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Nestlé reports full-year results for 2019
- Organic growth of 3.5%, with real internal growth (RIG) of 2.9% and pricing of 0.6%. Growth was supported by strong momentum in
the United States andPurina PetCare globally. - Total reported sales increased by 1.2% to
CHF 92.6 billion (2018:CHF 91.4 billion ). Net acquisitions had a negative impact of 0.8% and foreign exchange reduced sales by 1.5%. - One year ahead of Nestlé's medium-term plan, the company reached its 2020 profitability target range. The underlying trading operating profit (UTOP) margin increased by 60 basis points to 17.6%. The trading operating profit (TOP) margin decreased by 30 basis points to 14.8% due to increased restructuring and related expenses.
- Underlying earnings per share increased by 11.1% in constant currency and by 9.8% on a reported basis to
CHF 4.41 . Earnings per share increased by 28.0% toCHF 4.30 on a reported basis. - Free cash flow increased by 10.9% to
CHF 11.9 billion . - Board proposes dividend increase of 25 centimes to
CHF 2.70 per share, marking 25 consecutive years of dividend growth. In total,CHF 16.9 billion was returned to shareholders in 2019 through a combination of dividend and share buybacks. At the end of 2019, Nestlé completed theCHF 20 billion share buyback program initiated inJuly 2017 . It started a new share buyback program of up toCHF 20 billion inJanuary 2020 . - Nestlé divested Nestlé
Skin Health in 2019 and announced the sale of itsU.S. ice cream business forUSD 4 billion to Froneri (transaction closedJanuary 31, 2020 ). Nestlé also agreed to sell a 60% stake in itsHerta charcuterie (cold cuts and meat-based products) business toCasa Tarradellas . Portfolio rotation over the past three years amounts to 12% of total 2017 sales. - 2020 Outlook: continued increase in organic sales growth, expecting further acceleration in 2021/2022 towards sustainable mid single-digit growth. Underlying trading operating profit margin with continued improvement. Underlying earnings per share in constant currency and capital efficiency expected to increase. It is too early to quantify the financial impact of the coronavirus outbreak at this time.
In 2019, we made significant progress in our portfolio transformation. We did what we said we would do and more. We are not done yet. We will respond to rapid changes in the industry and fast-evolving consumer preferences to position our portfolio for higher growth.
Nestlé will continue to focus on fast innovation. The launch of our premium Starbucks products, for example, has been a great success. We are very pleased with the speed of the product rollout and the positive response by consumers. The company is fully embracing the need for speed, as the rapid expansion of our new plant-based food and beverage offerings has shown. We are getting to market faster with must-have products.
Our shareholders are seeing reliable, sustainable and increasing cash returns even in turbulent times. A key driver is our sustainable dividend practice. We are proud to propose the 25th consecutive annual dividend increase to our shareholders this year.
We have also reaffirmed our sustainability leadership at a time when society is increasingly looking to business for solutions to the major environmental problems we are facing. In addition, we have made significant progress in making our workplace even more diverse and inclusive. New initiatives, such as our enhanced parental leave policy, reaffirm Nestlé’s status as an employer of choice around the world.
In the past few weeks, the spread of the coronavirus has required extraordinary effort from our team in
Group Results
Zone AMS | Zone EMENA | Zone AOA | Nestlé Waters | Other Businesses | ||
Sales FY-2019 (CHF m) | 92 568 | 33 154 | 18 834 | 21 602 | 7 821 | 11 157 |
Sales FY-2018 (CHF m) | 91 439 | 30 975 | 18 932 | 21 331 | 7 878 | 12 323 |
Real internal growth (RIG) | 2.9% | 2.6% | 4.2% | 2.5% | -1.9% | 5.8% |
Pricing | 0.6% | 1.3% | -1.5% | 0.7% | 2.1% | 0.6% |
Organic growth | 3.5% | 3.9% | 2.7% | 3.2% | 0.2% | 6.4% |
Net M&A | -0.8% | 3.5% | -0.2% | -0.1% | -0.1% | -14.1% |
Foreign exchange | -1.5% | -0.4% | -3.0% | -1.8% | -0.9% | -1.7% |
Reported sales growth | 1.2% | 7.0% | -0.5% | 1.3% | -0.8% | -9.4% |
FY-2019 Underlying TOP Margin | 17.6% | 21.1% | 18.9% | 22.7% | 11.8% | 18.7% |
FY-2018 Underlying TOP Margin* | 17.0% | 21.0% | 18.7% | 22.7% | 11.0% | 16.5% |
* 2018 figures have been adjusted to reflect reallocation of some marketing and administration expenses from Unallocated items into the Operating segments. This was done to better reflect the use of central overheads by each Zone and Globally Managed Business.
