Nestle Reports Higher Growth in 2009
Paul Bulcke, Nestlé CEO: “With organic growth of 4.1% achieved in last year’s challenging environment, we were able to grow substantially faster than our industry."
19 Feb 2010 --- In 2009, the Nestlé Group’s sales reached CHF 107.6 billion, with organic growth of 4.1%, including real internal growth of 1.9%. Foreign exchange impacted sales by -5.5% and divestitures, net of acquisitions, by -0.7%. Food and Beverages’ sales reached CHF 99.8 billion, with organic growth of 3.9%, including real internal growth of 1.6%. Foreign exchange impacted Food and Beverages’ sales by -5.7% and divestitures, net of acquisitions, by -0.7%.
The acceleration of our efficiency drive as part of the ongoing Nestlé Continuous Excellence initiative yielded over CHF 1.5 billion in savings across all operational segments. Overall, cost of goods sold decreased by 110 basis points, and this in spite of a 2% increase of raw and packing material costs. Distribution costs fell by 40 basis points.
Marketing and administrative expenses rose by 110 basis points to 33.7% of sales. We increased our media spend by 10% in constant currencies, thereby taking further advantage of lower media rates in many markets. Investment in R&D was up 10 basis points, expanding our R&D capabilities – especially in developing countries – and further fuelling our innovation pipeline. These actions demonstrate our commitment to delivering in the short term whilst continuing to invest for the long term.
EBIT margin was up 30 basis points reported, and up 40 basis points in constant currencies, to 14.6%, with an EBIT of CHF 15.7 billion. The EBIT margin for Food and Beverages was also up 30 basis points reported, and up 40 basis points in constant currencies.
Underlying earnings per share rose by 9.6% from CHF 2.82 to CHF 3.09, or 16.3% in constant currencies. Net profit was CHF 10.4 billion in 2009 and earnings per share were CHF 2.92. These figures are not directly comparable with 2008 because of the CHF 9.2 billion profit on the disposal of 24.8% of Alcon in 2008.
The Group's operating cash flow rose by 67% or CHF 7.2 billion to CHF 17.9 billion, while free cash flow increased to CHF 12.4 billion. This improvement reflects a particularly strong working capital performance. The Group’s net debt reached CHF 18.1 billion. The group’s return on invested capital (ROIC) including goodwill increased by 90 basis points to 15.6% and by 30 basis points to 35.1% excluding goodwill. In line with changes in segment reporting, the ROIC calculation has been restated on a comparable basis.
The Group bought back CHF 7 billion worth of its own shares in 2009, bringing the total value of repurchased shares between August 2007 and 31 December 2009 to CHF 20.1 billion. Once the remaining CHF 5 billion in shares are bought back in the course of 2010, the CHF 25 billion share buyback programme launched in 2007 will be completed. The Group will then launch a new CHF 10 billion programme with the intent to buy back an additional CHF 5 billion in shares before the end of the year. The necessary filing with the Swiss Takeover Board will be made in due course.
The Board will be proposing a dividend of CHF 1.60 per share to shareholders, representing an increase of 14.3%.
In 2009, the organic growth of Nestlé Food and Beverages amounted to 4.8% in the Americas, 1.2% in Europe and 7.4% in Asia, Oceania and Africa. The results were broad-based across all categories and regions, combining strong top and bottom line performance, thereby demonstrating the disciplined alignment of our people behind clear strategic priorities fuelled by higher levels of brand support and R&D investment.
Paul Bulcke, Nestlé CEO: “With organic growth of 4.1% achieved in last year’s challenging environment, we were able to grow substantially faster than our industry. Combined with the further significant improvement of the EBIT margin, we delivered on our projection in line with the long-term Nestlé Model. We stepped up investment in our brands and the pace of our innovation, adapted our products to the changing needs of consumers and further accelerated efficiencies. These actions, together with the disciplined alignment of our people behind clear strategic priorities, allowed us to again combine a strong top and bottom line performance in 2009, coming on top of excellent results in 2008. Our 2009 performance was broad-based across all categories and regions and demonstrates our ability to deliver in the short term whilst continuing to invest for the long term. For 2010, I expect our Food and Beverages business to achieve higher organic growth than in 2009 and a further EBIT margin increase in constant currencies. This confidence is also reflected in our increased dividend proposal as well as our share buyback plans for the year.”
