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Nestl? nine-month sales: 6.1% organic growth, full-year outlook confirmed

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October 18, 2012

Nestl? nine-month sales: 6.1% organic growth, full-year outlook confirmed

Paul Bulcke, Nestl? CEO: ?Nestl??s growth in the first nine months is in line with our expectations. It is the result of the capabilities built over time in innovation, distribution and engaging with consumers. We delivered double-digit growth in emerging markets, where we are expanding our routes to market and enhancing our product offerings. We grew in the intensely competitive developed markets in spite of a general economic malaise and low levels of consumer confidence. Our continued momentum in real internal growth, combined with some easing of input cost pressures, allows us to confirm our full-year outlook.?

In the first nine months of 2012, the Nestl? Group?s organic growth was 6.1%, composed of real internal growth of 2.9% and pricing of 3.2%. Foreign exchange contributed 2.2%, positive for the first time this year. Acquisitions, net of divestitures, contributed 2.7%. Total sales increased 11.0% to CHF 67.6 billion.

Business Review

The Nestl? Group continued to grow in all regions of the world: the Americas achieved organic growth of 6.1%, Europe 2.5% and Asia, Oceania and Africa 10.8%. Our business grew 11.7% in emerging markets and 2.4% in developed markets.

Zone Americas

Sales of CHF 20.9 billion, 5.5% organic growth, 0.4% real internal growth

  • Growth in the zone was broad-based, with most categories and regions contributing.
  • In North America the trading environment remained subdued, reflecting tough economic conditions and low consumer confidence. The frozen meals and pizza categories continued to decline but our share performance by Stouffer?s and Lean Cuisine improved. The recent launches in pizza, Italian-style favourites and pizza dipping strips continued to perform well. Ice cream improved, whilst there were strong performances in both soluble coffee and coffee creamers: Nescaf? Cl?sico and Coffee-Mate Natural Bliss were highlights. Petcare maintained the positive momentum seen so far this year, with good performances in the cat category from Friskies and Fancy Feast, and from Beneful for dogs. Tidy Cats also did well.
  • There was double-digit growth in Latin America, with good contributions from most markets and regions. Brazil and Mexico both continued to drive strong growth. The chocolate, soluble coffee and ice cream categories grew well. Petcare reported growth of more than 20%.

Zone Europe

Sales of CHF 11.2 billion, 1.9% organic growth, 0.5% real internal growth

  • The zone?s innovation platforms, particularly in beverages and in petcare, continued to create growth in a deteriorating economic environment.
  • The Great Britain region, France and Switzerland were highlights among Western Europe?s main markets. Greece and Benelux also continued to grow.
  • In Central and Eastern Europe, Russia, Ukraine, the Adriatic region and Romania all made a positive contribution.
  • There was good growth in a number of categories. In coffee, both Nescaf? soluble coffee and the Nescaf? Dolce Gusto system performed well. Ice cream picked up well in the third quarter, after a slow start to the season. Pizza brands Wagner and Buitoni were the highlights in the frozen business. Our popularly positioned products were also a key growth driver for the zone, particularly in Russia and the Great Britain and Iberia regions. Petcare continued its strong momentum across Europe.

Zone Asia, Oceania and Africa

Sales of CHF 14.0 billion, 9.4% organic growth, 6.3% real internal growth

  • The zone focused on driving deeper distribution, innovating in all areas from premium to popularly positioned products, enhancing its capacities and integrating Yinlu and Hsu Fu Chi. Total sales for the zone, including the new partnerships, were up 25.9% from CHF 11.1 billion in the corresponding period of 2011.
  • The emerging markets delivered double-digit growth. Africa grew at twice the zone average and the Middle East also performed extremely strongly. China and Indonesia were among the other markets contributing well. The categories that were the key growth drivers were dairy, powdered beverages and ready-to-drink, particularly Nescaf?, ambient culinary with Maggi and Totole, chocolate including Shark in China, and ice cream.
  • Among developed markets, Japan reported growth due to its coffee systems Nescaf? Barista and Nescaf? Dolce Gusto, and chocolate, primarily Kit Kat.

