NESTLE NOM. 
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* Sales of CHF 107.6bn, up CHF 9.1bn (+9.2%), Food and
Beverages sales reach CHF 100.3bn
* Above-target organic growth of 7.4%, 4.4% real internal
growth
* EBIT of CHF 15bn (+12.9%), margin of 14%, +50 basis
points
* Food and Beverages: 7.1% organic growth, EBIT margin +40
basis points
* Net profit of CHF 10.6bn (+15.8%), earnings per share CHF
27.81 (+16.4%)
* Discipline in capital management: return on invested
capital (ROIC) up +100 basis points
* Proposed dividend CHF 12.20 per share, up 17.3% from CHF
10.40 for 2006
Peter Brabeck-Letmathe, Chairman and CEO of Nestlé: "This milestone
performance was achieved in a difficult external environment and, for
the twelfth year in a row, has demonstrated the power of the Nestlé
model: organic growth of at least 5-6% coupled with a sustainable
EBIT margin improvement, irrespective of prevailing economic
conditions. Nestlé is now uniquely positioned as the world's foremost
nutrition, health and wellness company with leading brands, global
geographic spread and an exceptional management team. Indeed, Nestlé
has ventured far beyond the traditional food industry: our success is
now driven more by our capacity to innovate and use our R&D pipeline
to launch new, added-value products and services, than by raw
material prices or the economic climate. Combined with our strong
emphasis on excellence in execution and discipline in capital
management, we have, over time, created powerful momentum which will
deliver profitable growth for years to come."
+-------------------------------------------------------------------+
| | Margins |
|-------------------------------------------+-----------------------|
| | Jan.-Dec. | Change vs. | Jan.-Dec. | vs. |
| | 2007 | Jan.-Dec. 2006 | 2007 | Jan.-Dec. |
| | | | | 2006 |
|-----------+-------------+-----------------+-----------+-----------|
| Sales | CHF 107 | + 9.2% | + CHF | | |
| | 552m | | 9 094m | | |
|-----------+-------------+--------+--------+-----------+-----------|
| EBIT | CHF 15 024m | + | + CHF | 14.0% | +50bps |
| | | 12.9% | 1722m | | |
|-----------+-------------+--------+--------+-----------+-----------|
| Net | CHF 10 649m | + | + CHF | 9.9% | +60bps |
| profit | | 15.8% | 1 452m | | |
|-----------+-------------+--------+--------+-----------+-----------|
| Total EPS | CHF 27.81 | + | | | |
| | | 16.4% | | | |
|-----------+-------------+--------+--------+-----------+-----------|
| Real | 4.4% | | | | |
| internal | 7.4% | | | | |
| growth | | | | | |
| Organic | | | | | |
| growth | | | | | |
+-------------------------------------------------------------------+
All calculations based on non-rounded figures
Group sales, profitability and financial position
Vevey, 21 February 2008 - In 2007, consolidated sales of the Nestlé
Group amounted to CHF 107.6 billion, an increase of 9.2% over the
same period last year. This was driven by organic growth of 7.4%,
consisting of real internal growth of 4.4% and price increases of
3.0%. Acquisitions net of divestitures, primarily driven by the
acquisition of Novartis Medical Nutrition and Gerber, contributed
another 1.4% of growth while exchange rate fluctuations added another
0.4%. The Group's Food and Beverages business, with sales of CHF
100.3 billion, was the main contributor to growth, achieving organic
growth of 7.1%, consisting of real internal growth of 4.0% and price
increases of 3.1%.
The Group's EBIT grew by 12.9% to CHF 15 billion, resulting in an
EBIT margin of 14%, a 50 basis point improvement over 2006. Food and
Beverages' EBIT grew by 12.7% to CHF 12.6 billion, resulting in a
margin improvement of 40 basis points. These performances were
achieved in spite of a negative 10 basis point currency impact.
