Excerpts from Analysts' Reports 2011

Consistent strong sales t l growth.. Momentum to continue Capex plans firming up Cut in dividend payout ratio to 56% Strong long term growth potential Raw material cost pressure continue Best play on packaged k g d foods No signs of competitive pressure

Performance in line with expectations

High pricing power

Margins a major concern

Band of margin margin strategy

Going ahead, ahead lower pressure from input cost inflation

Gross margins improve due to price hikes

Commendable cost management

Fading tax sops reduce PAT growth

Outperforms peers & broad market b d k t

Diversified & dominant product d t portfolio

Nestle Model delivers again

Input cost pressure softens

Positive budget measures t to boost FMCG growth

Analysts' Rating on Nestle India

Buy y
100 90 80 70

Sell

Hold

Not rated

(%)

60 50 40 30 20 10 0

2008

2009

2010

Q1 2011

Full Year highlights

INR 62.5 Bio 22.3 16.9 18.2% INR 11.4 Bio INR 8.2 Bio

2010

+ INR 11.3 Bio + 21.9%

INR 51.3 Bio

Volumes & Prices

+ INR 2.2 Bio + 30 bps

+ 25.0% + INR 1.6 Bio

INR 9.2 Bio 16.2 16 2 18.7 17.9% INR 6.6 Bio 66

2009

Net Sales N tS l

RIG%

OG%

OPBIT

Net Profit

Includes figures from Nestl Internal Reporting Standards

Successive quarters of double digit growth

NET SALES
% YoY 26.4 growth
Q1 Q2 Q3 Q4

23.5

22.2

21.7

16.0

16.8

17.6

24.0

16.9

21.3

25.7

23.6

43.2 Bio = 23.4%

51.3 Bio = 18.6%

62.5 Bio = 21.9%

INR Bio 10.9

10.4

11.1

10.9

12.7

12.1

13.0

13.5

14.8

14.7

16.4

16.7

2008
% of 20.2 Net Sales

2009

2010 12.5 19.2 17.8 18.3 17.6

OPBIT
16.6 16.8 16.9 22.0 18.6 18.8 7.6 Bio = 17.6% 9.2 Bio = 17.9% 11.4 Bio =18.2%

INR Bio 2.2

1.7

1.9

1.8

2.8

2.2

2.4

1.7

2.8

2.6

3.0

2.9

Doubled sales in less than 4 years

Organic Growth (OG) (%) Real Internal Growth (RIG) (%) Net Sales (INR Bio) 22.3 16.9

18.7 18 7 16.2 24.2 20.0 23.3 19.8

35.0
2007

43.2
2008

51.3
2009

62.5
2010

RIG & OG are basis Nestl Internal Reporting Standards in relation to third party sales only

Good domestic performance

Volume (000 Tons) +17.6% Value (INR Bio) +22.9%

341.3

401.6

48.0

59.0

Exports marginally
Volume (000 Tons) l +2.6%

due diversion of capacity.

Value (INR Bio) +7.6%

15.9 15 9
2009

16.3 16 3
2010

3.3 33
2009

3.5 35
2010

Our strong pillars

Contribution to Net Sales
% Share
14.5 14 5 27.5
Chocolate & Confectionery Prepared Dishes & Cooking Aids Beverages

% Share
14.0 14 0 26.0

13.6

14.9

44.4 44 4

Milk Products & Nutrition N t iti

45.1 45 1

2010

2009

All the pillars grow

35 30
Value Gr rowth (%) )
Milk Products & Nutrition

x = 17.0

Prepared Dishes & Cooking Aids

17.2 9.1
Chocolate & Confectionery C f ti

25 20 15 10 5 0 5 10 15
Volume Growth (%)

x = 21 1.9

27.8 8.5 85
Beverages

20

25

30
2010

Bubble shows Net Sales (INR Bio)

Our Cost Structure

48.9

2010

2009

% Net Sales

47.7 One-Off cost 6.9 8.4 5.0 4.7

.

Effective increase 14.0% 4.8 5.2 52 3.5 3.1 2.0

1.3

2.2
1.1

INR Bio 30.6 24.5

Materials

4.3

4.3

3.1

2.4

3.0

2.7 ASP

2.2

1.6

Employees

Distribution

Power & Fuel Depreciation

Figures have been regrouped / reclassified to make them comparable.

