Vevey / CH. (nsa) For 2011 the Swiss Nestle Group reported sales of 83,6 billion CHF and 7,5 percent organic growth on top of good growth in recent years. The organic growth was composed of 3,9 percent real internal growth and pricing of 3,6 percent. Foreign exchange had a negative impact of 13,4 percent and divestitures, net of acquisitions, a further 4,2 percent, mainly Alcon. Excluding the impact of the sale of Alcon, sales were down by 4,8 percent.
- The Group´s trading operating profit was 12,5 billion CHF. The margin increased 60 basis points (90 basis points in constant currencies) to 15,0 percent.
- Nestle Continuous Excellence in all areas of the company continued to create significant savings ahead of target, helping to partially offset major input cost pressures.
- Higher input costs increased the cost of goods sold by 190 basis points.
- Total marketing costs were down 100 basis points, mainly the result of leveraging our sales and marketing structures. Consumer facing marketing remained at almost the same level after two years of double-digit increases, which allowed us to further build our market positions in most categories.
- Administrative costs were down 80 basis points.
- Net profit was 9,5 billion CHF, up 8,1 percent on a continuing basis.
- The underlying earnings per share (EPS) increased 7,8 percent in constant currencies.
- Operating cash flow was 9,8 billion CHF, a similar level to 2010 excluding Alcon´s cash flow in 2010 and the impact of foreign exchange in 2011.
Paul Bulcke, Nestle CEO: «We delivered good performance, top and bottom line, in both emerging and developed markets in 2011. It was a challenging year, and we do not expect 2012 to be any easier. We have continued to invest for the future and strengthen our capabilities across the world. We have established new partnerships in China. Nestle Health Science has got off to a good start. Our innovation is creating opportunities in all categories, whether bringing new consumers to our brands in emerging markets, or building on our consumers´ engagement with our brands in the developed world. Our people are aligned behind our strategic roadmap, which is as relevant in today´s new reality as ever, to drive sustainable performance improvement. We are therefore well positioned in 2012 to deliver the Nestle Model of organic growth between five percent and six percent as well as an improved margin and underlying earnings per share in constant currencies».
Business Review
The Nestle Group continued to grow in all regions of the world, with 5,0 percent organic growth in Europe, 6,4 percent in the Americas and 13,1 percent in Asia, Oceania and Africa. Our business grew 13,3 percent in emerging markets and 4,3 percent in developed markets.
Trading operating profit margin for the Group as a whole and in many of our businesses improved in a year characterised by severe cost pressure and intensified competition around the world. Growth leverage combined with Nestle Continuous Excellence contributed significantly.
We continued to build our capabilities, investing in areas for future growth. Our two new partnerships with Yinlu and Hsu Fu Chi will deepen our engagement with Chinese consumers. Nestle Health Science and the Nestle Institute of Health Sciences are off to a good start in their first year of operation. These initiatives along with other investments are creating major growth platforms for the future.
Zone Americas
Sales of 26,8 billion CHF, 6,2 percent organic growth, 1,1 percent real internal growth; 18,4 percent trading operating profit margin, minus 30 basis points.
- The Zone achieved growth in both North America and Latin America.
- In North America most of our businesses contributed to the positive performance despite subdued consumer confidence. Pizza strengthened its lead over its competitors with a good performance by DiGiorno. Ice cream saw growth in snacks, Häagen-Dazs and Skinny Cow. The extension of the Skinny Cow brand into the chocolate category helped to drive growth there. Soluble coffee achieved good growth with Taster´s Choice and Nescafe Clássico. Coffee-mate benefited from the successful launch of Natural Bliss. The frozen segment continued to be challenging but Lean Cuisine held share. pet-care built on its leading market position with strong growth from Purina ONE Beyond and Dog Chow,and achieved share gains in all categories and channels.
- There was double-digit growth in Latin America where demand remained strong. Several markets recorded growth in double digits with Mexico a highlight. It was a similar story in many categories including powdered beverages with Nescau and Nestea, soluble coffee with Nescafe and ambient culinary. Maggi achieved excellent growth in key markets helped by the successful launches of new innovations, Maggi Doble Gusto bouillon cubes and Maggi Caldo Casero bouillon. For pet-care Purina Proplan, Dog Chow and Cat Chow also saw double-digit growth.
- The Zone´s trading operating profit margin was 30 basis points lower as higher input costs were not fully compensated by efficiencies and pricing.
Zone Europe
Sales of 15,2 billion CHF, 4,0 percent organic growth, 1,8 percent real internal growth; 15,6 percent trading operating profit margin, plus 230 basis points.
- The Zone achieved growth in Western and Central / Eastern Europe.
- In Western Europe all markets overcame tough economic conditions to deliver real internal growth. Portugal, Italy, Greece and Spain collectively achieved 3,7 percent organic growth. France, the Benelux countries and Great Britain did well. All the key categories grew with soluble coffee, chilled culinary, frozen pizza and pet-care among the highlights.
- In Central and Eastern Europe there were strong performances in Ukraine and Romania and in the Adriatic region. Trading conditions remained tough in Russia and Poland.
- Innovation continued to drive our European growth with a major contribution from brands like Nescafe Dolce Gusto, Nescafe Sensazione in soluble coffee and Herta in chilled culinary. The Juicy range of spice-filled roasting bags continued to be a strong contributor for Maggi in culinary. Growth in Popularly Positioned Products (PPPs) was more than twice the level of that achieved by the Zone as whole. In pet-care Felix did well, particularly the successful roll-out into Central and Eastern Europe.
- The Zone´s trading operating profit margin improved 230 basis points. Key drivers included the growth in Western Europe, pricing, efficiencies, as well as the benefits of past restructuring including changes to retirement plans.