Nestl? Waters

Sales of CHF 5.6 billion, 5.8% organic growth, 4.0% real internal growth

  • All regions grew, with North America and the emerging markets the key drivers.
  • In North America we continued to see dynamic growth in the premium waters Perrier and S.Pellegrino, as well as in the value brand Nestl? Pure Life. Among the regional brands, Poland Spring and Ice Mountain were highlights.
  • Growth in Europe was good in the third quarter, particularly in France, the UK, Poland and Hungary. Vittel, Buxton, Perrier and S.Pellegrino were key contributors.
  • The emerging markets grew double-digit, with high levels of growth across many markets. Nestl? Pure Life, as well as local brands such as La Vie, Erikli and Al Manhal performed well.

Nestl? Nutrition

Sales of CHF 5.8 billion, 6.6% organic growth, 2.4% real internal growth

  • Infant Nutrition achieved high growth in emerging markets, driven by infant formula and cereals, both of which continued to benefit from successful innovations and multi-market roll-outs for brands such as Nestl? NAN, Lactogen, Nestum and Cerelac. Trading conditions were subdued in a number of developed markets due to category contraction. However, innovations such as pouches for Gerber in the US and NaturNes plates in France created growth in their categories.
  • Performance Nutrition achieved positive growth, driven by the US and Europe. Weight Management continued to be challenged in its key market, the US.

Other

Sales of CHF 10.1 billion, 8.9% organic growth, 6.3% real internal growth

  • Nestl? Professional maintained its momentum, driven by double-digit growth in emerging markets and North America. The food business expanded its product range under the Chef and Maggi brands following the acquisition of the stocks and sauces business Oscar. The beverage business continued to roll out its beverage systems Nescaf? Milano, Viaggi by Nescaf? and Nescaf? Alegria which are now in sixty countries. It also achieved strong growth in its traditional soluble coffee and ready-to-drink categories.
  • Nespresso achieved double-digit growth in a period characterised by a high level of innovation, including three limited edition coffee launches and two new machines, as well as 28 boutique openings.
  • The Nestl? Health Science portfolio of products performed well. The acquisitions are integrated and delivering to plan, or better. The Nestl? Institute of Health Sciences is now beginning to enhance our capabilities through its work on personalised nutritional solutions for specific medical conditions.
  • The Cereal Partners Worldwide joint venture continued to achieve strong growth in emerging markets and subdued growth, in line with its category, in developed markets. There was high single-digit growth in the Pharma joint ventures, driven by dermatology.

Outlook

As we expected, the tough trading environment, especially in developed markets, is continuing. Our performance year-to-date is in line with our expectations. The capabilities built over time in innovation, distribution and engaging with consumers are driving our growth. This, combined with some easing of input cost pressures, allows us to confirm our guidance for the full year: we are well positioned to deliver the Nestl? Model of organic growth of 5% to 6%, improved margin and underlying earnings per share in constant currencies.

Annex

Nine-month sales overview 2012

Jan.-Sept. 2012
Sales
in?CHF?millions
Jan.-Sept. 2011
Sales
in?CHF?millions
Jan.-Sept. 2012
Organic Growth (%)
Jan.-Sept. 2012
Real?Internal
Growth (%)
By Operating Segment
– Zone Americas 20’892 19’131 +5.5 +0.4
– Zone Europe 11’198 11’114 +1.9 +0.5
– Zone Asia, Oceania, Africa 13’951 11’082 +9.4 +6.3
Nestl? Waters 5’584 5’084 +5.8 +4.0
Nestl? Nutrition 5’831 5’412 +6.6 +2.4
Other 10’112 9’066 +8.9 +6.3
Total Group 67’568 60’889 +6.1 +2.9
By Product
Powdered and liquid beverages 14’441 13’050 +9.5 +5.7
Water 5’588 5’089 +5.8 +4.0
Milk products and ice cream 14’083 12’159 +6.4 +1.3
Nutrition & Healthcare 7’921 7’188 +6.7 +3.4
Prepared dishes and cooking aids 10’419 10’045 +1.0 -0.9
Confectionery 7’166 6’282 +4.7 +2.7
Petcare 7’950 7’076 +7.8 +4.3
Total Group 67’568 60’889 +6.1 +2.9

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Source: Nestle

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