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Nestlé Continues to Make Strong Progress

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Nestlé Continues to Make Strong Progress

Nestlé Continues to Make Strong Progress
February 18
09:58 2020
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Nestlé has reported a 1.2% increase in sales to SFr92.6 billion (€87.2 billion) for 2019 with organic growth of 3.5%, with real internal growth (RIG) of 2.9% and pricing of 0.6%. RIG at 2.9% was the highest level in the last six years. Growth was fuelled in particular by innovation and portfolio management.

Year-on-year organic growth acceleration was supported by strong growth in the United States and Brazil, as well as improved momentum in Western Europe. All product categories saw positive organic growth. The largest contribution came from Purina PetCare and its premium brands Purina Pro Plan and Purina ONE. Coffee had good momentum, helped by strong demand for Starbucks products, which have now been rolled out in more than 40 countries. In total, Starbucks products generated more than SFr300 million of incremental sales in 2019.

Nestlé Health Science made good progress, based on strong sales development for medical nutrition and Atrium products. Water was subdued, reflecting pricing pressure in the mainstream segment and soft demand in Europe. Vegetarian and plant-based food products, including the Sweet Earth Awesome Burger and the Garden Gourmet Incredible Burger, saw strong double-digit organic growth, reaching sales of close to SFr200 million.

Underlying trading operating profit increased by 4.8% to SFR16.3 billion and Nestlé reached its 2020 profitability target range a year ahead of its medium-term plan. Underlying trading operating profit (UTOP) margin increased by 60 basis points to 17.6%. The trading operating profit (TOP) margin decreased by 30 basis points to 14.8% due to increased restructuring and related expenses.

During the year, Nestlé returned SFr16.9 billion to shareholders through a combination of dividend and share buybacks. At the end of 2019, Nestlé completed the SFr20 billion share buyback program initiated in July 2017. It has now started a new share buyback program of up to SFr20 billion.

Nestlé divested Nestlé Skin Health in 2019 and announced the sale of its US ice cream business for US$4 billion to Froneri. Nestlé also agreed to sell a 60% stake in its Herta charcuterie (cold cuts and meat-based products) business to Casa Tarradellas. Portfolio rotation over the past three years amounts to 12% of total 2017 sales.

Mark Schneider, chief executive of Nestlé, comments: “We saw strong progress in 2019, with key operating and financial metrics improving significantly for the second consecutive year. Organic growth accelerated, fuelled by strong momentum in the United States and Purina PetCare globally. Profitability improved again and reached our guided range one year ahead of plan. Cash flow was strong, while underlying earnings per share and returns to shareholders reached record levels. In 2020, we expect continued organic sales growth improvement as we take further steps to decisively address underperforming businesses.

Mark Schneider, chief executive of Nestlé.

“In 2019, we made significant progress in our portfolio transformation. We did what we said we would do and more. We are not done yet. We will respond to rapid changes in the industry and fast-evolving consumer preferences to position our portfolio for higher growth.”

He continues: “Nestlé will continue to focus on fast innovation. The launch of our premium Starbucks products, for example, has been a great success. We are very pleased with the speed of the product rollout and the positive response by consumers. The company is fully embracing the need for speed, as the rapid expansion of our new plant-based food and beverage offerings has shown. We are getting to market faster with must-have products.”

For 2020, Nestlé is projecting continued increase in organic sales growth and expects further acceleration in 2021/2022 towards sustainable mid single-digit growth. Underlying trading operating profit margin is expected to continue to improve. It is too early to quantify the financial impact of the coronavirus outbreak at this time. The Greater China region is Nestlé’s second largest market, representing about 8% of global sales.

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