Timely pricing actions, scale efficiencies, cost reduction
initiatives, as well as the ongoing strategic transformation process
allowed the Food and Beverages business to more than offset higher
raw material and energy costs in 2007.
Net profit grew by 15.8% to CHF 10.6 billion, resulting in a net
margin of 9.9%, up 60 basis points. Earnings per share once again
grew at a double-digit rate, by 16.4% to CHF 27.81.
The Group's operating cash flow increased by 15.1%, from CHF 11.7
billion to CHF 13.4 billion, while free cash flow increased from CHF
7 billion to CHF 8.2 billion. Tight capital management was
demonstrated by continued efficiencies in working capital and the
launch of a third share buyback programme. The return on invested
capital (ROIC), excluding goodwill, improved by 100 basis points, to
22.2%; including goodwill, it was up 50 basis points, to 12.2%. The
Group's net debt rose to CHF 21.2 billion, mainly due to the
acquisition of Novartis Medical Nutrition and Gerber, as well as the
buyback of shares amounting to CHF 4.4 billion in 2007.
Group Food and Beverages sales
In 2007, the organic growth of Nestlé's total Food and Beverages
business (including globally-managed businesses such as Nestlé
Waters, Nestlé Nutrition, Nespresso, the Food and Beverages joint
ventures, as well as the Zones) amounted to 4.2% in Europe, 8.6% in
the Americas and 9.6% in Asia, Oceania and Africa.
Sales and EBIT margins by management responsibilities and geographic
areas
+-------------------------------------------------------------------+
| | Jan.-Dec. | Jan.-Dec. | EBIT margins |
|------------------| 2007 | 2007 |------------------------|
| | Sales | Organic | Jan.-Dec. | Change vs |
| | in CHF | Growth | 2007 | Jan.-Dec. |
| | millions | (%) | | 2006(a) |
|------------------+-----------+-----------+-----------+------------|
| Food & Beverages | | | | |
| * Zone Europe | 28 464 | + 3.0 | 12.0% | +30 bps |
|------------------+-----------+-----------+-----------+------------|
| * Zone Americas | 32 917 | + 8.1 | 16.3% | +50 bps |
|------------------+-----------+-----------+-----------+------------|
| * Zone Asia, | 16 556 | + 8.8 | 16.3% | -30 bps |
| Oceania, | | | | |
| Africa | | | | |
|------------------+-----------+-----------+-----------+------------|
| Nestlé Waters | 10 404 | + 6.6 | 8.2% | -50 bps |
|------------------+-----------+-----------+-----------+------------|
| Nestlé Nutrition | 8 434 | + 9.7 | 17.2% | +30 bps |
|------------------+-----------+-----------+-----------+------------|
| Other Food & | 3 458 | + 23.2 | 15.8% | +220 bps |
| Beverages (b) | | | | |
|------------------+-----------+-----------+-----------+------------|
| Total Food & | 100 233 | + 7.1 | 12.6% | +40 bps |
| Beverages | | | | |
|------------------+-----------+-----------+-----------+------------|
| Pharma | 7 319 | + 11.0 | 33.3% | +140 bps |
|------------------+-----------+-----------+-----------+------------|
| Group Total | 107 552 | + 7.4 | 14.0% | +50 bps |
+-------------------------------------------------------------------+
(a) 2006 comparatives have been restated to reflect internal changes
in management responsibility as of 1 January 2007
(b) mainly joint ventures managed on a worldwide basis and Nespresso
All calculations based on non-rounded figures
Zone Europe: sales of CHF 28.5 billion, 2% real internal growth and
3% organic growth. The Zone experienced double-digit growth in
eastern Europe, mainly in Russia and Poland, and positive growth
trends in key western European markets, such as Germany, France and
Great Britain. The Zone's 30 basis points improvement in EBIT margin
was mainly driven by higher operational performance and was achieved
in spite of investments in premium segment initiatives. Mövenpick of
Switzerland did particularly well as a pan-European super-premium ice
cream brand. Nescafé Dolce Gusto had strong first year sales, driven
both by continued success in the initial launch markets and
successful introductions in a further six markets. Chocolate did well
due to a renewed focus on strategic brands, particularly in Great
Britain, as did soluble coffee and the pet care business.
