2 Name of chairmanSPRING PRESS CONFERENCE 2007
Disclaimer
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.
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Research & Development, Innovation and Technology
Corporate Research
Product Technology Centres
R&D Centres
R&DNestlé Waters
R&DNestlé Nutrition
R&DNestlé Purina
TechnologicalIntellectual
Property
InnovationPartnership
Management
Chief Technology Officer
Packaging& Design
InnovationAcceleration
TeamsRegulatory
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Operations Division
Sourcing Production Supply Chain Engineering Quality
Management
Safety, Health &
EnvironmentOperations
Performance
Operations
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Key Figures
• Organic Growth 6.2%
9.3%+ CHF 1 116 m+ 13.8%CHF 9 197 m• Net Profit
13.5%+ CHF 1 426 m + 12.0%CHF 13 302 m• EBIT
+ CHF 7 343 m+ 8.1%CHF 98 458 m• Sales
MarginsChange versus 2005
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Any Nestlé product must be clearly preferredby 150 consumers over competition60/40
The product must have a NutritionalCompetitive Advantage (NCA) over competition
60/40+ Assessment
+
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2006 Highlights – all metrics improve
+ 8.1%+ 6.2%
+ 12%+ 50bps
+ 13.8%+ 40bps
+ 100 bps
+14.4%+ 70 bps
+ 40 bps+ 30 bps
CHF 98.5 bio
CHF 13.3 bio13.5%
CHF 9.2 bio9.3%
6.7%
CHF 11.7 bio
21.2%11.7%
+ CHF 7.3 bio
+ CHF 1.4 bio
+ CHF 1.1 bio
- CHF 1.0 bio
+ CHF 1.5 bio
Sales – totalOrganic growth
EBITEBIT margin
Net profitNet profit margin
Working capital (% of sales)
Operating cash flow
ROIC- before goodwill- after goodwill
FY06 totalImprovements FY 06 v 05
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Food and BeveragesDelivering the Nestlé Model
2006
2005*
RIG OG EBIT margin
* Restated to be on comparable basis
Sales
CHF 91.8 bio
CHF 85.1 bio
+ 7.8% +40bp
12.2%
11.8%
Strongon-goinggrowth
4.2%
5.9%
6.0%
3.8%
EBIT
+ 11.2%
CHF 11.2 bio
CHF 10.0 bio
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Product Groups – Organic Growth
Pharmaceutical
Nutrition
0
2
4
6
8
10
12
14
0 5 10 15 20 25
Organic growth %
Sales CHF
PetCare
WatersPowdered & LiquidBeverages
Chocolate, Confectionery, Biscuits
PreparedDishes and Cooking Aids
DairyincludingIce Cream
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F&B "Billionaire Brands" represent about 70% of F&B sales
Growth %
BABs
AV market growth
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Organic growth by region
Sales CHF
Zone AMS
Total AOA
0123456789
10
0 10 20 30 40 50
Organic growth %
Zone AOA Total Americas
Zone EURTotal Europe
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2006 Full Year Results50 bps margin improvement
EBIT2005
COGS Distribution Marketing R&D EBIT2006
13.0%
- 30
+ Operation Excellence+ Mix
- Input costs
+ 30
DISCIPLINE IN EXECUTION / EFFICIENCIES / SCALE GLOBE
Spend up 15.7%
CHF 0.2 bio
- 10
+ 50
13.5%
EBIT up 12%
CHF 1.4bio
F&B +40bps+ 30
Spend up 6.3%
CHF 2 billion
+ 30
+ TTS + Growth
+ GNBS+ Growth
Administration
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Improved management of working capital
Working capital total (in % NPS)
2003 2004 2005 2006
7.2
6.9
7.7
6.7
6.2
6.4
6.6
6.8
7.0
7.2
7.4
7.6
7.8
Working capital total includes Trade receivables, Inventories, Trade payables, Other receivables, Prepayments, Accruals, Current tax payables and Other short term payables. Calculation is based on year-end figures.