Zone Asia, Oceania and Africa
Sales of 15,3 billion CHF, 11,9 percent organic growth, 7,9 percent real internal growth; 18,9 percent trading operating profit margin, plus 90 basis points.
- The Zone achieved growth in emerging and developed markets.
- Nestle´s presence in the region is deep-rooted, demonstrated by four 100 year anniversaries: Türkiye in 2009, Philippines in 2011, and Malaysia and India in 2012.
- The emerging markets produced double-digit growth. The highlights included China, India, Pakistan, North Africa, Central West Africa despite the conflict in Ivory Coast, and Egypt in spite of the turmoil endured for much of the year. In a volatile environment the Zone remained focused on deepening distribution, aiming to service an additional one million small retail outlets between 2010 and 2012. We invested in line extensions and new factories across the Zone. We also established promising partnerships in China with Yinlu and Hsu Fu Chi.
- There were many successful initiatives involving Popularly Positioned Products (PPPs) which were the key drivers of the Zone´s growth. For example, Maggi bouillons in Africa and Nido Essentia in Egypt. Innovation also played a significant role with successful launches for Nescafe Milky in China, Nescafe 3:1 in Thailand, Nido Fortified in several African countries and the continuing roll-out of peelable ice cream. The Maggi flavour world and noodles range was expanded in markets across the Zone.
- The developed markets´ performance was helped by a strong year for Japan, our people reacting fast and creatively in a market badly affected by natural disasters. There was a good performance in the coffee systems market by Nescafe Dolce Gusto and Barista, as well as in premium with Nescafe Koumibaisen. KitKat Black also continued to enjoy strong sales there.
- The Zone´s trading operating profit margin was up 90 basis points largely thanks to innovation and renovation across all areas and initiatives such as distribution, manufacturing and procurement supported by Nestle Continuous Excellence.
Nestle Waters
Sales of 6,5 billion CHF, 5,2 percent organic growth, 3,4 percent real internal growth; 8,0 percent trading operating profit margin, plus 90 basis points.
Nestle Nutrition
Sales of 7,2 billion CHF, 7,3 percent organic growth, 4,5 percent real internal growth; 20,0 percent trading operating profit margin, minus 30 basis points.
Other
Sales of 12,6 billion CHF, 11,4 percent organic growth, 8,3 percent real internal growth; 16,8 percent trading operating profit margin unchanged.
- Nestle Professional achieved good growth both in developed and emerging markets, especially in China, India and Brazil, in both beverages and food. We continued to roll out our innovative premium and super-premium beverage solutions (Nescafe Alegria, Nescafe Milano and Viaggi) to all regions. The established Nescafe and creamers businesses continued to perform well. The food business benefited from innovations such as Maggi Premium Bouillons and Chef Natural Flakes for sauces, with continued focus on growing our customised solutions, services capability and customer intimacy.
- Nespresso had another strong year, with growth over 20 percent on a sales base well in excess of three billion CHF. The continued strong consumption in Nespresso´s core markets, as well as geographical expansion and the constant innovation of products and systems, ensured a strong performance in the face of intensified competition. The unique Nespresso service proposition including boutiques, e-commerce and call centres builds intimacy with our consumers which helps further reinforce our prospects for future growth.
- Nestle Health Science in its first year of operations built up its capabilities with three significant investments. At the same time it achieved strong growth with contributions from innovative products like Resource Thicken Up Clear, the Peptamen range, and the relaunch of Boost which achieved high-teens growth in the US. Its core platforms; ageing medical care, critical care and surgery, and paediatric medical care all grew well, most of them double-digit. The 2011 acquisitions have been integrated and are delivering to expectation. Prometheus achieved double-digit sales growth. Vitaflo, acquired in 2010, also reported double-digit growth, driven by innovations for patients with metabolic conditions.
- CPW grew mid-single digit, achieving share gains in the majority of its markets. Trading conditions were toughest in Southern Europe, but growth was resilient in the rest of Europe and double-digit in many emerging markets. BPW had a positive year and will benefit in 2012 from its reshaping to cover Europe and Canada.
- Galderma grew double-digit and has successfully integrated Q-Med, acquired in March and accretive to growth. Laboratoires inneov made good progress with a particularly strong performance in Latin America.
- The «Other» trading operating profit margin was unchanged at 16,8 percent, reflecting a mixed picture by constituent. Nespresso, Nestle Health Science and the food and beverages joint ventures performed well, whilst Nestle Professional was impacted by input costs despite a strong programme of savings.
Board proposals to the Annual General Meeting
At the Annual General Meeting on 19 April, the Board of Directors will propose a dividend of 1,95 CHF per share. The net dividend will be payable as from 26 April 2012. The Board will also propose the cancellation of the shares bought back under the ten billion CHF buy-back programme completed in 2011.
The Board will propose the re-election of Daniel Borel as a director for a further term of three years, as well as the election of Henri de Castries. He is the Chairman and Chief Executive Officer of the AXA Group. He had a distinguished career in the French Finance Ministry before taking on several important executive roles within the AXA Group. Carolina Müller-Möhl and Jean-Rene Fourtou are not standing for re-election. The Board wishes to thank them for their highly appreciated services provided to our company over the past years.
Positive 2012 outlook
In view of continuing economic uncertainties and volatility, we do not expect 2012 to be any easier than previous years. But we continue to invest for the future and strengthen our capabilities across the world. Our innovation is creating opportunities in all categories, bringing new consumers to our brands in emerging markets, building on our consumers´ engagement with our brands in the developed world. Our people are aligned behind our strategic roadmap, which is as relevant as ever, to drive sustainable performance improvement. We are therefore well positioned in 2012 to deliver the Nestle Model of organic growth between five percent and six percent, as well as an improvement in the trading operating profit margin and underlying earnings per share in constant currencies.
