During its H1 2002, Swiss food giant Nestlé saw consolidated sales increase 7.2% to CHF44219m.
Go deeper with GlobalData
EBITA went up 13.5%, resulting in a profit margin improvement of 60 basis points to 11.7%. Net profit for that period grew strongly to CHF5656m, an increase of 79%, reflecting mainly the one-off effect of the Alcon IPO and other disposals. This results in a net margin of 12.8%, as compared to 7.6% in January-June 2001. For the same reason, earnings per share (EPS) rose to CHF 14.57.
Peter Brabeck, vice chairman and CEO, said: “Nestlé has delivered a good performance by any measure in the H1 2002, demonstrating its capacity for growth and performance improvement even in a difficult global environment. Our sound financial policies have allowed us to further increase our profit margins and at the same time to grow both internally as well as externally.
“As a result we have obtained leading profitable positions in businesses hitherto considered as developing areas, such as petcare, water and ice cream. Nestlé is in excellent financial health, has strong market positions around the world and is, therefore, well placed to report continued progress in sales and profits on a constant currency basis for the remainder of the year.”
Sales performance
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataReal internal growth, stripping out the impacts of acquisitions, pricing and foreign exchange, accelerated slightly during the second trimester and now stands at a cumulative 3.5%. Double-digit growth in Eastern Europe compensated for the slower pace in Western Europe, as did the excellent progress in the US for the more hesitant performance in Latin America, where several countries are faced with severe economic downturns.
Asia, Oceania and Africa saw strong advances in Asian countries, with the exception of Japan, and a significant increase of sales in Africa. Nestlé Waters achieved a Real Internal Growth (RIG) of 8.7%, with continued excellent growth and market share gains in the US, and Alcon confirmed its continued sales strength with a RIG of 8%.
Sales by Product Group
Jan-June 2002 Jan-June 2001 Change RIG %
in CHF billion % Jan-June 2002
Beverages 11.7 11.8 -1.6 4.4
Milk Products,
Nutrition and
Ice Cream 12.1 11.4 5.5 2.5
Prepared Dishes
& Cooking Aids 7.6 7.3 4.0 4.1
Petcare 5.4 3.0 81.9 3.7
Chocolate,
Confectionery
& Biscuits 4.8 5.0 -3.3 -0.1
Pharmaceutical
Products 2.7 2.6 4.3 8.0
TOTAL 44.2 41.2 7.2 3.5
All calculations based on non-rounded figures
Changes in selling prices and other items increased sales by 1.2%. The strength of the Swiss franc against all currencies reduced consolidated sales by 6%, while acquisitions, net of divestitures, had a positive impact of 8.5%. At comparable structure and at constant exchange rates, sales grew by 4.7%.
Profit performance
Improvements in operating efficiency produced an increase in the EBITA margin of 60 basis points, from 11.1% in the H1 2001 to 11.7% for January-June 2002. In a difficult economic and monetary environment, operating efficiency programmes, as well as lower commodity prices in some sectors, resulted in a reduction in the cost of goods sold as a percentage of sales. Marketing and administration expenses remained unchanged at 35.3%. After strong water sales and the Schöller acquisition, distribution expenses rose by 0.4% of sales.
Net non-trading items totaled CHF2.6bn in the H1 2002. The income came primarily from the par-tial IPO of Alcon, which resulted in an extraordinary gain of CHF3.9bn, and from the disposal of FIS, with a profit on disposal of CHF0.5bn, demonstrating the value that has been added to those businesses under Nestlé ownership. The reductions resulted primarily from impairments of the goodwill in the petcare and ice cream businesses, restructuring costs relating to the acquisition of Ralston Purina and from impairment of assets in petcare, ice cream, chocolate and milk. These totaled CHF1.9bn. The net financing cost rose moderately to CHF427m, reflecting a successful management of the debt position after the US$10.3bn acquisition of Ralston Purina. Lower interest rates as well as the strength of the Swiss franc also contributed to lowering financing costs of debt that is largely dollar denominated.
Cash flow and balance sheet
Nestlé continues to benefit from an exceptionally healthy financial position. Operating cash flow increased significantly, in line with EBITA, despite negative foreign exchange rates. Capital expenditure levels are comparable to those of last year. Net indebtedness fell from CHF 19.4bn at the end of 2001 to CHF 16.2bn, even after the dividend payout and the CHF 1.5bn spent for acquisitions; the reduction in debt results from the free cash flow generated during the H1 2002 and from the proceeds from disposals. The ratio of net debt to equity improved from 56.6% at year-end to 45.9%. It should be noted that the carrying value of treasury shares, valued at CHF 2.6bn, is not included when calculating that ratio.
Outlook
In an unstable economic, monetary and currency environment, forecasting trends is of questionable value. Nevertheless, Nestlé’s broad spread, both in products as well as geographically, provides a degree of protection against difficult market conditions. With its robust financial health, strong market positions and its capacity to deliver operational improvements, Nestlé expects to report continued progress in sales as well as in profits on a constant currency basis for the year 2002.
