Nestlé S.A. : FY 2012: Good performance across the board, Nestlé model delivered again
Nestlé S.A. /
Nestlé S.A. : FY 2012: Good performance across the board, Nestlé model delivered
again
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FY 2012: Good performance across the board, Nestlé model delivered again
* Sales of CHF 92.2 billion, up CHF 8.6 billion, +10.2%
* 5.9% organic growth, 3.1% real internal growth
* Trading operating profit up 11.8% to CHF 14.0 billion, margin up 20 basis
points to 15.2%
* Earnings per share up 12.2% to CHF 3.33
* Proposed dividend increased to CHF 2.05 per share
* Operating cash flow increased CHF 5.6 billion to CHF 15.8 billion
* 2013 outlook: Organic growth of 5% to 6%, improved trading operating profit
margin and underlying earnings per share in constant currencies
Paul Bulcke, Nestlé CEO: "In 2012 we delivered on our commitment: a good, broad-
based performance building upon the profitable growth achieved consistently over
previous years. All our businesses, both in developed and in emerging markets
contributed. Our nutrition, health and wellness agenda continued to bring
enhanced benefits for consumers, greater brand differentiation in the market
place and increased value for shareholders. With creativity and innovation, our
people laid the foundations for future growth. We increased the support behind
our brands. We further strengthened our global R&D network with new facilities
in India and China. We developed new capabilities for Nestlé Health Science and
acquired Wyeth Nutrition. We invested responsibly and sustainably, expanding our
manufacturing footprint, while continuing to reduce the environmental impact of
our business. Despite the many challenges 2013 will no doubt bring, we expect to
deliver the Nestlé Model of organic growth between 5% and 6% as well as an
improved margin and underlying earnings per share in constant currencies."
Group results
Vevey, 14 February 2013 - Nestlé's reported sales were up CHF 8.6 billion, or
10.2%, to CHF 92.2 billion. Organic growth was 5.9%, building on the strong
growth of recent years, and was composed of 3.1% real internal growth and 2.8%
pricing. After years of adverse impact, foreign exchange added 1.7% to sales,
and acquisitions, net of divestitures, a further 2.6%.
* The Group's trading operating profit was CHF 14.0 billion, up CHF 1.5
billion or 11.8%. The trading operating profit margin was 15.2%, up 20 basis
points, +10 basis points in constant currencies.
* The cost of goods sold fell by 30 basis points and distribution costs were
down 20 basis points. Nestlé Continuous Excellence delivered efficiencies of
over CHF 1.5 billion, building on savings in previous years.
* We increased the marketing support behind our brands bringing total
marketing costs up by 30 basis points. Consumer facing spend rose about 8%
in constant currencies.
* Administrative costs were up by 20 basis points, following last year's drop
of 80 basis points caused by the restructuring of pension plans in 2011.
* Net profit was up CHF 1.1 billion to CHF 10.6 billion, and earnings per
share were up 12.2% reported to CHF 3.33. Underlying earnings per share in
constant currencies were up 7.5%.
* We increased operating cash flow by CHF 5.6 billion to CHF 15.8 billion,
reflecting primarily a substantial improvement in our working capital.
Business review
* The Nestlé Group's growth was broad-based across all categories and
geographies, with 5.9% organic growth in the Americas, 2.4% in Europe and
10.3% in Asia, Oceania and Africa.
* In spite of the challenging trading environment in the developed world our
innovation in products, systems and routes to market delivered organic
growth of 2.5%. In emerging markets we grew 11%, achieving sales of CHF
39.3 billion.
* We took further steps to enhance our position as the trusted leader in
nutrition, health and wellness. We continued to reformulate products to make
them healthier and tastier. We leveraged our research and development
capabilities to deliver good nutrition and develop solutions to help people
manage diet-related illnesses. We continued to build partnerships with
organisations active in the fight against non-communicable diseases. We
acquired Wyeth Nutrition and a number of new capabilities for Nestlé Health
Science. We inaugurated the Nestlé Institute of Health Sciences, added two
new R&D units in China, a new R&D centre in India and opened a global centre
for clinical trials in Switzerland.
Zone Americas
Sales of CHF 28.9 billion, 5.2% organic growth, 0.6% real internal growth;
18.6% trading operating profit margin, +20 basis points.