Zone Americas: sales of CHF 32.9 billion, 3.3% real internal growth
and 8.1% organic growth. Real internal growth remained strong across
the Zone, with good contributions from fast-growing Popularly
Positioned Products and direct sales distribution initiatives in
Latin America. EBIT margins increased by 50 basis points led by
timely pricing, operational improvements and successful innovative
product launches such as Nescafé Protect, Panini Lean Cuisine or Cat
Chow Natural. Key product categories such as ice cream and beverages
improved their EBIT margin supported by a stronger focus on more
value-added products.
Zone Asia, Oceania and Africa: sales of CHF 16.6 billion, 4.4% real
internal growth and 8.8% organic growth. The Zone's EBIT margin
slipped 30 basis points to 16.3% as a result of two one-off factors
in 2007: Nestlé Japan was the Group's last market to move to a
demand-driven, just-in-time business model and, in Australia, Nestlé
was affected by the specific situation of a key customer. The Zone's
emerging markets continued to deliver double-digit growth with all
categories contributing. While these markets were particularly
exposed to exceptionally high milk prices, timely pricing, together
with efficiency initiatives and successful new launches such as Nido
growing up milks enriched with probiotics in several Asian markets
were sufficient to protect EBIT margins in emerging markets.
Nestlé Waters: sales of CHF 10.4 billion, 5% real internal growth and
6.6% organic growth. Following a very promising first half, the
second half of the year was somewhat softer, mostly due to
unfavourable weather conditions in Europe. This slow growth, together
with continued weakness in the European home and office delivery
(HOD) business as well as higher packaging and distribution costs,
caused the EBIT margin to fall by 50 basis points. In North America
and emerging markets, double-digit sales growth was achieved. With
over 30% organic growth, Nestlé Pure Life maintained its momentum and
the brand is now a key growth driver in over 20 countries. Overall
market shares continued to improve in most countries.
Nestlé Nutrition: sales of CHF 8.4 billion, real internal growth of
6.5% and 9.7% organic growth. As a result of the acquisition and
successful integration of Jenny Craig in 2006 as well as Novartis
Medical Nutrition and Gerber in 2007, Nestlé Nutrition reinforced its
undisputed world leadership in specialised nutrition, with annualised
sales of around CHF 11 billion. In parallel with the integration of
these acquisitions, thanks to a highly productive R&D pipeline,
Nestlé Nutrition continued to experience strong sales and profit
growth in its established businesses, mainly driven by new launches
of premium NAN starter formulas and infant cereals. Even though
recent acquisitions had an anticipated initial dilutive impact,
Nestlé Nutrition's EBIT margin increased by 30 basis points.
Nestlé Professional: sales of CHF 7.2 billion, 2.5% real internal
growth and 5.5% organic growth. The transformation of Nestlé's
FoodServices Strategic Business Division into Nestlé Professional, a
globally-managed business unit dedicated to the out-of-home food and
beverage market, was the main priority in 2007, including the
build-up of a new management team. The opening of Nestlé's first R&D
facility entirely dedicated to the out-of-home beverage business in
Orbe, Switzerland last November constituted a milestone in this
process. Nestlé Professional will have worldwide profit and loss
responsibility as of 1 January 2009.
