Nestlé Full-Year 2015: 4.2% Organic Growth, Trading Operating Profit Margin Up 10 Basis Points In Constant Currencies

Vevey, Switzerland,Feb 18, 2016—Paul Bulcke, Nestlé CEO: “In 2015 we delivered profitable growth at the higher end of the industry in what is still a challenging environment. This profitable growth was on the back of consistent performances in previous years. Our organic growth of 4.2% was supported by increased momentum in real internal growth combined with continued margin improvement. Additionally, we grew or maintained market share in the majority of our categories and markets.

At the same time we continued to invest for the future with increased support behind our brands and further development of our new platforms in nutrition and health as well as E-commerce. We kept up the focus on portfolio management, turning around our frozen food business in the United States, disposing of non-core businesses and forging a new partnership to create a leading player in ice cream.

Our free cash flow generation was again at the top end of the food industry at 11.2% of sales, as a result of our focus on margins with discipline in capital expenditure and working capital. Consequently we propose to increase the dividend as we have for the last twenty years.

We anticipate that our trading environment in 2016 will be similar to previous years with even softer pricing. As such we expect to deliver organic growth in line with 2015, with improvements in margins and underlying earnings per share in constant currencies, and capital efficiency.”

Group results

Sales

In 2015 Nestlé’s organic growth was 4.2%, composed of 2.2% real internal growth and 2.0% pricing.

Total sales of CHF 88.8 billion, with a foreign exchange impact of -7.4%. Acquisitions, net of divestitures, added 0.1% to sales.

Organic growth was broad-based across geographies and categories.

5.8% in the Americas (AMS)
3.5% in Europe, Middle East and North Africa (EMENA)
1.9% in Asia, Oceania and sub-Saharan Africa (AOA)

Real internal growth was also broad-based.

2.4% in AMS
2.8% in EMENA
1.2% in AOA

Continued strength in developed markets with organic growth of 1.9% and in emerging markets with 7.0%.
Increased or maintained market share in the majority of our categories and markets.
Trading operating profit was CHF 13.4 billion, with a margin of 15.1%, down 20 basis points on a reported basis affected by the strong Swiss Franc, up 10 basis points in constant currencies.
We delivered this margin improvement while:

Trading Operating Profit

Increasing substantially our investment in brand support, digital, research and development, and in our new nutrition and health platforms.

Absorbing the cost of exceptional events like Maggi noodles in India.

Net Profit

Net profit was CHF 9.1 billion. The reduction of CHF 5.4 billion versus last year was mostly due to the one-off impact from the disposal in 2014 of part of the L’Oréal stake combined with the revaluation of the Galderma stake. There was also some effect from foreign exchange.
Reported earnings per share at CHF 2.90 were down by 36.1%, for the same reasons.
Underlying earnings per share in constant currencies were up 6.5%.
The Group’s operating cash flow remained strong at CHF 14.3 billion and free cash flow wasCHF 9.9 billion or 11.2% of sales. This was the result of our focus on margins and our discipline in capital expenditure and working capital, and shows Nestlé’s capability to deliver very strong cash flow despite the challenging foreign exchange environment.
Average total working capital has improved by 60 basis points from 5.3% of sales to 4.7%.

Cash Flow / Working Capital

Zone AMS

Sales of CHF 25.8 billion, 5.5% organic growth, 1.6% real internal growth; 19.4% trading operating profit margin, +80 basis points

Growth in the Zone picked up momentum through the year and market shares grew broadly in both North and Latin America.

In North America growth accelerated, led by the turnaround in the frozen meals business.

Sales of the new ranges of Lean Cuisine and Stouffer’s were strong, supported by positive consumption trends. Pizza’s positive momentum also accelerated, driven by innovation.
In ice cream, Häagen-Dazs and snacks continued to drive growth with new product launches.
Coffee-mate maintained its good momentum through constant innovation and renovation of flavours and packaging as well as new distribution.
Petcare in North America continued to grow with strong performances from Fancy Feast, Purina One and cat litter. Increased brand support is helping the recovery of Beneful.

Nestlé Waters

Sales of CHF 7.6 billion, 6.7% organic growth, 6.7% real internal growth; 10.8% trading operating profit margin, +110 basis points

Nestlé Waters delivered good broad-based organic and real internal growth in all geographies, driven by category dynamics and innovation.

There was a strong performance for our flagship brand for healthy hydration, Nestlé Pure Life.
The premium international brands Perrier and S.Pellegrino continued their good growth momentum, creating additional value in the category.
Complementing these performances, our strong local brands also contributed good growth, especially Poland Spring in the United States, Buxton in the United Kingdom, Erikliin Turkey, and Sta.María in Mexico.

The improvement in the trading operating profit margin was due to a combination of volume growth, continuous cost improvement and lower input costs that also allowed for increased investment behind our brands.

Nespresso delivered solid growth in all regions in 2015, affirming its strong position in European markets and continued to build momentum in Asia and the Americas. In the USA, sales of the recently launched VertuoLine system accelerated on the back of the new varieties of machine and Grands Crus and the new communication campaign. Global growth was supported by innovations and significant investments in the coffee, machine and service pipeline, as well as in sustainability activities, brand awareness and geographic expansion in new and existing markets. Full report.