Nestle reports increased nine month sales

20/10/05 Nestle’s nine month sales have increased, beating forecasts. The company reported strong real internal growth of 3.8% and said that price increases of 2% result in organic growth of 5.8%. The company said that its model of strong organic growth combined with sustainable margin improvement remains secure. It is confident of achieving its target of between 5 and 6% organic growth for 2005 as a whole, combined with an improvement in constant currency margins.

Consolidated sales of the Nestlé Group reached CHF 67.7 billion during the first nine months of 2005. Real internal growth accelerated to 3.8%, while pricing, at 2.0%, was also higher than in the first half, resulting in organic growth of 5.8%. Foreign exchange fluctuations had a minimal negative impact of -0.2% on consolidated Swiss franc sales while divestitures, net of acquisitions, reduced Swiss franc sales by -0.8%.

The 5.6% organic growth of the food and beverage business was achieved through a continued emphasis in our markets on the successful extension of our distribution beyond the traditional supermarket grocery channel. They are also making effective use of consumer insight to build both a strong pipeline of product innovation and dynamic, consumer-relevant communication.

Zone Europe delivered positive organic growth of 1.6%, a slight improvement on the first half of the year. Western Europe's organic growth rose slightly, to 1.3%, in spite of continued challenging business conditions in some areas. Nestlé Purina PetCare Europe and Great Britain did particularly well in Western Europe. France accelerated to achieve positive organic growth. Eastern Europe reached 4.6% organic growth, with Russia continuing to be held back by the restructuring of the distribution network there. Russia is expected to return to normal growth rates in 2006.

Zone Americas' organic growth remained impressive at 7.3%. There were good performances in the US and Canada, with the Nestlé Prepared Food Company, Nestlé Purina PetCare North America and Dreyer's Grand Ice Cream Holdings doing particularly well. Latin America's organic growth rose to 8.9%, due to an acceleration in Brazil. Mexico and the smaller regions continued to experience strong organic growth.

Zone Asia, Oceania and Africa's organic growth accelerated to 7.0%. The recovery measures taken in Greater China, following the product exchange earlier in the year, are delivering sales growth again. Among many strong performances in other parts of the zone, India and the Middle East both achieved double-digit organic growth. Japan's real internal growth accelerated to be positive for the year to date, although pricing pressure held back organic growth. There was also improved organic growth in the Philippines and Africa.

Nestlé Waters' organic growth rose to 8.4%. Although Europe was flat, North America and the rest of the world experienced strong organic growth.

Within Other activities, Alcon, with 9.8% organic growth, once again enjoyed an excellent performance, as did Nespresso, with about 30% organic growth.
The organic growth of all product categories accelerated as compared to the first half, except for PetCare, which remained practically unchanged at 5.2%. Beverages enjoyed 7.8% organic growth largely due to the strong performance of water and soluble coffee. Milk products, Nutrition and Ice cream grew by 5.5% with shelf-stable dairy nearing double-digit organic growth, and Prepared dishes and cooking aids saw organic growth of 4.2%. The chocolate business did well in the Americas and in AOA, but was held back by Russia.

Nestel said that the GLOBE program remains within time frame and budget, with systems implementations to be slightly ahead of the 30% target for the full year. The savings programs, Operation Excellence 2007 and Project FitNes, are on track and will, together with price increases, play a key role in compensating for the continuing rise of input costs in many of the affected categories and markets.

The share buy-back program is now over 80% complete and is likely to be brought to a close in the coming weeks. In line with the Group's policy to manage its capital structure in an optimal manner, a second program will be proposed to the Board of Directors.

Peter Brabeck-Letmathe, Chairman and CEO of Nestlé: "The acceleration in our core food and beverage operations was broad-based and, together with the excellent performance of Alcon, allows me to reconfirm that we will deliver 5-6% organic growth for 2005, combined with a sustainable improvement of the EBITA margin in constant currencies. We can also announce a new share buy-back program, subject to Board approval. Thanks to the depth and quality of our management team, the necessary changes in the Executive Board will foster the ongoing strategic transformation process."