Nestle Sees 3.6% Organic Growth in January-September

Oct 22 - In the first nine months of 2009 the Group achieved organic growth of 3.6%. Real internal growth reached 1.0% having accelerated throughout the year and across most segments of the business.

Paul Bulcke, CEO of Nestlé: "The increased momentum of real internal growth in the third quarter, coming on top of high growth in 2008, once again proves the strength of Nestlé's strategy. In these challenging times, we have been streamlining our structures and product portfolio and, at the same time, we continue to invest in innovative technologies and expand our R&D capabilities around the world. In addition, we have increased spending in product innovation and consumer-facing brand-support. All this allows me to confirm my expectation that volume-driven organic growth will further accelerate and that the EBIT margin in constant currencies will improve for the full year."

In the first nine months of 2009 the Group achieved organic growth of 3.6%. Real internal growth reached 1.0% having accelerated throughout the year and across most segments of the business. Divestitures, net of acquisitions, had a negative impact of -0.6% on Group sales, as did the currency effect of -5.2% due to the strength of the Swiss franc compared to most other currencies. These two factors contributed to a reduction in Nestlé Group sales of -2.2%, to CHF 79.5 billion.

Organic growth for Nestlé's food and beverage business was 3.5%. Real internal growth accelerated in the third quarter to reach 0.7% for the nine months from 0.1% at the half year. This improvement was evident in each region, resulting in organic growth of 4.4% in the Americas, 0.9% in Europe and 6.5% in Asia, Oceania and Africa for Nestlé's total food and beverage businesses.

The nine-month sales and the first half EBIT margin improvement demonstrate Nestlé's ability to deliver solid performance on top of strong growth in 2008, whilst continuing to invest in longer-term strategic priorities. Emerging markets enjoyed 7.5% organic growth. Popularly Positioned Products, a business model now well established in emerging markets, delivered double-digit growth as the roll-out in developed countries gathered pace.

All calculations based on non-rounded figures.
Globally managed Nestlé Professional activities have been taken out of the Zones and included in “Other Food & Beverages”.

Zone Americas: sales of CHF 23.4 billion, 6.4% organic growth and 2.3% real internal growth. In North America, the real internal growth of petcare, ice cream, soluble coffee and chocolate accelerated in the third quarter, but slowed for frozen food. Brazil continued to build on the positive momentum, mainly due to growth in the ambient dairy category. Mexico and the rest of the region also showed improvement in the third quarter.

Zone Europe: sales of CHF 16.5 billion, 0% organic growth and -1.5% real internal growth. Germany, France, Switzerland, the Iberian region and Italy saw a rise in real internal growth. The Great Britain region delivered a strong performance, although the third quarter was weaker. Eastern Europe presented a mixed picture with weaker third-quarter real internal growth in Russia and the Czech and Slovak Republics, while Poland and the Ukraine enjoyed stronger growth. By category, sales volumes were good in soluble coffee, chilled culinary, powdered beverages and petcare.

Zone Asia, Oceania and Africa: sales of CHF 11.7 billion, 5.8% organic growth and 3.0% real internal growth. All the emerging regions contributed to improved volumes, although real internal growth in Oceania and Japan was unchanged. There was strong real internal growth in China, the Philippines, South Asia and Africa. The Middle East continued to improve. By category, real internal growth in ambient dairy improved and remained strong in ambient culinary, soluble coffee, powdered beverages and chocolate.

Nestlé Waters: sales of CHF 7.2 billion, -1.8% organic growth and -2.3% real internal growth. Real internal growth for the third quarter improved, mainly due to an acceleration in Europe where the business benefited from renewed brand support. The category as a whole was weak in North America, but the Nestlé business gained market share. The emerging markets business enjoyed strong growth. Nestlé Pure Life continued to achieve double-digit growth in the emerging markets and North America.

Nestlé Nutrition: sales of CHF 7.5 billion, 2.0% organic growth and -1.5% real internal growth. Infant nutrition's real internal growth improved in all three zones, benefiting from a strong innovation and renovation pipeline and increased marketing support. NaturNes continued to build market share in Europe. Healthcare Nutrition achieved good momentum in its core areas in the wake of recent rationalisation measures, and performed particularly well in Zone Asia, Oceania and Africa. Jenny Craig was affected by weak discretionary spend in the US. Performance nutrition saw good acceleration in all three zones.

