Nestlé 9-month sales: 8.9% organic growth – well above long-term target. Improved full-year outlook
* Sales of CHF 81.4 billion, +CHF 2.7 billion, 8.9% organic growth, 3.4% real internal growth
* Performance driven by Food and Beverages: 8.9% organic growth, 3.0% real internal growth
* Full-year outlook: organic growth of about 8% with improved EBIT margin
Paul Bulcke, Nestlé CEO: “These record sales in the first 9 months reflect strong growth momentum in both the developing and the developed world. The Group’s brands hold leadership positions in dynamic categories and will continue to deliver profitable growth on the back of our nutrition, health and wellness strategy. Indeed, such is the strength of alignment: 280,000 Nestlé people sharing the same vision and commitment to operational excellence, selling billions of products to consumers across the world, day after day. This is the driving force behind an outstanding shorter-term operational performance which, in turn, ensures the longer-term delivery of the Nestlé model: a good level of organic growth, combined with a constant currency EBIT margin improvement, year after year.”
During the first nine months of 2008, consolidated sales of the Nestlé Group amounted to CHF 81.4 billion, an increase of 3.4% in Swiss francs over the same period last year. Reported sales benefited from a very strong organic growth of 8.9%, including 3.4% real internal growth. Acquisitions, net of divestitures, added another 2.5% to Group sales. The currency effect reduced Group sales by 8.0% due to the strength of the Swiss franc compared to most other currencies. The Group’s Food and Beverages business, with sales of CHF 75.8 billion, was the main contributor to growth, achieving organic growth of 8.9%, including real internal growth of 3.0%.
In the first nine months of 2008, the organic growth of Nestlé’s total Food and Beverages business amounted to 5.4% in Europe, 9.5% in the Americas and 14.2% in Asia, Oceania and Africa. These figures include the Zones, globally-managed businesses such as Nestlé Waters, Nestlé Nutrition, Nespresso, as well as the Food and Beverages joint ventures.
Developing markets continued to experience good performances with an organic growth of 16.8% with all regions performing well. The Group’s long-standing presence in these markets, combined with strong market positions and ubiquitous distribution, are some of the key success factors. These are further enhanced by Nestlé’s Popularly Positioned Products (PPPs), an integrated business model to reach out to emerging consumers offering them quality, taste and nutritional content at affordable prices. PPPs achieved organic growth of more than 20%.
Developed markets also continued to achieve good performances with organic growth of 5.1%. Nestlé’s multi-channel focus is delivering growth in traditional retailers, hard discounters and impulse channels. The Group’s success in developed markets is increasingly driven by its capacity to innovate with new added-value products and services as well as continuously renovate the existing portfolio. Moreover, the premium and luxury end of the market continues to provide strong growth, with brands such as Nespresso, Häagen Dazs and Gourmet pet food performing well.
Zone Europe: sales of CHF 21.0 billion, 6.0% organic growth and 2.1% real internal growth. The Zone’s strong momentum continued in the second half of the year, with key Western European markets and businesses achieving good levels of organic growth, particularly Great Britain and the pan-European PetCare business. Organic growth in Eastern Europe continued to accelerate. The Zone’s bigger categories, chocolate, culinary, PetCare and soluble coffee, achieved high single-digit organic growth.
Zone Americas: sales of CHF 23.8 billion, 10.7% organic growth and 3.0% real internal growth. The Zone continued to achieve strong organic growth, with high single-digit organic growth in North America and double-digit organic growth in Latin America. PetCare, shelf stable dairy, soluble coffee were among the categories which achieved double-digit organic growth. There were improved performances from ice cream and frozen food in North America.
Zone Asia, Oceania and Africa: sales of CHF 12.7 billion, 13.2% organic growth and 4.5% real internal growth. The strong momentum continued in the second half, with all the Zone’s major emerging markets such as Middle East, South Asia, Africa and Greater China achieving double-digit organic growth. All the Zone’s key categories achieved high single-digit or double-digit organic growth with PPPs contributing significantly.
Nestlé Waters: sales of CHF 7.6 billion, -1.0% organic growth and -3.2% real internal growth. This performance remains unchanged from the half year and reflects the slowdown of the bottled water category in Western Europe and North America due to a combination of economic conditions and perceived environmental issues around bottled water. Nestlé Waters’ increasingly important emerging market businesses continued to achieve organic growth above 20%. The two billionaire brands, Poland Spring and Nestlé Pure Life, grew, as did the premium brands S. Pellegrino and Perrier.
