Nestle announces record year
2006 was a record year for Swiss giant Nestle and saw the company achieve double-digit increases in EBIT, net profit and cash flow.
Net profit rose by 13.8% to 9.2 billion Swiss francs (£5.6bn).“We are seeing the benefits of the Group’s transformation into a nutrition, health and wellness company, with stronger innovation and branding, as well as improved efficiency, says Peter Brabeck-Letmathe, chairman and CEO of Nestle.
Sales grew 8.1% in 2006 to 98.5billion Swiss francs (£60.7bn), and the single most important factor was organic growth at 6.2%, above the group’s long-term target of between 5 and 6%. Within the organic growth, real internal growth was 4.7% and pricing 1.5%.
The main driver of overall growth was the food and beverages business, which contributed 6.7 billion Swiss francs (£4.1bn) to the 7.3 billion (£4.5 bn) of growth, reflecting strong performances over most countries and brands.
The company’s efficiency programme, Operation Excellence 2007, exceeded its targeted savings of 1 billion Swiss francs and enabled the group to compensate for higher marketing, R&D and input costs.
Brands with sales of more than 1 billion (£0.6bn) account for over 70% of food and beverages sales and are increasingly derived from their strong nutritional credentials. Others have benefited from strong performances of health-
focused extensions. Products enriched with Brand Active Benefits (BABs) achieved organic growth of over 20% in 2006 with sales close to 4 billion Swiss francs. Marketing and administration spend rose by 6.2%.
The Group’s operating cash flow increased by 14.4% to 11.7 Swiss francs (£7.2bn) while free cash flow generation increased by 0.5 billion (£0.3bn) to 7 billion Swiss francs (£4.3bn). The difference between operating and free cash flows is mainly explained by capital expenditure, which rose from 3.7% of sales in 2005 to 4.3% in 2006.
The organic growth of Nestle’s total food, beverage and nutrition business, including Nestle Waters, Nestle Nutrition and Nespresso, amounted to 3.3% in Europe, 7.2% in the Americas and to 8.0% in Asia, Oceania and Africa.
Sales of Nestle Pure Life and Poland Spring, a North American regional brand, exceeded 1 billion Swiss francs for the first time and in Europe, Nestle Aquarel achieved double-digit growth, while among the international brands, San Pellegrino and Acqua Panna enjoyed good performances.