+ 100 bp or CHF 1 bio improvement
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Free cash flow
Strong cash flow generation
Operating cash flow
0
2
4
6
8
10
6.64
2004
10.41
6.56
2005
10.21
7.02
2006
11.68
6.28
2002
10.25
6.36
2003
10.13
CH
Fbi
llion 12
OCF+1.5 bio
FCF+0.5 bio
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Significant improvement in cash flow Profitable growth & innovation drive CapEx
10.21
3.38
6.56
11.68
4.20
7.02
0
2
4
6
8
10
12
14
2005 2006Operating cash flow
(CHF bio)
2005 2006Capex
(CHF bio)
2005 2006Free cash flow
(CHF bio)
+ CHF 1.5 bio
+ CHF 0.5 bio
+ CHF 0.8 bio
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Increased Capex into profitable growth categories, enhancing ROIC
Restructuring/ Compliance/ Replacement and efficiencies
Capacityincrease
New products/packaging
Capacityincrease
New products/packaging
2005 2006
40%35%
20%45%
25%
35%
Restructuring/ Compliance/ Replacement and efficiencies
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Return on invested capital improves
2006200520032002 2004
18.9%
11.0%
19.9%
11.0%
19.9%
10.8%
20.8%
21.2%
+ 40 bps
+ 30bps11.4%
excluding goodwillincluding goodwill
11.7%
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Increased earnings per share, proposeddividend and payout ratio
2002 2003 2004 2005 2006
7.00 7.208.00
9.00
10.40
19.51
16.05 17.04
23.90
20.78
35.9%
44.8%
46.9%
43.3% 43.5%
Dividend per shareEarning per share (Full)
Payout Ratio+15%
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2006 Summarised
� A quality set of results, with all key metrics improving
� Organic growth above target
� Nestlé generated an additional - CHF 7.3 billion of sales- CHF 1.4 billion of EBIT- CHF 1.1 billion of net profit- CHF 1.5 billion of operating cash flow
� Food and Beverage was the main driver of performance
� Well placed for further improvement in 2007
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Business Excellence/ Best Practice Implementation
GLOBE System Implementation
Approx. Cumulative % F&B Sales with GLOBE processes, data and systems
Data Standards/Data Management Implementation
2006
30%+
80%
90%+
20072005200420032002
GLOBE Increasing benefits from leverage
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GNBS implementation
30%
approx. 80%
200820072006
GNBS : Achieve critical mass and sustainability
50%+
Approx. Cumulative % F&B Sales supported by Nestlé Business Services;
Financial and Employee Services (insourced and outsourced)
Capturing our potential
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Uncle Tobys
Jenny Craig
Strategic acquisitions in Nutrition, Health & Wellness
Boost ReSource
NovaSource IsoSource Vivonex
Peptinex Impact Compleat
Optifast
Novartis Medical Nutrition
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Tackle underperformers to provide focus 12 disposals: annualised sales CHF 2bio+
Perrier bottle making (2006)
Japanese vending (2006)
Vlachas in Greece (Dairy in 2006)
Schöller Private Label business in Germany (announced Sep 2006)
Liquid milk businesses in Thailand, Malaysia, Singapore and Brunei (announced Oct 2006)
Chilled Dairy Europe (2005/6)
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Group EBIT Margin over last 10 yearsAcceleration fuelled thanks to F&B improvements
Figures correspond to published figures - not restated for accounting changes
10.2% 10.3% 10.3%
11.1%
11.8%11.8%
12.3%12.5%
12.6%12.9%
13.5%
0
2'000
4'000
6'000
8'000
10'000
12'000
14'000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
EBIT (in mio CHF)EBIT (in % NPS)
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-10%
-5%
0%
5%
10%
15%
% Growth
10 yearsaverage
Acquisitions
DivestituresForex
OG: OrganicGrowth
3.6%
2.2%
2.5%
-1.4%
OG5.8%
-1.5%
RIG Pricing & Other Acquisitions Divestitures FX Impact
Consistent Top-Line Organic Growthfor the past 10 Years
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
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We plan to deliver the Nestlé Model annually over the next 10 years
5-6% organic growth Sustainable improvement in EBIT
Improving trend in Return on Invested Capital
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Key Features
• Growth
• Innovation
• Four new 1-billion brands
• Cost management
• New operational structures
• GLOBE
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0
2
4
6
8
10
12
14
16
2000 2001 2002 2003 2004 2005 2006 2007
Lost
Tim
eIn
jurie
s(p
erm
illio
nho
urs
wor
ked)
Workplace Safety is Improving...
Improvement achieved: 4.8 (-31%)
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Reduction of Water Consumption in Factories
50
100
150
2001 2002 2003 2004 2005 2006
Production Volume Water Consumption Waste Water Generation
+ 22.5%
- 20%
- 23%
in million tonnes in million m3 in million m3
Inde
x
100
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Reduction of Energy Consumption in Factories
50
100
150
2001 2002 2003 2004 2005 2006
Production Volume Greenhouse Gases Energy Consumption
- 12%
- 16%
+ 22.5%
in million tonnes in PJ (Peta Joules)in million tonnes
Inde
x
100
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Nestlé Rated in Sustainability Indices
AAA rating (1st out of 47) from
Climate Leadership Index : 75
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PPP Factory in Feira de Santana / Brazil
"Nestlé’s initiative is a concrete example of how to generate jobs and income to make this country a fairer place, a place where people have the right to work, study and buy affordable products.”President of Brazil, Luiz Inácio Lula da Silva
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World Population by Income Bracket
People, mn
Sources: UN WIDER and World Bank (also for outlook on economic growth 2005-2015); analysis EIR
1970 1653 1429
2153 26012354
710940 1825
389522
443175
235286
295
494
849
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1995 2005 2015
> 28'000
22'000-28'000PPP$
13'000-22'000PPP$
5'000-13'000PPP$
1'500-5'000PPP$
< 1'500 PPP$
+ 355
+ 885+ 133
+ 230
+ 448
+ 199
1995 – 2005 – 2015
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US$ 5,000 US$ 13,000 US$ 22,000 US$ 28,000 p.c.
