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Good food, Good life
NHI Group
Annual Financial Report
December 31, 2023
2 Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2023
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4 Management Report
9 Responsibility Statement
10 Report of Independent Auditors
Consolidated Financial Statements
16 Consolidated income statement for the year ended December 31, 2023
17 Consolidated statement of comprehensive income for the year ended December 31, 2023
18 Consolidated balance sheet as at December 31, 2023
20 Consolidated cash flow statement for the year ended December 31, 2023
21 Consolidated statement of changes in equity for the year ended December 31, 2023
Notes
22 1. Accounting policies
24 2. Scope of consolidation, acquisitions and disposals of businesses
and acquisitions of non-controlling interests
25 3. Analyses by segment
29 4. Net other trading and operating income/(expenses)
30 5. Net financial income/(expense)
31 6. Inventories
7. Trade and other receivables/payables
33 8. Property, plant and equipment
38 9. Goodwill and intangible assets
42 10. Employee benefits
49 11. Provisions and contingencies
51 12. Financial instruments
63 13. Taxes
65 14. Associates
15. Cash flow statement
67 16. Transactions with related parties
68 17. Events after the balance sheet date
Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2023 3
4 Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2023
Management Report
Nestlé Holdings, Inc. (“NHI”) (hereinafter, together with its subsidiaries, referred to as the
“NHI Group”) incorporated in the State of Delaware, United States, is a wholly owned subsidiary
of NIMCO US, Inc., which is an indirect wholly owned subsidiary of Nestlé S.A., incorporated
in Switzerland, which is the holding company of the Nestlé Group of companies (hereinafter,
referred to as the “Nestlé Group”). NHI is the holding company for Nestlé S.A.’s principal
operating subsidiaries in the United States, which include, among others, Nestlé USA, Inc.,
Nestlé Purina Petcare Company, and Gerber Products Company. The NHI Group engages
primarily in the manufacture and sale of food products, pet care products, premium waters,
beverage products as well as nutrition and health science products. These businesses derive
revenue across the United States and in international markets.
Key Figures
In millions of Dollars
2023 2022 Change
Sales 31 466 29 848 5.4%
Cost of goods sold (18 325) (17 490) 4.8%
as a percentage of sales (58.2%) (58.6%)
Underlying trading operating profit 2 715 2 466 10.1%
as a percentage of sales 8.6% 8.3%
Trading operating profit 2 507 2 067 21.3%
as a percentage of sales 8.0% 6.9%
Net financial expense (115) (114) 0.9%
Taxes (640) (461)
Profit for the year (Net profit) 1 741 1 127 54.5%
as a percentage of sales 5.5% 3.8%
Cash generated from operations 3 503 1 801 94.5%
as a percentage of sales 11.1% 6.0%
Capital additions 2 579 2 433 6.0%
as a percentage of sales 8.2% 8.2%
Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2023 5
Sales
For the years ended December 31, 2023 and 2022, consolidated sales totaled $31.5 billion and
$29.8 billion, respectively, representing an increase of 5.4%. The NHI Group delivered another
year of sales growth in a continued challenging macroeconomic environment and heightened
competitive intensity. The company focused on strategic investment in demand generating
activities, in particular digital media, product portfolio optimization and staggered pricing
enabled a healthy sales growth.
All segments favorably benefited from the selling price increases to mitigate the impact of
inflation and commodity prices. The key highlights per segment are as follows:
• Nestlé USA Brands sales were $12.6 billion and $12.3 billion for the years ended
December 31, 2023 and 2022, respectively. The overall growth was mainly driven by inflation-
led pricing and continued momentum for e-commerce. Beverages grew with the strong
performance of Starbucks products including out of home solutions lab and Nescafé.
Prepared foods were adversely impacted by product portfolio optimization initiatives. Water
saw low single-digit growth. S.Pellegrino and Acqua Panna posted double-digit growth,
which more than offset the impact of capacity constraints for Perrier.
• PetCare sales were $12.7 billion and $11.5 billion for the years ended December 31, 2023
and 2022, respectively. PetCare experienced strong growth with broad-based demand
across segments, channels and brands, particularly Purina ONE, Purina Pro Plan and
Friskies.
• Other businesses sales were $6.1 billion and $6.0 billion for the years ended December 31, 2023
and 2022, respectively. Sales growth was driven mainly by Nestlé Professional due to continued
recovery in the hospitality sector, Nespresso with a strong momentum in ecommerce channel
and healthy growth in Nestlé Health Science portfolio which was offset by divestments and
other portfolio optimization initiatives.
Profitability
Trading operating profit was $2.5 billion and $2.1 billion for the years ended December 31,
2023 and 2022, which equaled 8.0% and 6.9% of sales for each year, respectively. The NHI
Group’s continued focus on structural cost leverage, positive pricing, enhanced product mix
and portfolio optimization while increasing generating demand investments enabled an overall
improvement in the margins.
Cost of goods sold was $18.3 billion and $17.5 billion for the years ended December 31,
2023 and 2022, which equaled 58.2% and 58.6% of sales for each year, respectively. Cost of
goods sold, as a percentage of sales, declined mainly due to overall product mix and
staggered selling price increases over the last year.
Distribution expenses were $2.8 billion and $3.0 billion for the years ended December 31, 2023
and 2022, which equaled 8.9% and 9.9% of sales for each year, respectively. The decrease was
mainly attributed to favorable product mix.
Marketing, general and administrative expenses were $4.2 billion and $3.8 billion for the
years ended December 31, 2023 and 2022, which equaled 13.5% and 12.6% of sales for each
year, respectively. The significant increase in marketing and advertisement expenses was
mainly for strategic demand generation activities. This increase was partly offset by the NHI
Group’s accelerated actions on cost saving initiatives and operational efficiencies.
Royalties to affiliated companies were $3.4 billion and $3.2 billion for the years ended
December 31, 2023 and 2022, which equaled 10.8% and 10.7% of sales for each period,
respectively. These payments to the affiliated companies were in line with the approved
general licensing agreement.
Net other trading expenses were $208 million and $399 million for the years ended
December 31, 2023 and 2022, respectively. The decrease was driven by lower impairments,
reduced litigations and onerous contracts and net favorable movement in the company-owned
life insurance related investments.
Management Report
6 Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2023
Net Profit Margin – Other Items of Note
The net profit was $1.7 billion as compared to $1.1 billion for the years ended December 31, 2023
and 2022 respectively, primarily driven by an increase in operating profit, net of taxes.
Tax expense was $640 million in 2023 as compared to tax expense of $461 million in 2022. Taxes
increased mainly due to an increase in profit before taxes.
Cash Flow
Cash generated from operations increased to $3.5 billion during the years ended December 31,
2023, from $1.8 billion during the same period of 2022, mainly due to an increase in the
operating profit and favorable working capital movements.
Principal Risks and Uncertainties
Risk Management
At the Nestlé S.A. level, the Nestlé Group Enterprise Risk Management (ERM) framework is
designed to identify, assess and mitigate risks in order to minimize their potential impact on
the Nestlé Group, including the NHI Group.
A top-down assessment is performed at the Nestlé Group level once a year to create a
robust understanding of the Nestlé Group’s most significant risks, and to allocate ownership to
drive specific actions. A bottom-up assessment occurs in parallel resulting in the aggregation
of individual assessments by all Nestlé markets and globally managed businesses of the
Nestlé Group. These different risk mappings allow the NHI Group to make sound decisions on
its future operations.
Risk assessments are the responsibility of business line management; this applies equally
to a business or a function, and any mitigating actions identified in the assessments are the
responsibility of the individual line management. If Nestlé S.A. intervention is required,
responsibility for mitigating actions will generally be determined by the Nestlé Group Executive
Board.
The results of the ERM are presented annually to the Nestlé Group Executive Board, half-
yearly to the Audit Committee of Nestlé S.A., and reported annually to the Board of Directors
of Nestlé S.A.
Factors Affecting Results
Maintaining high levels of trust with consumers is essential for the NHI Group’s success. Any
major event triggered by a serious food safety or other compliance issue could have a negative
effect on the NHI Group’s reputation or brand image. The NHI Group has policies, processes,
controls and regular monitoring to ensure high-quality products and prevention of health risks
arising from handling, preparation and storage throughout the value chain.
The success of the NHI Group depends on its ability to anticipate consumer preferences and
to offer high quality, competitive, relevant, and innovative products. The NHI Group’s Nutrition,
Health and Wellness strategy aims to enhance people’s lives at all stages through access to
industry-leading research and development to drive innovation and the continuous
improvement of the NHI Group’s portfolio.
Prolonged negative perceptions concerning health implications of processed food and
beverage categories could lead to an increase in regulation of the industry and may also
influence consumer preferences. The NHI Group has long-term objectives in place to apply
scientific and nutritional know-how to enhance nutrition, health and wellness, contributing to
healthier eating, drinking and lifestyle habits, as well as improve accessibility of safe and
affordable food.
Changing customer relationships and channel landscape may inhibit the NHI Group’s
growth if the NHI Group fails to maintain strong engagements or adapt to changing customer
needs. The NHI Group’s strategy is to maintain and develop strong relationships with
customers across the United States to help them win in their respective prioritized categories
where the NHI Group operates.
Management Report
Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2023 7
The NHI Group is dependent on the sustainable supply of several raw and packaging
materials. Issues relating to longer-term changes in weather patterns, water shortages, shifts
in production patterns, economic and social inequality in supply chains, etc. could result in
capacity constraints, as well as reputational damage. The NHI Group has policies, processes,
controls, and regular monitoring in place which are intended to allow the NHI Group to
anticipate such events and adequately take actions to mitigate the adverse impacts.
The NHI Group manages risks related to climate change and water resources.
The NHI Group is subject to environmental regulation regimes and has controls in place to
comply with legislation concerning the protection of the environment, including the use of
natural resources, release of air emissions and wastewater, and the generation, storage,
handling, transportation, treatment, and disposal of waste materials.
The NHI Group is reliant on the procurement of materials, manufacturing, and supply of
finished goods for all product categories. A major event impacting input prices, or in one of the
NHI Group’s key plants, at a key supplier, contract manufacturer, co packer, and/or warehouse
facility could potentially lead to a supply disruption. Active price risk management on key
commodities and business continuity plans are established and regularly maintained to
mitigate against such events.
The investment choices of the NHI Group evolve over time and may include investments in
emerging technologies, new business models, and the creation of, or entry into, new
categories. This may result in broader exposures for the NHI Group, e.g. a more highly
regulated environment for the healthcare segment. The NHI Group’s investment choices are
aligned with its strategy and prioritized based on the potential to create value over the long-
term.
The NHI Group, as part of its strategy, undertakes business transformations such as large-
scale change management projects, mergers, acquisitions, and divestitures. To ensure the
realization of the anticipated benefits of these business transformations, they receive executive
sponsorship with aligned targets as well as appropriate levels of resources to support
successful execution of them.
The ability to attract and retain skilled, talented employees is critical to the success of the
NHI Group’s strategy. The NHI Group’s initiatives and processes aim to sustain a high-
performance culture, supported by a total awards approach and people development that
emphasizes diversity, innovation and growth.
The NHI Group is subject to health and safety regimes and has procedures in place to comply
with legislation concerning the protection of the health and welfare of employees and
contractors, as well as long-term initiatives to promote safe and healthy employee behaviors.
The NHI Group depends on accurate, timely data along with increasing integration of digital
solutions, services, and models, both internal and external. Disruption impacting the reliability,
security, and privacy of the data, as well as the information technology infrastructure, is a
threat to the NHI Group’s business. Contingency plans along with policies and controls are in
place aiming to protect and ensure compliance on both infrastructure and data.
The NHI Group’s liquidity/liabilities (currency, interest rate, hedging, cost of capital, pension
obligations/retirement benefits, banking/commercial credit, etc.) could be impacted by any
major event in the financial markets. The NHI Group, along with its ultimate parent company,
Nestlé S.A., has the appropriate risk mitigation measures in place with strong governance to
actively manage exposures and long-term asset and liability outlook.
Security, political instability, legal and regulatory, fiscal, macroeconomic, foreign trade,
labor, conflict and/or infrastructure risks could potentially impact the NHI Group’s ability to do
business. Major events caused by natural hazards (such as flood, drought, infectious disease
pandemics, etc.) could also impact the NHI Group’s ability to operate. Any of these events
could lead to a supply disruption and impact the NHI Group’s financial results. Regular
monitoring and ad hoc business continuity plans are established in order to mitigate against
such events.
Management Report
8 Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2023
Outlook
The NHI Group is committed to supporting the Nestlé Group in achieving its financial
objectives including organic sales growth towards a mid-single-digit rate, underlying trading
operating margin with continued moderate improvement, an increase in underlying earnings
per share in constant currency and capital efficiency.
Management Report
Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2023 9
Rui Barbas, Chief Financial Officer, confirms that to the best of his knowledge:
(a) the Consolidated Financial Statements of the NHI Group for the annual period ended
December 31, 2023, which have been prepared in accordance with IFRS standards as adopted
by the European Union, give a true and fair view of the assets, liabilities, financial position and
profit or loss of NHI Group, and the undertakings included in the consolidation taken as a
whole; and
(b) the management report includes a fair review of the development and performance of the
business and the position of NHI Group and the undertakings included in the consolidation
taken as a whole, together with a description of the principal risks and uncertainties that they
face.
February 28, 2024
Responsibility Statement
10 Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2023
Report of Independent Auditors
To the Board of Directors of Nestlé Holdings, Inc.:
Opinion
We have audited the consolidated financial statements of Nestlé Holdings, Inc. and its subsidiaries (the
“NHI Group”), which comprise the consolidated balance sheets as of December 31, 2022 and 2021,
and the related consolidated income statements, statements of comprehensive income, statements of
changes in equity and cash flow statements for the years then ended, and the related notes (collectively
referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the
financial position of the NHI Group at December 31, 2022 and 2021, and the results of their operations
and their cash flows for the years then ended in accordance with International Financial Reporting
Standards promulgated by the International Accounting Standards Board.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States
of America (GAAS) and in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report. We are required to be independent of the NHI
Group, and have fulfilled our other ethical responsibilities, in accordance with the relevant ethical
requirements relating to our audits, which include relevant ethical requirements in the United States of
America and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional
Accountants. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.
Key Audit Matters
Key audit matters are those matters that were communicated with those charged with governance and,
in our professional judgment, were of most significance in our audit of the financial statements for the
year ended December 31, 2022. This matter was addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on this matter.
Ernst & Young LLP
1775 Tysons Blvd
Tysons, VA 22102
Tel: +1 703 747 0000
ey.com
Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2023 11
Key audit matter How our audit addressed the key audit matter
Measurement of sales as it relates to trade spend
As described in Note 3 of the financial statements,
sales are recognized when control of the goods
has transferred to the customer, which is mainly
upon arrival at the customer. Revenue is
measured as the amount of consideration that the
NHI Group expects to receive after deduction of
returns, sales taxes, pricing allowances, other
trade discounts, and couponing and price
promotions to consumers. The level of discounts,
allowances, and promotional rebates (collectively
‘trade spend’) are estimated and recognized as a
deduction from revenue.
We assessed the NHI Group’s revenue recognition
accounting policies, including the recognition and
classification criteria for trade spend.
We evaluated monthly trends of trade spend. We
performed a predictive analysis focused on trade
spend as a percentage of sales by month, and by
customer. For a sample of trade spend, we
considered if those items were properly classified
with reference to the NHI Group’s accounting
policies.
The risk of sales being misstated, through error,
misinterpretation or misapplication of accounting
standards and policies or intentional manipulation,
may result from the pressure that management
may feel to achieve performance targets. The
nature of the misstatements may include bias in
estimates, unrecorded accruals, or the
misclassification of trade spend in the
consolidated income statement.
We deemed the measurement of trade spend to
be a key audit matter due to the materiality and
complexity in estimating the amount of trade
spend that is ultimately claimed. Management
estimates the level of trade spend using
judgments based on historical experience and the
specific terms of the agreements with the
customers. The estimates require the use of
assumptions that are complex, given the diversity
of trade spend arrangements and the uncertainty
related to future outcomes. There is a risk that
discounts, allowances, and promotional rebates
to consumers are not properly measured or
classified at the reporting date, resulting in a
misstatement of sales.
For a sample of trade spend arrangements, we
reconciled key inputs and assumptions used in the
estimates with internal and external sources of
information, such as the contracts with the relevant
customers or other third-party support. We
recalculated the accrual and consolidated income
statement amounts to test mathematical accuracy.
We considered the aging of trade spend accruals
based on our understanding of the average lead
time for settlement. We reviewed the NHI Group’s
lookback analysis over the prior year end accrual
balance and assessed the accuracy at which the
NHI Group determined their accruals. We tested
payments made to customers after the reporting
date to assess the completeness of accruals and
assessed whether recorded in the correct period.
We assessed the adequacy of the disclosures
provided in Note 3 of the financial statements in
relation to the relevant accounting standards.
12 Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2023
Responsibilities of Management and Those Charged with Governance
for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with International Financial Reporting Standards promulgated by the International
Accounting Standards Board; and for the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial statements that are free of material
misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the NHI Group’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless management either intends to liquidate the NHI Group or
to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the NHI Group’s financial reporting
process.
Management is responsible for presenting and marking up the financial statements in compliance with
the requirements set out in the Delegated Regulation 2019/815 on European Single Electronic Format
(“ESEF Regulation”).
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free of material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance
and therefore is not a guarantee that an audit conducted in accordance with GAAS and ISAs will always
detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control. Misstatements are considered
material if there is a substantial likelihood that, individually or in the aggregate, they would influence the
judgment made by a reasonable user based on the financial statements.
Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2023 13
In performing an audit in accordance with GAAS and ISAs, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, and design and perform audit procedures responsive to those risks. Such procedures
include examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the NHI Group’s internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluate the overall presentation of the
financial statements.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists to events or
conditions that may cast significant doubt on NHI Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions may cause the NHI Group to cease to
continue as a going concern.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the NHI Group to express an opinion on the financial statements. We are
responsible for the direction, supervision, and performance of the group audit of the NHI Group.
We remain solely responsible for our audit opinion.
We are required to communicate with those charged with governance regarding, among other matters,
the planned scope and timing of the audit, significant audit findings, and certain internal control-related
matters that we identified during the audit.
Our responsibility is to assess whether the financial statements have been prepared, in all material
respects, in compliance with the requirements laid down in the ESEF Regulation.
14 Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2023
Other information
Management is responsible for the other information. The other information comprises Management’s
Report included in the annual report but does not include the financial statements and our auditor’s
report thereon. Our opinion on the financial statements does not cover the other information, and we do
not express an opinion or any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and consider whether a material inconsistency exists between the other information and the financial
statements, or the other information otherwise appears to be materially misstated. If, based on the work
performed, we conclude that an uncorrected material misstatement of the other information exists, we
are required to describe it in our report.
Report on Other Legal and Regulatory Requirements
We have checked the compliance of the financial statements of the NHI Group as at December 31, 2022
with relevant statutory requirements set out in the ESEF Regulation that are applicable to financial
statements.
For the NHI Group it relates to:
• Financial statements prepared in a valid XHTML format;
• The XBRL markup of the financial statements using the core taxonomy and the common rules
on markups specified in in the ESEF Regulation
In our opinion, the financial statements of the NHI Group as at December 31, 2022, identified as
“549300EAEU8YV8MQXP30-2022-12-31”, have been prepared, in all material respects, in compliance
with the requirements laid down in the ESEF Regulation.
The partner in charge of the audit resulting in this report of independent auditors is Michelle Montes.
February XX, 2024
Consolidated
Financial Statements
Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2023 15
16 Consolidated Financial Statements of the NHI Group 2023