* The Zone grew in both North America and Latin America.
·        In North America we focused on increasing the value perception of our
frozen food business, with improved recipes and nutritional profiles, a new
promotional strategy and communication, whilst also prioritising the higher
value segments within ice cream. The result has been generally improving share
trends across our categories. Frozen was helped by innovations including
DiGiorno Italian Favorites and Lean Cuisine Salad Additions. Ice cream grew in
the higher value areas, super-premium and snacks, reflecting our strategy to
optimise the category mix. Another innovation, Häagen Dazs Gelato, was launched
successfully. The coffee and creamers businesses performed well in categories
that are enjoying good growth. The Coffee-Mate liquid range, including Natural
Bliss, was the highlight in creamers, whilst Nescafé Clásico was the growth
driver in soluble coffee. Petcare continued to grow volume and improve shares,
with line extensions and launches. Friskies Tasty Treasures for cats and Beneful
Fiesta for dogs were among a number of strong performers.
·        In Latin America where we have continued to see generally positive
trends, we drove innovation through regional roll-outs under our well-
established brands. In Brazil, most categories grew double-digit. Highlights
included the successful launches of Kit Kat and peelable ice cream, as well as
the continuing good performance of Nescafé Dolce Gusto. In Mexico, coffee helped
drive growth, from popularly positioned products to Nescafé Dolce Gusto. The
other regions contributed positively. Petcare grew double-digit across Latin
America.
* The Zone's trading operating profit margin increased 20 basis points due to
necessary pricing actions and consistent discipline in cost savings.
Zone Europe
Sales of CHF 15.4 billion, 1.8% organic growth, 1.1% real internal growth;
15.7% trading operating profit margin, + 10 basis points.
* The Zone grew in both Western and Central / Eastern Europe, demonstrating
that even in a challenging trading environment, there are opportunities to
achieve above-market growth and share gains.
·        We continued to grow in Western Europe, maintaining momentum from last
year. This growth, fuelled by a strong innovation pipeline combined with a
rigorous approach to efficiencies, is enabling the Zone to increase both its
brand investment and margin. This should enable us to maintain our growth
momentum in 2013. In Greece and Spain trading conditions were extremely tough
but we were able to deliver growth. We also grew well in Great Britain where we
made real progress in the fast-growing online, convenience and discounter
channels. In France we gained market share in most categories. Across the Zone,
Nescafé Dolce Gusto continued to be a key growth engine and Maggi also performed
well in many markets. The performance of petcare, another key growth driver, was
driven by the premium category, in particular Felix, Gourmet, Proplan and Purina
ONE.
·        In Central Europe and Eastern Europe we have enhanced our competitive
position in coffee and petcare, with increased local manufacturing and
distribution capabilities. There was continued improving momentum in Russia,
with Nescafé, ice cream and chocolate all contributing good real internal
growth. The other parts of the region also performed well.
* The Zone's trading operating profit margin increased 10 basis points,
reflecting volume growth and good cost management, and was achieved whilst
increasing brand investment. This improvement built on the 230 basis points
improvement in 2011.
Zone Asia, Oceania and Africa
Sales of CHF 18.9 billion, 8.4% organic growth, 5.9% real internal growth;
19.0% trading operating profit margin, +10 basis points.
·        The Zone grew in the developed markets and in the emerging markets
where we continued to focus on increasing distribution and rolling out popularly
positioned products with strong nutritional profiles. We also invested in new
manufacturing facilities in different markets including China, India, the
Philippines, South Africa, Angola and Vietnam.
* Amongst emerging markets, we achieved double-digit growth in Africa, China,
the Middle East and Indonesia. There were strong contributions from powdered
beverages, predominantly Milo, and culinary, mainly Maggi, as well as
chocolate, ice cream and ready-to-drink beverages. Innovations included
Maggi Magic Meals, Milo High Fibre and Nestlé Esquimo Mummy.
* Japan was the strongest performer amongst the developed markets, with
Nescafé Dolce Gusto and Kit Kat both highlights. Kit Kat became the number
one brand in the chocolate category.
* The Zone's trading operating profit margin rose by 10 basis points.
