Record year for Nestlé in 2006

Nestlé Reported sales amounting to a new high of 98.5 billion Swiss francs (CHF) Lm26.3 billion in 2006, a rise of CHF7.3 billion or 8.1%. The single most important factor in this increase was organic growth of 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%. Positive exchange rates added 1.6%, while acquisitions, net of divestitures, added 0.3%. The main driver of growth was the food and beverages business, which contributed CHF6.7 billion to the group's CHF7.3 billion of growth.

Its sales were up 7.8% to CHF91.8 billion. Its organic growth was 5.9%, with real internal growth at 4.2%, reflecting strong performances over most countries and brands. Peter Brabeck-Letmathe, chairman and CEO, said: "2006 was another record year for Nestlé.

"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. At the same time, we strengthened our portfolio with the acquisitions of Uncle Tobys, Jenny Craig and Novartis Medical Nutrition, while divesting more commoditised businesses.

"Our competitiveness was further boosted by higher spending on marketing and R&D, the roll-out of GLOBE and shared services, as well as our strong commitment to savings programmes. This drove profitability to record levels while maintaining top-line growth.

"The record result is, above all, a testimony to the quality of our people. For 2007, despite the tough input cost environment, we again plan to deliver organic growth of between 5 and 6% as well as an EBIT margin improvement."

At CHF13.3 billion, the Group's EBIT improved by 12%, or CHF1.4 billion, and now stands at 13.5% of sales, an improvement of 50 basis points over 2005. Food and beverages contributed 40 basis points to this increase, with pharmaceutical products, primarily Alcon, accounting for 10 basis points.

Net profit reached a record CHF9.2 billion, up 13.8% or CHF1.1 billion, to 9.3% of sales. Total earnings per share were up 15.0%, amounting to CHF 23.90 (CHF 20.78 in 2005). 

The main engine of Nestlé's growth is its brands. Today, brands with sales of more than CHF 1 billion account for over 70% of food and beverages sales. The success of many Nestlé brands is increasingly derived from their strong nutritional credentials. Others have benefited from strong performances of health-focused extensions.

The company's commitment to growing its brands is demonstrated by a 6.3% increase in marketing and administration spend in 2006. Another vital growth driver is innovation and renovation, and Nestlé's spend on research and development was up 16% in 2006, to CHF 1.7 billion (1.8% of sales).

For 2007, the group is confident of once again achieving the Nestlé model: organic growth of between 5 and 6% and a further EBIT margin improvement in constant currencies, and this in spite of continued strong input cost pressure, especially on agricultural raw materials, and more investment in brands, R&D and additional capacity.