Nestlé Group in 2002: Sales, Net Profit, EBITA and Cash Flow at Record Levels

   
To Press Releases listVevey,Feb 27, 2003

Sales by Management Responsibilities and Geographic Area
Reported Results FY 2002 FY 2001 % change
Sales CHF 89 160 mio CHF 84 698 mio  +5.3
EBITA CHF 10 940 mio CHF  9 987 mio  +9.5
Net Profit CHF  7 564 mio CHF  6 681 mio +13.2
EPS CHF 19.51 CHF 17.25 +13.1
Dividend Proposal CHF  7.00 CHF  6.40  +9.4

  • At constant exchange rates: sales up 13 percent; EBITA up 19 percent, net profit up 19 percent
  • Substantial margin improvement: EBITA from 11.8 percent to record 12.3 percent; net profit from 7.9 percent to 8.5 percent
  • 4.9 percent organic growth; RIG 3.4 percent
  • Operating cash flow up 19 percent to CHF 10.2 billion, up 130 basis points to 11.5 percent of sales
  • Peter Brabeck, CEO of Nestlé: "Nestlé did well in 2002. Achieving record levels in sales, EBITA, net profit, and cash flow in Swiss francs in a period of currency headwinds, economic downturns and political uncertainty shows that we are on the right track. We have continued to improve performance, we have pursued our future-oriented investments and have seen new R&D driven sectors become significant businesses. We have also made strategic acquisitions as well as divestments, and have been able to improve Nestlé's position at the head of the food industry. In spite of political and economic turbulence and the continued strength of the Swiss franc, I am confident that in 2003 Nestlé will be able to further improve its performance."

In 2002 the Nestlé Group reached consolidated sales of CHF 89 160 million (2001: 84 698 million), an increase of 5.3 percent over the preceding year. EBITA (Earnings Before Interest, Taxes and Amortization of goodwill) improved to CHF 10 940 million, resulting in a record margin of 12.3 percent. Net profit was up 13.2 percent to CHF 7 564 million with a margin of 8.5 percent (7.9 percent in 2001). Earnings per share increased 13.1 percent, from CHF 17.25 to CHF 19.51.

2002 was a year marked by political uncertainty, economic downturns and currency crises in many parts of the world. Notwithstanding their impact on consumer purchasing power and confidence, the Group achieved very satisfactory full-year results, with outstanding improvements in sales growth and EBITA at constant exchange rates.

Sales

Organic growth (real internal growth of 3.4 percent in 2002 plus positive pricing impact of 1.5 percent) amounted to 4.9 percent, reflecting the strength of the Group's brands, which benefit from constant innovation and support. All Zones contributed to growth and a number of key markets showed excellent results. Highlights in the Americas were the USA and Canada, as well as Brazil, which recorded growth above the level achieved in 2001. In countries such as Japan, Mexico and Argentina, the general economic slowdown weighed on sales. Zone Europe realized accelerated growth in the second half of the year, with France, Nestlé's largest European market, growing at more than twice the level of the previous year. In 2002 Russia for the first time achieved sales of over one billion Swiss francs, and Greater China exceeded CHF 1.4 billion in sales. The Group's water business had a very successful year and managed to increase sales, market share and profits in a highly competitive environment. Nestlé Purina PetCare USA managed to grow both sales and market share while undergoing a very successful integration process. Nestlé Purina PetCare Europe focused on improving margins through product rationalization.

In a year marked by the partial IPO completed in March 2002, Alcon showed excellent progress in terms of sales and profits and ended the year with sales of over USD 3 billion. Group sales at constant exchange rates grew 13 percent indicating the severity of the impact of the Swiss franc's strength on the Group's consolidated sales. That negative impact amounted to 8 percent, while acquisitions, net of divestments, added 8.4 percent to reported sales.

Profits

Nestlé Group EBITA increased to CHF 10 940 million. With a margin improvement of 50 basis points to 12.3 percent, Nestlé is returning to its tradition of annual improvements in margins. This has been achieved despite increased investment in GLOBE, a negative foreign exchange impact and additional pension-related costs. The improvement is particularly marked in Europe where management is undertaking a coordinated, broad-based effort to enhance asset utilization and leverage regional synergies. The Group considers performance improvement as one of its priorities. Four major initiatives are being implemented at this time, covering areas such as production, white collar productivity, and distribution channel performance. The GLOBE (Global Business Excellence) program went live successfully in three test markets in 2002. The program is on budget and on time.

Many product groups improved their profit margins, including ice cream and chilled dairy, as well as milk powders, prepared dishes and cooking aids, Cereal Partners Worldwide as well as pet care. In confectionery, the Group managed to maintain margins in spite of higher cocoa prices.

Net profit grew 13.2 percent from CHF 6 681 million to CHF 7 564 million and earnings per share improved from CHF 17.25 to CHF 19.51, an increase of 13.1 percent. These results were influenced by a number of one-off events. On the one hand, there were gains from the partial IPO of Alcon and from the disposal of Food Ingredients Specialities. On the other, there were charges relating to restructuring and to impairments of both goodwill and property (plants and equipment). This results from the Group's commitment to optimizing manufacturing performance on a regional and global basis. The series of closures with which these write-downs are associated is an investment in future performance which will be closely monitored to ensure an appropriate pay-back. The improved EBITA margin therefore gives a clearer indication than the net profit margin of the like for like performance of the Group's business in 2002 over 2001. It should also be noted that these charges will have a positive effect on the future margin development.

Cash Flow and Net Debt

The operating cash fIow was at the record level of CHF 10 248 million, or 11.5 percent of sales, an increase of 130 basis points over 2001. The Group's net debt stood at CHF 14.96 billion, a significant reduction from the CHF 19.39 billion at the end of 2001. Capital expenditure amounted to CHF 3.58 billion, or 4 percent of sales, down from CHF 3.61 billion, or 4.3 percent of sales in 2001. The Group retains its AAA rating, reflecting its position as one of the most financially secure companies in the world.

Outlook

Nestlé showed in 2002 that even in difficult market conditions the Group is able to deliver strong results. 2003 could again be a testing year. The Group is however well placed to deliver industry leading organic growth rates, a key health indicator for the food business. The Group will continue to focus on margin and further cash flow improvements, pursuing its policy of long-term profitable growth. Barring major unforeseen events, Nestlé expects to continue to improve its performance in 2003.

At its meeting of February 26, 2003 the Board of Directors approved the fully audited accounts and decided to propose to the General Meeting of Shareholders that the dividend be raised in line with the improvement in EBITA, from CHF 6.40 to CHF 7.-, an increase of 9.4 percent. This represents a payout ratio of 36 percent. Provided the General Meeting accepts this proposal, the dividend will be payable on April 9, 2003.

At the General Meeting, the terms as directors of Mr. Stephan Schmidheiny and Professor Peter Böckli will expire. Mr. Schmidheiny has decided not to stand for re-election. The Board recommends to the General Meeting to re-elect Professor Böckli and to newly elect Mr. Andreas Nikolaus Koopmann, CEO of Bobst Group S.A., Lausanne, as a new director.

The General Meeting of Nestlé S.A. will take place on April 3, 2003 at 15:00 at the Palais de Beaulieu in Lausanne. No transfer of shares affecting voting rights will be registered between March 15, 2003 and the day of the General Meeting. The management report, together with reports on corporate governance and on the efforts undertaken to develop and train Nestlé staff, will be available from March 17, 2003, whereas the fully audited financial statements are displayed as of today on the Nestlé Corporate Website.