Not to scale

Margins remain within a healthy band

17.6 17.9 18.2

17.5

6.1 2007

7.6 2008
OPBIT (INR Bio)

9.2 2009

11.4 2010
OPBIT % of Net Sales
25

OPBIT Bridge

110 bps

120 bps

20 bps 30 bps
Scale Mix

One-Off in 2009 Materials

Others

70 bps

60 bps

17.9% 17 9%

ASP and Power & Fuel Impairments I i t and d Distribution

18.2%

OPBIT 2009
% & bps are with reference to Net sales

OPBIT 2010

Increased selling prices while retaining growth

Price increase Real Internal Growth (RIG)

6.6 2.3 23 5.3

7.0 5.4

14.3

14.9

19.6

18.7

16.9

Q Q1
Material Cost as % of Net Sales

Q2 Q

Q3 Q

Q4 Q

Full Year

2009 2010 Change bps

47.2 47 2 49.8 260

47.6 47 6 49.0 140

47.8 47 8 49.1 130

48.2 48 2 47.6 60

47.7 47 7 48.9 120

Effective tax rate

33.9 33.5 34.0 34.0

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

33.4

29.8 28.4 28 4 2.1 21

2007
Tax Expense (INR Bio)

28.5 28 5

2.3 23
2008

2.6 26
2009

3.3 33
2010
Effective Tax Rate (%)

Marginal Tax Rate (%)

Excludes Fringe Benefit & Dividend Distribution Tax

Net profit doubled in 3 years

X2

Comes from OPBIT

12.8 12.4 12 4 11.8

13.1

4.1 2007

5.3 2008 Net Profit (INR Bio)

6.6 2009

8.2 2010

% of Net Sales

Operating working capital within tolerance levels, adversely impacted by unabsorbed material cost
5.4 5.1 4.6 4.8 48

2.0
2007

2.3
2008

2.4
2009

3.1
2010

Operating working capital (INR Bio)

% of Net 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 back to normal levels

Employees Cost p y Payables

18.1 18 1 14.8 15.5

16.6

5.2 52 2007

6.7 67 2008 # Operating cash flows (INR Bi ) O ti h fl Bio)

9.3 93 2009 % of Net Sales fN tS l

10.4 10 4 2010

# excludes one off inflows. Reported 16.7%

How have we used the cash generated from operations ?

Cash Generated (INR Bio)

5.2

7.2

9.3

10.4

13.4

14.0

4.5

71.7
(%)

52.5 51.7 58.5

32.5 (4.2) 2007

34.9 34 9

43.0 27.5 2009

Dividends

2008
Cash retained

2010
Fixed Assets

ROIC is 5 times ACC

61 50 62 51 62 49 64 51

3.3
2007
Economic Profit (INR Bio)

4.1
2008
Economic Profitability (%)

4.9
2009

6.2
2010

Return on Invested Capital (%)

ACC % Risk Free rate % Group risk Premium%

11.3 7.7 2.5

11.6 7.9 2.5

12.8 8.5 3.0

12.9 8.0 3.5

Basis Nestl Internal Reporting Standards

Retained shareholders wealth increases & ROE % decreases

Average 1179 Share Price (INR)

1544

1987

3021

8.6 113 113 96 84.9

99 5.8 58 4.7 4.2 55.4 42.9 33.0

2007 2008 2009 DPS (INR) EPS (INR)

67.9 48.5 42.5 48.5

2010 ROE %

Period end Shareholders fund (INR Bio)

CAPEX on high trajectory

6.5 5.9 5.6 56 5.8 4.8 4.7 5.4 54 7.1

1.7 0.7
2007 Capex (INR Bio)
Dep.
(INR Bio)

2.8 1.0
2008 Commitment

2.4 0.7
2009 Capex as % of Net sales

4.5 7.7
2010 FA Rotation

0.64

0.82

1.01

1.19

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

Financing Strategy on track

Dividend maintained at 2009 level ~INR 48.5/ Share=485%. Payout is 74% (including DDT) of the distributable profits.

RBI approves ECB USD 450 Mio. from foreign equity holders.

Other elements of strategy in progress

Impact of Union Budget 2011

Impact basis 2010 actual g g g BUT without factoring mitigating measures

Negative impact on OPBIT

(Excise Duty & Service Tax)

~ 50 bps

Positive impact in Direct Taxes

~ 10 bps

Negative impact on PAT

~ 22 bps

Volatility in commodity prices!

