including expenses for bonuses paid to frontline workers, employee 
safety protocols, donations and other staff and customer allowances. 
Around CHF 260 million of these costs impacted underlying trading 
operating profit, partially offset by savings such as travel expenses. 
In addition, the Group absorbed costs of CHF 170 million related to 
staff and facilities made idle due to lockdown measures. Overall 
COVID-19-related costs decreased in the second half of the year, as 
movement restrictions eased. 
 
 
 
   Underlying Trading Operating Profit 
 
   Underlying trading operating profit decreased by 8.3% to CHF 14.9 
billion. The underlying trading operating profit margin reached 17.7%, 
an increase of 20 basis points in constant currency and 10 basis points 
on a reported basis. 
 
   Margin expansion was supported by structural cost reductions, portfolio 
management and slightly lower consumer-facing marketing expenses(1) 
which more than offset commodity inflation and COVID-19-related costs. 
In the second half of the year, consumer-facing marketing expenses(1) 
returned to a normalized level and increased versus the same period of 
2019. 
 
   Restructuring expenses and net other trading items decreased by CHF 1 
916 million to CHF 670 million, reflecting lower asset impairments and 
COVID-19-related delays to restructuring programs. As a result, trading 
operating profit increased by 4.1% to CHF 14.2 billion. The trading 
operating profit margin reached 16.9%, an increase of 220 basis points 
in constant currency and 210 basis points on a reported basis. 
 
 
 
   Net Financial Expenses and Income Tax 
 
   Net financial expenses decreased by 14.0% to CHF 874 million, reflecting 
a reduction in average net debt and a lower cost of debt. 
 
   The Group reported tax rate increased by 320 basis points to 24.2%, due 
to exceptional items in 2019, including the divestiture of Nestlé 
Skin Health. The underlying tax rate decreased by 50 basis points to 
21.1%, mainly due to the evolution of the geographic and business mix. 
 
 
 
   Net Profit and Earnings Per Share 
 
   Net profit decreased by 3.0% to CHF 12.2 billion. The net profit margin 
increased by 90 basis points to 14.5%, due to one-off items related to 
gains on disposals, asset impairments, restructuring costs and 
revaluation of equity investments. 
 
   Underlying earnings per share increased by 3.5% in constant currency and 
decreased by 4.5% on a reported basis to CHF 4.21. Earnings per share 
was unchanged at CHF 4.30 on a reported basis. Divestitures had a 
negative impact of 3.5%. Nestlé's share buyback program contributed 
1.4% to the underlying earnings per share increase, net of finance 
costs. 
 
 
 
   Cash Flow 
 
   Free cash flow decreased from CHF 11.9 billion to CHF 10.2 billion. The 
reduction was mainly due to the appreciation of the Swiss franc against 
most currencies and the impact of divestitures. Free cash flow margin 
decreased by 80 basis points to 12.1%. Free cash flow is expected to 
remain at around 12% of sales. 
 
   Working capital(2) decreased by 60 basis points to 0.0% of sales, 
marking 9 consecutive years of improvement. This reduction came even as 
the company increased inventory levels materially to meet 
COVID-19-related demand. 
 
   _______ 
 
   (1) Excluding the divestiture of Nestlé Skin Health 
 
   (2) Calculated on a 5-quarter rolling average 
 
 
 
 
 
   Dividend 
 
   At the Annual General Meeting on April 15, 2021, the Board of Directors 
will propose a dividend of CHF 2.75 per share, an increase of 5 
centimes. If approved, this will be the company's 26th consecutive 
annual dividend increase. The company has maintained or increased its 
dividend in Swiss francs over the last 61 years. Nestlé is 
committed to maintaining this long-held practice to increase the 
dividend in Swiss francs every year. 
 
   The last trading day with entitlement to receive the dividend will be 
April 16, 2021. The net dividend will be payable as from April 21, 2021. 
 
   Shareholders entered in the share register with voting rights on April 
8, 2021 at 12:00 noon (CEST) will be entitled to exercise their voting 
rights. 
 
 
 
   Share Buyback Program 
 
   During 2020, the Group repurchased CHF 6.8 billion of Nestlé shares 
as part of the three-year CHF 20 billion share buyback program that 
began in January 2020. 
 
 
 
   Net Debt 
 
   Net debt increased to CHF 31.3 billion as at December 31, 2020, compared 
to CHF 27.1 billion at the end of 2019. The increase largely reflected 
share buybacks of CHF 6.8 billion completed during 2020. 
 
 
 
   Return on Invested Capital (ROIC) 
 
   The Group's ROIC increased by 240 basis points to 14.7%, as a result of 
disciplined capital allocation and improved operating performance. 
 
 
 
   Portfolio Management 
 
   Nestlé completed acquisitions and divestments with a total value of 
around CHF 8.4 billion in 2020. 
 
