Not easy, but Nestle delivers solid results

by Eric Schroeder
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VEVEY, SWITZERLAND — Fiscal 2012 “was not a walk in the park,” but even so, Nestle S.A. managed to deliver a good broad-based set of results, said company executives. Net profit in the year ended Dec. 31, 2012, totaled 10,611 million Swiss francs ($11,514 million), up 12% from 9,487 million Swiss francs in fiscal 2011.

Sales for the year were 93,186 million Swiss francs ($100,035 million), up 10% from 83,642 million Swiss francs in fiscal 2011.

Wan Ling Martello, executive vice-president and chief financial officer of Nestle, said in a Feb. 14 conference call with financial analysts to discuss full-year financials that the company once again delivered on the top line, on the margin, on the earnings and on the cash flow.

“We delivered in emerging markets and in developed world,” Ms. Martello said. “We have brought dynamism to our categories. We’ve brought exciting, far-reaching consumer-driven innovations to our products and brands. And our innovations go beyond products. We’re bringing new services to our consumers, and we are finding new ways to engage with them. We have grown the portfolio across all segments, in premium systems and products and in PPPs.

“And we know there is no room for complacency, which is why we have continued to invest for the future, to invest in our people and brands, to invest in R.&D. and to invest in our capacities and our capabilities. And we have done so while respecting our commitment to create value both for our shareholders and for those societies in which we operate. This sets us up well to win in our markets around the world not just in 2013, but also beyond, to deliver the Nestle model and to continue to drive the consistent growth, the performance improvement and the brand investment that is Nestle’s DNA.”

Ms. Martello said both the United States and Latin America grew during fiscal 2012. While the United States had challenges in some categories in 2012, she said new product launches, the communications plan, and new leadership were all reasons to be more positive about the prospects for 2013 and beyond.

She noted innovations are “the cornerstone” of Nestle’s ability to develop growth and to remain differentiated from its competition.

“In the U.S. there is also a stream of innovation coming through in our frozen business,” she said. “This includes DiGiorno Pizzeria, to which I gave my personal seal of approval, and DiGiorno Italian Favorites and Lean Cuisine salad additions. And in ice cream, you can see in the picture Haagen Dazs Gelato, Outshine Fruit Bars and Skinny Cow candy bars. There will also be new capsule options in machines coming for Nescafe Dolce Gusto and Nespresso.”

The Zone Americas segment had sales of 28,927 million Swiss francs in fiscal 2012, up from 26,756 million Swiss francs in fiscal 2011. Trading operating profit in the segment was 5,380 million Swiss francs, up from 4,922 million Swiss francs a year ago.

“In North America we focused on increasing the value perception of our frozen food business, with improved recipes and nutritional profiles, a new promotional strategy and communication, whilst also prioritizing the higher value segments within ice cream,” the company said. “The result has been generally improving share trends across our categories.”

Looking ahead, Nestle said fiscal 2013 “looks to be every bit as challenging” as 2012, but will “provide opportunities to leverage our competitive advantages, deliver on our growth opportunities and benefit from our drive for continuous improvement across the group.”

Nestle said it expects to deliver organic growth between 5% and 6%, as well as improved trading operating profit margin and underlying earnings per share in constant currencies.
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