.4 1.19

5.8 0.87

4.0 1.09

0.82

(INR Bio)

Fixed Assets exclude Intangibles Capex excludes Capital advances which are shown in commitments

External Commercial Borrowing (ECB) for CAPEX

Financing Cost for USD 85 Mio
Gross cost Net cost 421.5 399.0

Accounting Treatment
32.2% 421.5

Cost above benchmark Exchange differences capitalised per option given in AS 11 (rev) (amended by NACAS in March 2009)

22.8% Annualised Gross Cost 32.2%

368.8
local borrowing cost benchmark 9.4%

295.0

Cost upto benchmark (Per AS 16)

5.4%
52.7
(22.5)

73.8 52.7

4.0%

Capitalised (INR 88 mio) Expensed off (INR 16 mio), after offsetting income earned on ECB ahead of utilisation ( INR 22.5 mio)

Jan-Sep 2011
Interest cost FX movement Earning

Interest cost Exchange diff upto benchmark Exchange diff above benchmark

INR Mio

53 52 51 50 49 48 47 46 45 44 Jan Feb Mar Apr

USD:INR Movement

May

Jun
2010

Jul

Aug
2011

Sep

Oct

Nov

Dec

Nestl India Limited rankings as given by

&

November 13, 2011 Total Income Net Profit

October 24, 2011 Dividend % Tax paid Employee number

ROCE

Mkt Cap

EPS

100

91

34

61

26

53

99

Thank You

July - September Quarter highlights

INR 19.6 Bio 20.6 15.2 18.9% * 13.3% * INR 3.7 Bio INR 2.6 Bio

Q3 2011

+ INR 3.3 Bio + 19.9%

INR 16.4 Bio

Weighted Volumes & Prices

26.2 19.5

+ INR 0.7 Bio + 60 bps

+ INR 0.4 Bio

INR 3.0 Bio

INR 2.2 Bio

18.3% * 13.3% *

Q3 2010

Net Sales

RIG OG% Third Party Sales

OPBIT

Net Profit * % of Net Sales

Includes figures from Nestl Internal Reporting Standards

Nestl India's Commodity Basket Price Index

136

123

+13

110

112

+11

100

+12

2007

2008

2009

2010

YTD 2011

Key Raw Materials Jan-Sep 11

400

Sugar Impact of price change (INR Mio)

represents consumption in (INR Bio) 200

1.4

Wheat Flour

2.1
(20) (200)

Cocoa

0.3

20

40

60

80

Fresh Milk
(400)

MSK

1.4 2.1 2.2

Palm Oil

1.0
Fats

(600)

7.2

Green Coffee

(800)

Total Adverse Price Variance INR 2.3 Bio

Price indices (%)

Impact of price change & Price indices reflect YoY change. Based on production and Internal Accounting Standards

Fresh Milk Fat prices 4.4 % over 2010

156.3 147.0 138.4 137.3 124.9 119 106.6 100.0 111.1 104.2 106.9 110.2 140.0 139.9 137.4
164.1 Current

Q1
Indexed with base Q1-08

Q2
2008 2009 2010

Q3
2011

Q4

MSK prices 27.2 % over 2010

137.3 128.3
132.5

Current

113.4 108.5 103.3 100.0 96.0 87.8 99.5 99.1 100.7 95.8 87.8 89.9 97.3

Q1
Indexed with base Q1-08

2008

Q2

2009

2010

2011

Q3

Q4

Green Coffee prices 35.2 % over 2010

Current 140.0

121.5 117.6 115.9 104.7 100.0 91.0 86.7 114.6

122.8 118.0 112.3 102.4 103.7

89.9

95.6

Q1
2008
Indexed with base Q1-08

Q2
2009 2010

Q3
2011

Q4

Sugar prices 12.6 % over 2010

240.1 218.0 202.0 192.3 212.1 191.7 170.2 157.3 140.6 125.0 115.5 100.0 104.5
Current 230.0

214.2 209.2

Q1
2008
Indexed with base Q1-08

Q2
2009 2010

Q3
2011

Q4

Wheat Flour prices 1.4% over 2010

126.2 118.4 114.5 109.8 104.7 100.0 101.0 100.7 99.6 102.1 101.4
Current 100.7 101.4

117.7 111.2

115.8

Q1

Q2 2008 2009

Q3 2010 2011

Q4

Indexed with base Q1-08

Palm Oil prices 40.7 % over 2010

125.3 118.0 112.9 106.6 105.8 100.0 82.2 81.7 84.7 81.9 85.3 76.4 99.3 111.6
Current
118.6

111.1

Q1
2008
Indexed with base Q1-08

Q2
2009 2010

Q3
2011

Q4
42

COFFEE ROBUSTA [LIFFE]

London International Financial Futures Exchange

COFFEE ARABICA [ICE]

Inter Continental Exchange

SUGAR [NCX]

National Commodity Exchange- Muzafarnagar-Sugar

WHEAT [NCX]

National Commodity Exchange- Wheat- Delhi

PALM OIL [BMD]

Bursa Malaysia Derivatives

Evolution Crude Oil Prices [NYMEX]

X Jan-Sep 11 95.5 USD/Barrel

Current 97.1 USD/Barrel

+ 22.9%

X Jan-Sep 10 77.7 USD/Barrel

New York Mecantile Exchange

Fuel Oils
38.6
+28.1%

30.1

+8.9%

36.9

33.8

Furnace Oil
Price - Rs./ltr
Share % in total Power & Fuel cost Furnace Oil ~ 55% HSD ~ 10%

HSD
Jan-Sep 11 Jan-Sep 10

Materials Cost as % of Net Sales

Q1 10
PY CY Change bps 47.2 49.8 260

Q2 10
47.6 49.0 140

Q3 10
47.8 49.1 130

Q4 10
48.2 47.6 60

Q1 11
49.8 48.8 100

Q2 11
49.03 49.45 42

Q3 11
49.1 48.2 90