Nestle S A : TRANSCRIPT 312KB

NESTLÉ S.A.

2021 CAGNY PRESENTATION + Q&A TRANSCRIPT

19th February 2020, 08.00 EST

Speakers:

François-Xavier Roger, Chief Financial Officer, Nestlé S.A.

Laurent Freixe, Chief Executive Officer, Zone Americas, Nestlé S.A.

Luca Borlini, Head Investor Relations, Nestlé S.A.

This transcript may have been edited for clarity, and the spoken version is the valid record. This document is subject to the same terms and conditions found athttp://www.nestle.com/info/tc

François-Xavier Roger, Chief Financial Officer, Nestlé S.A.

Slide:

Our business is global, balanced and diversified

During my presentation today I will cover the Nestlé way to create value through sustainability leadership. I will start with a quick summary of our business and our full-year 2020 results just as a reminder. Nestlé is the largest food and beverage company in the world with annual sales of 84.3 billion Swiss francs last year.

2020 has demonstrated the agility of our business and the strength of our diversified portfolio across geographies, product categories and channels. By geography, the Americas represented 45% of total sales in 2020. Laurent will cover Zone Americas in more detail later.

By product category, Nestlé's portfolio is well diversified. We operate in attractive high-growth categories within the food and beverage industry, such as coffee and PetCare. We are less labor and capital intensive than we were in 2015, with almost 20% less employees and 62 less factories, on slightly lower sales. We are the largest investor in R&D in our industry, with annual spending of around 1.6 billion Swiss francs.

Slide:

Another year of strong financial results in 2020

Let me now give a quick overview of the full-year 2020 financial highlights. We delivered another year of strong financial results. Organic growth accelerated to 3.6%, reaching the highest level in the last 5 years. The underlying trading operating profit margin improved by 20 basis points in constant currency. Our underlying EPS grew by 3.5% in constant currency, in-line with our expectations. The disposals of Nestlé Skin Health, US ice cream and Herta had a negative impact of 3.5% on our underlying EPS growth. Return on invested capital improved to 14.7%, the 6th consecutive year of increase. It is now close to our 15% ambition. Free cash flow was 12.1% of sales. Going forward, free cash flow is expected to remain at around this level. We returned 14.5 billion Swiss francs to our shareholders through dividends and share buybacks. We also proposed a 26th consecutive increase of our dividend to 2.75 Swiss francs.

Slide:

Third consecutive year of improved growth and margins

Nestlé delivered improved organic growth and profitability for the third consecutive year in 2020. We landed last year close to our organic growth ambition set in 2017. We remain very much focused on this target. On margin, we already achieved our 2020 target one year ahead of schedule.

Slide:

Mid-term outlook

Our mid-term outlook is based on the balanced pursuit of top- and bottom-line growth. Our ambition is to deliver sustained mid single-digit organic growth. The sustainability of growth matters as much as the level of growth, which we want to be at the high end of our industry. At the same time, we plan to deliver continued moderate margin improvement, while taking a prudent, focused approach to capital allocation. We believe our company will be successful in the long term by creating value for both society and our shareholders.

Slide:

Sustainability: business as a force for good

Indeed, Creating Shared Value is part of our value creation model. Working to create value for communities and protect the environment has been the way we have been doing business for decades. We believe that business should act as a force for good. Acting on sustainability is integral to our long-term success.

We recognize that as a company operating in nearly every country around the world, we have the scale, resources and reach to make a positive difference. We believe sustainability will support our growth agenda, as consumers increasingly expect companies and brands to act on sustainability. We can strengthen the resilience of our supply chain by supporting farmers and their communities. Our collective purpose and impact can be aspirational and help us to retain and attract a diverse talent pool. Finally, it allows us to better anticipate government regulation and policy.

Slide:

Nestlé's net zero roadmap

Now, let me talk more about our actions and ambitions. In September 2019, we pledged to achieve net zero greenhouse gas emissions by 2050, embracing the Paris Agreement to limit global temperature rise to 1.5 degrees. In December 2020, we outlined a comprehensive action plan, setting clear milestones on our journey to Net Zero. We expect to achieve a 20% reduction in greenhouse gas emissions by 2025 and a 50% reduction by 2030.

Slide:

Investing in sustainability

We are investing in a wide range of sustainability initiatives. As we accelerate our carbon reduction journey, we plan to spend around 3.2 billion Swiss francs over the next 5 years, ofwhich 1.2 billion Swiss francs will be spent on regenerative agriculture. Examples include training and technical assistance provided to farmers, and premiums paid for commodities using regenerative agricultural practices.

Another key focus is sustainable packaging. We plan to invest around 1.5 billion Swiss francs to help create a market for food-grade recycled plastic by paying a premium for these materials. We are also working on many other solutions such as paperization, compostable materials and monolayer plastics. In addition, we have created a 250 million Swiss franc venture fund to invest in start-up companies that focus on packaging innovation, including new materials, refill systems and recycling solutions. So far, investments have included the

Closed Loop Leadership Fund, the European Circular Bioeconomy Fund and Loop.

Aside from the venture fund, our investments are expected to be mostly P&L-related and may not be linear over time. Our plans and associated costs are expected to evolve and will be influenced by developments in technology, solutions and the effectiveness of projects.

Slide:

Sustainability integral to our growth strategy

Sustainability is not only a cost. It also creates growth opportunities. It is one of the attributes that differentiates our offering, alongside health and nutrition, taste, and convenience.

To share some examples, we see many growth opportunities with low-carbon products, which are "good for you and good for the planet", such as plant-based food and drinks. We are building a portfolio of strong plant-based brands such as Garden Gourmet and Sweet

Earth. We are also launching products across our portfolio using more climate-friendly ingredients, such as meatless lasagna and plant-based pizzas. All together, sales of plant-based food products are close to 700 million Swiss francs, with strong growth.

Our science and technology capabilities are also key to drive innovation, support our sustainability agenda and enhance our relevance with consumers. We have around 10% of our R&D scientists working on plant-based products. To accelerate the development of new and better packaging materials, we set up an Institute of Packaging Sciences, conducting cutting-edge research to ensure the safety and applicability of new materials.

We are increasing the number of our carbon neutral brands. We aim to achieve carbon neutrality for key brands like Nespresso, S. Pellegrino, Garden of Life and Garden Gourmet by 2022, and for Nestlé Waters and Sweet Earth by 2025.