Sales and EBIT margins by product group
+-------------------------------------------------------------------+
| | Jan.-Dec. | Jan.-Dec. | EBIT margins |
|-----------------| 2007 Sales | 2007 |-----------------------|
| | in CHF | Organic | Jan.-Dec. | Change vs |
| | millions | Growth (%) | 2007 | Jan.-Dec. |
| | | | | 2006 |
|-----------------+------------+------------+-----------+-----------|
| Nestlé | 8 434 | + 9.7 | 17.2% | +30 bps |
| Nutrition | | | | |
|-----------------+------------+------------+-----------+-----------|
| Powdered and | 17 841 | + 10.3 | 22.4% | 0 bps |
| liquid | | | | |
| beverages | | | | |
|-----------------+------------+------------+-----------+-----------|
| Prepared dishes | 18 504 | + 4.0 | 13.0% | -20 bps |
| and cooking | | | | |
| aids | | | | |
|-----------------+------------+------------+-----------+-----------|
| Milk products | 20 672 | + 7.8 | 11.1% | +90 bps |
| and ice cream | | | | |
|-----------------+------------+------------+-----------+-----------|
| Nestlé Waters | 10 404 | + 6.6 | 8.2% | -50 bps |
|-----------------+------------+------------+-----------+-----------|
| Confectionery | 12 248 | + 5.3 | 11.6% | +10 bps |
|-----------------+------------+------------+-----------+-----------|
| PetCare | 12 130 | + 7.0 | 15.5% | +40 bps |
|-----------------+------------+------------+-----------+-----------|
| Total Food & | 100 233 | +7.1 | 12.6% | +40 bps |
| Beverages | | | | |
|-----------------+------------+------------+-----------+-----------|
| Pharmaceutical | 7 319 | + 11.0 | 33.3% | +140 bps |
| products | | | | |
|-----------------+------------+------------+-----------+-----------|
| Group Total | 107 552 | + 7.4 | 14.0% | +50 bps |
+-------------------------------------------------------------------+
All calculations based on non-rounded figures
Powdered and liquid beverages: sales of CHF 17.8 billion, 7.6% real
internal growth and 10.3% organic growth. This excellent performance
was driven by the core brands of the product group. Nescafé
experienced strong growth due to the continued success of the coffee
mixes, freeze dried soluble coffee and the successful launch of
Nescafé Dolce Gusto. Nespresso had another outstanding year with over
40% organic growth. Double-digit growth was also recorded by two
other billionaire brands - Milo, helped by its Actigen-E Branded
Active Benefit, and Nestea, which enjoyed strong performances in
Asia, Africa and central and eastern Europe. EBIT margins remained
unchanged at 22.4% in spite of the substantial investment in the
launch of Nescafé Dolce Gusto.
Prepared dishes and cooking aids: sales of CHF 18.5 billion, 3.2%
real internal growth and 4.0% organic growth, including an
acceleration over the second half of the year. Double-digit
performance was realized by culinary products in emerging markets,
especially under the Maggi brand, as well as by Lean Cuisine and
Buitoni in North America, where the business continued to benefit
from strong innovation focused on health and wellness. Maggi achieved
market share improvements in western Europe. Despite this
acceleration, EBIT margins declined by 20 basis points in 2007,
reflecting investments in distribution networks in developing
countries as well as the tough competitive environment in some lower
value-added activities, such as dried pasta in Europe.
Milk products and ice cream: sales of CHF 20.7 billion, 1.7% real
internal growth and 7.8% organic growth. Nestlé's strong brand
portfolio in shelf-stable milk products allowed the Group to take the
necessary actions to compensate for an exceptional milk cost increase
while at the same time achieving volume growth. The growing-up milk
segment was led by Nido and innovations in Branded Active Benefits.
Coffeemate experienced impressive volume growth, especially in the US
and Asia. Ice cream sales performed well in Latin America, Asia and
eastern Europe. Volumes in western Europe and the US were weaker as a
result of a greater focus on profitability. Chilled dairy
substantially improved its profit performance. Overall the category's
EBIT margin improved by 90 basis points, a notable achievement in
view of prevailing high input costs.