In millions of Dollars |  |  |
| Notes | 2023 | 2022
Sales | 3 | 31 466 | 29 848
Cost of goods sold |  | (18 325) | (17 490)
Distribution expenses |  | (2 788) | (2 950)
Marketing and administration expenses |  | (4 235) | (3 750)
Royalties to affiliated company | 16 | (3 403) | (3 192)
Other trading income | 4 | 10 8 | 60
Other trading expenses | 4 | (316) | (459)
Trading operating profit | 3 | 2 507 | 2 067
Other operating income | 4 | 6 8 | 11 9
Other operating expenses | 4 | (80) | (4 66)
Operating profit |  | 2 495 | 1 720
Financial income | 5 | 9 41 | 68 7
Financial expense | 5 | (1 056) | (8 0 1)
Profit before taxes and associates |  | 2 380 | 1 606
Taxes | 13 | (64 0) | (4 61)
Income/(Loss) from associates | 15 | 1 | (18)
Net profit for the year |  | 1 741 | 1 127

Consolidated income statement
for the year ended December 31, 2023
Consolidated Financial Statements of the NHI Group 2023 17

In millions of Dollars |  |  |
| Notes | 2023 | 2022
Profit for the year recognized in the income statement |  | 1 741 | 1 127
Changes in cash flow hedge and cost of hedge reserves, net of taxes |  | 53 | (13)
Items that are or may be reclassified subsequently to the income statement |  | 53 | (13)
Remeasurement of defined benefit plans, net of taxes |  | (141) | 46
Items that will never be reclassified to the income statement |  | (141) | 46
Other comprehensive (loss)/income for the year |  | (88) | 33
Total comprehensive income for the year |  | 1 653 | 1 160

Consolidated statement of comprehensive income
for the year ended December 31, 2023
18 Consolidated Financial Statements of the NHI Group 2023

In millions of Dollars |  |  |
| Notes | 2023 | 2022
Assets |  |  |
Current assets |  |  |
Cash and cash equivalents | 12/15 | 330 | 412
Short-term investments | 12 | 31 | 46
Inventories | 6 | 3 215 | 3 710
Trade and other receivables | 7/12 | 3 191 | 2 627
Loans to the parent and affiliates | 12/16 | 30 895 | 25 709
Prepayments |  | 59 | 4 4
Derivative assets | 12 | 3 | 2 5
Total current assets |  | 37 724 | 32 573
Non-current assets |  |  |
Property, plant and equipment | 8 | 11 046 | 9 434
Goodwill | 9 | 14 817 | 14 773
Intangible assets | 9 | 4 536 | 4 585
Investments in associates | 14 | 53 | —
Financial assets | 12 | 1 276 | 1 337
Derivative assets | 12 | 15 4 | —
Loans to the parent and affiliates | 12/16 | 6 43 | 1 588
Employee benefits assets | 10 | — | 4 8
Total non-current assets |  | 32 525 | 31 765
Total assets |  | 70 249 | 64 338

Consolidated balance sheet
as at December 31, 2023
Consolidated Financial Statements of the NHI Group 2023 19

In millions of Dollars |  |  |
| Notes | 2023 | 2022
Liabilities and equity |  |  |
Current liabilities |  |  |
Financial debt | 12 | 3 940 | 3 064
Derivative liabilities | 12 | 21 | 26
Trade and other payables | 7/12 | 3 809 | 4 491
Loans from affiliates | 12/16 | 2 678 | 2 565
Accruals |  | 2 507 | 1 542
Provisions | 11 | 147 | 14 3
Current income tax liabilities |  | 6 71 | 56 6
Total current liabilities |  | 13 773 | 12 397
Non-current liabilities |  |  |
Financial debt | 12 | 28 116 | 25 087
Derivative liabilities | 12 | 28 4 | 50 9
Employee benefits liabilities | 10 | 1 337 | 1 413
Provisions | 11 | 107 | 85
Deferred tax liabilities | 13 | 1 352 | 1 217
Other payables | 12 | 7 | 10
Total non-current liabilities |  | 31 203 | 28 321
Total liabilities |  | 44 976 | 40 718
Equity |  |  |
Additional paid-in capital |  | 5 680 | 5 680
Other reserves |  | (1 000) | (9 12)
Retained earnings |  | 20 593 | 18 852
Total equity attributable to shareholders of the parent |  | 25 273 | 23 620
Total liabilities and equity |  | 70 249 | 64 338

Consolidated balance sheet as at December 31, 2023
20 Consolidated Financial Statements of the NHI Group 2023

In millions of Dollars |  |  |
| Notes | 2023 | 2022
Operating activities |  |  |
Operating profit | 15 | 2 495  | 1 720
Depreciation and amortization | 15 | 8 49  | 8 07
Impairment | 15 | 9 9  | 48 7
Net result on disposal of businesses | 15 | — | 7
Other non-cash items of income and expense | 15 | (24)  | 6 0
Cash flow before changes in operating assets and liabilities |  | 3 419  | 3 081 
Decrease/(increase) in working capital | 15 | 270  | (1 336)
Variation of other operating assets and liabilities | 15 | (18 6) |  56
Cash generated from operations |  | 3 503  | 1 801 
Interest paid |  | (99 2) | (90 5)
Interest and dividends received |  | 942 | 729
Taxes paid |  | (313) | (9 0)
Operating cash flow |  | 3 140  | 1 535 
Investing activities |  |  |
Capital expenditure |  | (2 422) | (1 908)
Expenditure on intangible assets | 9 | (8 3) | (60)
Acquisition of businesses, net of cash acquired |  | (73) | (20)
Disposal of businesses, net of cash disposed of |  | — | 95
Investments in associates |  | (10 9) | (49)
Inflows from treasury investments |  | 15 | 3 166
Other investing activities |  | 161 | 4 3
Investing cash flow |  | (2 511)  | 1 267
Financing activities |  |  |
Loans from/(to) the parent and affiliates, net | 16 | (4 128)  | (5 853)
Acquisition of non-controlling interest |  | — | (18 4)
Inflows from bonds and other-long term financial debt | 12 | 5 462 | 5 153
Outflows from bonds, lease liabilities and other long-term financial debt | 12 | (2 290) | (1 974)
Inflows/(outflows) from short-term financial debt | 12 | 245 | (2 5)
Financing cash flow |  | (7 11) |  (2 883)
Decrease in cash and cash equivalents |  | (8 2)  | (81) 
Cash and cash equivalents at beginning of year |  | 4 12  | 49 3 
Cash and cash equivalents at end of year | 15 | 3 30  | 41 2 
(a) Related primarily to settlement of payable created as a result of 2021 acquisition of remaining non-controlling interest in Vital |  |  |
Proteins. |  |  |

(a)
Consolidated cash flow statement
for the year ended December 31, 2023
Consolidated Financial Statements of the NHI Group 2023 21

In millions of Dollars |  |  |  |
Equity as at January 1, 2022 | 5 680 | (94 5) | 17 723 | 22 458
Profit for the year | — | — | 1 127 | 1 127
Other comprehensive income for the year | — | 33 | — | 33
Total comprehensive income for the year | — | 33 | 1 127 | 1 160
Other movements | — | — | 2 | 2
Equity as at December 31, 2022 | 5 680 | (912) | 18 852 | 23 620
Equity as at January 1, 2023 | 5 680 | (912) | 18 852 | 23 620
Profit for the year | — | — | 1 741 | 1 741
Other comprehensive loss for the year | — | (88) | — | (88)
Total comprehensive income/(loss) for the year | — | (88) | 1 741 | 1 653
Equity as at December 31, 2023 | 5 680 | (1 000) | 20 593 | 25 273

