Nestlé 9-Month Sales Up 9%

18/10/07 Nestle has reported that during the first nine months of 2007, consolidated sales of the Nestlé Group amounted to CHF 78.7 billion, an increase of +9% over the comparable period of 2006. Real internal growth was strong at 4.5% and pricing added another 2.7%, resulting in an organic growth of 7.2%. The strength of Nestlé's brands allowed the Group to raise prices to offset rising raw material costs. These price increases, together with the resulting slight dip in real internal growth, reflect the Group's commitment to profitable growth regardless of market circumstances. Foreign exchange contributed +0.9% to reported sales, while acquisitions, net of divestitures, added another +0.9% to sales. The Group's Food and Beverages business achieved organic growth of 6.8%, consisting of real internal growth of 4.2% and price increases of 2.6%.

Peter Brabeck-Letmathe, Chairman and CEO of Nestlé said: "The Group's strong organic growth continued over the third quarter, reflecting good performances across most product categories. In spite of increasing input cost pressures, I remain confident that Nestlé will achieve above-target organic growth and a sustainable margin improvement for 2007 as a whole, once again demonstrating the strength of the Nestlé model. Furthermore, I am very pleased to announce the establishment of Nestlé Professional, a new globally-managed business unit, as an additional pillar of this company's long-term, profitable growth strategy.”

Finally, the appointment of Paul Polman as new head of Zone Americas and Jim Singh as new CFO, together with the other changes to the Executive Board, creates a strong management team under the leadership of the newly designated CEO, Paul Bulcke, which will extend and broaden the successful developments achieved over the past years."

In the first nine months of 2007, the organic growth of Nestlé's total Food and Beverages business (including globally-managed businesses such as Nestlé Waters, Nestlé Nutrition and Nespresso, as well as Food and Beverages joint ventures) amounted to 3.8% in Europe, 8.3% in the Americas and 9.5% in Asia, Oceania and Africa. Sales by Zones: organic growth in Zone Europe (+2.5%) picked up over the third quarter as a result of accelerating innovation in the region, while Zone Americas (+7.5%) and Zone Asia, Oceania and Africa (+8.7%) both experienced strong organic growth, partly as a result of price increases to compensate for higher raw material costs, especially milk.

Nestlé Nutrition: sales of CHF 5.7 billion, 6.6% real internal growth and 9.7% organic growth, in line with the business' long-term target of 10%. Strong performances in Infant Formula and Healthcare Nutrition continued, supported by a robust innovation and renovation pipeline. NAN premium starter formulas, and Nestlé infant cereals enriched with probiotics to strengthen infants' immune systems, did particularly well in their global roll-out.

Powdered and Liquid Beverages: sales of CHF 12.8 billion, 7.5% real internal growth and 10.0% organic growth. Coffee was strongly driven by innovation, notably by the continued success of Nespresso and the successful launch of Nescafé Dolce Gusto in Europe. Nescafé Protect, a new soluble coffee with a higher antioxidant content sold mainly in Asian markets, did particularly well. Milo experienced double-digit organic growth, not least thanks to the reformulation of its Actigen E branded active benefit. Nesquik with an improved nutritional profile was especially successful in the US.

Prepared dishes and cooking aids: sales of CHF 13.3 billion, 3.4% real internal growth and 3.8% organic growth. Maggi experienced strong organic growth in emerging markets, driven in particular by popularly positioned products (PPPs) such as the reformulated, single portion Maggi Noodles in India. In North America, frozen and chilled food continued to benefit from strong innovation and consumer focus on health, with Lean Cuisine achieving double-digit organic growth and Stouffer's growing at a high single-digit rate.

Milk Products and Ice Cream: sales of CHF 15.7 billion, 1.8% real internal growth and 6.5% organic growth. This category saw the strongest price increases to mitigate input cost pressures, and its performance was driven by higher value segments and innovation. NIDO, the world leader in children's milk powder, experienced double-digit organic growth, with products containing added probiotics and branded active benefits (BABs). Across all categories, sales of products containing BABs grew by 18%. Ice cream grew strongly in Latin America, Asia and Eastern Europe thanks to higher impulse sales and strong innovation, including products with an improved nutritional profile, whereas higher prices in North America and a cool summer in Western Europe softened sales volumes there.

Nestlé Waters: sales of CHF 8.2 billion, 5.4% real internal growth and 6.9% organic growth. This somewhat lower organic growth rate compared to the first half is due to a cool summer in several key European markets, although organic growth remains positive for the region as a whole. Nestlé Pure Life experienced high double-digit organic growth in North America, and there were further strong performances in the Middle East and Latin America. Super-premium brands such as S.Pellegrino and Acqua Panna experienced double-digit growth, whereas home-and-office delivery in Europe continued to encounter difficulties.

Confectionery: sales of CHF 8.4 billion, 2.6% real internal growth and 5.4% organic growth. The acceleration of organic growth in this category was driven chiefly by the continued upmarket move towards premium dark chocolate across the world, such as Nestlé Noir in France and Perugina Nero in Italy. In geographical terms, Western Europe, especially the UK, Latin America and Asia experienced the strongest levels of organic growth.

PetCare: sales of CHF 9 billion, 4.1% real internal growth and 7.1% organic growth. This strong performance was driven by the continued upmarket movement of this category's brand portfolio towards the premium and super-premium market segments. Top performing brands included Beneful, Fancy Feast, Gourmet Gold, ONE, Pro Plan, Bakers and Dog and Cat Chow.

Pharmaceutical Products: sales of CHF 5.5 billion, 9.2% real internal growth and 10.3% organic growth. Alcon and the joint ventures, Galderma and Innéov, continued to grow strongly.

While Nestlé is already world leader in the food services sector, the Group feels that the overall market opportunity will better be seized with a dedicated, segment-specific organisation. Consequently, Nestlé has decided to upgrade its existing FoodServices Strategic Business Division into Nestlé Professional, a globally-managed business unit dedicated to the out-of-home food and beverage market. Nestlé Professional will have full operational responsibility from 2008 and full financial responsibility from 2009. It will be managed by Marc Caira, the current head of Nestlé's FoodServices Strategic Business Division.

Following the designation of Paul Bulcke as Nestlé's next CEO as of 10 April 2008, the Board of Directors made a number of changes to the composition of the Executive Board. Paul Polman, currently CFO, will replace Paul Bulcke as Executive Vice President, Zone Americas, from 1 February 2008. James Singh, currently Senior Vice President, "Acquisitions and Business Development", will become a member of the Executive Board as Executive Vice President and succeed Paul Polman as CFO. Furthermore, to reflect the fact that Nestlé Nutrition is now an over CHF 10 billion business, Richard Laube will be appointed Executive Vice President on 1 January 2008. Finally, as already announced, John Harris, currently head of Nestlé Purina for Europe, Asia, Oceania and Africa, will take over from Carlo Donati as Executive Vice President, Nestlé Waters, on 1 December 2007. Carlo Donati, after 35 years with the Company and assignments in three continents, has expressed the wish to retire. The Board takes this opportunity to thank him warmly for his substantial contribution over the years, most recently for his successful period as head of Nestlé Waters.

As foreseen at the time of the first-half results, input cost pressures are increasing over the second half of the year. While this has a dampening effect on real internal growth, Nestlé's outlook for 2007 as a whole remains unchanged: above-target organic growth as well as a sustainable margin improvement.