Financial results
Nestlé posts optimistic outlook in its annual report but warns of a storm ‘about to hit’
In its Annual Report for 2019, Nestlé reportedly saw strong progress over the past 12 months, with significant improvements in key operating and financial metrics.
The Zurich-based company has over 290,000 employees around the world and had banned international travel for business purposes at the end of last month. It has now said it is taking additional safety measures in factories, offices and distribution centres.
Reuters has reported that chief executive Mark Schneider told staff in a memo last week: "Please get ready for the storm to hit – because hit it will."
In its Annual Report, figures showed organic growth increased to 3.5%, with 2.9% of real internal growth (RIG) and pricing of 0.6%. Increased organic growth was supported by good momentum in Nestlé’s largest market, the United States, and Purina PetCare. Innovation was key to the accelerated growth, the company stated.
Other financial highlights included:
- Total reported sales increased by 1.2% to CHF92.6bn ($94.66bn) (2018: CHF91.4bn). Net divestments had a negative impact of 0.8% and foreign exchange reduced sales by 1.5%.
- Underlying trading operating profit (UTOP) margin increased by 60 basis points in constant currency and on a reported basis to 17.6%.
- Underlying earnings per share growth increased by 11.1% in constant currency and by 9.8% on a reported basis to CHF 4.41.
- Free cash flow increased by 10.9% to CHF 11.9 billion ($12.16bn) (2018: CHF10.8bn).
- Based on these results, the Board of Directors has proposed a 25th consecutive increase of the yearly dividend to CHF 2.70 ($2.76), to be paid in April 2020.
“We continue to drive profitable growth and progress towards our mid-term targets through: A sharpened focus on Nutrition, Health and Wellness; Faster innovation; A simpler, more cost-efficient organization; Purposeful use of technology,” said chairman Paul Bulcke, and CEO Schneider, in a letter to its shareholders.
'Leadership role in sustainability'
Nestlé said it is taking a “leadership role in sustainability” and has accelerated its actions to tackle climate change and is committed to zero net greenhouse gas emissions by 2050. “We made substantial progress on our journey to make 100% of our packaging recyclable or reusable by 2025.”
As most of Nestlé’s carbon footprint relates to its sourcing of raw materials, it stated it will support its farmers and develop a series of initiatives in agriculture.
Nestlé said it is also continuing to work towards a waste-free future. The company inaugurated its Institute of Packaging Sciences in 2019, dedicated to the discovery and development of functional, safe and environmentally-friendly packaging solutions, and said it has deployed more sustainable packaging across its product portfolio.
This included launching innovative paper packaging materials, increasing the use of recycled plastic in its water brands and introducing new bulk delivery systems. It also engaged in initiatives to support local recycling infrastructure and community-based waste management systems.
Innovation
Nestlé said it has also changed its approach to innovation. It has made processes quicker, enhanced rapid prototyping and created accelerators. The company funded 50 additional fast-track innovation projects leading to product launches within six to 12 months. It has significantly reduced the average duration of centrally-led research and innovation projects – and said its innovation strength remains rooted in its scientific expertise and the ability to leverage research findings across different product categories.
Digitalization is also a key ingredient to its continued business success, the report stated, and touches on all aspects of its business, from supply chain management to production to marketing and sales. In 2019, e-commerce sales grew by 18.5% to account for 8.5% of total sales.
The company said it is moving to connect with consumers in “a relevant and personalized way”. In 2019, 20% of all consumer contacts with Nestlé were personalized. The objective is to reach 40% by the end of 2020.
Nestlé is also transforming operations by further digitalizing its supply chains and manufacturing. At the end of 2019, 100 Nestlé factories were equipped with ‘collaborative robots’ that interact with humans in a shared space or work safely in close proximity.
- The company’s Annual General Meeting will take place as planned on April 23, 2020, although shareholders will not be allowed to attend in person but will be fully able to exercise their voting rights through an independent representative.