Additional
paid-in capital
Other reserves
Retained earnings
Total equity
Consolidated statement of changes in equity
for the year ended December 31, 2023
22 Consolidated Financial Statements of the NHI Group 2023
1. Accounting policies
Accounting convention and accounting standards
The Consolidated Financial Statements comply with IFRS Accounting Standards as adopted by
the European Union.
They have been prepared on a historical cost basis, unless stated otherwise. All consolidated
companies and associates have a December 31 accounting year-end. The Consolidated
Financial Statements 2023 were approved for issuance by NHI’s directors on February 28, 2024.
Accounting policies
Accounting policies are included in the relevant Notes to the Consolidated Financial
Statements and are presented as text highlighted with a grey background. The accounting
policies below are applied throughout the Consolidated Financial Statements.
Key accounting judgments, estimates and assumptions
The preparation of the Consolidated Financial Statements requires management to exercise
judgment and to make estimates and assumptions that affect the application of policies,
reported amounts of revenues, expenses, assets and liabilities as well as disclosures.
Estimated climate impacts, current and probable stated regulatory changes and Nestlé’s
environmental commitments have been taken into account. These estimates and associated
assumptions are based on historical experience and various other factors that are believed to
be reasonable under the circumstances. The estimates and underlying assumptions are
reviewed on an ongoing basis. Information about potential impacts under alternative scenarios
(including, among others, the policies aligned with the Paris ambition and Nestlé’s
environmental commitments) in the medium and long term, aligned with the Task Force on
Climate-related Financial Disclosures (TCFD) methodology, have been considered.
Management believes that the Financial Statements as at December 31, 2023 reflect the most
reasonable view of the value of the assets and liabilities at this date. The implications for the
NHI Group and the global economy of the war in Ukraine as well as potential escalations are
highly uncertain, and remain difficult to predict or quantify. Actual results and outcomes could
differ from the judgments and estimates taken into account in these Consolidated Financial
Statements.
Those areas that involved a higher degree of judgment or uncertainty are explained further
in the relevant Notes, including:
• assessment of control and estimation of the fair value of net assets acquired in business
combinations (see Note 2);
• recognition and estimation of revenue (see Note 3);
• presentation of additional line items and subtotals in the income statement (see Note 4);
• identification of a lease and lease term (see Note 8);
• identification of cash generating units (CGUs) and estimation of recoverable amount for
• impairment tests (see Note 9);
• assessment of useful lives of intangible assets, including assessment as finite or indefinite
(see Note 9);
• measurement of employee benefit obligations (see Note 10);
• recognition and measurement of provisions (see Note 11); and
• estimation of current and deferred taxes, including uncertain tax positions (see Note 13).
Foreign currencies
The functional currency of the NHI Group’s entities is the currency of their primary economic
environment, which is the “US Dollar”.
In individual companies, transactions in foreign currencies are recorded at the rate of
exchange at the date of the transaction. Monetary assets and liabilities in foreign currencies are
translated at year-end rates. Any resulting exchange differences are taken to the income
statement, except when deferred in other comprehensive income as qualifying cash flow hedges.
Notes
Consolidated Financial Statements of the NHI Group 2023 23
Expenses
Operating expenses are presented in the income statement using the function of expense
method, as this is the method used by management to analyze performance and is commonly
used in the consumer goods industry, and thus provides more relevant information.
Cost of goods sold is determined on the basis of the cost of purchase or of production
(comprised of the costs of raw and packaging material, direct labor, energy, manufacturing
overheads and depreciation of factory assets, which are allocated to products using activity-
based drivers), adjusted for the variation of inventories. It includes the cost of royalties due to
third party licensors for the use of their intellectual property, which are accrued in accordance
with the respective agreement. Cost of goods sold also includes amortization of intangible
assets related to acquired licenses to sell products or to use technology, as well as
maintenance and depreciation of equipment used in the sales process like coffee machines
and water coolers.
All other expenses, including those in respect of advertising and promotions, are recognized
when the NHI Group receives the risks and rewards of ownership of the goods or when it
receives the services. Government grants that are not related to assets are credited to the
income statement as a deduction of the related expense when they are received, if there is
reasonable assurance that the terms of the grant will be met.
Distribution expenses encompass the costs of storing products and transporting products
between factories, warehouses and customer locations. It includes the costs of outsourced
transportation services, salaries and wages of drivers, warehouse employees and customer
service staff, as well as depreciation and running costs of warehouses and related storage,
transportation and handling equipment.
Marketing and administration expenses include the costs of advertising and consumer
promotion activities, merchandising, sales teams and head office functions such as finance,
human resources, legal, information technology, supply chain and general management. It is
primarily comprised of salaries, depreciation and maintenance of real estate, and the costs of
third-party services.
Additional details of other trading income and expenses and other operating income and
expenses are provided in the respective Notes.
Changes in IFRS Accounting Standards
Several amendments apply for the first time in 2023 including, among others, Definition of
Accounting Estimates (Amendments to IAS 8), International Tax Reform – Pillar Two Model Rules
(Amendments to IAS 12), Insurance Contracts (IFRS 17), Disclosure of Accounting Policies
(Amendments to IAS 1 and IFRS Practice Statement 2) and Deferred Tax related to Assets and
Liabilities arising from a Single Transaction (Amendments to IAS 12). None of these had a
material impact on the Consolidated Financial Statements.
Changes in IFRS Accounting Standards that may affect the NHI Group after December 31,
2023
The following standards have been issued and will become effective after December 31, 2023:
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16), Non-current Liabilities with
Covenants (Amendments to IAS 1), Supplier Finance Arrangements (Amendments to IAS 7 and
IFRS 7), and Lack of Exchangeability (Amendments to IAS 21). The NHI Group is currently
evaluating the effects of these new amendments.
1. Accounting policies
24 Consolidated Financial Statements of the NHI Group 2023
2. Scope of consolidation, acquisitions and disposals of businesses,
and acquisitions of non-controlling interests
Scope of consolidation
Nestlé Holdings, Inc. (“NHI”) (herein, together with its subsidiaries, referred to as the “NHI
Group”) incorporated in the State of Delaware, United States, is a wholly owned subsidiary
of NIMCO US, Inc., which is an indirect wholly owned subsidiary of Nestlé S.A., incorporat ed
in Switzerland, which is the Parent company of the Nestlé Group of companies (hereinafter ,
referred to as the “Nestlé Group”). The NHI Group’s registered office is The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 1980 1,
United States and its principal place of business is located at 1812 North Moore Street,
Arlington, Virginia 22209, United States.
The Consolidated Financial Statements comprise those of Nestlé Holdings Inc. and of its
subsidiaries (the NHI Group). Companies which the NHI Group controls are fully consolidat ed
from the date at which the NHI Group obtains control. The NHI Group controls a company
when it is exposed to, or has rights to, variable returns from its involvement with the compan y
and has the ability to affect those returns through its power over the company.
As part of the Consolidated Financial Statements, the list of principal subsidiaries are includ ed
below:
• Gerber Products Company
• Nespresso USA, Inc.
• Nestlé Capital Corporation
• Nestlé HealthCare Nutrition, Inc.
• Nestlé Insurance Holdings, Inc.
• Nestlé Purina PetCare Company
• Nestlé Regional Globe Office North America, Inc.
• Nestlé USA, Inc.
2.1 Change of the scope of consolidation
Acquisitions
There were no significant acquisitions or associated cash flows in 2023, nor in 2022.
Disposals
There were no disposals or associated cash flows during 2023.
In 2022, among other non-significant disposals, were Freshly (a healthy prepared meals
business) and the Infant Formula Business. Before each disposal, impairment charges were
recorded during the year, in Other trading and operating expenses (see Note 4).
Cash inflows during 2022 are related mainly to these non-significant disposals.
Consolidated Financial Statements of the NHI Group 2023 25
3. Analyses by segment
Segment reporting
Basis for segmentation
Operating segments reflect the NHI Group’s management structure and the way financial
information is regularly reviewed by the NHI Group’s chief operating decision maker (CODM).
The CODM has been defined as a body comprising the members of the Nestlé Group
Executive Board to whom the various operating segments report, since this is the level at
which resources are allocated and results are assessed. Operating segments that meet the
quantitative threshold of 10% of total sales, trading operating profit or assets for all operating
segments, are presented on a stand-alone basis as reportable segments.
• The NHI Group’s management structure is aligned with the Nestlé Group management
structure and is organized around products.
• The Nestlé USA Brands segment forms part of the Nestlé Group Zone North America
segment. It consists primarily of beverages, snacks, frozen prepared foods, pizza, and
other food products.
• The PetCare segment also forms part of the Nestlé Group Zone North America segment
and sells products for domestic pets.
• The Other businesses segment category comprises other operating segments that do not
meet the criteria for separate reporting, such as the Nutrition segment (forming part of the
Nestlé Group Zone North America segment), which consists primarily of infant and baby
food products; Nestlé Professional (forming part of the Nestlé Professional Regionally
Managed Business (RMB) within Nestlé Group Zone North America), which sells products
for the food services industry; Nestlé Health Science, which provides pioneering science
based nutritional solutions to deliver improved personalized health care for people with
medical conditions, and the Nespresso business unit.
Revenue and results by segment
Segment results (Trading operating profit) represent the contribution of the different segments
to the Trading operating profit of the NHI Group. In addition to the Trading operating profit,
Underlying trading operating profit is shown on a voluntary basis because it is one of the key
metrics used by the Company to monitor the performance of the NHI Group.
Depreciation and amortization include depreciation of property, plant and equipment
(including right-of-use assets under leases) and amortization of intangible assets.
Invested capital and other information by segment
No segment assets and liabilities are regularly provided to the CODM to assess segment
performance or to allocate resources and therefore segment assets and liabilities are not
disclosed. However, the NHI Group discloses the invested capital, goodwill and intangible
assets by segment on a voluntary basis, and uses the assets directly allocated to the
segments to determine if a segment is reportable.
Invested capital comprises property, plant and equipment, trade receivables and some
other receivables, assets held for sale, inventories, prepayments, less trade payables,
accruals and some other payables, liabilities directly associated with assets held for sale, and
non-current other payables.
Goodwill and intangible assets are not included in invested capital since the amounts
recognized are not comparable between segments due to differences in the intensity of
acquisition activity and changes in the accounting standards that were applicable at various
points in time when the NHI Group undertook significant acquisitions. Nevertheless,
allocations of goodwill and intangible assets by segment and the related impairment
expenses are provided.
3. Analyses by segment
Invested capital and goodwill and intangible assets by segment represent the situation a t
the end of the year.
Capital additions represent the total cost incurred to acquire property, plant and
equipment (including right-of-use assets under leases), intangible assets and goodwill,
including those arising from business combinations.
Revenue
Sales represent amounts received and receivable from third parties for goods supplied
and for services rendered to customers and affiliates (outside of the NHI Group). Sales are
recognized when control of the goods has transferred to the customer, which is mainly upon
arrival at the domestic customer and in accordance with International Commercial Terms
(“incoterms”) for exports.
Revenue is measured as the amount of consideration which the NHI Group expects to
receive, based on the list price applicable to a given distribution channel after deduction of
returns, sales taxes, pricing allowances, other trade discounts and couponing and price
promotions to consumers. The level of discounts, allowances and promotional rebates is
recognized as a deduction from revenue at the time that the related sales are recognized or
when the rebate is offered to the customer (or consumer if applicable). They are estimated
using judgments based on historical experience and the specific terms of the agreements
with the customers. Payments made to customers for commercial services received are
expensed. The NHI Group has a range of credit terms that are typically short term, in line
with market practice and without any financing component.
The NHI Group does not generally accept sales returns, except in limited cases mainly in
the Infant Nutrition business. Historical experience is used to estimate such returns at the
time of sale. No asset is recognized for products to be recoverable from these returns, as
they are not anticipated to be resold.
Trade assets (mainly coffee machines) may be sold or leased separately to customers.
Arrangements where the NHI Group transfers substantially all the risks and rewards
incidental to ownership to the customer are treated as finance lease arrangements.
Operating lease revenue for trade asset rentals is recognized on a straight-line basis over
the lease term.
26 Consolidated Financial Statements of the NHI Group 2023
Consolidated Financial Statements of the NHI Group 2023 27
3.1 Operating segments
Revenue and results
In millions of Dollars

|  |  |  | 2023
| Brands | PetCare | Other | Total
Sales | 12 636 | 12 713 | 6 117 | 31 466
Underlying trading operating profit | 1 218 | 1 346 | 151 | 2 715
Trading operating profit | 1 025 | 1 365 | 117 | 2 507
Net other trading income/(expenses) | (193) | 19 | (34) | (208)
Of which impairment of property, plant and equipment | (91) | (5) | (3) | (99)
Of which restructuring costs | (72) | (5) | (15) | (92)
Depreciation and amortization | (306) | (349) | (194) | (849)

(a)
(a)
(b)
(c)
(d)

|  |  |  | 2022
| Brands | PetCare | Other | Total
Sales | 12 323 | 11 464 | 6 061 | 29 848
Underlying trading operating profit | 1 384 | 1 056 | 26 | 2 466
Trading operating profit (loss) | 1 239 | 973 | (145) | 2 067
Net other trading expenses | (145) | (84) | (170) | (399)
Of which impairment of property, plant and equipment | (70) | (17) | (64) | (151)
Of which restructuring costs | (17) | (31) | (4) | (52)
Depreciation and amortization | (284) | (320) | (203) | (807)

(a)
(a)
(b)
(c)
(d)
(a) Nestlé USA Brands primarily consists of Nestlé Coffee Partners, beverage, prepared foods, snacks, and other food products.
Other primarily consists of Nutrition, Nestlé Professional, Nespresso, and Nestlé Health Science, which do not meet the criteria
for separate disclosure.
(b) Trading operating profit before Net other trading income (expenses).
(c) The NHI Group determines trading operating profit by allocating corporate expenses to its operating segments based on
activity-based cost drivers.
(d) Included in Trading operating profit.
Invested capital and other information
In millions of Dollars

|  |  |  | 2023
| Brands | PetCare | Other | Total
Invested capital | 2 705 | 6 612 | 2 119 | 11 436
Goodwill and intangible assets | 9 005 | 8 922 | 1 426 | 19 353
Impairment of goodwill | — | — | — | —
Capital additions | 777 | 1 414 | 388 | 2 579

(a)
(a)

|  |  |  | 2022
| Brands | PetCare | Other | Total
Invested capital | 2 661 | 5 715 | 1 573 | 9 949
Goodwill and intangible assets | 9 040 | 8 877 | 1 441 | 19 358
Impairment of goodwill | — | — | (336) | (336)
Capital additions | 540 | 1 433 | 460 | 2 433

(a)
(a)
(a) Nestlé USA Brands primarily consists of Starbucks products, beverage, prepared foods, snacks, and other food products.
Other primarily consists of Nestlé Professional, Nestlé Nutrition, Nespresso, Freshly (disposed of in November 2022), and
Nestlé Health Science, which do not meet the criteria for separate disclosure.
3. Analyses by segment
28 Consolidated Financial Statements of the NHI Group 2023
3.2a Reconciliation from Underlying trading operating profit to Profit before taxes and
associates

In millions of Dollars |  |
| 2023 | 2022
Underlying trading operating profit (a) as per Note 3.1 | 2 715 | 2 466
Net other trading expenses as per Note 4.1 | (208) | (399)
Trading operating profit as per Note 3.1 | 2 507 | 2 067
Net other operating expenses | (12) | (347)
Operating profit | 2 495 | 1 720
Net financial expense | (115) | (114)
Profit before taxes and associates | 2 380 | 1 606

(a) Trading operating profit before Net other trading income/(expenses).
3.2b Reconciliation from invested capital and goodwill and intangible assets to total assets

In millions of Dollars |  |
| 2023 | 2022
Invested capital as per Note 3.1 | 11 436 | 9 949
Liabilities included in invested capital | 6 072 | 5 957
Subtotal | 17 508 | 15 906
Intangible assets and goodwill as per Note 3.1 | 19 353 | 19 358
Other assets | 33 388 | 29 074
Total assets | 70 249 | 64 338

3.3 Customers
The NHI Group has one customer contributing 20% to the total sales in both years across all
segments.
3. Analyses by segment
Consolidated Financial Statements of the NHI Group 2023 29
4. Net other trading and operating income/(expenses)
Other trading income/(expenses)
These comprise restructuring costs, impairment of property, plant and equipment and
intangible assets (other than goodwill), litigations (related legal, advisory, and other
professional fees) and onerous contracts, results on disposals of property, plant and
equipment, and specific other income and expenses that fall within the control of operating
segments.
Restructuring costs are restricted to dismissal indemnities and employee benefits paid to
terminated employees upon the reorganization of a business or function.
Other operating income/(expenses)
These comprise impairment of goodwill, results on disposals of businesses (including
impairment and subsequent remeasurement of businesses classified as held for sale, as well
as other directly related disposal costs like restructuring costs directly linked to businesses
disposed of and legal, advisory and other professional fees), acquisition-related costs, and
income and expenses that fall beyond the control of operating segments or relate to events
such as natural disasters including extreme weather events linked to climate change, as well
as expropriation of assets .
4.1 Net other trading income/(expenses)
In millions of Dollars

| 2023 | 2022
Return on company-owned life insurance | 88 | —
Result on deferred compensation | — | 37
Miscellaneous trading income | 20 | 23
Other trading income | 108 | 60
Return on company-owned life insurance | — | (77)
Restructuring costs | (92) | (52)
Impairment of property, plant and equipment and intangible assets | (99) | (151)
Litigations and onerous contracts | (42) | (146)
Result on deferred compensation | (46) | —
Miscellaneous trading expenses | (37) | (33)
Other trading expenses | (316) | (459)
Total net other trading expenses | (208) | (399)

30 Consolidated Financial Statements of the NHI Group 2023
4. Net other trading and operating income/(expenses)
4.2 Net other operating income/(expenses)

In millions of Dollars |  |  |
|  | 2023 | 2022
Re-measurement of contingent consideration and other compensation liabilities | (a) | — | 22
Miscellaneous operating income |  | 68 | 97
Other operating income |  | 68 | 119
Loss on disposal of businesses |  | — | (7)
Impairment of goodwill |  | — | (336)
Miscellaneous operating expenses |  | (80) | (123)
Other operating expenses |  | (80) | (466)
Total net other operating expenses |  | (12) | (347)

(b)
(c)
(b)
(a) Mainly related to Freshly items.
(b) Miscellaneous operating income mainly consists of transitional services provided to disposed businesses. Miscellaneous
operating expenses mainly consists of transitional service agreements and a result of long-term investments.
(c) See goodwill and intangible assets (refer to Note 9) .
5. Net financial income/(expense)
Net financial income/(expense) includes net financing cost of net financial debt and net
interest income/(expense) on defined benefit plans.
Net financing cost comprises the interest income earned on cash and cash equivalents,
short- term investments and loans to the parent and affiliates, as well as the interest expense
on financial debt (including leases), and loans from affiliates, collectively termed “net
financial debt“. These headings also include other income and expense such as exchange
differences on net financial debt and results on related foreign currency and interest rate
hedging instruments. Certain borrowing costs are capitalized as explained in the Note on
Property, plant and equipment (see Note 8).

In millions of Dollars |  |  |
| Notes | 2023 | 2022
Interest income |  | 913 | 666
Interest expense |  | (994) | (761)
Net financing cost of net financial debt |  | (81) | (95)
Interest income on defined benefit plans | 10 | 28 | 21
Interest expense on defined benefit plans | 10 | (62) | (40)
Net interest expense on defined benefit plans |  | (34) | (19)
Net financial expense |  | (115) | (114)

Interest expense on amounts due to affiliated companies and bonds and commercial paper
guarantee fees to Nestlé S.A. amounted to $176 million and $131 million in 2023 and 2022,
respectively. Interest income on amounts due from the parent and affiliated companies
amounted to $899 million and $660 million in 2023 and 2022, respectively .
Consolidated Financial Statements of the NHI Group 2023 31
6. Inventories
Raw materials are valued at the lower of purchase cost calculated using the FIFO (first-in,
first-out) method and net realizable value. Work in progress, sundry supplies and finished
goods are valued at the lower of their weighted average cost (including an allocation of
factory overheads and depreciation) and net realizable value. The cost of inventories includes
the gains/losses on cash flow hedges for the purchase of raw materials and finished goods.