Nestlé Waters
Sales of CHF 7.2 billion, 6.4% organic growth, 4.9% real internal growth; 8.9%
trading operating profit margin,
+90 basis points.
* Nestlé Waters continued to perform well, further strengthening its positions
in developed markets in North America and Europe and increasing the scale of
its operations in emerging markets. It was helped by strong sales of
premium brands, S.Pellegrino and Perrier. Nestlé Pure Life reinforced its
leading position globally with strong double digit top line, confirming
healthy hydration as core to the bottled water category growth.
* In North America, regional brands including Poland Spring, Ice Mountain and
Zephyrhills benefited from growth in the category. The "Home & Office"
business also performed well.
* In Europe, good performances in France and Great Britain compensated for the
subdued environment in Southern Europe.
* Emerging markets grew dynamically, with double-digit growth in Turkey,
Egypt, Mexico and Thailand, amongst others.
* The Nestlé Waters trading operating profit margin increased due to the
division's growth and a high level of efficiencies in manufacturing,
procurement and distribution.
Nestlé Nutrition
Sales of CHF 7.9 billion, 6.7% organic growth, 3.0% real internal growth; 19.2%
trading operating profit margin,
-80 basis points.
* 2012 was a good year for infant nutrition, particularly in emerging markets,
including the BRICs and Africa, with double-digit growth in both formula and
cereals. It also achieved growth in developed markets, despite low birth
rates, with good performances in particular in France and the US, where it
gained share. Innovations included the continued global roll-out of anti-
colic formula, Gerber pouches and shelf-stable infant yoghurts in the US.
The acquisition of Wyeth Nutrition, completed in November, will enhance
materially our position and capabilities in key emerging markets, and
improve the growth profile of our nutrition business.
* Weight Management continued to under-perform. Performance Nutrition grew its
distribution, aligned with its focus on its core consumers, and released a
renovated PowerBar ProteinPlus.
* Nestlé Nutrition's trading operating profit margin was impacted by Weight
Management and transition and integration costs for Wyeth Nutrition.
Other activities
Sales of CHF 13.9 billion, 8.7% organic growth, 6.5% real internal growth,
17.2% trading operating profit margin, +40 basis points.
* Nestlé Professional achieved growth in the developed markets and double-
digit growth in the emerging markets, with both food and beverages
contributing. The beverages business enjoyed good overall growth, driven by
double-digit growth in system solutions, where sales are now at CHF 1
billion for the first time. Nescafé Alegria is now in over 60 markets,
whilst Nescafé Milano is in more than 30 and expanding. The food business
also contributed solid growth, driven by innovation in sweet and savoury
flavour solutions and close customer collaboration.
* Nespresso again delivered a strong performance with double-digit growth. The
company continued to reinforce its position in Europe and expanded its
presence at an accelerated pace in Asia Pacific and the Americas.
Innovations included five new Grand Cru coffees and two new machines,
Maestria and U. The boutique network saw 52 new openings to pass 300
locations in 48 countries, and new services were launched for Nespresso Club
Members. Nespresso sourced more than two-thirds of its green coffee through
its unique AAA Sustainable Quality programme and reached its 75% recycling
capacity commitment one year ahead of plan.
* Nestlé Health Science continued to build its pipeline and capabilities
through an investment in Accera and the creation of a joint venture with
Chi-Med group, called Nutrition Science Partners. We inaugurated the Nestlé
Institute of Health Sciences. The product portfolio performed well despite a
challenging environment in some markets in southern Europe, affected by
changes to reimbursement arrangements. Aging Medical Care and Critical Care
and Surgery both benefited from product innovations and roll-outs.
* Cereal Partners Worldwide achieved double digit growth in emerging markets,
which compensated weak category dynamics in developed markets. The Beverage
Partners Worldwide realignment is complete. The pharmaceuticals joint
ventures, Galderma and Laboratoires innéov, together achieved mid single-
digit growth.
Board proposals to the Annual General Meeting
At the Annual General Meeting on 11 April 2013, the Board of Directors will
propose an increase in the dividend to CHF 2.05 per share. The last trading day
with entitlement to receive the dividend is 12 April 2013. The net dividend will
be payable as from 18 April 2013. Shareholders who are on record in the share
register with voting rights on 4 April 2013 at 12:00 noon (CEST) will be
entitled to exercise their voting rights.
