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NESTLÉ – Full – Year 2013: 4.6% Organic Growth, Trading Operating Profit Margin up 20 basis points, up 40 basis points in constant currencies

VEVEY, Switzerland –  Nestle, the world’s biggest food and drink maker, on Thursday reported full year 2013 results.

Executive Summary

  • Sales of CHF 92.2 billion, +2.7%
  • 4.6% organic growth, 3.1% real internal growth
  • Trading operating profit margin up 20 basis points to 15.2%, up 40 basis points in constant currencies
  • Underlying earnings per share up 11.0% in constant currencies
  • Strong operating cash flow at CHF 15.0 billion
  • Proposed dividend increased to CHF 2.15 per share

Paul Bulcke, Nestlé CEO: “The macro-environment in 2013 was one of soft growth, minimal in the developed world and below recent levels in the emerging markets. Our response was to increase brand support, accelerate innovation, and to ensure our pricing was sensitive to consumer needs.

“This gave impetus to our real internal growth and, together with efficiencies and structural cost savings, contributed to our margin improvement and strong cash flow. We also intensified our portfolio management which resulted in some charges in 2013 but ensures we are putting our people and resources behind the best opportunities.

“Our long-term strategic direction is to be the leader in nutrition, health and wellness. We reinforced this strategy with the creation of Nestlé Health Science, and we are extending it now to the field of specialised medical skin treatments by setting up Nestlé Skin Health S.A.

“Last year was challenging and 2014 will likely be the same. We will continue to be disciplined in driving our performance in line with the Nestlé Model of profitable growth and resource efficiency. I therefore expect our 2014 performance to be similar to last year and again weighted to the second half, outperforming the market, with growth around 5% and improvements in margins, underlying earnings per share in constant currencies and capital efficiency.

Group results

In 2013 Nestlé’s sales increased by 2.7% to CHF 92.2 billion, impacted by negative foreign exchange of 3.7%. Organic growth was 4.6%, composed of 3.1% real internal growth and 1.5% pricing. Acquisitions, net of divestitures, added 1.8% to sales.

  • The Group’s trading operating profit was CHF 14.0 billion, representing a margin of 15.2%, up 20 basis points versus last year, and up 40 basis points in constant currencies.
  • Nestlé Continuous Excellence again delivered more than CHF 1.5 billion in efficiencies in all areas of the business. This, together with reduced structural costs, enabled us to increase our brand support and absorb higher restructuring costs.
  • The cost of goods sold fell by 70 basis points as a percentage of sales, also supported by a favourable input cost environment.
  • Distribution costs were down by 10 basis points.
  • Administrative costs decreased by 40 basis points, reflecting structural efficiencies including in our pension plans.
  • Total marketing costs increased by 60 basis points with consumer facing spend up 16.3% in constant currencies.
  • Net profit was CHF 10.0 billion down slightly due to the costs of portfolio restructuring and the currency impact. As a consequence, reported earnings per share were CHF 3.14, down 2.2%. Underlying earnings per share in constant currencies were up 11.0%.
  • The Group’s operating cash flow continued to be strong at CHF 15.0 billion.

Business review

  • The Nestlé Group’s organic growth was broad-based, 5.1% in the Americas, 0.8% in Europe and 7.4% in Asia, Oceania and Africa. Our business in developed markets grew 1.0%, achieving sales of CHF 51.4 billion. Our emerging markets business grew 9.3%, delivering sales of CHF 40.8 billion.
  • Real internal growth was 2.1% in the Americas, 1.9% in Europe and 5.9% in Asia, Oceania and Africa. This growth reflected a focus on the priorities that enabled us to outperform the market: stay competitive by ensuring we offered consumers best value, invest behind our brands and build the capabilities to win in today’s challenging environment.

Nespresso

Nespresso continued to perform strongly globally. It grew in its core European markets and accelerated in the Americas, supported by new Grands Crus coffee and continuous innovation in machines and services, as well as increasing brand awareness and continued geographic expansion with 48 boutique openings in 2013.

Outlook

“Last year was challenging and 2014 will likely be the same. We will continue to be disciplined in driving our performance in line with the Nestlé Model of profitable growth and resource efficiency.