In millions of Dollars |  |
| 2023 | 2022
Raw materials, work in progress and sundry supplies | 1 105 | 1 229
Finished goods | 2 194 | 2 561
Allowance for write-down to net realizable value | (84) | (80)
Total | 3 215 | 3 710

Inventories amounting to $17 685 million (2022: $17 094 million) were recognized as an expense
during the year and included in Cost of goods sold. No inventories were pledged as security for
financial liabilities during 2023 and 2022.
7. Trade and other receivables/payables
7.1 Trade and other receivables
Recognition and measurement
Trade and other receivables are recognized initially at their transaction price and subsequently
measured at amortized cost less loss allowances.
Expected credit losses
The NHI Group applies the IFRS 9 simplified approach to measuring expected credit losses
(ECLs) for trade receivables at an amount equal to lifetime ECLs. The ECLs on trade receivables
are calculated based on actual credit loss experience over the preceding three to five years
on the total balance of non-credit impaired trade receivables, adjusted for forward-looking
information where relevant (such as significant deterioration in the economic environment).
The NHI Group’s credit loss experience has shown that the aging of receivable balances is
primarily due to negotiations about variable consideration.
The NHI Group considers a trade receivable to be credit impaired when one or more
detrimental events have occurred such as:
• significant financial difficulty of the customer; or
• it is becoming probable that the customer will enter bankruptcy or other financial
reorganization.
Impairment losses related to trade and other receivables are not presented separately in the
consolidated income statement but are reported under the heading Marketing and
administration expenses .
32 Consolidated Financial Statements of the NHI Group 2023
7. Trade and other receivables/payables
In millions of Dollars

|  |  | 2023 |  |  | 2022
| Gross carrying | Expected credit |  | Gross carrying | Expected credit |
| amount | loss allowance | Total | amount | loss allowance | Total
Trade receivables (not credit impaired) | 3 069 | (12) | 3 057 | 2 517 | (10) | 2 507
Other receivables (not credit impaired) | 133 | — | 133 | 117 | — | 117
Credit impaired trade and other receivables | 2 | (1) | 1 | 4 | (1) | 3
Total | 3 204 | (13) | 3 191 | 2 638 | (11) | 2 627

The top five major customers represent 45% (2022: 51%) of trade and other receivables,
none of them individually exceeding 18% in either year (2022: 21%).
Based on the historic trends and expected performance of the customers, the NHI Group
believes that the above expected credit loss allowance sufficiently covers the risk of default.
7.2 Trade and other payables by type
Recognition and measurement
Trade and other payables are recognized initially at their transaction price and subsequently
measured at amortized cost.
Supplier finance arrangements
The NHI Group participates in supplier finance arrangements under which suppliers may elect
to receive early payment from financial institutions by factoring their receivables from the NHI
Group. The arrangements avoid concentration of liquidity risk, since the due dates of the
payments by the NHI Group are based on the agreed trade terms with the suppliers, are
compliant with the applicable regulations and remain consistent with the normal operating
cycle of its business.
The NHI Group continues to present invoices eligible to be settled through these programs
as Trade payables considering that the original liability is neither legally released nor
substantially modified on entering into such arrangements. Related payments are included
within operating cash flows because they remain operational in nature.

In millions of Dollars |  |
| 2023 | 2022
Due within one year |  |
Trade payables | 3 809 | 3 574
Total | 3 809 | 3 574

Consolidated Financial Statements of the NHI Group 2023 33
8. Property, plant and equipment
Property, plant and equipment is comprised of owned and leased assets.

In millions of Dollars |  |
| 2023 | 2022
Property, plant and equipment – owned | 10 202 | 8 629
Right-of-use assets – leased | 844 | 805
Total | 11 046 | 9 434

8.1 Owned assets
Owned property, plant and equipment are shown on the balance sheet at their historical cost.
Depreciation is assessed on components that have homogenous useful lives by using the
straight-line method so as to depreciate the initial cost down to the residual value over the
estimated useful lives. The residual values are up to 30% on the head office and nil for all
other asset types. The useful lives are as follows:
Buildings 20–40 years
Machinery and equipment 10–25 years
Tools, furniture, information technology
and sundry equipment 3–15 years
Vehicles 3–10 years
Land is not depreciated.
Useful lives, components, and residual amounts are reviewed annually. Such a review takes
into consideration the nature of the assets, their intended use including but not limited to the
closure of facilities, the evolution of the technology and competitive pressures.
Depreciation of property, plant and equipment is allocated to the appropriate headings of
expenses by function in the income statement.
Borrowing costs incurred during the course of construction are capitalized if the assets
under construction are significant and if their construction requires a substantial period to
complete (typically more than one year). The capitalization rate is determined on the basis of
the short-term borrowing rate for the period of construction.
Government grants are recognized as deferred income, which is released to the income
statement over the useful life of the related assets.
34 Consolidated Financial Statements of the NHI Group 2023

In millions of Dollars |  |  |  |  |  |  |  |
|  |  |  | Tools, |  |  |  |
|  |  |  | furniture, |  | Information |  |
|  | Land and | Plant and | and sundry |  | technology | Assets under |
|  | buildings | machinery | equipment | Vehicles | equipment | Construction | Total
Net carrying amount |  |  |  |  |  |  |  |
As at January 1, 2023 |  | 2 430 | 2 405 | 234 | — | 59 | 3 501 | 8 629
Additions | (a) | 91 | 163 | 117 | 61 | (4) | 1 863 | 2 291
Acquisitions through business combinations |  | 5 | 4 | — | — | — | 7 | 16
Reclassification from assets under construction |  | 480 | 454 | 24 | 4 | 26 | (988) | —
Depreciation |  | (142) | (352) | (77) | (7) | (31) | — | (609)
Impairments |  | (3) | (95) | (3) | — | — | — | (101)
Disposals |  | (3) | (10) | (3) | (7) | (1) | — | (24)
Classification from held for sale and disposals of businesses |  | — | — | — | — | — | — | —
As at December 31, 2023 |  | 2 858 | 2 569 | 292 | 51 | 49 | 4 383 | 10 202
Gross value |  | 4 488 | 7 145 | 958 | 132 | 258 | 4 383 | 17 364
Accumulated depreciation and impairments |  | (1 630) | (4 576) | (666) | (81) | (209) | — | (7 162)
Net carrying amount |  |  |  |  |  |  |  |
As at January 1, 2022 |  | 2 396 | 2 449 | 203 | 11 | 69 | 2 279 | 7 407
Additions |  | 60 | 70 | 97 | (7) | 10 | 1 812 | 2 042
Acquisitions through business combinations |  | — | — | — | — | — | — | —
Reclassification from assets under construction |  | 178 | 365 | 13 | — | 15 | (571) | —
Depreciation |  | (130) | (353) | (69) | (4) | (33) | — | (589)
Impairments |  | (38) | (84) | (4) | — | — | — | (126)
Disposals |  | (2) | (14) | (4) | — | (1) | (17) | (38)
Classification from held for sale and disposals of businesses |  | (34) | (28) | (2) | — | (1) | (2) | (67)
As at December 31, 2022 |  | 2 430 | 2 405 | 234 | — | 59 | 3 501 | 8 629
Gross value |  | 3 868 | 6 718 | 862 | 90 | 275 | 3 501 | 15 314
Accumulated depreciation and impairments |  | (1 438) | (4 313) | (628) | (90) | (216) | — | (6 685)
(a) Including capitalized |  | borrowing costs of $95 million (2022: $24 million) |  |  |  |  |  |

(a)
There were $1 631 million and $1 479 million in commitments for future capital expenditures as
of December 31, 2023 and 2022, respectively.
8. Property, plant and equipment
Consolidated Financial Statements of the NHI Group 2023 35
Impairment of property, plant and equipment
Reviews of the carrying amounts of the NHI Group’s property, plant and equipment are
performed when there is an indication of impairment. An indicator could be technological
obsolescence, unfavorable development of a business under competitive pressures or
severe economic slowdown in a given market as well as reorganization of the operations to
leverage their scale. Earlier than planned retirement of property, plant and equipment due to
the transition to a low carbon economy, Nestlé’s commitments regarding recyclable or
reusable packaging, reduction to virgin plastic and Nestlé’s Net Zero Roadmap on
greenhouse gas emissions are also considered as triggers for impairment.
In assessing value in use, the estimated future cash flows are discounted to their present
value, based on the time value of money and any risks specific to the asset’s location. The
risks specific to the asset are included in the determination of the cash flows.
Impairment of property, plant and equipment arises mainly from plans to optimize industrial
manufacturing capacities by closing or selling inefficient production facilities and
underperforming businesses. The majority of Nestlé’s emissions are classified as Scope 3 (i.e.
indirect emissions that occur across Nestlé’s value chain and outside of Nestlé’s direct control),
and the property, plant and equipment are georgraphically widespread. Therefore, property,
plant and equipment are not materially exposed to climate transition risks nor to physicaly
climate risks, and no significant climate-related triggers for impairment have been identified.
8.2 Leases – Group as a lessee
The NHI Group assesses whether a contract is or contains a lease at inception of the contract.
This assessment involves the exercise of judgment about whether it depends on a specified
asset, whether the NHI Group obtains substantially all the economic benefits from the use of
that asset, and whether the NHI Group has the right to the direct use of the asset.
The NHI Group recognizes a right-of-use (ROU) asset and a lease liability at the lease
commencement date, except for short-term leases of 12 months or less which are expensed
in the income statement on a straight-line basis over the lease term.
The lease liability is initially measured at the present value of the lease payments that are
not paid at the commencement date, discounted using the interest rate implicit in the lease.
If this rate cannot be readily determined, the NHI Group uses an incremental borrowing rate
specific to the country, term and currency of the contract. Lease payments can include fixed
payments; variable payments that depend on an index or rate known at the commencement
date; and extension option payments or purchase options which the NHI Group is reasonably
certain to exercise. The lease liability is subsequently measured at amortized cost using the
effective interest rate method and remeasured (with a corresponding adjustment to the
related ROU asset) when there is a change in future lease payments in case of renegotiation,
changes of an index or rate in case of reassessment of options.
At inception, the ROU asset comprises the initial lease liability, initial direct costs and the
obligation to refurbish the asset, less any incentives granted by the lessors. The ROU asset is
depreciated over the shorter of the lease term or the useful life of the underlying asset. The
ROU asset is subject to testing for impairment if there is an indicator for impairment, as for
owned assets.
ROU assets are included in the heading Property, plant and equipment, and the lease
liability is included in the headings current and non-current Financial debt.
8. Property, plant and equipment
8. Property, plant and equipment
8.2a Description of lease activities
Real estate leases
The NHI Group leases land and buildings for its office and warehouse space and retail stores.
Lease terms are negotiated on an individual basis and contain a wide range of different terms
and conditions. Leases are typically made for a fixed period of 5–15 years and may include
extension options which provide operational flexibility. If the NHI Group exercised all extension
options not currently included in the lease liability, the additional payments would amount to
$971 million (undiscounted) at December 31, 2023 (2022: $969 million).
Vehicle leases
The NHI Group leases trucks for distribution in specific businesses and cars for management
and sales functions. The average contract duration is 6 years for trucks and 3 years for cars.
Other leases
The NHI Group also leases machinery and equipment, and tools, furniture and other
equipment that are each insignificant to the total leased asset portfolio.
8.2b Right-of-use assets
In millions of Dollars

| Land and |  |  |
| buildings | Vehicles | Other | Total
Net carrying amount |  |  |  |
As at January 1, 2023 | 728 | 28 | 49 | 805
Additions | 166 | 22 | 20 | 208
Depreciation | (120) | (14) | (18) | (152)
Impairments, net of reversals | 6 | — | — | 6
Derecognition of sub-leased right-of-use assets and others | (23) | — | — | (23)
As at December 31, 2023 | 757 | 36 | 51 | 844
Net carrying amount |  |  |  |
As at January 1, 2022 | 721 | 21 | 29 | 771
Additions | 273 | 23 | 35 | 331
Depreciation | (112) | (13) | (15) | (140)
Impairments, net of reversals | (25) | — | — | (25)
Derecognition of sub-leased right-of-use assets and others | (129) | (3) | — | (132)
As at December 31, 2022 | 728 | 28 | 49 | 805
36 Consolidated Financial Statements of the NHI Group 2023 |  |  |  |

Consolidated Financial Statements of the NHI Group 2023 37
8.2c Other lease disclosures
A maturity analysis of lease liabilities is shown in Note 12.2b.
The NHI Group incurred interest expense on lease liabilities of $23 million (2022: $18 million).
The expense relating to short-term leases and variable lease payments not included in the
measurement of lease liabilities is not significant. The total cash outflow for leases amounted
to $170 million (2022: $148 million).
During the year, there was a reversal of impairment totaling $6 million, due to early
termination of leases. In 2022, net impairment of $25 million in relation to leases that were not
likely to be used in the forseeable future, net of reversals of impairments for subleases
executed during the period. The NHI Group continues to explore alternative avenues for
impaired facilities, such as renegotiation of more favorable lease terms or subleasing.
There are no significant lease commitments for leases not commenced at year-end.
8. Property, plant and equipment
38 Consolidated Financial Statements of the NHI Group 2023
9. Goodwill and intangible assets
Goodwill
Goodwill is initially recognized during a business combination (see Note 2). Subsequently it is
measured at cost less impairment.
Intangible Assets
This heading includes intangible assets that are internally generated or acquired, either
separately or in a business combination, when they are identifiable and can be reliably
measured. Internally generated intangible assets (mainly management information system
software) are capitalized, provided that there is an identifiable asset that will be useful in
generating future benefits in terms of savings, economies of scale, etc.
Indefinite life intangible assets mainly comprise operating rights which can be renewed
without significant cost and are supported by ongoing marketing activities. They are not
amortized but are tested for impairment annually or more frequently if an impairment indicator
is present. Any impairment charge is recorded in the income statement under Other trading
expenses. The assessment of the classification of intangible assets as indefinite is reviewed
annually.
Finite life intangible assets are amortized over the shorter of their contractual or useful
economic lives. They comprise mainly management information systems, rights and
customer relationships. They are amortized on a straight-line basis assuming a zero residual
value. Useful lives are as follows: management information systems over 3 to 8 years; other
finite intangible assets over the shorter of the estimated useful life or the related contractual
period, generally 5 to 25 years. Useful lives and residual values are reviewed annually.
Amortization of finite life intangible assets starts when they are available for use and is
allocated to the appropriate headings of expenses by function in the income statement
under Other trading expenses.
Consolidated Financial Statements of the NHI Group 2023 39
9. Goodwill and intangible assets
In millions of Dollars

| Goodwill | Intangible assets
Net carrying amount |  |
As at January 1, 2023 | 14 773 | 4 585
Expenditure | — | 83
Acquisitions through business combinations | 44 | 10
Amortization | — | (88)
Impairments | — | (4)
Disposals | — | (50)
As at December 31, 2023 | 14 817 | 4 536
of which indefinite useful life | — | 4 198
As at December 31, 2023 |  |
Gross value | 19 106 | 5 824
Accumulated amortization and impairments | (4 289) | (1 288)
Net carrying amount |  |
As at January 1, 2022 | 15 110 | 4 619
Expenditure | — | 60
Acquisitions through business combinations | — | —
Amortization | — | (79)
Impairments | (336) | —
Disposals | (1) | (3)
Classification from held for sale and disposals of businesses | — | (12)
As at December 31, 2022 | 14 773 | 4 585
of which indefinite useful life | — | 4 198
As at December 31, 2022 |  |
Gross value | 19 062 | 5 792
Accumulated amortization and impairments | (4 289) | (1 207)