 
   -- Divestments: In January, Nestlé completed the sale of its U.S. ice 
      cream business for USD 4 billion to Froneri. In June, the Group closed 
      the sale of a 60% stake in its Herta charcuterie business to Casa 
      Tarradellas. On December 31, 2020, Nestlé completed the sale of the 
      Yinlu peanut milk and canned rice porridge businesses in China to Food 
      Wise Co., Ltd. 
 
   -- Acquisitions: In April, Nestlé completed the acquisition of Lily's 
      Kitchen, a premium natural pet food business. Nestlé also expanded 
      its presence in direct-to-consumer meal delivery services through the 
      acquisition of Freshly in the United States in November and the purchase 
      of a majority stake in Mindful Chef in the United Kingdom in December. 
      Nestlé Health Science continues to build its presence and leadership 
      in the field of nutritional science. The Group completed the purchase of 
      the Zenpep business in May, the acquisition of a majority stake in Vital 
      Proteins in July and the purchase of Aimmune Therapeutics in October. 
 
 
 
   On February 17, 2021, Nestlé announced that it had reached an 
agreement to sell its regional spring water brands, purified water 
business and beverage delivery service in the U.S. and Canada to One 
Rock Capital Partners, in partnership with Metropoulos & Co. for USD 4.3 
billion. The transaction is expected to close in spring 2021. 
 
 
 
   Zone Americas (AMS) 
 
 
 
 
   -- 4.8% organic growth: 4.1% RIG; 0.7% pricing. 
 
   -- North America saw mid single-digit organic growth, with strong RIG and 
      negative pricing. 
 
   -- Latin America reached high single-digit organic growth, with positive RIG 
      and pricing. 
 
   -- The underlying trading operating profit margin increased by 40 basis 
      points to 20.5%. 
 
 
 
 
 
 
 
         Sales   Sales                  Organic  UTOP    UTOP   Margin  Margin 
         2020    2019    RIG   Pricing  growth   2020    2019    2020    2019 
          CHF     CHF                              CHF     CHF 
Zone      34.0    37.8                             7.0     7.6 
 AMS       bn      bn    4.1%     0.7%     4.8%     bn      bn   20.5%   20.1% 
 
 
 
 
   Organic growth was 4.8%, with robust RIG of 4.1% and pricing of 0.7%. 
Divestitures reduced sales by 5.0%, largely related to the divestment of 
the U.S. ice cream business. Foreign exchange had a negative impact of 
9.9%, reflecting broad-based currency depreciations against the Swiss 
franc. Reported sales in Zone AMS decreased by 10.1% to CHF 34.0 
billion. 
 
   North America posted mid single-digit organic growth, with strong RIG 
across most product categories. The largest growth contributor was 
Purina PetCare, which saw strong momentum in e-commerce. Its 
science-based and premium brands Purina Pro Plan, Purina ONE and Fancy 
Feast all grew at a double-digit rate. Beverages, including Starbucks 
products, Coffee mate and Nescafé, posted double-digit growth, 
supported by a strong innovation pipeline. Frozen food reported high 
single-digit growth, led by Stouffer's, DiGiorno and Hot Pockets. 
Home-baking products, including Toll House and Carnation, saw elevated 
consumer demand. Gerber baby food posted positive growth, based on 
strong sales development in e-commerce and for the organic range. Water 
and Nestlé Professional reported a sales decrease, reflecting 
reduced demand in out-of-home channels during lockdowns. 
 
   Latin America reported high single-digit organic growth, with positive 
contributions across geographies and most product categories. Brazil 
posted double-digit growth, with strong broad-based demand, particularly 
for Ninho, NAN and Nescafé. Growth in Chile reached a double-digit 
rate, led by dairy, confectionery and ice cream. Mexico saw mid 
single-digit growth, supported by La Lechera and Nescafé. By 
product category, dairy, Purina PetCare, coffee and culinary all posted 
double-digit growth. Led by Brazil, confectionery reported positive 
growth reaching a high single-digit rate in the second half. Sales in 
Nestlé Professional decreased, with growth turning almost flat in 
the fourth quarter led by delivery businesses and on-the-go products. 
 
   The Zone's underlying trading operating profit margin increased by 40 
basis points. Operating leverage, portfolio management and structural 
cost reductions more than offset commodity inflation and 
COVID-19-related costs. 
 
 
 
   Zone Europe, Middle East and North Africa (EMENA) 
 
 
 
 
   -- 2.9% organic growth: 3.3% RIG; -0.4% pricing. 
 
   -- Western Europe saw low single-digit organic growth with solid RIG, 
      partially offset by negative pricing. 
 
   -- Central and Eastern Europe reported mid single-digit organic growth, with 
      strong RIG and negative pricing. 
 
   -- Middle East and North Africa posted low single-digit organic growth, 
      entirely driven by pricing. 
 
   -- The underlying trading operating profit margin grew by 50 basis points to 
      18.6%. 
 
 
 
 
 
 
 
        Sales   Sales                  Organic   UTOP    UTOP   Margin  Margin

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February 18, 2021 01:15 ET (06:15 GMT)