Nestlé Group: Higher Profit in 1998

   
Back to News archiveVevey,Mar 26, 1999

In 1998, a difficult year marked by severe economic and financial crises in Asia, Eastern Europe and in Latin America, the Nestlé Group obtained good results: with consolidated sales of CHF 71,747 million, up 2.5 percent over the preceding year, the Group produced a consolidated net profit of CHF 4,291 million, an increase of 2.6%, and maintained the net profit margin at 6%. Trading profit increased to CHF 7,100 million (CHF 7,057 million in 1997).

At comparable structure (without acquisitions net of divestments) and at constant exchange rates, consolidated sales grew by 5.2%. This increase resulted on the one hand from a slightly accelerating real internal growth of 3.3% and from price adaptations amounting to 1.9%. The depreciation of virtually all currencies versus the Swiss franc on the other hand exerted a negative effect of 5.6%. Finally, acquisitions contributed 3.9% to the consolidated sales, whereas divestment of non-core activities reduced it by 1%.

Consolidated sales grew mainly thanks to the dynamism shown by the Group’s operating companies in industrialized countries, notably in the U.S.A.. In Africa, in the Middle East and in some Latin American countries also, sales made good progress. On the whole, most product groups contributed to the development of the business, with particularly positive results in the areas of prepared frozen dishes, mineral water and the pharmaceutical activities.

Taking into account the volatile economic environment in many countries, the Company considers the development of its business as satisfactory. It has rapidly adapted its strategies to the circumstances and has maintained its profitability, while simultaneously making significant marketing investments in order to maintain and increase its market share. In those countries hit by devaluations, the Group also had to face certain cost increases. In spite of these difficult operational conditions, the trading margin suffered only a slight erosion from 10.1 to 9.9%. Note should be taken that the data on which both the operating margin and the net profit margin are based have been restated, as the Group discarded the notion of replacement value for its tangible fixed assets and returned to the principle of historical cost.

The financial situation of the Group remains very healthy. As a result of the good operational cash flow, net financial debt has increased by CHF 1,825 million while the Group spent CHF 4,047 million on acquisitions in strategic areas such as pet food, mineral water and increased its shareholding in several operational companies.

Profit per share rose from CHF 106.3 to CHF 109.2, an increase that is largely in line with the growth of net profit.

The present year will be marked by a volatile and difficult economic climate. Barring events of exceptional gravity, also with regard to the evolution of foreign exchange markets, Nestlé expects again to be able to improve both sales and results.

At its meeting of March 25, 1999, the Board of Directors decided to propose to the General Meeting of shareholders that the dividend be raised from CHF 35.- to CHF 38.- per share, an increase of 8.6 percent. The pay-out ratio will consequently amount to 34.8 percent of the profit per share.

Provided the General Meeting accepts this proposal, the dividend will be payable from June 9, 1999. No transfer of shares affecting voting rights will be registered between May 14, 1999 and the day of the General Meeting.

Furthermore, the Board of Directors decided to propose to the General Meeting to elect Lord George Simpson, Chief Executive Officer of General Electric Company, PLC, London, as a member of the Board of Nestlé S.A..

The General Meeting of Nestlé S.A. will take place on June 3, 1999 at 15:00 at the Palais de Beaulieu in Lausanne. The management report will be available from May 5, 1999.

A recording of an Investors’ Relations conference call is available at the following numbers: (1) 719 457 0820 (passcode 642735) from 1200 Eastern Time March 26 1999 to 2400 Eastern Time March 30, and (44) 181 288 4459, passcode 627892, 1800 CET March 26 to 0600 CET March 31 1999.