Group Sales
Organic growth reached 3.5% in 2019, fully in line with our guidance. RIG accelerated to 2.9% for the full year, the highest level in the last six years. Growth was supported in particular by innovation and portfolio management. Pricing contributed 0.6% and returned to positive territory in the fourth quarter.
Year-on-year organic growth acceleration was supported by strong growth in
All product categories saw positive organic growth. The largest contribution came from
Net acquisitions had a negative impact of 0.8%, largely related to the divestment of Nestlé
Underlying Trading Operating Profit
Underlying trading operating profit increased by 4.8% to
Margin expansion was supported by structural cost reductions, portfolio management, pricing and improved mix, which more than offset input cost inflation. Consumer-facing marketing expenses increased by 3.4% in constant currency.
Restructuring expenses and net other trading items increased by
Net Financial Expenses and Income Tax
Net financial expenses grew by 33.5% to
The Group reported tax rate decreased by 550 basis points to 21.0% due to exceptional items including the sale of Nestlé
Net Profit and Earnings Per Share
Net profit increased by 24.4% to
Underlying earnings per share increased by 11.1% in constant currency and by 9.8% on a reported basis to
Cash Flow
Free cash flow grew by 10.9% to
Dividend
At the Annual General Meeting on
The last trading day with entitlement to receive the dividend will be
Shareholders entered in the share register with voting rights on
Share Buyback Program
During 2019, the Group repurchased
Net Debt
Net debt decreased to
Return on
The Group's ROIC increased by 20 basis points to 12.3%. The improvement was the result of improved operating performance and disciplined capital allocation. ROIC will trend towards 15% over time, including the impact of any future mid-sized acquisitions.
Portfolio Management
Nestlé completed acquisitions and divestments with a total value of around
In
Nestlé also agreed to sell a 60% stake in its
Strategic Developments
In
In
Zone
- 3.9% organic growth: 2.6% RIG; 1.3% pricing.
North America saw mid single-digit organic growth, with positive RIG and pricing.Latin America reported mid single-digit organic growth, with positive RIG and pricing.- The underlying trading operating profit margin increased by 10 basis points to 21.1%.
Sales 2019 | Sales 2018 | RIG | Pricing | Organic growth | UTOP 2019 | UTOP 2018 | Margin 2019 | Margin 2018 | |
Zone AMS | 2.6% | 1.3% | 3.9% | 21.1% | 21.0% |
Organic growth increased to 3.9%, supported by higher RIG of 2.6%. Pricing improved to 1.3% with positive contributions from both
The Zone's underlying trading operating profit margin increased by 10 basis points. Pricing and structural cost reductions more than offset cost increases from commodity inflation and one-off Direct-Store-Delivery transition costs. Marketing and commercial investments increased to support innovation and brand building.
Zone
- 2.7% organic growth: 4.2% RIG; -1.5% pricing.
Western Europe posted strong RIG and positive organic growth. Pricing was negative.- Central and
Eastern Europe maintained mid single-digit organic growth with strong RIG. Pricing was slightly negative. Middle East andNorth Africa saw mid single-digit organic growth based on strong RIG and flat pricing.- The underlying trading operating profit margin grew by 20 basis points to 18.9%.
Sales 2019 | Sales 2018 | RIG | Pricing | Organic growth | UTOP 2019 | UTOP 2018 | Margin 2019 | Margin 2018 | |
Zone EMENA | 4.2% | -1.5% | 2.7% | 18.9% | 18.7% |
Organic growth was 2.7%, with strong RIG of 4.2% supported by both volume and mix. RIG more than offset negative pricing of 1.5%, mainly related to coffee prices. Net acquisitions reduced sales by 0.2%. Foreign exchange negatively impacted sales by 3.0%. Reported sales in Zone EMENA decreased by 0.5% to
Zone EMENA recorded its best RIG in the last five years. In a low-growth environment Nestlé made broad-based market share gains across categories and geographies. Each sub-region had positive organic growth, with an acceleration in both
The Zone's underlying trading operating profit margin increased by 20 basis points. This improvement was supported by structural cost reductions, operational efficiencies and product mix. Marketing and commercial investments increased to support innovation and brand building.
Zone
- 3.2% organic growth: 2.5% RIG; 0.7% pricing.