Confectionery: sales of CHF 12.2 billion, 2.3% real internal growth
and 5.3% organic growth. All three categories - chocolate, sugar and
biscuits - grew, led by emerging markets in Latin America and Asia.
Kit Kat had a strong year, particularly in Oceania, South Asia and
most markets in Europe. Double-digit growth was seen in the tablet
segment, driven by premium dark chocolate products such as Perugina
Nero in Italy. Increased focus on core strategic and strong local
brands resulted in an EBIT margin improvement of 10 basis points
overall.
PetCare: sales of CHF 12.1 billion, 3.8% real internal growth and
7.0% organic growth. This was driven by strategic brands, new product
launches and continued product mix improvements across the world.
Brands in the super-premium and high premium segments performed
particularly well. These included Fancy Feast, Pro Plan, One, Gourmet
Gold and Beneful. Core premium brands such as Dog Chow and Cat Chow
also generated appreciable growth. The excellent result was achieved
despite increased pricing. The business' EBIT margin improved by 40
basis points, to 15.5%. This increased profitability was the result
of continued growth of value-added strategic brands together with
price increases which offset significantly higher input costs.
Pharmaceutical products: sales of CHF 7.3 billion, 10.2% real
internal growth and 11.0% organic growth was the result of
double-digit growth by both Alcon and the joint ventures. The EBIT
margin increased 140 basis points to 33.3%, mainly due to operational
efficiencies and a positive product mix at Alcon.
Board proposals to the Annual General Meeting
The strong performance in 2007 and the positive outlook for 2008 will
enable the Board to propose to shareholders a dividend increase of
17.3% from CHF 10.40 per share to CHF 12.20 per share.
The ongoing share buy-back programme has so far resulted in the
purchase of 10,196,000 shares between 24 August 2007 and 5 February
2008. The Board will propose the cancellation of 10,072,500 shares
amounting to CHF 5.3 billion. Furthermore, in order to increase the
liquidity and tradability of Nestlé shares, the Board will propose a
1-for-10 share split. Should this proposal be accepted, the Board
would then divide ADRs by 2.5 to achieve value parity with ordinary
shares.
The mandate of Mr. Peter Böckli, who first joined the Board in 1993,
expires in April 2008. The Board wishes to express its gratitude to
Mr. Böckli for his highly-appreciated services over the years, not
only as one of its members, but also as member of the Audit Committee
and chairman of the Compensation and Nomination Committee.
The Board will propose the re-election of Messrs. Andreas Koopman and
Rolf Hänggi, 1st and 2nd Vice Chairman of the Board, respectively.
Furthermore, the Board will propose the election of Mr. Beat W. Hess,
Group Legal Director and member of the Group Executive Committee of
Royal Dutch Shell. Mr. Hess has over 20 years' experience in complex
business and management issues in large global companies,
particularly in the area of corporate governance.
The Board will also propose the election of Mr. Paul Bulcke, until
recently Executive Vice President in charge of Zone Americas, as one
of its members with the intention of immediately confirming his
appointment as Administrateur délégué (CEO) once he is elected. As
previously announced, Mr. Peter Brabeck-Letmathe will stand down as
CEO, but will remain Chairman of the Board.
Finally, the Board will submit a proposal for new Articles of
Association to shareholders for approval at the forthcoming Annual
General Meeting. Individual elements of this proposal include
abolishing the old attendance quorums and supermajority clauses;
lowering the threshold for shareholders to put items on the Annual
General Meeting agenda from 0.25% to 0.15% of total share capital;
reducing Board members' term of office from five years to three; and
increasing the maximum voting rights' percentage of any one
shareholder from 3% to 5% of total share capital. The Board is
convinced that its proposal is well balanced, taking into account the
views of different shareholder groups, and is in the company's best
interest.
