Nestle Confident to Meet Targets

21/04/08 In the first quarter of 2008, the Nestlé group reached consolidated Swiss franc sales of 25.7 billion, up CHF 1.5 billion or 6.0% over the same period last year. Reported sales benefited from a very strong organic growth of 9.8%, including 4.5% real internal growth. Food and Beverages also delivered 9.8% organic growth, of which 4.2% consisted of real internal growth. Acquisitions, net of divestitures, added another 3.2% to Group sales, primarily due to the acquisition of Gerber and Novartis Medical Nutrition in 2007. The net currency effect reduced reported group sales by 7% due to the strength of the Swiss franc compared to most other currencies.

The Group expects raw material cost pressures to abate somewhat in the course of 2008 and its reported pricing to come down in the second half of the year. However, in view of its strong start to the year, Nestlé foresees organic growth approaching the 2007 level for the full year, clearly above the company's long-term target, together with improved EBIT margins in constant currencies. 2008 will be another year of delivering the Nestlé model.

Paul Bulcke, CEO of Nestlé: "The strong start to the year reflects Nestlé's momentum as the world's leading nutrition, health and wellness company. On the basis of this high-quality growth, with a good balance between real internal growth and pricing, I am confident that we will achieve our 2008 targets: organic growth approaching the 2007 level together with improved EBIT margins in constant currencies."

In the first quarter of 2008, the organic growth of Nestlé's total Food and Beverages business (the Zones as well as globally-managed businesses such as Nestlé Waters, Nestlé Nutrition, Nespresso, the Food and Beverages joint ventures) amounted to 6.1% in Europe, 10.9% in the Americas and 14.9% in Asia, Oceania and Africa.

Zone Europe: sales of CHF 6.7 billion, 6.6% organic growth, 2.9% real internal growth. A majority of the countries in the Zone enjoyed strong performances. Eastern Europe continued to experience double-digit organic growth. Western Europe also did very well, with Great Britain achieving near double-digit organic growth. By category, PetCare achieved strong growth led by premium brands such as Dog Chow. Soluble coffee did well, including the continued successful roll-out of Nescafé Dolce Gusto. An increased focus on Mövenpick of Switzerland helped ice cream sales in the low season.

Zone Americas: sales of CHF 7.5 billion, 11.5% organic growth, 3.7% real internal growth. Both North and Latin America achieved good organic growth. Pricing and other actions were applied across the Zone in response to continued input cost rises. The good performance of brands such as Nescafé, Nesquik, Nido, Coffeemate, Garoto and Dog Chow ensured strong organic growth in their respective product groups.

Zone Asia, Oceania and Africa: sales of CHF 4.1 billion, 14.0% organic growth, 5.3% real internal growth. The Zone's strong real internal growth was due to the strength of key brands such as Nescafé, Milo, Nido and Maggi, and it delivered double-digit organic growth in many product groups. Emerging markets did particularly well, especially South Asia, the Middle East, Indochina and the Philippines. Dairy products achieved positive real internal growth despite cost pressures over the past year.

Nestlé Waters: sales of CHF 2.2 billion, -0.6% organic growth, -2.3% real internal growth. These figures reflect the tough comparison with an excellent first quarter in 2007, as well as softer market conditions in the developed world. However, many developing markets enjoyed strong performances. Turkey, the Middle East and Latin America delivered double-digit organic growth. In terms of brands, Nestlé Pure Life maintained strong momentum with double-digit organic growth.

Nestlé Nutrition: sales of CHF 2.6 billion, 14.4% organic growth, real internal growth of 10.2%. This excellent performance was driven by near double-digit real internal growth in infant nutrition, mainly due to the continued roll-out of premium NAN starter formulas and infant cereals with branded active benefits. Jenny Craig achieved strong double-digit organic growth and its "improved health" campaign is proving a great success. The integration of Novartis Medical Nutrition and Gerber is almost complete and these businesses are performing in line with acquisition expectations.

Powdered and liquid beverages: sales of CHF 4.4 billion, 14.7% organic growth, 10.1% real internal growth. This outstanding performance again confirmed the strength of Nestlé's billionaire brands: Nescafé, Milo, Nesquik, Nestea and Nespresso. Furthermore, the continued success in rolling out Nescafé Dolce Gusto in Europe allowed Nestlé to increase its market share in the fast-growing portioned coffee segment there. The product group achieved double-digit organic growth in the Americas as well as Asia, Africa and Oceania.

Milk products and ice cream: sales of CHF 4.6 billion, 16.0% organic growth, 4.6% real internal growth. The very strong performance of milk products was the result of high single-digit real internal growth despite cost pressures both in 2007 and 2008. Strategic billionaire brands Nido and Coffeemate enjoyed strong performances, as did Nestlé EveryDay, the emerging tea creaming brand. Ice Cream had a good start to the year ahead of the summer season in Europe, in particular under the Mövenpick of Switzerland premium brand. The product group as a whole achieved double-digit organic growth in the Americas, as well as in Asia, Oceania and Africa.

Prepared dishes and cooking aids: sales of CHF 4.3 billion, 5.1% organic growth, 1.2% real internal growth. Maggi continued to deliver double-digit growth in Africa, Asia and Eastern Europe, as well as accelerated growth in Western Europe. In North America, frozen food was slower following recent price increases. Chilled food achieved strong organic growth in the US, mainly driven by Buitoni. The product group as a whole achieved double-digit organic growth in Asia, Oceania and Africa.

Confectionery: sales of CHF 3.0 billion, 7.3% organic growth, 2.1% real internal growth. The product group benefited from a successful Easter. KitKat had an excellent start to the year with strong trade acceptance in the UK for KitKat Senses and good growth in Europe after the re-launch of 4-finger KitKat in Germany and France. Overall, Latin America continued to be an excellent performer recording double-digit organic growth thanks to strong global and local chocolate and biscuit brands (Brazil with Nestlé assortment boxes, Chile with the Sahne Nuss and Super 8 brands and Venezuela with Toronto and Samba). Double-digit organic growth was also generated in the Middle East (with strong sales of KitKat and Quality Street), in Asian markets, as well as in Great Britain.

PetCare: sales of CHF 2.9 billion, 9.5% organic growth, 3.9% real internal growth. Organic growth continued to be driven by strategic brands, new product launches and product mix improvements. Both in Europe and the Americas, pricing and other actions were taken to offset continued increases in input costs. Several new product launches took place in the first quarter of 2008. Some examples in the US were Healthful Life from Purina Cat Chow, the innovative Tidy Cat Breeze litter system as well as the national rollout of Beneful prepared meals. Super premium wet cat offerings under the Fancy Feast, Gourmet Gold and Mon Petit brands performed well. The product group achieved strong organic growth in Europe and North America and double-digit organic growth in the rest of the world.

Pharmaceutical products: sales of CHF 1.8 billion, 8.5% organic growth, 8.9% real internal growth. Both Alcon and the joint ventures achieved strong organic growth.

Nestlé's recently-announced agreement to sell a 24.85% share of Alcon to Novartis is further evidence of the Group's strategy of focusing on its recognized leadership in nutrition, health and wellness. The proceeds of the transaction, which is subject to regulatory approval and expected to be completed by the autumn, will be used to reduce debt as Nestlé pursues its on-going share buy-back programme.

At Nestlé's Annual General Meeting on 10 April 2008, shareholders approved the cancellation of 10,072,500 shares repurchased under the share buy-back programme launched on 24 August 2007, as well as a 1-for-10 share split to increase the liquidity and tradability of Nestlé shares. These measures will be completed by the end of June.