(a)
(b)
(a)
(a) Of which $4 195 million are perpetual rights to market, sell and distribute certain Starbucks’ consumer and
food service products globally.
(b) Mainly related to Freshly (refer to Note 9.1.1) .
40 Consolidated Financial Statements of the NHI Group 2023
9. Goodwill and intangible assets
Impairment of goodwill and intangible assets
Goodwill and intangible assets with an indefinite life or not yet available for use are tested for
impairment at least annually and whenever there is an indication of impairment. Finite life
intangible assets are tested when there is an indication of impairment.
The annual impairment tests are performed at the same time each year and at the cash
generating unit (CGU) level. The NHI Group defines its CGU for goodwill impairment testing
based on the way that it monitors and derives economic benefits from the acquired goodwill.
For indefinite life intangible assets, the NHI Group performs the test at the level of the
smallest identifiable assets or group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets.
The impairment tests are performed by comparing the carrying amount of the assets of
these CGU with their recoverable amount, usually based on their fair value less costs of
disposal, but occasionally on their value in use.
An impairment loss in respect of goodwill is never subsequently reversed.
9.1 Impairment
9.1.1 Impairment charge during the year
No impairment charges were recognized in 2023.
The impairment charge of goodwill in 2022 related mainly to the Goodwill associated with the
Freshly CGU, which was included in the “Other” segment. Further deterioration in market
conditions led to sales and operating profit well below projections during 2022 and challenges
in acquisition of customers due to regulatory changes, resulted in lower performance
expectations during 2022 and beyond. The business was disposed of in 2022 (see Note 2.1).
Consequently, a goodwill impairment charge amounting to $311 million was recognized in 2022
in net other operating expenses of the income statement using the net selling priceas the
highest CGU recoverable amount.
Consolidated Financial Statements of the NHI Group 2023 41
9.1.2 Annual impairment tests
Goodwill impairment reviews have been conducted for nine Cash Generating Units (CGU).
Impairment reviews on intangible assets with indefinite useful life (IAIUL) were performed at
the level of the smallest identifiable assets or group of assets.
The following table sets out the key assumptions for CGUs that have significant Goodwill or
IAIUL allocated to them.
Goodwill
carrying
amount (a)
IAIUL carrying
amount (a)
Period of
cash flow
projections
Average
annual sales
growth
Annual
margin
evolution
Terminal
growth
rate
Discount
rate

CGU |  |  |  |  |  |  |
PetCare | 8 858  | — | 5 years | 7.4% | Stable | 2.6% | 7.4%
Food | 3 059  | — | 5 years | 5.5% | Improvement | 2.6% | 7.4%
Coffee | 1 133  | 4 195  | 5 years | 5.1% | Stable | 2.6% | 7.4%
Subtotal | 13 050  | 4 195  |  |  |  |  |
Other CGUs | 1 767  | 3  |  |  |  |  |
Total | 14 817  | 4 198  |  |  |  |  |
CGU |  |  |  |  |  |  |
PetCare | 8 814 | — | 5 years | 6.7% | Stable | 2.0% | 5.9%
Food | 3 059 | — | 5 years | 3.8% | Stable | 2.0% | 5.9%
Coffee | 1 133 | 4 195 | 5 years | 3.1% | Stable | 2.0% | 5.9%
Subtotal | 13 006 | 4 195 |  |  |  |  |
Other CGUs | 1 767 | 3 |  |  |  |  |
Total | 14 773 | 4 198 |  |  |  |  |

(a) In millions of Dollars
For each significant CGU the recoverable amount is higher than its carrying amount. The
recoverable amount has been determined based upon a fair value less costs of disposal
calculation. Generally, no directly observable market inputs are available to assess the fair
value less costs of disposal. Therefore, the calculation is based on net present value
techniques (fair value measurements categorized within Level 3 of the fair value hierarchy).
Cash flows are projected over 5 years. They are extrapolated using a steady or declining
terminal growth rate.
Finally, the following are taken into account in the impairment tests:
• The cash flows are discounted at post-tax weighted average rates. The discount rates are
computed based on external sources of information and reflect the time value of money and
the risks specific to the CGU.
• The cash flows are based upon financial plans approved by NHI Group’s management
consistent with the strategy for this period. They are based on past performance and
current initiatives. The business risk is included in the determination of the cash flows.
• Climate change risks, including transition and physical risks, over the medium to longer
term are taken into account in assessing the risks of the cash flows. Impacts on the
underlying assumptions on future forecasts of CGUs and their portfolio strategy are
considered. Sales growth, margin evolution and terminal growth are adjusted if necessary,
considering the resilience of the CGUs to climate change risks as well as Nestlé’s
commitments to tackle climate change (including the Nestlé Group’s “Net Zero Roadmap”).
In addition, the headroom of the CGUs is compared to information obtained from Nestlé
climate scenario modeling prepared in accordance with the Task Force on Climate-related
Financial Disclosures (TCFD) framework. The outcomes of the scenarios analyzed (selected
9. Goodwill and intangible assets
20232022
42 Consolidated Financial Statements of the NHI Group 2023
high, intermediate and low emissions scenarios) are probability weighted and proportionally
allocated and compared to the headroom of each CGU. The process did not lead to any
impairment charges.
• The terminal growth rates are determined to reflect the long-term view of the nominal
evolution of the business taking into account the latest outlook for long-term inflation.
• The cash flows, discount rates and terminal growth rates include inflation.
The NHI Group assesses the uncertainty of these estimates by performing sensitivity analyses.
Management believes that no reasonably possible change in any of the above key assumptions
would cause the CGU’s recoverable amount to fall below its carrying amount of the CGUs.
10. Employee benefits
10.1 Employee remuneration
The NHI Group’s salary expenses of $2 575 million (2022: $2 657 million) and welfare expenses
of $1 208 million (2022: $1 186 million) represent a total of $3 783 million (2022: $3 843 million).
In addition, certain NHI Group employees are eligible for long-term incentives in the form of
equity compensation plans, for which the cost amounts to $69 million (2022: $49 million).
Employee remuneration is allocated to the appropriate headings of expenses by function (see
Note 1, section Expenses).
10.2 Post-employment benefits
The liabilities of the NHI Group arising from defined benefit obligations, and the related
current service cost, are determined using the projected unit credit method. Actuarial advice
is provided both by external consultants and by actuaries employed by the NHI Group who
perform valuations on an annual basis. Such plans are externally funded or unfunded. The
deficit or excess of the fair value of plan assets over the present value of the defined benefit
obligations is recognized as a liability or an asset on the balance sheet.
Pension costs charged to the income statement consist of service cost (current and past
service cost, gains and losses arising from curtailment and settlement) and administration
costs (other than costs of managing plan assets), which are allocated to the appropriate
heading by function, and net interest expense or income, which is presented as part of net
financial income/(expense). The actual return less interest income on plan assets, changes in
actuarial assumptions, and differences between actuarial assumptions and what has actually
occurred are reported in Other comprehensive income. Some benefits are also provided by
defined contribution plans. Contributions to such plans are charged to the income statement
as incurred.
Pensions and retirement benefits
In the USA, Nestlé’s primary pension plan is a pension equity design, under which members
earn pension credits each year based on a schedule related to the sum of their age and service
with Nestlé Group. A member’s benefit is the sum of the annual pension credits earned
multiplied by an average earning payable as a lump sum. However, in lieu of the lump sum,
members have the option of converting the benefit to a monthly pension annuity. With the
exception of certain Nestlé Purina hourly employees, the Nestlé Pension Plan has been fully
closed to new entrants and replaced by a defined contribution scheme. In 2023, the Nestlé
Pension Plan was fully closed to new entrants, following the transfer of the remaining active
Nestlé Purina hourly employees into the Nestlé Hourly Retirement Plan. The contributions paid
to the plan trust in 2023 amount to $89 million (2022: $64 million) and expected contributions
for 2024 will be approximately $127 million to the Nestlé Pension Plan and to the Nestlé Hourly
Retirement Plan. In August 2022, a buyout transaction with a third party insurance company
was completed and $819 million of defined benefit obligation was removed from the balance
9. Goodwill and intangible assets
Consolidated Financial Statements of the NHI Group 2023 43
sheet. This transaction did not change the pension benefits provided to pensioners.
Post-employment medical benefits and other employee benefits
The NHI Group maintains medical benefit plans, classified as defined benefit plans under IAS
19, which cover eligible retired employees. The obligations for other employee benefits consist
mainly of post service healthcare benefits, which do not have the characteristics of pensions.
In September 2023, a buyout transaction with a third party insurance company was completed
and $97 million of defined benefit obligations were removed from the balance sheet. This
transaction did not significantly change the retiree medical benefits provided to participants. In
addition, the NHI Group established a VEBA trust to fund the major part of these obligations,
and paid contributions of $100 million in 2023 (2022: nil) for the post-employment medical
benefit plans.
Multi-employer pension plans
The NHI Group entities are collectively members of four multi-employer defined benefit
pension plans, including the Central States Southeast and Southwest Areas Pension Fund
(“Central States”), the Western Conference of Teamsters Pension Trust Fund, the Stationary
Engineers Local 39 Pension Trust Fund and the Central Pension Fund of the International
Union of Operating Engineers and Participating Employers.
The NHI Group makes contributions to these plans based on a rate per hour as agreed
under collective bargaining arrangements with the applicable Unions.
No entity under the NHI Group was listed on available plan tax filings as an entity that provides
more than 5 percent of any of the plans’ contributions.
These plans are managed by an independent trustee board typically appointed in equal
number by employers and unions. The trustees, not the NHI Group or its entities, are
responsible for the investment of plan assets and the administration of the plans, including
maintenance of participant records.
The actuarial risks of participating in multi-employer pension plans are different from
single-employer plans. Assets contributed to a multi-employer plan by one employer may be
used to provide benefits to employees of other participating employers. If a participating
employer ceases contributions to a plan, the unfunded obligations of the plan are allocated to
the remaining participating employers.
Information about a participating employer’s allocation of a plan’s unfunded actuarial
liability is only made available upon request to the trustees. The Central States plan has
a Pension Protection Act (PPA) zone status of “Red” as of the most recent publicly available
tax form filing. A PPA red zone status means that the plan is generally less than 65 percent
funded. The remaining plans in which the NHI Group participates are in a green PPA zone
status as of their most recent government form filings. A PPA green zone status means that
the plan is at least 80 percent funded. In January 2023 the Central States plan received $36
billion of Special Financial Assistance (“SFA”) as a result of its application to the PBGC as
defined under The American Rescue Plan, passed by Congress in March 2021. The SFA will
substantially improve the funded status of the Central States plan once updated funded status
information that includes the SFA is published by the Central States administrators.
If an entity under the NHI Group were to cease participation in any of the multi-employer
pension plans, that entity would be allocated a portion of the plan’s unfunded actuarial liability,
otherwise known as withdrawal liability. A cessation of participation in a multi-employer plan
would most commonly be triggered through negotiation with the union. The NHI Group
entities have no current existing negotiated withdrawals from any of the named multi-
employer pension plans.
10. Employee benefits
44 Consolidated Financial Statements of the NHI Group 2023
Risks related to defined benefit plans
The main risks to which the NHI Group is exposed in relation to operating defined benefit plans
are:
• market and liquidity risks: these are the risks that the investments do not meet the expected
returns over the medium to long term. This also encompasses the mismatch between assets
and liabilities. In order to minimize the risks, the structure of the portfolios is reviewed and
asset-liability matching analyses are performed on a regular basis when relevant.
• mortality risk: the assumptions adopted by the NHI Group make allowance for future
improvements in life expectancy. However, if life expectancy improves at a faster rate than
assumed, this would generally result in greater payments from the plans and consequential
increases in the plans’ liabilities. In order to minimize this risk, mortality assumptions are
reviewed on a regular basis.
As certain of the NHI Group’s pension arrangements permit benefits to be adjusted in the case
that downside risks emerge, the NHI Group does not always have full exposure to the risks
described above.
Plan amendments and restructuring events
Plans within the NHI Group are regularly reviewed by management as to whether they are
aligned with market practice in the local context. Should a review indicate that a plan needs to
be changed, prior agreement with the local governing body, the regulator and, if applicable,
the members, is sought before implementing plan changes.
In 2023 as in 2022, there were plan amendments and restructuring activities (among others
risk transfer transactions related to medical and retirement liabilities of pensioners) leading to
curtailments and settlements, individually not significant, amounting to net related settlement
and negative past service costs of $4 million (2022: $6 million).
Asset-liability management and funding arrangement
Governing bodies are responsible for determining the mix of asset classes and target
allocations of the NHI Group’s plans with the support of investment advisors and/or local asset
management firms. Periodic reviews of the asset mix are made by external parties to assess
the adequacy of the portfolio’s structure. Such analyses aim at dynamically comparing the fair
value of the assets and liabilities in order to determine the most adequate strategic asset
allocation.
The overall investment policy and strategy for the NHI Group’s funded defined benefit plans
are guided by the objective of achieving an investment return which, together with the
contributions paid, is sufficient to maintain reasonable control over the various funding risks of
the plans. To the extent possible, the risks are shared equally amongst the different
stakeholders. As those risks evolve with the development of capital markets and asset
management activities, the NHI Group addresses the assessment and control process of the
major investment pension risks. In order to protect the NHI Group’s defined benefit plans
funding ratio and to mitigate the financial risks, protective measures on the investment
strategies are in force, considering sustainability, social and climate factors.
10. Employee benefits
Consolidated Financial Statements of the NHI Group 2023 45
10.2a Reconciliation of assets and liabilities recognized in the balance sheet

In millions of Dollars |  |  |  |  |  |  |  |
|  |  |  | 2023 |  |  |  | 2022
|  | Post employment |  |  |  | Post employment |  |
| Defined benefit | medical benefits |  |  | Defined benefit | medical benefits |  |
| retirement plans | and other benefits | Total |  | retirement plans | and other benefits | Total |
Present value of funded obligations | 2 501 | 338 |  | 2 839 | 2 344 | — |  | 2 344
Fair value of plan assets | (2 309) | (116) |  | (2 425) | (2 352) | — |  | (2 352)
Excess of liabilities/(assets) over funded |  |  |  |  |  |  |  |
obligations | 192 | 222 |  | 414 | (8) | — |  | (8)
Present value of unfunded obligations | 421 | 30 |  | 451 | 426 | 466 |  | 892
Net defined benefit liabilities | 613 | 252 |  | 865 | 418 | 466 |  | 884
Other employee benefit liabilities |  |  |  | 472 |  |  |  | 481
Net liabilities |  |  |  | 1 337 |  |  |  | 1 365
Reflected in the balance sheet as follows: |  |  |  |  |  |  |  |
Employee benefit assets |  |  |  | — |  |  |  | (48)
Employee benefit liabilities |  |  |  | 1 337 |  |  |  | 1 413
Net liabilities |  |  |  | 1 337 |  |  |  | 1 365

10.2b Movement in the present value of defined benefit obligations

In millions of Dollars |  |  |  |  |  |  |
|  |  | 2023 |  |  |  | 2022
|  | Post employment |  | Defined benefit | Post employment |  |
| Defined benefit | medical benefits |  | retirement | medical benefits |  |
| retirement plans | and other benefits Total |  | plans | and other benefits | Total |
As at January 1 | 2 770 | 466 | 3 236 | 4 679 | 582 |  | 5 261
of which funded defined benefit plans | 2 344 | — | 2 344 | 4 147 | — |  | 4 147
of which unfunded defined benefit |  |  |  |  |  |  |
plans | 426 | 466 | 892 | 532 | 582 |  | 1 114
Service cost | 119 | 8 | 127 | 153 | 9 |  | 162
of which current service cost | 117 | 6 | 123 | 147 | 9 |  | 156
of which past service cost and losses |  |  |  |  |  |  |
arising from settlements | 2 | 2 | 4 | 6 | — |  | 6
Interest expense | 138 | 24 | 162 | 125 | 14 |  | 139
Actuarial (gains)/losses | 208 | (2) | 206 | (940) | (105) |  | (1 045)
Benefits paid on funded defined benefit |  |  |  |  |  |  |
plans | (258) | (101) | (359) | (1 194) | — |  | (1 194)
Benefits paid on unfunded defined benefit |  |  |  |  |  |  |
plans | (55) | (28) | (83) | (56) | (34) |  | (90)
Plan mergers | — | — | — | 3 | — |  | 3
As at December 31 | 2 922 | 367 | 3 289 | 2 770 | 466 |  | 3 236
of which funded defined benefit plans | 2 501 | 338 | 2 839 | 2 344 | — |  | 2 344
of which unfunded defined benefit |  |  |  |  |  |  |
plans | 421 | 30 | 451 | 426 | 466 |  | 892

