SPRING PRESS CONFERENCE February 22, 2007 · Operations Performance Operations. 5 SPRING PRESS CONFERENCE 2007 Name of chairman ... 7.02 2006 11.68 6.28 2002 10.25 6.36 2003 10.13

Name of chairman

SPRING PRESS CONFERENCEFebruary 22, 2007

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.


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


Operations Division

Sourcing Production Supply Chain Engineering Quality

Management

Safety, Health &

EnvironmentOperations

Performance

Operations


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


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

+



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


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


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


F&B "Billionaire Brands" represent about 70% of F&B sales

Growth %

BABs

AV market growth


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


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


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


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


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


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


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%


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%


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


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


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


Uncle Tobys

Jenny Craig

Strategic acquisitions in Nutrition, Health & Wellness

Boost ReSource

NovaSource IsoSource Vivonex

Peptinex Impact Compleat

Optifast

Novartis Medical Nutrition


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)


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)


-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


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


Key Features

• Growth

• Innovation

• Four new 1-billion brands

• Cost management

• New operational structures

• GLOBE


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%)



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


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


Nestlé Rated in Sustainability Indices

AAA rating (1st out of 47) from

Climate Leadership Index : 75


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


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


Popularly Positioned Products


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.


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


Specific Distribution Channels


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


Nestlé HealthCare Nutrition


Infant Infant NutritionNutrition

HealthCare HealthCare NutritionNutrition

Performance Performance NutritionNutrition

WeightWeightManagementManagement

Nestlé Nutrition Today


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


• 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


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


Nestlé Nespresso


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


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


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


Cereal Partners Worldwide: Volume Growth

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06


Cereal: A Dynamic Category

• Consumers range from kids to adults• A category of brands, not just products• Diverse range of product identities and flavors


Strong category & CPW growth in 2006

4%

6%

Category CPW RetailTONNAGE / Source: Nielsen + Internal Estimates


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%


Cereal Partners Worldwide 1995







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


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



Nestlé: 140 Years


Next Media Events

18 October 2007 – Autumn Press Conference

19 April 2007 – Annual General Meeting23 April 2007 – First Quarter Sales

15 August 2007 – Half-Year Results

SPRING PRESS CONFERENCE February 22, 2007 · Operations Performance Operations. 5 SPRING PRESS CONFERENCE 2007 Name of chairman ... 7.02 2006 11.68 6.28 2002 10.25 6.36 2003 10.13

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