Other Food and Beverages: sales of CHF 7.4 billion, 6.2% organic growth and 2.8% real internal growth. Nespresso continued to deliver double-digit growth. Growth was positive in both the joint ventures, Cereal Partners Worldwide and Beverage Partners Worldwide. As a newly-created, globally-managed business, Nestlé Professional delivered slightly improved growth momentum, in spite of weak out-of-home consumption.

Pharma: sales of CHF 5.8 billion, 5.9% organic growth, 5.5% real internal growth. Alcon and the joint ventures as a whole achieved good growth.

All calculations based on non-rounded figures.
The slight difference in the figures for water and nutrition between the “Sales by operating segment” and “Sales by product” tables is due to the fact that some water and nutrition products are also sold by management segments other than Nestlé Waters and Nestlé Nutrition.

Powdered and liquid beverages: sales of CHF 14.0 billion, 9.8% organic growth and 5.3% real internal growth. All segments contributed to the acceleration in real internal growth, with strong results for billionaire brands Nescafé, Nesquik, Nespresso and Nestea, which accounted for 80% of this product group's sales. Nesquik in North America and Europe and Milo in Asia benefited from their health and wellness profiles. Nescafé enjoyed strong growth in all three zones. Nescafé Dolce Gusto reached organic growth of over 50%, taking strategic market positions in the 16 countries where it has so far been rolled out. Nespresso delivered 28% organic growth.

Milk products and ice cream: sales of CHF 14.9 billion, 0.7% organic growth and -0.2% real internal growth. Real internal growth for ambient dairy continued to build momentum during the year, driven by a strong range of Popularly Positioned Products with brands such as Nido. Coffee-mate, primarily in the US, continued to achieve almost double-digit growth. The ice cream business increased its leadership position in the US, its biggest market, with strong communication around nutrition-focused innovations, particularly in the super-premium segment. In Europe, the performance was stronger in the North with successful launches of Nestlé Extrême All Natural in countries such as Germany and Switzerland, but weaker in the South.

Prepared dishes and cooking aids: sales of CHF 12.4 billion, 0% organic growth and -0.5% real internal growth. In Europe, the dough segment and frozen pizza business delivered growth, with Herta also performing well, whilst ambient culinary and frozen meals were weaker, particularly due to lower out-of-home consumption. In the US, Hot Pockets and Stouffer's family packs performed well, but demand was weaker for its single serve offerings and for Lean Cuisine. Good demand in Africa, Asia, Eastern Europe and Latin America continued to deliver double-digit growth for Maggi in emerging markets.

Confectionery: sales of CHF 8.2 billion, 4.0% organic growth and -1.6% real internal growth. There was some softness in the growth of biscuits and sugar confectionery, but the chocolate business continued to make good progress. Kit Kat continued to perform well overall. Demand was weak in Russia, while many emerging markets delivered strong growth with products such as Nestlé Classic tablets in Turkey, Munch in India and Sahne Nuss in Chile. Core brands gained momentum in the US.

PetCare: sales of CHF 9.6 billion, 8.8% organic growth and 3.2% real internal growth. Strong growth for the nine months in petcare reflected continued innovation and renovation of key brands such as Friskies, Beneful, Dog Chow, Bakers, ONE and Gourmet, which outperformed the category in all regions. New product launches, such as Chef Michael’s dry and wet dog food, also contributed to the strong performance.

Share buyback

Based on Nestlé's solid operational performance, the Board of Directors has agreed to increase the 2009 share buyback programme from CHF 4 billion to CHF 7 billion. This change will allow the company to complete its current CHF 25 billion share buyback programme earlier than initially contemplated. The Board of Directors expressed satisfaction at Nestlé's current credit rating which allowed easy access to financial markets at attractive pricing during the financial crisis, and reaffirmed its decision to maintain the company's current credit quality for the foreseeable future.

2009 outlook

The nine-months performance is in line with earlier guidance, with growth momentum increasingly driven by real internal growth. The Group therefore continues to expect volume-driven organic growth to further accelerate as well as an EBIT margin improvement in constant currencies for the full year.