Outlook
Nestlé is confident that the momentum built up over time and once
again demonstrated by the 2007 results will be maintained over the
coming years. The company's strategic re-orientation and the related
structural adjustments have largely been completed and the Group's
leadership position in nutrition, health and wellness is now deeply
rooted. Nestlé's rich R&D pipeline promises many new, innovative
product launches over the coming years. Operational efficiency and
capital discipline will remain high on the agenda. Within Nestlé's
excellent prospects overall, four key strategic areas have been
identifed as having above-average growth and profit potential in 2008
and beyond.
Nestlé Nutrition has annualised sales of around CHF 11 billion. The
integration of Novartis Medical Nutrition and Gerber was achieved in
record time and the two businesses' performance is already exceeding
expectations. For years to come, Nestlé's strong R&D pipeline will
continue to drive growth of all Nestlé Nutrition businesses, and will
also fuel the performance of mainstream products enriched with
Branded Active Benefits (BABs), which grew by over 16% to reach CHF
4.4 billion in sales in 2007.
Popularly Positioned Products (PPPs). Products aimed at lower income
consumers in the developing world will continue to grow strongly in
2008 and beyond. Nestlé PPPs, which mostly consist of dairy products,
Nescafé and Maggi culinary products, grew by over 25% to reach around
CHF 6 billion in sales in 2007. The overall market for such products
in Asia, Africa and Latin America is estimated at over CHF 80
billion.
Out-of-home. In the US and other mature markets, consumers spend more
on out-of-home food and beverages than on home consumption, a trend
which is set to continue. With sales of over CHF 7.2 billion and
10,000 employees in 97 countries, Nestlé is already uncontested world
leader in this highly fragmented market. With the on-going
transformation of Nestlé's FoodServices Strategic Business Division
into Nestlé Professional, the company is well poised to take
advantage of a business opportunity over coming years estimated at
around CHF 400 billion in total.
Luxury and premium products. With growth of well over 40% in 2007,
Nespresso is set to reach the CHF 2 billion sales mark in 2008.
Mövenpick of Switzerland, which was relaunched as a pan-European
super-premium ice cream brand in 2007, should continue growing fast
in 2008, as should Häagen-Dazs in North America and Antica Gelateria
del Corso in Europe. In confectionery, the strong growth of darker,
premium chocolate is another visible sign of "premiumisation" and
explains Nestlé's partnership with Belgian luxury chocolatier Pierre
Marcolini, as well as the acquisition of Ruzskaya Confectionery
Factory (RKF), producer of Russia's leading premium chocolate brands
Comilfo and Ruzanna. The "premiumisation" of mainstream Nestlé
products, as witnessed for instance by the recent launch of Nido
Excella Gold in Asia and Latin America, will pick up further speed
over years to come.
In summary, the Group is confident of achieving the Nestlé model in
2008:
* organic growth of between 5 and 6%;
* a further EBIT margin improvement in constant currencies;
* a further capital efficiency improvement.
The Nestlé model, combined with the ongoing ambitious share buyback
programme, will deliver strong earnings per share growth, resulting
in industry-outperforming, long-term shareholder value creation.
Date of the next General Meeting
The General Meeting of Nestlé S.A. will take place on 10 April 2008
at 14:30 at the Palais de Beaulieu in Lausanne. The management report
will be available from 14 March 2008, whereas the fully-audited
financial statements are now posted on the Nestlé Corporate Website
(www.nestle.com). The dividend will be payable from 16 April 2008.
Contacts:
Media: François-Xavier Perroud
Tel.: +41-21-924 2596
Investors: Roddy
Child-Villiers Tel.: +41-21-924 3622
--- End of Message ---
Nestlé S.A.
Avenue Nestlé 55 Vevey
WKN: 887208; ISIN:
CH0012056047; Index: SLCI, SMI, SPI, SMIEXP;
Listed: Main Market in SWX Swiss Exchange;
Copyright © Hugin AS 2008. All rights reserved.NESTLE NOM. : 2007 milestone year for Nestlé: Sales reach CHF 107.6bn, EBIT margin 14%
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