Nestlé Group: Sales Growth Target Beaten – RIG 4.4% 2002

• Double-digit growth in net profit, EPS and dividend proposal
• 4.4 percent rate of real internal sales growth (RIG)
• 6.4 percent organic growth
• 9.7 percent growth at comparable structure and at constant exchange rates
• Peter Brabeck, CEO of Nestlé: "Even in a turbulent year, the Group has delivered healthy, excellent growth and performance. In addition, we have further strengthened the bases of our business by investing in marketing, in R&D and in adapting our structures to ensure Nestlé's long-term growth and operational performance. I am therefore confident that in 2002 we can again meet our target of sustainable value creation."

The Nestlé Group's consolidated sales for 2001 amounted to CHF 84 698 million (2000: 81 422 million), an increase of 4 percent over the preceding year. The trading profit reached CHF 9 218 million, resulting in a margin of 10.9 percent of sales. This is despite the effect of the trade spend initiative as well as the initial costs of the GLOBE project. EBITA (Earnings Before Interest, Taxes and Amortization) improved to CHF 9 713 million. Net profit was up 15.9 percent to CHF 6 681 million, setting a new net margin record of 7.9 percent. Earnings per share increased by 15.7 percent, from CHF 14.91 to CHF 17.25.

With a RIG of 4.4 percent, the Group outperformed its annual growth trend target of 4 percent. Most areas and activities contributed to RIG. The Group recorded particularly strong progress in Eastern Europe, especially in Russia, as well as in much of Asia. China, India and the Indochina Region reached double-digit growth rates, as did some areas in Africa, as well as water in the USA and in Germany. Alcon had an excellent year and the joint-ventures also grew well above Group average.

Sales growth of 9.7 percent at comparable structure and constant exchanges rates, incorporating organic growth of 6.4 percent, resulted in consolidated sales growth of 4 percent in Swiss francs. The key driver of this positive development was the strong RIG of 4.4 percent, while pricing and other factors contributed another 5.3 percent. The strengthening of the Swiss franc had a negative effect of 4.7 percent and divestitures net of acquisitions reduced sales by one percent.

The Ralston Purina acquisition was concluded in mid-December and therefore had no material impact on 2001 results. Its financing, as well as that of other acquisitions in water and in the ice cream sector, increased the Group's net debt to CHF 19.4 billion (CHF 3.0 billion at the end of 2000). In view of the very healthy cash flow generation of CHF 8 614 million (CHF 8 851 million in 2000), the Group's financial situation remains comfortable, as demonstrated by its AAA debt rating.

In 2001 Nestlé enhanced its business platform for achieving healthy and sustainable growth and performance by moving forward with its worldwide GLOBE project successfully concluding its MH97 program with an additional saving of CHF 900 million in 2001, bringing the total savings to CHF 4 billion
launching three new initiatives in the area of production, trade spend and white collar productivity, and continuing its program of divesting non-core or under-performing businesses.
Furthermore, major efforts were undertaken to strengthen the market position of Nestlé's strategic brands and product lines and to extend the availability of Nestlé products to consumers everywhere. Strategically important acquisitions like Ralston Purina, sole ownership of Ice Cream Partners USA and the purchase of Schoeller Holding, as well as several key acquisitions in water demonstrate the Group's determination and capacity to broaden its activities in key areas.

In this context, Nestlé announces the purchase of Brazilian chocolate and confectionery manufacturer Garoto S/A in Vila Velha in the State of Espirito Santo. The company operates two plants with a staff of over 2500 people and generates yearly sales of slightly more than CHF 310 million. This acquisitions strengthens Nestlé's position on the chocolate market in northern Brazil and gives it acces to a complementary range of products.

Barring major unforeseen events, Nestlé expects the current year to deliver a continued positive trend for its business. Economic indicators point to an overall acceleration in North America as well as in parts of Europe. Latin America, some isolated areas excepted, appears to be making progress, whilst the economic situation in most of Asia is satisfactory. The Company therefore expects to progress both in sales and profits during 2002.

At its meeting of February 27, 2002 the Board of Directors approved the fully audited accounts and decided to propose to the General Meeting of Shareholders that the dividend be raised from CHF 5.50 (adjusted for the share split) to CHF 6.40, an increase of 16.4 percent, representing a payout ratio of 37.1 percent. Assuming the General Meeting accepts this proposal, the dividend will be payable on April 17, 2002.

At the General Meeting the terms as directors of Mrs. Vreni Spoerry and Mr. Peter Brabeck-Letmathe will expire. Mrs. Spoerry will present herself for re-election for a period of two years, while Mr. Brabeck is standing for another full five-year term. The Board recommends to the General Meeting to elect Professor Vernon Young, Professor of Nutritional Biochemistry at the Massachusetts Institute of Technology in Boston/Cambridge, USA, as a new director.

The General Meeting of Nestlé S.A. will take place on April 11, 2002 at 15:00 at the Palais de Beaulieu in Lausanne. No transfer of shares affecting voting rights will be registered between March 22, 2002 and the day of the General Meeting. The management report will be available from March 22, 2002, whereas the fully audited financial statements are displayed as of today on the Nestlé Corporate Website (http://www.nestle.com/).

The complete 2001 financial statements of the Nestlé Group can be downloaded from our website