Nestlé battles the crisis with strong figures
The Swiss-based food and beverage giant, Nestlé, has turned in a solid performance for 2009 and expects to see higher growth in 2010.
Nestlé, whose brands include Nescafé coffee, Gerber baby food, Purina pet food and Perrier mineral water, announced sales of SFr107.6 billion, which represents organic growth of 4.1 per cent.
Organic growth is the growth rate that a company can achieve by increasing output and enhancing sales, but it excludes mergers and acquisitions.
Strong demand for chocolate, soluble coffee and pet products drove the Vevey-based company’s full-year sales.
Operating profit came in at SFr15.7 billion, while net profit was SFr10.43 billion (SFr18 billion for the previous year included SFr9.2 billion from the disposal of 24.8 per cent of Alcon to Novartis).
“With organic growth of 4.1 per cent achieved in last year’s challenging environment, we were able to grow substantially faster than our industry,” commented Nestlé chief executive Paul Bulcke.
Investment in brands
“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.”
Analyst Andreas von Arx at Helvea described the performance as “good numbers for 2009”.
“On a relative valuation, Nestlé continues to be more attractive than [competitors] Danone and Unilever.”
Against this background, Nestlé bought back SFr7 billion of its own shares in 2009, bringing the total value of repurchased shares between August 2007 and December 2009 to SFr20.1 billion.
Once the remaining SFr5 billion in shares are bought back during this year, the SFr25 billion share buyback programme launched in 2007 will be completed. The group will then launch a new SFr10 billion programme.
The board of directors is to propose a dividend of SFr1.60 per share, representing an increase of 14.3 per cent compared with the previous year.
Roth on board
It will also propose the election of Jean-Pierre Roth, former president of the Swiss National Bank, to its ranks.
Roth, who is set to join the board of the Swatch Group, was also chairman of the board of the Basel-based Bank for International Settlements and represented Switzerland in the International Monetary Fund.
In its outlook, Nestlé said in spite of continued economic uncertainty in 2010, especially in developed countries, it expected its food and beverages business to achieve higher organic growth than in 2009 and further increase its operating profit margin in constant currencies for the year as a whole.
“The outlook statement is fair enough; they are promising at least four per cent growth,” Jon Cox, an analyst at Kepler Capital Markets told Bloomberg.
“It is below the five to six percent target, but the company would be foolish to promise that given the uncertain environment. Still, I would not be surprised to see them approaching that long term goal.”
swissinfo.ch and agencies
In the 1860s Henri Nestlé, a pharmacist, developed a food for babies who were unable to breastfeed. His first success was a premature infant who could not tolerate his mother’s milk or any of the usual substitutes.
In 1905 Nestlé merged with the Anglo-Swiss Condensed Milk Company. By the early 1900s, the company was operating factories in the United States, Britain, Germany and Spain.
Nestlé initially saw a significant decline in profits when the Second World War started but production and sales went on to rise in the wartime economy. A new product, Nescafé, became a staple drink of the US military.
After the war, growth accelerated and companies were acquired: there were mergers with Maggi seasonings and soups (1947), Crosse & Blackwell (1960), Findus (1963), Libby’s (1971) and Stouffer’s (1973). It took a shareholding in L’Oréal in 1974.
In 1984, Nestlé’s improved profits allowed it to acquire the US food giant Carnation.
Other acquisitions have included San Pellegrino (1997), Spillers Petfoods (1998) and Ralston Purina (2002), Chef America (2002), Mövenpick Ice Cream (2003), Jenny Craig and Uncle Toby’s (both 2006), Novartis Medical Nutrition, Gerber and Henniez(2007). In 2002 it merged its US ice cream business into Dreyer’s.
Sales: SFr107.6 billion
Earnings before interest and taxes (Ebit): SFr15.7 billion
Net profit: SFr10.4 billion
Earnings per share: SFr2.9
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