Sources: UNIDO (value-added), WIDER and World Bank; Nestlé F&C; analysis EIR
Growth Scenario (2005-15):US$ 222bn of food manufacturingvalue-added
Growth Scenario(2005-15)
+ US$ 170bn5.9% p.a.
Convenience Nutrition WellBeing
Health and Wellness
Pleasure and DiversitySustenance
Evolution of the Global Food Market– Two Income Brackets
Growth Scenario(2005-15)
+ US$ 70bn6.9% p.a.
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PPPs – Affordable Nutritional Products
Widely available in traditional neighborhood stores
Affordable at Php 8, or CHF 0.20
Addresses micronutrient deficiencies with Vitamin A and Iodine fortification. The only brand to offer protection from illness with Vitamin C and Zinc
Uses a unique distribution method and innovative product development to drive out costs and offer a margin enhancing product
Example: Nestlé Bear Brand / Philippines
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Maggi Bouillon Central West Africa
Addresses micronutrient deficiencies with Iodine fortification and offers a tastier alternative to salt
Sold in individual cubes to meet daily affordability level
Use of local neighborhood women for direct marketing
65 million bouillon cubes sold per day with a 45% penetration of rural areas
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Infant Infant NutritionNutrition
HealthCare HealthCare NutritionNutrition
Performance Performance NutritionNutrition
WeightWeightManagementManagement
Nestlé Nutrition Today
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Nestlé Acquisition Strategy
• To be category No.1 or strong No.2
• Generate value for shareholders
• Focused approach on value-added growth categories
• Strong brands in leadership positions
• RIG, cash flow and earnings enhancing
• High degree of certainty of successful integration
• Maintain strong credit ratings and financial flexibility
Novartis MN acquisition meets these criteria
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• Strong R&D- Continuous pipeline of scientifically developed products that target
specific conditions- Clinical trial management- Regulatory capabilities
• Specialised HealthCare Marketing Capabilities- Healthcare economic data- Superior consumer / patient understanding; customer intimacy- Branded differentiated benefits- Medical detailing teams to reach key decision makers
• Multi-Channel Distribution Competency - Retail – Traditional category management targeting Pharmacies and
Groceries- Institutions – Access to decision makers in Hospitals, Nursing Homes
and Homecare organizations
Scale is the key driver of these success factors
Key Category Success Factors
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Complementary competencies will result in better innovations, brought to market faster, globally
• Nutritional science• Food technology excellence
(taste, texture, sensory)• Consumer-centric approach
Pipeline
• Pharma heritage• Health economics data• Regulatory competences• Clinical trial design• Access to Key Opinion
Leaders
Enhanced R&D Profile
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Nespresso Sales Development 2006
1990 1992 1994 1996 1998 2000 2002 2004 200619881986
in CHF million
+ 42 %
819
600
449
352
264
154206
127100
1163
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New Members Acquisition in 2006 > 1.1 Million
0100200300400500600700800900
1000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
1’100
770
510
380330240
1509070605040
Loyal and growing member base; more than 3.1 million active members
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Nespresso offers a full range of coffee machines to cater different consumer needs in terms of design and functionality
• March 06 – Launch Essenza Spring Colours Limited Edition• April 06 – Launch Le Cube Alinghi/AC Limited Edition• June 06 – Launch Nespresso Siemens by Porsche Design• July 06 – Start of the launch of Le Cube machine range• Sept 06 – Launch Siemens Essenza
2006 - The Year of Machine Innovation
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Cereal Partners Worldwide: Volume Growth
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
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Cereal: A Dynamic Category
• Consumers range from kids to adults• A category of brands, not just products• Diverse range of product identities and flavors
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Strong category & CPW growth in 2006
4%
6%
Category CPW RetailTONNAGE / Source: Nielsen + Internal Estimates
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Record Global Share – Cereal*
17.7%18.0%
18.4%
1.4%
2004 2005 2006
* All cereal markets outside USA and Canada
+46 bps ex UT
19.8%
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43.8
56.2
43.2
56.8
45.3
54.7
46.7
53.3
45.7
54.3
47.3
52.7
51.6
48.4
56
44
67
33
65.3
34.7
67.4
32.6
68.9
31.1
70
30
0%
20%
40%
60%
80%
100%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Institutionals Private Shareholders
Share Capital by Investor Type 1994 - 2006
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Proportion of Nestlé Shareholders by Country
0
10
20
30
40
50
60
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Switzerland USA France UK Germany