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Nestlé Delivers Record Performance

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With a net profit of CHF 4 724 million, up 12.3 percent over last year, and with significant, broad-based improvement in all major performance indicators, the Nestlé Group looks back on a record year 1999. The net profit margin reached 6.3 percent (5.9 percent in 1998) on consolidated sales of CHF 74 660 million (1998:CHF 71 747 million). The trading profit of CHF 7 914 million increased by 11.8 percent, a margin of 10.6 percent of sales (9.9 percent in 1998). EBITA (Earnings Before Interest, Taxes and Amortization) improved by 12.4 percent to CHF 8 298 million (1998: CHF 7 382 million).

These substantial improvements reflect a series of measures taken over the past years, touching virtually all activities. Streamlining the business portfolio, increasing operational efficiency, industrial restructuring and progress in purchasing and supply chain management enabled the Group to achieve higher profits, margins and return on invested capital. Nestlé also made the necessary investments to ensure future top-line growth by investing in new products and strengthening its brands and market shares.

In 1999, sales grew by 4.1 percent, in spite of the unfavorable economic climate in South America and the poor performance of the Eastern European economies during the first half. Real internal growth once again showed an improvement over the previous year, with a rate of 3.6 percent as compared to 3.3 percent in 1998. As a result of the significant number of disinvestments, the contribution of acquisitions net of disinvestments amounted to 0.9 percent, while the negative effect of currency movements versus the Swiss franc was reduced to 0.6 percent. As a result of lower raw material costs, changes in the product mix and generally higher price stability, price adaptations contributed 0.2 percent.

The positive volume growth stems from a strong performance in North America, an accelerating improvement in Western Europe and the manifest recovery in Asia. Alcon, the water business, the joint ventures, nutrition and the out-of-home businesses showed particularly good growth.

Operating cash flow increased by 28.5 percent and reached a record at CHF 8 187 million. The Group reduced its net financial debt to CHF 6 202 million.

Earnings per share rose 14.1 percent, from CHF 107.0 to CHF 122.1; this is higher than the growth of net profit due to a reduction in the number of shares outstanding.

At its meeting of February 24, 2000 the Board of Directors decided to propose to the General Meeting of shareholders that the dividend be raised from CHF 38 to CHF 43 per share, an increase of 13.2 percent. The payout ratio amounts to 35.2 percent.

Provided the General Meeting accepts this proposal, the dividend will be payable from May 31, 2000. No transfer of shares affecting voting rights will be registered between May 5, 2000 and the day of the General Meeting.

As announced previously, Mr. Helmut Maucher, Chairman of the Board of Directors, having reached the Board's mandatory retirement age, will relinquish his functions on May 25, 2000. In view of his exceptional contribution to the development of the Nestlé Group and his inspired leadership, the Board has decided to name him Honorary Chairman at that time. Mr. Rainer E. Gut, Member of the Board since 1981 and Vice-Chairman since 1991, will succeed him. Mr. Paul A. Volcker, Member of the Board since 1988, has also reached the mandatory retirement age and will step down in May 2000. The Board of Directors expresses to Mr. Volcker its deeply felt gratitude for his wise counsel.

The General Meeting of Nestlé S.A. will take place on May 25, 2000 at 15:00 at the Palais de Beaulieu in Lausanne. The management report will be available from March 20, 2000.