The Board will propose the re-elections of Peter Brabeck-Letmathe, Steven G.
Hoch, Titia de Lange and Jean-Pierre Roth as directors, each for a further term
of three years. The Board will also propose the election of Eva Cheng. Ms. Cheng
is the former Corporate Executive Vice President responsible for Greater China
and Southeast Asia Region of Amway Corporation, a U.S. based global consumer
product company. André Kudelski has reached the end of his third term and is not
standing for re-election. The Board wishes to thank him for his service over the
past twelve years which was highly appreciated.
Positive 2013 outlook
The environment looks to be every bit as challenging in 2013 as it was in 2012.
But 2013 will again provide opportunities to leverage our competitive
advantages, deliver on our growth opportunities and benefit from our drive for
continuous improvement across the Group. We expect, therefore, to deliver the
Nestlé Model once again in 2013: organic growth between 5% and 6% together with
an improved trading operating profit margin and underlying earnings per share in
constant currency, as well as improvement in our capital efficiency.
Contacts
Media: Robin Tickle    Tel.: +41 21 924 22 00
Investors: Roddy Child-Villiers    Tel.: +41 21 924 36 22
Annex
Full-year sales and trading operating profit margins overview
+---------------------+---------------+------------+---------------------------+
|Â | Â | Â | Trading operating profit |
| | | | margins |
| +---------------+------------+------------+--------------+
| |Jan.-Dec. 2012 | Jan.-Dec. | Jan.-Dec. | Change vs. |
| | Sales | 2012 | 2012 |Jan.-Dec. 2011|
| |in CHF millions| Organic | (%) | |
| | | Growth | | |
| | | (%) | | |
| | | | | |
| | | Â | | |
+---------------------+---------------+------------+------------+--------------+
|By operating segment |
+---------------------+---------------+------------+------------+--------------+
|Â | | | | |
| | | | | |
|· Zone Americas | 28'927 | +5.2 | 18.6 | +20 bps |
+---------------------+---------------+------------+------------+--------------+
|· Zone Europe | 15'385 | +1.8 | 15.7 | +10 bps |
+---------------------+---------------+------------+------------+--------------+
|· Zone Asia, Oceania,| 18'912 | +8.4 | 19.0 | +10 bps |
|Africa | | | | |
+---------------------+---------------+------------+------------+--------------+
|Nestlé Waters | 7'174 | +6.4 | 8.9 | +90 bps |
+---------------------+---------------+------------+------------+--------------+
|Nestlé Nutrition | 7'858 | +6.7 | 19.2 | -80 bps |
+---------------------+---------------+------------+------------+--------------+
|Other | 13'930 | +8.7 | 17.2 | +40 bps |
+---------------------+---------------+-+----------+-+----------+--------------+
|Total Group | 92'186 | +5.9 | 15.2 | +20 bps |
+---------------------+-----------------+------------+----------+--------------+
|By product |
+---------------------+-----------------+------------+----------+--------------+
|Powdered and liquid| 20'038 | +8.9 | 22.5 | -20 bps |
|beverages | | | | |
+---------------------+-----------------+------------+----------+--------------+
|Water | 7'178 | +6.4 | 8.9 | +90 bps |
+---------------------+-----------------+------------+----------+--------------+
|Milk products and ice| 18'564 | +5.7 | 15.1 | +140 bps |
|cream | | | | |
+---------------------+-----------------+------------+----------+--------------+
|Nutrition &| 10'726 | +6.7 | 18.3 | -40 bps |
|HealthCare | | | | |
+---------------------+-----------------+------------+----------+--------------+
|Prepared dishes and| 14'432 | +1.4 | 14.1 | -40 bps |
|cooking aids | | | | |
+---------------------+-----------------+------------+----------+--------------+
|Confectionery | 10'438 | +4.8 | 17.1 | +30 bps |
+---------------------+-----------------+------------+----------+--------------+
|PetCare | 10'810 | +7.0 | 20.4 | -20 bps |
+---------------------+-----------------+------------+----------+--------------+
|Total Group | 92'186 | +5.9 | 15.2 | +20 bps |
+---------------------+---------------+-+----------+-+----------+--------------+
 | | | | | |
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