China posted slightly positive organic growth, with flat RIG and positive pricing.South-East Asia andSouth Asia saw mid single-digit organic growth, with strong RIG and positive pricing.- Sub-Saharan Africa reached high single-digit organic growth, with strong RIG and positive pricing.
Japan andOceania had low single-digit organic growth, as strong RIG more than offset negative pricing.- The underlying trading operating profit margin was unchanged at 22.7%.
Sales 2019 | Sales 2018 | RIG | Pricing | Organic growth | UTOP 2019 | UTOP 2018 | Margin 2019 | Margin 2018 | |
Zone AOA | 2.5% | 0.7% | 3.2% | 22.7% | 22.7% |
Organic growth was 3.2%, with RIG of 2.5% and pricing of 0.7%. Net acquisitions had a minimal negative impact of 0.1%. Foreign exchange reduced sales by 1.8%. Reported sales in Zone AOA increased by 1.3% to
Zone AOA saw solid growth despite slower momentum in
By product category the largest contributions to the Zone's growth came from culinary products, infant nutrition, and
The Zone's underlying trading operating profit margin was unchanged. Structural cost reductions, pricing and favorable mix offset cost increases from commodity inflation. Marketing investments increased to support innovation and brand building.
Nestlé Waters
- 0.2% organic growth: -1.9% RIG; 2.1% pricing.
North America saw slightly positive organic growth. Positive pricing was mostly offset by negative RIG.Europe reported negative organic growth largely due to lower RIG. Pricing declined slightly.- Emerging markets posted mid single-digit organic growth, with strong pricing and positive RIG.
- The underlying trading operating profit margin increased by 80 basis points to 11.8%.
Sales 2019 | Sales 2018 | RIG | Pricing | Organic growth | UTOP 2019 | UTOP 2018 | Margin 2019 | Margin 2018 | |
Nestlé Waters | -1.9% | 2.1% | 0.2% | 11.8% | 11.0% |
Organic growth was 0.2% as pricing increased by 2.1% and RIG declined by 1.9%. Net acquisitions reduced sales by 0.1%. Foreign exchange had a negative impact on sales of 0.9%. Reported sales in Nestlé Waters decreased by 0.8% to
In
Nestlé Waters is managed and reported as part of the Group's three geographical Zones since
The underlying trading operating profit margin increased by 80 basis points. The improvement was based on structural cost reductions and pricing. These more than offset higher PET packaging costs and higher marketing investments.
Other Businesses
- 6.4% organic growth: 5.8% RIG; 0.6% pricing.
- Nespresso reported mid single-digit organic growth driven by RIG. Pricing was positive.
- Nestlé Health Science posted high single-digit growth based entirely on strong RIG.
- Nestlé
Skin Health saw high single-digit organic growth for the nine months of consolidation. - The underlying trading operating profit margin of Other Businesses increased by 220 basis points to 18.7%.
Sales 2019 | Sales 2018 | RIG | Pricing | Organic growth | UTOP 2019 | UTOP 2018 | Margin 2019 | Margin 2018 | |
Other Businesses | 5.8% | 0.6% | 6.4% | 18.7% | 16.5% |
Organic growth of 6.4% was supported by strong RIG of 5.8% and pricing of 0.6%. Net acquisitions decreased reported sales by 14.1%, due to the divestment of Nestlé
Nespresso maintained mid single-digit organic growth, with positive growth across all regions.
Nestlé Health Science grew at a high single-digit rate, supported by strong growth in Medical Nutrition and Atrium products in Consumer Care. This reflected a pipeline of successful innovations and strong growth in the e-commerce channel. In September, Nestlé Health Science expanded into personalized nutrition with the acquisition of Persona, a leading personalized vitamin business.
Nestlé
The underlying trading operating profit margin of Other Businesses increased by 220 basis points. This was the result of broad based improvements across all businesses.
Our business as a force for good: Shaping the new plastics economy
Packaging and plastics play a key role in preventing food waste and ensuring the quality and safety of food products. However, the leakage of plastic waste into the environment has become a significant environmental challenge.
Nestlé's commitment is to make 100% of its packaging recyclable or reusable by 2025. In the same period, Nestlé will reduce its use of virgin plastics by one third. This will be achieved by creating a market for food-grade recycled plastics and boosting packaging innovation whilst working with others to advance the circular economy.