(a)
(a) Including the buyout transactions as described in Note 10.2, section Post-employment benefits
10. Employee benefits
46 Consolidated Financial Statements of the NHI Group 2023
10. Employee benefits
10.2c Movement in fair value of defined benefit assets
In millions of Dollars

|  |  | 2023 |  |  | 2022
|  | Post |  |  | Post |
|  | employment |  |  | employment |
| Defined benefit | medical |  | Defined benefit | medical |
| retirement plans | benefits | Total | retirement plans | benefits | Total
As at January 1 | 2 352 | — | 2 352 | 4 348 | — | 4 348
Interest income | 119 | 5 | 124 | 118 | — | 118
Actual return on plan assets, excluding interest income | 7 | 11 | 18 | (983) | — | (983)
Employer contributions | 144 | 199 | 343 | 118 | — | 118
Benefits paid on funded/unfunded defined benefit plans | (313) | (99) | (412) | (1 249) | — | (1 249)
As at December 31 | 2 309 | 116 | 2 425 | 2 352 | — | 2 352
(a) Including the buyout transactions as described in Note 10.2, section Post-employment benefits |  |  |  |  |  |

(a)
(a)
The major classes of plan assets as a percentage of total plan assets:
In millions of Dollars

| 2023 | 2022
December 31: |  |
Equities | 20% | 14%
Debts | 60% | 63%
of which government debts | 34% | 38%
of which corporate debts | 26% | 25%
Alternative investments | 20% | 23%
(a) Almost all have a quoted market price in an active market. |  |
(b) Almost all are either not quoted or are quoted in a market which is not active. |  |

(a)
(a)
(b)
(b)
Equities and government debts represent 54% (2022: 52%) of the plan assets. Corporate debts,
real estate and hedge funds represent 46% (2022: 48%) of the plan assets.
10.2d Expenses recognized in the income statement
In millions of Dollars

|  |  | 2023 |  |  | 2022
Service cost | 114 | 8 | 122 | 153 | 9 | 162
Net interest expense | 16 | 18 | 34 | 5 | 14 | 19
Administration expenses | 13 | 3 | 16 | 16 | — | 16
Defined benefit expenses | 143 | 29 | 172 | 174 | 23 | 197
Defined contribution expenses |  |  | 158 |  |  | 129
Total |  |  | 330 |  |  | 326

Defined benefit
retirement plans
Post emplo yment
medical benefits and
other benefits
T otal
Defined benefit
retirement plans
Post emplo yment
medical benefits and
other benefits
T otal
The expenses for defined benefit and defined contribution plans are allocated to the
appropriate headings of expenses by function.
Consolidated Financial Statements of the NHI Group 2023 47
10. Employee benefits
10.2e Remeasurement of defined benefit plans reported in other comprehensive income
In millions of Dollars

|  |  | 2023 |  |  | 2022
Actual return on plan assets, excluding |  |  |  |  |  |
interest income | 7 | 11 | 18 | (983) | — | (983)
Experience adjustments on plan liabilities | (113) | 2 | (111) | (50) | 4 | (46)
Change in demographic assumptions on plan liabilities | 2 | — | 2 | 11 | 2 | 13
Change in financial assumptions on plan |  |  |  |  |  |
liabilities | (97) | — | (97) | 979 | 99 | 1 078
Remeasurement of defined benefit plans |  |  |  |  |  |
- actuarial gains/(losses) | (201) | 13 | (188) | (43) | 105 | 62

Defined benefit
retirement plans
Post employment
medical benefits and
other benefits
Total
Defined benefit
retirement plans
Post employment
medical benefits and
other benefits
Total
10.2f Principal financial actuarial assumptions
The principal financial actuarial assumptions are presented below. Each item is a weighted
average in relation to the relevant underlying component.
In millions of Dollars

| 2023 | 2022
Discount rates | 5.1% | 5.4%
Expected rates of salary increases | 4.0% | 4.0%
Medical cost trend rates | 4.5% - 6.3% | 4.5% - 6.5%

10.2g Mortality tables and life expectancies
Expressed in years

| Life expectancy at age 65 for a male |  | Life expectancy at age 65 for a female |
| member currently aged 65 |  | member currently aged 65 |
| 2023 | 2022 | 2023 | 2022
Mortality table |  |  |  |
Pri-2012 | 20.7 | 20.6 | 22.6 | 22.6

Life expectancy is reflected in the defined benefit obligations by using the best estimate of the
mortality of plan members. When appropriate, base tables are adjusted to take into consideration
expected changes in mortality e.g. allowing for future longevity improvements.
48 Consolidated Financial Statements of the NHI Group 2023
10. Employee benefits
10.2h Sensitivity analyses on present value of defined benefit obligations
The table below gives the present value of the defined benefit obligations when major
assumptions are changed.
In millions of Dollars

| 2023 | 2022
As reported | 3 290 | 3 236
Discount rates |  |
Increase of 50 basis points | 3 144 | 3 093
Decrease of 50 basis points | 3 449 | 3 395
Expected rates of salary increases |  |
Increase of 50 basis points | 3 317 | 3 284
Decrease of 50 basis points | 3 263 | 3 212
Medical cost trend rates |  |
Increase of 50 basis points | 3 292 | 3 238
Decrease of 50 basis points | 3 287 | 3 234
Mortality assumption |  |
Setting forward the tables by 1 year | 3 250 | 3 196
Setting back the tables by 1 year | 3 329 | 3 276

All sensitivities are calculated using the same actuarial method as for the disclosed present
value of the defined benefit obligations at year-end.
10.2i Weighted average duration of defined benefit obligations
At December 31, 2023, the weighted-average duration of the defined benefit obligation
was 9.8 years (2022: 9.6 years).
Consolidated Financial Statements of the NHI Group 2023 49
11. Provisions and contingencies
Provisions
Provisions comprise liabilities of uncertain timing or amount that arise from restructuring
plans, environmental, litigation, and other risks. Provisions are recognized when a legal or
constructive obligation stemming from a past event exists and when the future cash outflows
can be reliably estimated. Provisions are measured at the present value of the expenditures
unless the impact of discounting is immaterial. Obligations arising from restructuring plans
are recognized when detailed formal plans have been established and when there is a valid
expectation that such plans will be carried out by either starting to implement them or
announcing their main features. Obligations under litigation reflect management’s best
estimate of the outcome based on the facts known at the balance sheet date.
Contingent assets and liabilities
Contingent assets and liabilities are possible rights and obligations that arise from past events
and whose existence will be confirmed only by the occurrence or non-occurrence of one or
more uncertain future events not fully within the control of the NHI Group.
11.1 Provisions
Provisions are as follows:
In millions of Dollars

| Restructuring | Environmental | Legal | Other | Total
As at January 1, 2023 | 56 | 18 | 49 | 105 | 228
Provisions made during the year | 98 | — | 22 | 24 | 144
Amounts used | (55) | (3) | (24) | (25) | (107)
Reversal of unused amounts | (7) | — | (4) | — | (11)
As at December 31, 2023 | 92 | 15 | 43 | 104 | 254
of which expected to be settled within 12 months | 83 | 1 | 6 | 57 | 147
As at January 1, 2022 | 53 | 22 | 16 | 68 | 159
Provisions made during the year | 62 | 2 | 51 | 149 | 264
Amounts used | (49) | (6) | (16) | (112) | (183)
Reversal of unused amounts | (10) | — | (2) | — | (12)
As at December 31, 2022 | 56 | 18 | 49 | 105 | 228
of which expected to be settled within 12 months | 54 | 4 | 33 | 52 | 143

(a)
(a)
(a) Including discounting of provisions.
Restructuring
Restructuring provisions arise from a number of projects across the NHI Group. These include
plans to optimize production, sales, and administration structures. Restructuring provisions are
expected to result in future cash outflows when implementing the plans (usually over one to
three years).
Environmental
Situations where the NHI Group is found liable for remediation or cleanup efforts by the U.S.
environmental Protection Agency (“EPA”) or other governmental agencies on specific sites
represent known liabilities.
11. Provisions and contingencies
In these instances, it is the NHI Group’s policy to accrue for environmental cleanup costs
when they are assessed. As assessments and cleanups proceed, these liabilities are reviewed
and adjusted as additional information becomes available regarding the nature and extent of
contamination, methods of remediation required, other actions by governmental agencies or
private parties, and the amount, if any, of available coverage by the NHI Group’s insurance
carriers.
Legal
Legal provisions have been established to cover legal and administrative settlements that arise
in the ordinary course of the business. They cover numerous separate cases whose detailed
disclosure could be detrimental to the NHI Group interests. The NHI Group does not believe
that any of these cases will have a material adverse impact on its financial position. The timing
of outflows is uncertain as it depends upon the outcome of the cases. Management does not
believe it is possible to make assumptions on the evolution of these cases beyond the balance
sheet date.
Other
Other provisions are mainly constituted by onerous contracts and various damage claims that
occurred during the year but were not covered by insurance companies. Onerous contracts
result from the termination of contracts or supply agreements above market prices in which
the unavoidable costs of meeting the obligations under the contracts exceed the economic
benefits expected to be received or for which no benefits are expected to be received.
11.2 Contingencies
Litigation
The NHI Group is exposed to a number of asserted claims and unasserted potential claims
encountered in the normal course of business. In the opinion of NHI Group management, the
resolution of these matters will not have a material impact on the NHI Group’s consolidated
financial position.
Exposure for environmental matters
The NHI Group has contingent liabilities related to environmental matters where the NHI Group
has received “Notices of Potential Liability” from, or has been identified as a “Potentially
Responsible Party” by, the EPA or other government agencies regarding the alleged disposal
of hazardous material at various sites around the country that allegedly require environmental
cleanup.
These proceedings are being vigorously defended or resolutions are being negotiated.
Although the outcome of these proceedings is unknown, NHI Group management does not
believe that any resulting liability would be material to the financial position of NHI Group.
50 Consolidated Financial Statements of the NHI Group 2023
Consolidated Financial Statements of the NHI Group 2023 51
12. Financial instruments
Financial assets – classes and categories
The classification of financial assets is generally based on the business model in which
a financial asset is managed as well as its contractual cash flow characteristics. The NHI
Group classifies financial assets in the following categories:
• measured at amortized cost;
• measured at fair value through the income statement (abbreviated as FVTPL, fair value
through profit or loss); and
• measured at fair value through Other comprehensive income (abbreviated as FVOCI).
For an equity investment that is not held for trading, the NHI Group may irrevocably elect to
classify it as measured at FVOCI. This election is made at initial recognition on an investment
by investment basis.
Financial assets – recognition and derecognition
The settlement date is used for initial recognition and derecognition of financial assets as
these transactions are generally under contracts whose terms require delivery within the
time frame established by regulation or convention in the market place (regular-way
purchase or sale). Financial assets are derecognized when substantially all of the NHI
Group’s rights to cash flows from the financial assets have expired or have been transferred
and the NHI Group has transferred substantially all the risks and rewards of ownership.
Financial assets – measurement
Financial assets are initially recognized at fair value plus directly attributable transaction
costs. However, when a financial asset measured at FVTPL is recognized, the transaction
costs are expensed immediately. Subsequent remeasurement of financial assets is
determined by their category, which is revisited at each reporting date.
Commercial paper and time deposits are held by the NHI Group’s treasury unit in a separate
portfolio in order to mitigate the credit risk exposure of the NHI Group and provide interest
income. The NHI Group considers that these investments are held within a business model
whose objective is achieved by collecting contractual cash flows. The contractual terms of
these financial assets give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding. These assets have therefore been
classified as measured at amortized cost.
Investments in equities, debt funds, equity funds as well as other financial assets not
giving rise on specified dates to cash flows that are solely payments of principal and interest
are classified at FVTPL. These investments are mainly related to liquidity management and
self-insurance activities.
Financial assets – impairment
The NHI Group assesses whether its financial assets carried at amortized cost and FVOCI
are impaired on the basis of expected credit losses (ECL). This analysis requires the
identification of significant increases in the credit risk of the counterparties. Considering
that the majority of the NHI Group’s financial assets are trade receivables, the analysis also
integrates statistical data reflecting the past experience of losses incurred due to default,
as well as any relevant forward-looking information. See Note 7.1 for impairments related to
trade receivables.
The NHI Group measures loss allowances for investments in debt securities and time
deposits that are determined to have low credit risk at the reporting date at an amount equal
to 12 months’ expected credit losses. The NHI Group considers a debt security to have low
credit risk when the credit rating is ‘investment grade‘ according to internationally
recognized rating agencies.
52 Consolidated Financial Statements of the NHI Group 2023
To assess whether there is a significant increase in credit risk since initial recognition, the
NHI Group considers available reasonable and supportive information such as changes in
the credit rating of the counterparty. If there is a significant increase in credit risk the loss
allowance is measured at an amount equal to lifetime expected losses.
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as
the present value of all cash shortfalls due to a credit default event of the counterparty (i.e.
the difference between cash flows in accordance with the contract and the cash flows that
the NHI Group expects to receive).
Loss allowances for financial assets measured at amortized cost are deducted from the
gross carrying amount of the assets. For debt securities carried at FVOCI, the loss allowance
is recognized in Other comprehensive income.
Impairment losses on other financial assets related to treasury activities are presented
under Financial expense.
The model and some of the assumptions used in calculating these ECLs are key sources
of estimation uncertainty.
Financial liabilities at amortized cost
Financial liabilities are initially recognized at the fair value, net of transaction costs incurred.
Subsequent to initial measurement, financial liabilities are recognized at amortized cost.
The difference between the initial carrying amount of the financial liabilities and their
redemption value is recognized in the income statement over the contractual term using the
effective interest rate method. This category includes the following classes of financial
liabilities: trade and other payables, commercial paper, bonds, lease liabilities and other
financial liabilities.
Financial liabilities at amortized cost are classified as current or non-current depending
whether these will fall due within 12 months after the balance sheet date or beyond.
Financial liabilities are derecognized (in full or partly) when either the NHI Group is
discharged from its obligation, they expire, they are canceled or they are replaced by a new
liability with substantially modified terms.
12. Financial instruments
Consolidated Financial Statements of the NHI Group 2023 53
12.1 Financial assets and liabilities
12.1a By class and by category
In millions of Dollars

|  |  |  | 2023 |  |  |  | 2022
Classes |  |  |  |  |  |  |  |
Cash at bank and in hand | 212 | — | — | 212 | 412 | — | — | 412
Time deposits | 118 | — | — | 118 | — | — | — | —
Bonds and debt funds | — | 343 |  | 343 | — | 337 | — | 337
Equity and equity funds | — | 196 | 5 | 201 | — | 176 | 96 | 272
Other financial assets | 169 | 590 | 3 | 762 | 182 | 587 | 5 | 774
Liquid assets (b) and non-current |  |  |  |  |  |  |  |
financial assets | 499 | 1 129 | 8 | 1 636 | 594 | 1 100 | 101 | 1 795
Trade and other receivables | 3 191 | — | — | 3 191 | 2 627 | — | — | 2 627
Loans to the parent and affiliates | 31 538 | — | — | 31 538 | 27 297 | — | — | 27 297
Derivative assets | — | 157 | — | 157 | — | 25 | — | 25
Total financial assets | 35 228 | 1 286 | 8 | 36 522 | 30 518 | 1 125 | 101 | 31 744
|  |  |  | — |  |  |  | —
Trade and other payables | (3 816) |  | — | (3 816) | (3 584) | — | — | (3 584)
Financial debt | (32 056) | — | — | (32 056) | (28 151) | — | — | (28 151)
Loans from affiliates | (2 678) | — | — | (2 678) | (2 565) | — | — | (2 565)
Derivative liabilities | — | (305) | — | (305) | — | (535) | — | (535)
Total financial liabilities | (38 550) | (305) | — | (38 855) | (34 300) | (535) | — | (34 835)
|  |  |  | — |  |  |  | —
Net financial position | (3 322) | 981 | 8 | (2 333) | (3 782) | 590 | 101 | (3 091)
of which at fair value | — | 981 | 8 | 989 | — | 590 | 101 | 691

