Nestlé profit breaks SFr10 billion
Net profit at Swiss food giant Nestlé rose by 15.8 per cent to a record SFr10.649 billion ($9.68 billion) in 2007, the company said on Thursday.
Sales were up over nine per cent, at SFr107.6 billion.
Vevey-based Nestlé said it expected its momentum to carry on into 2008 and announced it would propose a one-for-ten share split to increase the liquidity of its stock.
“This milestone performance was achieved in a difficult external environment and, for the 12th year in a row, has demonstrated the power of the Nestlé model,” said Peter Brabeck, chairman and CEO of Nestlé.
“Nestlé is now uniquely positioned as the world’s foremost nutrition, health and wellness company with leading brands, global geographic spread and an exceptional management team,” added Brabeck who steps down as CEO in April.
Sales experienced organic growth of 7.4 per cent, consisting of real internal growth of 4.4 per cent and price increases of three per cent.
Net profit grew by 15.8 per cent to a record SFr10.6 billion, resulting in a net margin of 9.9 per cent, up 60 basis points. Earnings per share once again grew at a double-digit rate, by 16.4 per cent to SFr27.81.
Acquisitions net of divestitures, primarily driven by the acquisition of Novartis Medical Nutrition and Gerber, contributed another 1.4 per cent of growth while exchange rate fluctuations added another 0.4 per cent.
Nestlé’s food and beverages business, with sales of SFr100.3 billion, was the main contributor to growth, the company said.
It pointed out that these performances were achieved in spite of a negative ten basis point currency impact.
It added that timely pricing actions, scale efficiencies, cost reduction initiatives, as well as the ongoing strategic transformation process allowed the food and beverages business to more than offset higher raw material and energy costs in 2007.
“The results are well ahead of our expectations – that were already ahead of consensus – and indicate a strong end to what has been an exceptional year for Nestlé,” said Andrew Wood, a senior analyst with Sanford C. Bernstein in New York.
Liquidity
In 2007 the organic growth of Nestlé’s total food and beverages business – including globally managed businesses such as Nestlé Waters, Nestlé Nutrition and Nespresso – amounted to 4.2 per cent in Europe, 8.6 per cent in the Americas and 9.6 per cent in Asia, Oceania and Africa.
The strong performance in 2007 and the positive outlook for 2008 enabled the Nestlé board to propose to shareholders a dividend increase of 17.3 per cent from SFr10.40 per share to SFr12.20 per share.
The ongoing share buy-back programme has so far resulted in the purchase of 10,196,000 shares between August 24, 2007 and February 5, 2008. The board will propose the cancellation of 10,072,500 shares amounting to SFr5.3 billion.
“Combined with our strong emphasis on excellence in execution and discipline in capital management, we have, over time, created powerful momentum which will deliver profitable growth for years to come,” said Brabeck.
swissinfo with agencies
Nestlé, the leading food business ahead of Unilever, Kraft and Danone, is among the first 30 companies in the world in terms of capital.
It employs around 250,000 people in five continents.
Sales: SFr107.5 billion (+9.2%)
EBIT: SFr5.024 billion (+12.9%)
Organic growth: 7.4 per cent
Net profit: SFr10.649 billion (+15.8%)
The Nestlé Model seeks to achieve three measurable objectives over the long term.
Annual organic growth of between 5% and 6%
Year-on-year improvement of Ebit (Earnings before interest and tax) margin
Improved return on invested capital
In compliance with the JTI standards
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