Nestlé Nutrition: sales of CHF 7.8 billion, 9.6% organic growth and 4.0% real internal growth. These figures are in line with the business’ long-term organic growth target of 10%. Strong performances in infant nutrition continued, driven by a strong innovation and renovation pipeline. Jenny Craig achieved double digit organic growth. The integration of Novartis Medical Nutrition and Gerber is now complete and these businesses are performing well.
Powdered and Liquid Beverages: sales of CHF 13.7 billion, 13.1% organic growth and 8.1% real internal growth. This excellent performance again confirmed the strength of Nestlé’s billionaire brands Nescafé, Milo, Nespresso, Nesquik and Nestea. The roll-out of Nescafé Dolce Gusto in Western Europe continued successfully. Health-focused offerings such as Nescafé Body Partner, Nescafé Protect in Asia and sugar-reduced Nesquik performed well, while Popularly Positioned Products grew strongly in emerging markets. Nespresso continued to achieve an outstanding performance with over 30% organic growth.
Milk Products and Ice Cream: sales of CHF 15.9 billion, 10.8% organic growth and 1.7% real internal growth. The organic growth of shelf stable dairy products reflected the first effects of falling milk prices but remained double-digit in most markets. CoffeeMate continued to perform well across all Zones. Ice cream’s organic growth was impacted by higher raw material costs. However, the super-premium brand Mövenpick of Switzerland achieved double-digit organic growth, as did products with an improved nutritional profile such as La Laitière in France, Skinny Cow in the US and La Cremeria in Italy.
Prepared Dishes and Cooking Aids: sales of CHF 13.1 billion, 6.3% organic growth and 1.4% real internal growth. Maggi continued to experience strong organic growth in Eastern Europe, Asia and Africa. Frozen food in the US accelerated, particularly Hot Pockets, and in Europe the Wagner and Buitoni pizza businesses continued to perform well. Chilled food continued to grow, mainly driven by Buitoni in the US and Herta in France.
Confectionery: sales of CHF 8.7 billion, 9.1% organic growth and 2.8% real internal growth. The relaunch of the “Best Ever” Kit Kat proved to be successful and the launch of Kit Kat Senses in the UK, Germany and France is also showing strong early results. These initiatives, as well as a continued strong performance in emerging markets contributed to this billionaire brand’s double-digit growth. Increased consumer interest in home baking resulted in good performances of products such as Nestlé Dessert in France and Toll House in the US. In Brazil, the launch of nutritious snacking alternatives such as Combina biscuits with wholegrain and added fibre showed good results.
PetCare: sales of CHF 9.0 billion, 11.4% organic growth and 5.0% real internal growth. The acceleration in the third quarter reflects resilient demand for key premium brands such as Beneful and super-premium brands such as Fancy Feast and Gourmet, despite the timely pricing action in response to increased cost pressure earlier in the year.
Pharmaceutical Products: sales of CHF 5.6 billion, 9.5% organic growth and 8.9% real internal growth. Alcon and the joint ventures, Galderma and Innéov, continued to grow strongly.
The proceeds of the sale of a 24.85% share of Alcon by Nestlé to Novartis, USD 10.4 billion, were used to reduce the Group’s exposure to the short-term commercial paper market. Nestlé’s net debt will be lower at the end of 2008 than at the end of 2007, when it stood at CHF 21.2 billion. Nestlé enjoys predictable cash flows which, combined with its high credit quality, have positioned it well in recent market conditions, enabling it to continue to make below-market rate debt offerings. Nestlé’s strong financial position is reflected in the fact that it is continuing with its share buy-back programme at the accelerated level announced in August 2008.
Nestlé is committed to becoming the recognized global leader in nutrition, health and wellness and the reference for sustainable financial performance in its industry. The alignment of the Group’s businesses behind this commitment will drive profitable growth both in the current environment and in the longer term, demonstrating Nestlé’s defensive qualities as well as its strong growth credentials.
In view of Nestlé’s strong third quarter, the company foresees organic growth of about 8% for the full year, higher than expected at the first half, together with an improvement in EBIT margin, both reported and constant currency. Thereafter, Nestlé is committed to delivering the Nestlé model, consisting of 5 to 6% organic growth together with constant currency margin improvement, year after year.
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