At amortized cost
(a)
At fair value
to income statement
At fair value to
other comprehensive
income
Total
categories
At amortized cost
(a)
At fair value
to income statement
At fair value to
other comprehensive
income
Total
categories
(c)
(c)
(a) Carrying amount of these instruments is a reasonable approximation of their fair value. For bonds included in financial debt, see
Note 12.1d.
(b) Liquid assets are composed of cash and cash equivalents and short-term investments.
(c) Include derivatives held in hedge relationships and those that are undesignated (categorized as held-for-trading), see Note
12.2d .
12. Financial instruments
54 Consolidated Financial Statements of the NHI Group 2023
12.1b Fair value hierarchy of financial instruments
The NHI Group classifies the fair value of its financial instruments in the following hierarchy,
based on the inputs used in their valuation:
• Level 1: the fair value of financial instruments quoted in active markets is based on their
quoted closing price at the balance sheet date. Examples include exchange-traded
commodity derivatives and financial assets such as investments in equity and debt
securities.
• Level 2: the fair value of financial instruments that are not traded in an active market is
determined by using valuation techniques based on observable market data. Such
valuation techniques include discounted cash flows, standard valuation models based on
market parameters for interest rates, yield curves or foreign exchange rates, dealer quotes
for similar instruments and comparable arm’s length transactions. For example, the fair
value of forward exchange contracts, currency swaps and interest rate swaps is determined
by discounting estimated future cash flows.
• Level 3: the fair value of financial instruments that are measured on the basis of entity
specific valuations using inputs that are not based on observable market data (unobservable
inputs). When the fair value of unquoted instruments cannot be measured with sufficient-
reliability, the NHI Group carries such instruments at cost less impairment, if applicable.
I n millions of Dollars

| 2023 | 2022
Derivative assets | 3 | 10
Other financial assets | 2 | 2
Derivative liabilities | (21) | (26)
Prices quoted in active markets (Level 1) | (16) | (14)
Derivative assets | 154 | 15
Bonds and debt funds | 339 | 321
Equity and equity funds | 195 | 268
Investments in life insurance company general accounts | 589 | 586
Derivative liabilities | (284) | (509)
Valuation techniques based on observable market data (Level 2) | 993 | 681
Financial assets | 12 | 24
Valuation techniques based on unobservable input (Level 3) | 12 | 24
Total financial instruments at fair value | 989 | 691

There have been no transfers between the different hierarchy levels in 2023 and
in 2022.
12. Financial instruments
Consolidated Financial Statements of the NHI Group 2023 55
12.1c Changes in liabilities arising from financing activities
In millions of Dollars

| 2023 | 2022
As at January 1 | (28 648) | (25 219)
Changes in fair values | 65 | 12
Changes arising from acquisition and disposal of businesses | — | 17
Increase in lease liabilities | (186) | (304)
Inflows from bonds and other long-term financial debt | (5 462) | (5 153)
Outflows from bonds, lease liabilities and other long-term financial debt | 2 290 | 1 974
(Inflows)/outflows from short-term financial debt | (245) | 25
As at December 31 | (32 186) | (28 648)
of which current financial debt | 3 940 | 3 064
of which non-current financial debt | 28 116 | 25 087
of which derivatives hedging financial debt | 130 | 497

12. Financial instruments
56 Consolidated Financial Statements of the NHI Group 2023
12.1d Bonds
In millions of Dollars

|  | Effective | Years of issue/ |  |  |
| Coupon | interest rate | maturity | Comments | 2023 | 2022
EUR 850 | 0.88% | 0.92% | 2017–2025 | (a) | 940 | 904
CHF 550 | 0.25% | 0.24% | 2017–2027 | (a) | 654 | 595
CHF 150 | 0.55% | 0.54% | 2017–2032 | (a) | 178 | 162
USD 600 | 3.13 % | 3.28% | 2018–2023 |  | — | 600
USD 1500 | 3.35% | 3.41% | 2018–2023 | (b) | — | 1 500
USD 900 | 3.50% | 3.59% | 2018–2025 | (b) | 899 | 898
USD 1250 | 3.63% | 3.72% | 2018–2028 | (b) | 1 245 | 1 244
USD 1250 | 3.90% | 4.01% | 2018–2038 | (b) | 1 234 | 1 233
USD 2100 | 4.00% | 4.11% | 2018–2048 | (b) | 2 063 | 2 062
USD 1150 | 0.38% | 0.49% | 2020–2024 | (b) | 1 150 | 1 149
USD 750 | 0.63% | 0.77% | 2020–2026 | (b) | 748 | 747
USD 1100 | 1.00% | 1.06% | 2020–2027 | (b) | 1 097 | 1 097
USD 1000 | 1.25% | 1.37% | 2020–2030 | (b) | 993 | 992
GBP 600 | 0.63% | 0.75% | 2021–2025 | (a) | 764 | 723
GBP 400 | 1.38% | 1.46% | 2021–2033 | (a) | 505 | 478
USD 300 | 1.13% | 1.19% | 2021–2026 |  | 299 | 299
USD 1500 | 0.61% | 0.66% | 2021–2024 | (b) | 1 499 | 1 499
USD 1000 | 1.50% | 1.58% | 2021–2028 | (b) | 996 | 996
USD 1000 | 1.88% | 1.91% | 2021–2031 | (b) | 998 | 997
USD 500 | 2.50% | 2.55% | 2021–2041 | (b) | 497 | 497
USD 500 | 1.15% | 1.22% | 2021–2027 | (b) | 499 | 499
USD 500 | 2.63% | 2.69% | 2021–2051 | (b) | 494 | 493
CAD 2000 | 2.19% | 2.23% | 2021–2029 | (a) | 1 511 | 1 476
GBP 300 | 2.13% | 2.25% | 2022–2027 | (a) | 381 | 360
GBP 600 | 2.50% | 2.53% | 2022–2032 | (a) | 763 | 722
USD 750 | 4.00% | 4.07% | 2022–2025 | (b) | 749 | 749
USD 500 | 4.13 % | 4.20% | 2022–2027 | (b) | 499 | 498
USD 500 | 4.25% | 4.31% | 2022–2029 | (b) | 498 | 498
USD 1250 | 4.30% | 4.38% | 2022–2032 | (b) | 1 243 | 1 242
USD 1000 | 4.70% | 4.76% | 2022–2053 | (b) | 990 | 990
USD 1000 | 5.25% | 5.32% | 2023–2026 | (b) | 999 | —
USD 850 | 5.00% | 5.06% | 2023–2028 | (b) | 848 | —
USD 500 | 4.95% | 5.01% | 2023–2030 | (b) | 498 | —
USD 650 | 4.85% | 4.90% | 2023–2033 | (b) | 648 | —
USD 500 | 5.00% | 5.06% | 2023–2028 | (b) | 499 | —
USD 500 | 5.00% | 5.10 % | 2023–2030 | (b) | 497 | —
USD 500 | 5.00% | 5.09% | 2023–2033 | (b) | 496 | —
GBP 400 | 5.25% | 5.39% | 2023–2026 | (a) | 508 | —
GBP 400 | 5.13% | 5.28% | 2023–2032 | (a) | 505 | —
Other Bonds |  |  |  |  | 54 | 98
Total carrying amount |  |  |  |  | 29 938 | 26 297
of which due within one year |  |  |  |  | 2 649 | 2 143
of which due after one year |  |  |  |  | 27 289 | 24 154
Fair value (*) of bonds, based on prices |  |  |  |  |  |
quoted (level 2) |  |  |  |  | 28 461 | 23 785

(*)
(*) Carrying amount and fair value of bonds exclude accrued interest.
(a) Subject to an interest rate and currency swap that creates a U.S. dollar asset or liability at fixed rates.
(b) Sold in the United States only to qualified institutional buyers and outside the United States to non-US persons .
12. Financial instruments
Consolidated Financial Statements of the NHI Group 2023 57
Several bonds are hedged by currency and/or interest derivatives. The fair value of these
derivatives is shown under derivative assets of $154 million (2022: $12 million) and under
derivative liabilities of $284 million (2022: $509 million).
12.2 Financial risks
In the course of its business, the NHI Group is exposed to a number of financial risks: credit
risk, liquidity risk, market risk (including foreign currency risk and interest rate risk, commodity
price risk and equity price risk). The Note presents the NHI Group’s objectives, policies and
processes for managing its financial risk and capital.
Financial risk management is an integral part of the way the NHI Group is managed. The
Board of Directors determines the financial control principles as well as the principles of
financial planning. The Chief Executive Officer organizes, manages, and monitors all financial
risks, including asset and liability matters.
Nestlé S.A. Asset and Liability Management Committee (ALMC), chaired by the Chief
Financial Officer of Nestlé S.A., is the governing body for the establishment and subsequent
execution of Nestlé S.A.’s Financial Asset and Liability Management Policy, to which NHI is
subject. It ensures implementation of strategies and achievement of objectives
of the Nestlé S.A.’s financial asset and liabilities management, which are executed by the
Center Treasury, the Regional Treasury Centers, and in specific local circumstances, by the
subsidiaries. Approved treasury management guidelines define and classify risks as well as
determine, by category of transaction, specific approval, execution, and monitoring procedures.
The activities of the Center Treasury and of the Regional Treasury Centers are monitored by
an independent Middle Office, which verifies the compliance of the strategies and/or operations
with the approved guidelines and decisions taken by the ALMC.
12.2a Credit risk
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations
resulting in financial loss to the NHI Group. Credit risk arises on financial assets (liquid,
non-current and derivatives) and on trade and other receivables.
The NHI Group aims to minimize the credit risk of liquid assets, non-current financial assets
and derivative assets through the application of risk management policies. Credit limits are set
based on each counterparty’s size and risk of default. The methodology used to set the credit
limit considers the counterparty’s balance sheet, credit ratings, risk ratios and default
probabilities. Counterparties are monitored regularly, taking into consideration the evolution of
the above parameters, as well as their share prices and credit default swaps. As a result of this
review, changes on credit limits and risk allocation are carried out. The NHI Group avoids the
concentration of credit risk on its liquid assets by spreading them over several institutions and
sectors.
Trade receivables are subject to credit limits, control and approval procedures in all the
subsidiaries. Due to its large number of customers, the NHI Group is not exposed to material
concentrations of credit risk on its trade receivables (see Note 7.1). Nevertheless, commercial
counterparties are constantly monitored in accordance with the same methodology used for
financial counterparties.
The maximum exposure to credit risk resulting from financial activities, without considering
netting agreements and without taking into account any collateral held or other credit
enhancements, is equal to the carrying amount of the NHI Group’s financial assets.
12. Financial instruments
58 Consolidated Financial Statements of the NHI Group 2023
Credit rating of financial assets
This includes liquid assets, non-current financial assets and derivative assets. The credit risk of
the financial assets is assessed based on the risk of the counterparties including the associated
country risk. The NHI Group uses an internationally recognized credit scale to present the
information. The NHI Group deals mainly with financial institutions located in United Kingdom,
the European Union, and North America.
In millions of Dollars

| 2023 | 2022
A- and above | 1 358 | 1 300
BBB+, BBB and BBB- | 60 | 64
BB+ and below | 15 | 13
Not rated | 1 004 | 1 031
| 2 437 | 2 408

(a)
(a) Mainly equity securities and other investments for which no credit rating is available.
12.2b Liquidity risk
Liquidity risk management
Liquidity risk is the risk that a company may encounter difficulties in meeting its obligations
associated with financial liabilities that are settled by delivering cash or other financial assets.
Such risk may result from inadequate market depth or disruption or refinancing problems. The
NHI Group’s objective is to manage this risk by limiting exposures to financial instruments that
may be affected by liquidity problems and by maintaining sufficient back-up facilities .
12. Financial instruments
Consolidated Financial Statements of the NHI Group 2023 59
12. Financial instruments
Contractual maturities of financial liabilities and derivatives (including interest)
In millions of Dollars

|  |  |  |  |  | 2023
|  |  |  | After | Contractual | Carrying
| 1st year | 2nd year | 3rd to 5th year | the 5th year | amount | amount
Trade and other payables | 3 816 | — | — | — | 3 816 | 3 816
Loan from affiliates | 2 678 | — | — | — | 2 678 | 2 678
Commercial paper | 859 | — | — | — | 859 | 855
Bonds | 2 654 | 4 250 | 11 323 | 19 415 | 37 642 | 29 938
Lease liabilities | 297 | 173 | 401 | 312 | 1 183 | 1 128
Other financial debt | 135 | — | — | — | 135 | 135
Other financial liabilities | — | — | — | — | — | —
Total financial debt | 3 945 | 4 423 | 11 724 | 19 727 | 39 819 | 32 056
Financial liabilities (excluding derivatives) | 10 439 | 4 423 | 11 724 | 19 727 | 46 313 | 38 550
Non-currency derivative assets | 3 | — | — | — | 3 | 3
Non-currency derivative liabilities | (20) | (1) | — | — | (21) | (21)
Gross amount receivable from currency |  |  |  |  |  |
derivatives | 203 | 1 837 | 1 837 | 3 470 | 7 346 | 6 392
Gross amount payable from currency |  |  |  |  |  |
derivatives | (257) | (2 001) | (1 815) | (3 638) | (7 710) | (6 521)
Net derivatives | (71) | (165) | 22 | (168) | (382) | (147)
of which derivatives under cash flow hedges | 71 | 165 | (22) | 168 | 382 | 147
|  |  |  |  |  | 2022
|  |  |  | After | Contractual | Carrying
| 1st year | 2nd year | 3rd to 5th year | the 5th year | amount | amount
Trade and other payables | 3 584 | — | — | — | 3 584 | 3 584
Loan from affiliates | 2 565 | — | — | — | 2 565 | 2 565
Commercial paper | 547 | — | — | — | 547 | 547
Bonds | 2 788 | 3 224 | 8 956 | 18 852 | 33 820 | 26 297
Lease liabilities | 175 | 149 | 386 | 453 | 1 163 | 1 110
Other financial debt | 197 | — | — | — | 197 | 197
Other financial liabilities | — | — | — | — | — | —
Total financial debt | 3 707 | 3 373 | 9 342 | 19 305 | 35 727 | 28 151
Financial liabilities (excluding derivatives) | 9 856 | 3 373 | 9 342 | 19 305 | 41 876 | 34 300
Non-currency derivative assets | 10 | — | — | — | 10 | 10
Non-currency derivative liabilities | (25) | (1) | — | — | (26) | (26)
Gross amount receivable from currency |  |  |  |  |  |
derivatives | 107 | 77 | 2 792 | 2 878 | 5 854 | 4 865
Gross amount payable from currency |  |  |  |  |  |
derivatives | (164) | (136) | (3 107) | (3 207) | (6 614) | (5 359)
Net derivatives | (72) | (60) | (315) | (329) | (776) | (510)
of which derivatives under cash flow hedges | 72 | 60 | 315 | 329 | 776 | 510

