2 Ac 2044 wy sacelizend Ely Reenrch CREDIT SUISSE Food Proauce Nestle wesuv Tepes om 0 000 Exeguowue(Srm___ “ets A work in progress Sereherecsn 1 Neots aa a romsctbiy contin! tack record of organic ESTA. growth, — sveraging 7.8% over 18/0725 years, Te calnge Pow st mary ak auc atte Gf wh agate cpl asepne, Relun on eapaais nw a kay gro. Ateersecemay ete Wht oo, we dowgrade OX aig to Neural (fom OP) an TP “totais fe S7a (rom Ser sen eonatygse canst i » ruses Thora ar aft of pastes to bo seen i tho progress tus fr: woking a Atsiaieg "Goat naefaten fom 6% to 1% of tales In fst 24 morte: MA aah cuemaegettansess _ Stporals outweigh sequin forte ft tine me can eral (zen aes) ‘mun 88 challenged businesses were aot thre a Sane eidanch Ot a ar moe Set feouandpocees of vestnert ‘umeatagendsstieat Desi is the grou reluns havent inerove as expense acquistons ‘gn onthe hgh rum businesses and ta US contruse io sruage Frozen and ie eam). 1 ale ofthe ltr wou sand 9 very stong message tot erally and txeraty hat under performers wor be rated = ou 2 vow i at the groop wate rarar more poten han we wou hope '= The Game deat hough smal pits the recon the groups taking — is. view en Nuon Is gating ever more broad. Some S% the Invested ‘all hes gore nf vatousaequlions nh lad nti ou * Such deals thus duo tha grou reums in conrst wih the coprato imeseage, To avo ths eon tne group suey ed vo be. mare oprestve wiht urdarprormars (agin US oso”). * Nest remains a ret soy, bu he valuation has now sate 1 tle! hs Tho shares have reumed io longeunning modest genium To the fectr which ks about igh o Us. Neutal nok mare sppepte er now woes outa accord. ~ oo eae on oa ae . rt vansed —wonces whens wigs arox(Gren) fas ives igzis |" daase a Sgusatnalnzme(Srrm) sagen agte a : _ Saar Ge Lona eren sie | hetrser Se 3k ie rt et ee meen uy 8a ee ee “ao we “twee. Reccaenmnema Bae Oo oe Eekreerwwer es Se ie a 2 pide sem Scum oe 15 ae 1g Relevance.) Fait) what 38 ‘oa bvare ae ce Nee las) tz‘cup suss* Galderma: The way forward For sth daa might be sali io at ust CHFS.Ton, butt provides ielrothng ina: Ino te crecton manager are king the business. 4. Loreal ie strategie For Nese to scque LOveafs 50% sake in Galena. veal requted Nese to ‘sown par of thaw UOeal sake, Wiout Ns, Neste woul nol heve 95 100% of alerms. Neste Chaiman Peter Grabeck esd Neal's remaining 22.20% sake in LOreal ‘valle and the radcton in the tke aot 8 sign of disengagement Indeed, Peter Brabeck ighlglted Ness sat solo frets ten years 90. 2 Another expensive acquisition outside thelr ski set |LOrea with is global larship in skin caro, on the co oft. acosr lo Gadorma | ‘han Neste, the global leader In Toodbeveapesrutiton. LOreas cones on the ‘Gaterma doa: is irrosng, butts acti run paral fo cosmetic, re a6 0. ‘peratonalpecucU R&D synagie’ The sare coud be sald tobe ire for Neste Gaierms wit be n indepanentsubsisary in Neste wth no sare, pur te pric (of 26x EBITA and 175 EBITDA at fo Nigh end of star ransaciors. Mover, th ‘peratng pevtormance Galera hasbeen poo. To riake the eal able Nest as 1 ‘yon. recover inthe product pipeline and margins. ‘ain om = 20.0% aes 0% en | sso oLEEEAHE ‘20012002 2003200 20052006 200720082008 2010 20112012 2013 orn sales arom —s-eBmAmaran IR) Sara Company tan Ga ue aso (on an EPS basis, wih debt l but ree or Nes, the transaction broadly EPS neal ‘ernest | Health Sctance coverage broaéening {nour open, Galdoma ls by fr he greneststch Nest has made ana rom is coe. ‘Gaourma il nt be pat of Nest Heath Stence,Noste Healy Science coves 3 areas: train haath, metabo heath and gastinetnel heath forthe eer, eat ana Infants, Nes ha created anoher sed, Nese Skin Hoa.crn sus “To date, we exinse post aliens Nestle has spent ove CHF 86n on nitonipharma asses (over 5% of groups Ives eaptal ase) and added CHEZ Son in ele (2.7% of {F0UP sale) The capital auay ls now meaningl, on patoed ana inf ron have ‘nore invested capital and vests od to eeraiis what valve Neste bangs 10 (is ‘ea, hata slanalone ene hese businesses could nat delveremselves. ‘4 Move up the value chal pot ust about acquiring assets eat’ history reveals 9 continu evolution ofthe porto out of low vate added Low urs on hese asso ‘sroduts and no Tigh value add. Hesle Hea s6once f fe laas sage In tis ve 1 be tances by ‘Srluon. But Ps has tobe te onze and without the Sapossl o ighypromsted, ow ‘clin url anos ot ‘lus colgeris suchas ice ream Hozan fod wd water, the ealogy wil pat have tha ou rls {at impacton operating mates. ‘5 Conficting message onuses of cash ‘At8 2012 AGM, Nest signaled the dividend payout rato was se fl nthe caing ors, having reached 489%. A vel ely betiored by lobaco names. Neste have now nounced boyboes poet te oong oe ds Figure: Payout rate more thandoubledin en years to Figure 9: rasuling in sector beating vided yl of| over 68% ‘over 3% tape av of 25% ‘Se Caner a Goa Sub atoe ‘Sere Cap dn El Sabor eres