Creating a market for food-grade recycled plastics. Making recycled plastics safe for direct contact with food is an enormous challenge for our industry. This is technically feasible and economically viable for PET, but not yet for other types of plastics. Nestlé is leading the shift to recycled plastics approved for direct contact with food and beverages. The company has committed to sourcing up to 2 million metric tons of food-grade recycled plastics between now and 2025. To create a market, Nestlé is allocating more than
Boosting packaging innovation. In 2019, Nestlé opened the
These initiatives are part of Nestlé’s broader sustainability agenda. They contribute to the company’s goal to achieve zero net greenhouse gas emissions by 2050. As part of these commitments and to increase transparency, Nestlé will continue to outline further initiatives and provide regular progress updates.
Board Nomination
Nestlé today also announced that it proposes
Outlook
2020 Outlook: Nestlé expects a continued increase in organic sales growth. The company foresees further organic sales growth acceleration in 2021/2022 towards sustainable mid single-digit growth. The underlying trading operating profit margin is expected to see continued improvement. 2020 restructuring costs1 are expected at around
1Not including impairment of fixed assets, litigation and onerous contracts
Annex
Full-year sales and underlying trading operating profit (UTOP) overview by operating segment
Zone AMS | Zone EMENA | Zone AOA | Nestlé Waters | Other Businesses | ||
Sales FY-2019 (CHF m) | 92 568 | 33 154 | 18 834 | 21 602 | 7 821 | 11 157 |
Sales FY-2018 (CHF m) | 91 439 | 30 975 | 18 932 | 21 331 | 7 878 | 12 323 |
Real internal growth (RIG) | 2.9% | 2.6% | 4.2% | 2.5% | -1.9% | 5.8% |
Pricing | 0.6% | 1.3% | -1.5% | 0.7% | 2.1% | 0.6% |
Organic growth | 3.5% | 3.9% | 2.7% | 3.2% | 0.2% | 6.4% |
Net M&A | -0.8% | 3.5% | -0.2% | -0.1% | -0.1% | -14.1% |
Foreign exchange | -1.5% | -0.4% | -3.0% | -1.8% | -0.9% | -1.7% |
Reported sales growth | 1.2% | 7.0% | -0.5% | 1.3% | -0.8% | -9.4% |
FY-2019 Underlying TOP (CHF m) | 16 260 | 6 998 | 3 567 | 4 908 | 922 | 2 089 |
FY-2018 Underlying TOP (CHF m)* | 15 521 | 6 496 | 3 545 | 4 834 | 865 | 2 036 |
FY-2019 Underlying TOP Margin | 17.6% | 21.1% | 18.9% | 22.7% | 11.8% | 18.7% |
FY-2018 Underlying TOP Margin* | 17.0% | 21.0% | 18.7% | 22.7% | 11.0% | 16.5% |
Full-year sales and underlying trading operating profit (UTOP) overview by product
Powdered & liquid beverages | Water | Milk products & ice cream | Nutrition & Health Science | Prepared dishes & cooking aids | Confection-ery | Petcare | ||
Sales FY-2019 (CHF m) | 92 568 | 23 221 | 7 391 | 13 268 | 14 990 | 12 188 | 7 888 | 13 622 |
Sales FY-2018 (CHF m) | 91 439 | 21 620 | 7 409 | 13 217 | 16 188 | 12 065 | 8 123 | 12 817 |
Real internal growth (RIG) | 2.9% | 2.9% | -1.6% | 1.7% | 4.2% | 2.5% | 3.2% | 5.3% |
Pricing | 0.6% | -0.1% | 2.3% | 1.6% | 0.7% | 0.0% | -1.3% | 1.7% |
Organic growth | 3.5% | 2.8% | 0.7% | 3.3% | 4.9% | 2.5% | 1.9% | 7.0% |
FY-2019 Underlying TOP (CHF m) | 16 260 | 5 197 | 846 | 2 706 | 3 314 | 2 170 | 1 332 | 2 919 |
FY-2018 Underlying TOP (CHF m)* | 15 521 | 4 879 | 775 | 2 506 | 3 306 | 2 161 | 1 391 | 2 758 |
FY-2019 Underlying TOP Margin | 17.6% | 22.4% | 11.4% | 20.4% | 22.1% | 17.8% | 16.9% | 21.4% |
FY-2018 Underlying TOP Margin* | 17.0% | 22.6% | 10.5% | 19.0% | 20.4% | 17.9% | 17.1% | 21.5% |
* 2018 figures have been adjusted to reflect reallocation of some marketing and administration expenses from Unallocated items into the Operating segments. This was done to better reflect the use of central overheads by each Zone and Globally Managed Business.
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