(a)
(a)
(a) Commercial paper of $839 million (2022: $547 million) and Bonds of $2 649 million (2022: $895 million) have maturities of less
than three months .
60 Consolidated Financial Statements of the NHI Group 2023
12. Financial instruments
12.2c Market risk
The NHI Group is exposed to risk from movements in foreign currency exchange rates, interest
rates and market prices that affect its assets, liabilities and future transactions.
Foreign currency risk
The NHI Group is exposed to foreign currency risk from transactions.
Transactional exposures arise from transactions in foreign currency. They are managed
within a prudent and systematic hedging policy in accordance with the NHI Group’s specific
business needs through the use of currency forwards, futures, swaps and options.
Value at Risk (VaR) based on historic data for a 250-day period and a confidence level of
95% results in no VaR in 2023 and 2022.
The NHI Group cannot predict the future movements in exchange rates, therefore the above
VaR neither represents actual losses nor considers the effects of favorable
movements in underlying variables. Accordingly, the VaR may only be considered
indicative of future movements to the extent that historic market patterns repeat in the future.
Interest rate risk
Interest rate risk on financial debt is managed based on duration and interest management
targets set by the ALMC through the use of fixed-rate debt and interest rate swaps.
Taking into account the impact of interest derivatives, the proportion of financial debt
subject to fixed interest rates for a period longer than one year represents 88% (2022: 89%).
Price risk
Commodity price risk
Commodity price risk arises from transactions on the world commodity markets to secure
supplies of green coffee, cocoa beans, cereals and grains and other commodities necessary for
the manufacture of some of the NHI Group’s products.
The NHI Group’s objective is to minimize the impact of commodity price fluctuations and
this exposure is hedged in accordance with the Nestlé Group policy on commodity price risk
management. The Global Procurement Organization is responsible for managing commodity
price risk based on internal directives and centrally determined limits, generally using exchange-
traded commodity derivatives. The commodity price risk exposure of future purchases is
managed using a combination of derivatives (mainly futures and options) and executory contracts.
This activity is monitored by an independent Middle Office. Given the short product business
cycle of the NHI Group, the majority of the anticipated future raw material transactions
outstanding at the balance sheet date are expected to occur in the next year.
Equity price risk
The NHI Group is exposed to equity price risk on investments. To manage the price risk arising
from these investments, the NHI Group diversifies its portfolios in accordance with the
guidelines set by the Board of Directors of Nestlé S.A.
Consolidated Financial Statements of the NHI Group 2023 61
12. Financial instruments
12.2d Derivative assets and liabilities and hedge accounting
Derivative financial instruments
The NHI Group’s derivatives mainly consist of currency forwards, options and swaps;
commodity futures and options and interest rate swaps. Derivatives are mainly used to
manage exposures to foreign exchange, interest rate and commodity price risk as described
in Note 12.2c Market risk.
Derivatives are initially recognized at fair value at the trade date. They are subsequently
remeasured at fair value on a regular basis and at each reporting date at a minimum. The
NHI Group applies hedge accounting to hedging relationships that meet the qualifying
criteria.
Hedge accounting
The NHI Group designates and documents the use of certain derivatives and other financial
assets or financial liabilities as hedging instruments against changes in fair value of
recognized assets and liabilities (fair value hedges) and highly probable forecast transactions
(cash flow hedges). The effectiveness of such hedges is assessed at inception and verified at
regular intervals and at least on a quarterly basis to ensure that an economic relationship
exists between the hedged item and the hedging instrument.
The NHI Group generally excludes from the designation of the hedging relationship the
hedging cost element. Subsequently, this cost element impacts the income statement
at the same time as the underlying hedged item.
For the designation of hedging relationships on commodities, the NHI Group applies the
component hedging model when the hedged item is separately identifiable and measurable
in the contract to purchase the materials.
Fair value hedges
The NHI Group uses fair value hedges to mitigate foreign currency and interest rate risks
of its recognized assets and liabilities, being mostly financial debt.
Changes in fair value of hedging instruments designated as fair value hedges and the
adjustments for the risks being hedged in the carrying amounts of the underlying
transactions are recognized in the income statement.
Cash flow hedges
The NHI Group uses cash flow hedges to mitigate a particular risk associated with
a recognized asset or liability or highly probable forecast transactions, such as anticipated
future export sales, purchases of equipment, and goods, as well as the variability of
expected interest payments and receipts.
The effective part of the changes in fair value of hedging instruments is recognized in
Other comprehensive income, while any ineffective part is recognized immediately in the
income statement. Ineffectiveness for hedges of foreign currency and commodity price risk
may result from changes in the timing of the forecast transactions. When the hedged item
results in the recognition of a non-financial asset or liability, including acquired businesses,
the gains or losses previously recognized in Other comprehensive income are included in the
measurement of the cost of the asset or of the liability. Otherwise the gains or losses
previously recognized in Other comprehensive income are recognized in the income
statement at the same time as the hedged transaction.
Undesignated derivatives
Derivatives which are not designated in a hedging relationship are classified as undesignated
derivatives. They are used in the framework of approved risk management policies .
62 Consolidated Financial Statements of the NHI Group 2023
12. Financial instruments
Derivatives by hedged risks
In millions of Dollars

|  |  | 2023 |  |  | 2022
Cash flow hedges |  |  |  |  |  |
Currency risk on future purchases or sales | 71 | 1 | — | 30 | 3 | —
Foreign currency and interest rate risk on net financial debt | 4 322 | 154 | 284 | 3 111 | 12 | 509
Commodity price risk on future purchases | 330 | 2 | 21 | 416 | 10 | 26
Total derivatives | 4 723 | 157 | 305 | 3 557 | 25 | 535
Conditional offsets |  |  |  |  |  |
Derivative assets and liabilities |  | (41) | (41) |  | (2) | (2)
Balances after conditional offsets |  | 116 | 264 |  | 23 | 533

Contractual or
notional amounts
Fair value assets
Fair value liabilities
Contractual or
notional amounts
Fair value assets
Fair value liabilities
(a)
(a) Represent amounts that would be offset in case of default, insolvency or bankruptcy of counterparties.
A description of the types of hedging instruments by risk category is included in Note 12.2c
Market risk.
The majority of hedge relationships are established to ensure a hedge ratio of 1:1.
Impact on the consolidated income statement of fair value and cash flow hedges
The majority of fair value hedges are related to financing activities and are included in Net
financing cost.
In millions of Dollars

| 2023 | 2022
on hedged items | (306) | 397
on hedging instruments | 305 | (397)

Ineffective results of fair value and cash flow hedges are not significant.
12.2e Capital risk management
The NHI Group‘s capital risk management strategy is to maintain a sound capital base to
support the continued development of the NHI Group’s operations, utilizing various funding
sources available to it. Substantially all of the NHI Group’s debt is guaranteed by Nestlé S.A.,
which allows the NHI Group to borrow from third parties at lower interest rates. In order to
ensure that the return on invested capital is optimized, the NHI Group establishes strict limits
on annual additions of property, plant and equipment.
Consolidated Financial Statements of the NHI Group 2023 63
13. Taxes
The NHI Group files a consolidated return with Nestlé US Holdco Inc. However, the NHI Group
also records its own tax expense and liability as if it filed on a standalone basis. Taxes and
fiscal risks recognized in the Consolidated Financial Statements reflect NHI Group
management’s best estimate of the outcome based on the facts known at the balance sheet
date. These facts may include, but are not limited to, changes in tax laws and interpretations
thereof in the United States. They may have an impact on the income tax as well as the
resulting assets and liabilities. Any differences between tax estimates and final tax
assessments are charged to the income statement in the period in which they are incurred,
unless anticipated.
Taxes include current and deferred taxes on profit and tax adjustments relating to prior
years. Income tax is recognized in the income statement, except to the extent that it relates
to items directly taken to equity or other comprehensive income, in which case it is recognized
against Equity or Other comprehensive income.
Deferred taxes are based on the temporary differences that arise when taxation authorities
recognize and measure assets and liabilities with rules that differ from the principles of the
Consolidated Financial Statements. They also arise on temporary differences stemming from
tax losses carried forward.
Deferred taxes are calculated under the liability method at the rates of tax expected to
prevail when the temporary differences reverse, subject to such rates being substantially
enacted at the balance sheet date. Any changes in the tax rates are recognized in the income
statement unless related to items directly recognized against Equity or Other comprehensive
income. Deferred tax liabilities are recognized on all taxable temporary differences excluding
non-deductible goodwill. Deferred tax assets are recognized on all deductible temporary
differences provided that it is probable that future taxable income will be available.
13.1 Components of taxes recognized in the income statement
In millions of Dollars

| 2023 | 2022
Current taxes | (475) | (296)
Deferred taxes | (165) | (165)
Total taxes | (640) | (461)

13.2 Reconciliation of taxes recognized in the income statement

In millions of Dollars |  |
| 2023 | 2022
Profit before taxes | 2 380 | 1 606
Expected tax expense at average applicable tax rate | (600) | (413)
Tax effect on non-deductible amortization and impairment of goodwill and other intangible assets | — | (78)
Permanent differences on company-owned life insurance policies | 25 | (17)
Tax effect of non-deductible or non-taxable items | (20) | 105
Prior years’ taxes | (45) | (5)
Transfers from unrecognized deferred tax assets | 7 | (43)
Other | (7) | (10)
Tax expense at effective tax rate | (640) | (461 )

64 Consolidated Financial Statements of the NHI Group 2023
The components of deferred tax (expense)/benefit by type are as follows:
In millions of Dollars

| 2023 | 2022
Tangible fixed assets | (24) | (9)
Goodwill and other intangible assets | (114) | (131)
Employee benefits | (35) | (68)
Inventories, receivables, payables, accruals, and provisions | (2) | 49
Other | 10 | (6)
Deferred tax expense | (165) | (165)

Taxes recognized in other comprehensive income/(loss):
In millions of Dollars

| 2023 | 2022
Tax effect relating to: |  |
Fair value adjustments on cash flow hedges | (18) | 4
Defined benefit plan actuarial losses | 48 | (16)
Total taxes recognized | 30 | (12)

13.3 Reconciliation of deferred taxes by type of temporary differences recognized
in the balance sheet
Deferred tax assets by types of temporary differences are as follows:
In millions of Dollars

| 2023 | 2022
Employee benefits | 378 | 366
Inventories, receivables, payables, accruals, and provisions | 221 | 222
Net operating losses | 20 | 20
Others | 5 | 10
Total deferred tax assets | 624 | 618

Deferred tax liabilities by types of temporary differences are as follows:
In millions of Dollars

| 2023 | 2022
Tangible fixed assets | 693 | 678
Goodwill and other intangible assets | 1 250 | 1 127
Financial instruments | 20 | 2
Others | 13 | 28
Total deferred tax liabilities | 1 976 | 1 835

Deferred tax is presented as a net deferred tax liability in the 2023 consolidated balance sheet
at an amount of $1 352 million (2022: $1 217 million).
13.4 Unrecognized deferred taxes
As at December 31, 2023 and 2022, deferred taxes were recognized for all temporary
differences, unless an exception from the general principal applied. At December 31, 2023,
13. Taxes
Consolidated Financial Statements of the NHI Group 2023 65
these unrecognized deferred tax assets totaled $37 million which have no expiration date
(2022: $43 million).
14. Associates
Associates are companies where the NHI Group has the power to exercise a significant
influence but does not exercise control. Significant influence is the power to participate in
the financial and operating policy decisions of the investee, and the determination of
whether the NHI Group has significant influence requires the exercise of judgment. It may be
evidenced when the NHI Group has 20% or more of the voting rights in the investee or has
obtained representation on the Board of Directors or otherwise participates in the policy-
making process of the investee.
Associates are accounted for using the equity method. The net assets and results are
adjusted to comply with the NHI Group’s accounting policies. The carrying amount of
goodwill arising from the acquisition of associates is included in the carrying amount of
Investments in associates.
In % and in millions of Dollars

| Ownership interest |  | Net book value |
| 2023 | 2022 | 2023 | 2022
Stampede Holdings, LLC | 44% | — | 28 | —
Ganado Solar Holdings, LLC | 36% | 36% | 25 | —
TE Taygete Energy Holdco LLC | 48% | 48% | — | —
Total investments in associated companies |  |  | 53 | —

In December of 2023, the Company acquired a minority interest of 44% in Stampede
Holdings, LLC. In November 2022, the Company acquired a minority interest of 36% in Ganado
Solar Holdings, LLC. Both of these investments are related to renewable energy projects in the
U.S.
15. Cash flow statement
15.1 Operating profit
In millions of Dollars

| 2023 | 2022
Profit for the year | 1 741 | 1 127
(Income)/loss from associates | (1) | 18
Taxes | 640 | 461
Financial income | (941) | (687)
Financial expense | 1 056 | 801
Total | 2 495 | 1 720

13. Taxes
66 Consolidated Financial Statements of the NHI Group 2023
15.2 Non-cash items of income and expense
In millions of Dollars

| 2023 | 2022
Depreciation of property, plant and equipment | 761 | 728
Impairment of property, plant and equipment | 95 | 151
Impairment of goodwill | — | 336
Amortization of intangible assets | 88 | 79
Impairment of intangible assets | 4 | —
Net result on disposal of businesses | — | 7
Net result on disposal of assets | 50 | 20
Non-cash items in financial assets and liabilities | (74) | 40
Total | 924 | 1 361

15.3 Decrease/(increase) in working capital
In millions of Dollars

| 2023 | 2022
Inventories | 500 | (691)
Trade and other receivables | (563) | 39
Prepayments and accrued income | (16) | 12
Trade and other payables | 290 | (799)
Financial Assets | (5) | (6)
Accruals | 64 | 109
Total | 270 | (1 336)

15.4 Variation of other operating assets and liabilities
In millions of Dollars

| 2023 | 2022
Variation of employee benefits and liabilities | (216) | (144)
Variation of provisions | 27 | 74
Other | 3 | 126
Total | (186) | 56

15.5 Cash and cash equivalents at end of year
Cash and cash equivalents include cash at bank and in hand and other short-term highly
liquid investments with maturities of three months or less from the initial recognition.
15. Cash flow statement
Consolidated Financial Statements of the NHI Group 2023 67
16. Transactions with related parties
Compensation of key management personnel
Key management personnel comprise five high-ranking officers in each of the following
subsidiaries: Nestlé USA, Inc., Nestlé Purina PetCare Company, and Gerber Products
Company. These officers hold the positions of Chief Executive Officer, Chief Financial Officer,
Head of Human Resources, General Counsel, and Head of Sales or Sales/Marketing. The Chief
Executive Officer and the Chief Financial Officer of Nestlé USA, Inc. are directors of NHI. There
is one non-executive director.
The compensation paid or payable to key Company management for employee services is
shown below:
In millions of Dollars

| 2023 | 2022
Salaries and other short-term employee benefits | 16 | 17
Share-based payments | 12 | 11
Post-employment benefits | 2 | 1
Total compensation | 30 | 29

Loans with related parties
In millions of Dollars

| 2023 | 2022
Loans to NIMCO US, Inc. (Parent) and NUSHI (NIMCO Parent): |  |
As at January 1 | 18 800 | 17 596
Loans granted during year | 4 459 | 1 204
As at December 31 | 23 259 | 18 800
Loans to affiliates: |  |
As at January 1 | 8 497 | 4 351
Loans granted during year | 431 | 4 344
Loan repayments | (649) | (198)
As at December 31 | 8 279 | 8 497
Total loans to the parent and affiliates | 31 538 | 27 297
Of which current | 30 895 | 25 709
Of which non-current | 643 | 1 588
Loans from affiliates: |  |
As at January 1 | 2 565 | 3 068
Loans received during year | 261 | 112
Loan repayments | (148) | (615)
Total loans from affiliates as at December 31 | 2 678 | 2 565

68 Consolidated Financial Statements of the NHI Group 2023
16. Transactions with related parties
Transactions under common control
There were no transactions under common control during 2023. In 2022, the NHI Group sold
Freshly, a healthy prepared meals business to a Nestlé Group affiliate for its fair value of $27
million. The total fair value of the assets transferred was $67 million with associated liabilities
amounting to $40 million.
Royalties to Nestlé Group
The NHI Group is granted use of licensed brands and other intellectual property and obtains
technical assistance from a Nestlé Group affiliated company via a general license agreement. In
2023, the NHI Group incurred royalties of $3 403 million to the Nestlé Group affiliated company
(2022: $3 192 million).
Intergroup receivables
Intergroup receivables for the NHI Group were $356 million at December 31, 2023 (2022:
$219 million), which have been reported as part of Trade and other receivables under current
assets.
Intergroup payables
Intergroup payables for the NHI Group were $1 093 million at December 31, 2023 (December
31, 2022: $939 million), which have been reported as part of Trade and other payables under
current liabilities.
17. Events after the balance sheet date
The Company is not aware of any specific events or transactions occurring after December 31,
2023 and up to February 28, 2024, that could have a material impact on the presentation of the
accompanying Consolidated Financial Statements.