March 2011

1/Mar

2/Mar

3/Mar

4/Mar

5/Mar

6/Mar

7/Mar

8/Mar

9/Mar

10/Mar

11/Mar

12/Mar

13/Mar

14/Mar

Sugar - LIFFE S

Robusta R b t - LIFFE

Arabica A bi - ICE

Palm P l Oil - BMD

Wheat Wh t - CBOT

Indexed with base 1 March 2011

15/Mar

Thank You

Nestl India's Commodity Basket Price Index

123

110 100 +12

112

+11

2007

2008

2009

2010

Key Raw Materials 2010

Green Coffee Impact of price ch f hange (INR Mio) R
500

2.3 1.2 Palm Oil

Fats

represents consumption in (INR Bio)

(20)

0.9

20

40

2.5
( (500) )

2.0

MSK

0.3 03 Cocoa

60

Wheat Flour

2.1
Sugar Fresh F h Milk

(1000)

(1500)

8.9 89

(2000)

Total Adverse Price Variance INR 2.4 Bio

Price indices (%)

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

Fresh Milk Fat prices

155.5 155 5 152.5

20.1 % over 2009

155.4 152.6 152 6
Current 154.9

138.7 132.2 123.4 118.5 111.1 105.2 100.0 115.8 115 8 118.8 115.0 110.1 122.4

Q1
Indexed with base Q1-07

Q2
2007 2008 2009

Q3
2010

Q4

MSK prices

12.3 % over 2009

Current 140.9

119.0 113.3 109.7 105.4 100.0 96.3 96.3 96 3 95.5 95 5 109.2 108.7 110.4 108.3 106.7 106 7 105.1 98.6 98 6 98.6

Q1
Indexed with base Q1-07

Q2
2007 2008 2009

Q3
2010

Q4

Green Coffee prices

132.5 131.1

10.4 % over 2009

Current 156.9

128.4

135.0

119.7 114.3 117.0

118.6

109.3 104.0 100.0 100.1 99.1 100.4 102.8 101.6

Q1
Indexed with base Q1-07

Q2
2007 2008 2009

Q3
2010

Q4

Sugar prices
222.4 201.8

27.8 % over 2009

196.4 198.4
Current

193.7 192.3 157.6 145.6 130.2 115.8 100.0 92.6 107.0 96.8 91.1 84.0 89.3

Q1
2007
Indexed with base Q1-07

Q2
2008 2009

Q3
2010

Q4

Wheat Flour prices

128.0

8.5% over 2009

120.1 116.1 117.4 106.2 102.4 101.4 101 4 100.0 102.1 101.0 93.0 93 0 103.5 102.9 102 9 100.8 97.2 102.1
Current 112.6

Q1

Q2 2007 2008

Q3 2009 2010

Q4

Indexed with base Q1-07

Palm Oil prices

121.2 121 2 114.4 106.5 100.1

6.4 % over 2009

Current 123.2

119.7

119.2

107.3 100.0 100 0

99.7

102.0 91.5

88.2

90.8 90 8 87.6 87.8

82.0

Q1
2007
Indexed with base Q1-07

Q Q2
2008 2009

Q Q3
2010

Q Q4
47

Evolution Crude Oil Prices [NYMEX]Current

99 USD/Barrel

Mean 2010 79.9 USD/Barrel

Mean 2009 M 62.1 USD/Barrel

+ 28.6% 28 6%

New York Mecantile Exchange

Fuel Oils
30.2

+28.5%
23.5

+11.4%
34.1 30.7

Furnace Oil
Price - Rs./ltr

HSD
2010 2009

Share % in total Power & Fuel cost Furnace Oil ~ 49% HSD ~ 14%

COFFEE ROBUSTA [LIFFE]

London International Financial Futures Exchange

COFFEE ARABICA [ICE]

Inter Continental Exchange

SUGAR [LIFFE]

London International Financial Futures Exchange

WHEAT [CBOT]

Chicago Board Of Trade

PALM OIL [BMD]

Bursa Malaysia Derivatives

Fourth Quarter highlights

INR 16.7 Bio 25.7 INR 2.0 Bio 18.7 17.6% INR 2.9 Bio

Oct-Dec 10

+ INR 3.2 Bio + 23.6%

INR 13.5 Bio

Volumes & Prices

+ INR 1.3 Bio + 510 bps

+ 80.1% + INR 0.9 Bio

22.5

23.7 INR 1.7 Bio 17 INR 1.1 Bio 12.5%

Oct-Dec 09

Net Sales N tS l

RIG%

OG%

OPBIT

Net Profit

Includes figures from Nestl Internal Reporting Standards