Nestlé: Dynamic Growth in the Americas and Asia Drives Strong Nine-Month Sales

   
Back to News archiveVevey,Oct 21, 2004

  • Third quarter sales accelerated real internal growth to 2.9 percent for the nine months, resulting in 4.5 percent organic growth
  • Sales in Swiss francs stable at CHF 64.6 billion, in spite of the 4.6 percent combined negative impact of foreign exchange fluctuations and divestitures
  • A further improvement of real internal growth and organic growth in the last quarter is expected
  • Positive outlook for constant currency EBITA margin improvement for 2004
  • GLOBE systems implemented in a further three key markets - Canada, the Philippines and Nestlé Purina UK - bringing coverage to 12 countries and more than 10 percent of Group sales

Peter Brabeck-Letmathe, CEO of Nestlé: "The acceleration of real internal growth in the third quarter is the dividend from Nestlé's increased investment in its brands during the first half of the year. This benefit will continue through the final quarter. Achieving 4.5 percent organic growth in spite of the competitive situation in Europe in the first nine months demonstrates the unmatched defensive qualities of Nestlé. These are due to a unique combination of geographic spread and leadership positions in faster growth food categories. For the full year I expect an improved constant currency EBITA margin."

Consolidated sales of the Nestlé Group reached CHF 64.6 billion during the first nine months of 2004. Real internal growth accelerated to 2.9 percent, while pricing added 1.6 percent, resulting in organic growth of 4.5 percent. Foreign exchange fluctuations had a negative impact of 2.7 percent on consolidated Swiss franc sales, while divestitures, net of acquisitions, reduced Swiss franc sales by a further 1.9 percent.

Sales by Management Responsibilities and Geographic Area
  Jan.-Sept. 2004
in CHF billion
Jan.-Sept. 2003
in CHF billion
Jan.-Sept. 2004
Organic Growth (%)
Jan.-Sept. 2004
Real Internal Growth (RIG) (%)
food        
  - Europe (a) 21.0 20.9  -0.3 -1.4
  - Americas 30.3 19.8  +8.3 +5.3
  - Asia, Oceania and Africa 10.9 10.6  +6.7 +4.4
Nestlé Waters  6.4  6.4  -0.6 +1.1
Other Activities *(a)  6.0  6.9 +11.2 +9.7
Total 64.6 64.6  +4.5 +2.9
All calculations based on non-rounded sales figures
* Essentially pharmaceutical products, joint ventures and, for 2003 only, "Trinks"
(a) "Europe" restated for 2003 by excluding Eismann; "Other Activities" include Eismann

Zone Europe delivered organic growth of -0.3 percent, a slight improvement over the first half of the year. Eastern Europe reached 10.7 percent organic growth, while Western Europe, where competitive conditions continue to be challenging, had organic growth of -1.4 percent. The UK saw significant improvement in growth from the half year as a result of a marked upswing in the Group's chocolate and soluble coffee businesses there.

Zone Americas has performed very well this year, with organic growth of 8.3 percent. Latin America achieved an impressive organic growth of 11.3 percent. Mexico continued to be a key driver in the region with organic growth of 15.5 percent, and Brazil's expected improvement materialized with 5.0 percent organic growth for the year to date. All Nestlé businesses in the USA did particularly well, not least due to growth of over 20 percent in nutrition, a strong acceleration of growth in frozen food and continued high growth in pet care.

Zone Asia, Oceania and Africa achieved organic growth of 6.7 percent. Among many strong performances, Greater China, the Philippines, the South/East African region and the Middle East all achieved double-digit organic growth. Japan experienced organic growth of -1.9 percent, reflecting the necessary destocking of soluble coffee ahead of the Nescafé relaunch foreseen for October. Chocolate sales continued to do well in Japan.

Nestlé Waters experienced real internal growth of 1.1 percent, resulting in an organic growth of -0.6 percent. The excellent 14 percent real internal growth in North America was offset by the tough comparison basis and by challenging conditions in Europe.

Sales by Product Groups
  Jan.-Sept. 2004
in CHF billion
Jan.-Sept. 2003
in CHF billion
Jan.-Sept. 2004
Organic Growth (%)
Jan.-Sept. 2004
Real Internal Growth (RIG) (%)
Beverages 16.4 17.5  +2.5  +2.6
Milk Products, Nutrition and Ice Cream 18.0 17.6  +4.9  +1.7
Prepared Dishes and Cooking Aids 11.6 11.5  +3.0  +1.7
PetCare  7.4  7.2  +6.9  +3.9
Chocolate, Confectionery and Biscuits  7.1  7.0  +4.4  +3.1
Pharmaceutical Products  4.1  3.8 +11.5 +10.6
Total 64.6 64.6  +4.5  +2.9
All calculations based on non-rounded sales figures

Among the product categories, there was good organic growth from PetCare with 6.9 percent, from Milk Products, Nutrition and Ice Cream with 4.9 percent, and Chocolate, Confectionery and Biscuits with 4.4 percent; whilst Prepared Dishes and Cooking Aids accelerated to 3.0 percent. Pharmaceutical products, primarily Alcon, achieved an outstanding 11.5 percent organic growth.

The successful "Target 2004+" savings initiative will be completed at the end of 2004, after having achieved savings of over CHF 3 billion. In January 2005, Nestlé will launch a new savings and efficiency program, called "Operation EXCELLENCE 2007", targeting improvements in total delivered costs throughout the entire supply chain, from purchasing to customer service. Nestlé expects this initiative to deliver total savings of CHF 3 billion between 2005 and 2007. The on-going "FitNes" program will be extended until the end of 2007.

Outlook

Nestlé expects that accelerating real internal growth will yield an improved constant currency EBITA margin for the year as a whole. The various cost-efficiency initiatives, as well as GLOBE, are on track to reach their targets for 2004. This performance, achieved in a highly competitive environment, demonstrates that Nestlé remains committed to both delivering long-term, sustainable sales growth as well as improving operating margins and return on invested capital.