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5 Highlights 2016
6 Key figures (consolidated)
8 Financial review
17 Extract from the Consolidated Financial Statements
18 Consolidated income statement
for the year ended 31 December 2016
19 Consolidated statement of comprehensive income
for the year ended 31 December 2016
20 Consolidated balance sheet as at 31 December 2016
22 Consolidated cash flow statement
for the year ended 31 December 2016
24 Consolidated statement of changes in equity
for the year ended 31 December 2016
25 Extract from the Financial Statements of Nestlé S.A.
25 Income statement for the year ended 31 December 2016
26 Balance sheet as at 31 December 2016
27 Proposed appropriation of profit
30 Shareholder information
All sections should be read in connection with the Consolidated Financial Statements of
the Nestlé Group 2016 and the 150th Financial Statements of Nestlé S.A. The Statutory
Auditor’s Report on Financial Statements are available on page 136 and 178 of the
Corporate Governance Report 2016, Compensation Report 2016, Financial Statements
2016.
In the Financial Review, the acronyms in the tables at the beginning of each operating
segment have the following meaning:
– OG: organic growth
– RIG: real internal growth
– Margin: trading operating profit margin
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Organic growth at the high end of the industry but at the lower end of our
expectations
– Sales of CHF 89.5 billion.
– 3.2% organic growth, continued strong real internal growth of 2.4%.
– Trading operating profit margin up 30 basis points in constant currency, reported trading
operating profit margin up 20 basis points to 15.3%.
– Net profit of CHF 8.5 billion, impacted by several items, the largest one being a one-off
non-cash adjustment to deferred taxes.
– Underlying earnings per share in constant currency increased by 3.4%.
– Operating cash flow improved by CHF 1.3 billion to CHF 15.6 billion (17.4% of sales) and free
cash flow improved by CHF 200 million to CHF 10.1 billion (11.3% of sales).
2017 Outlook
In 2017, we expect organic growth between 2% and 4%. In order to drive future profitability,
we plan to increase restructuring costs considerably in 2017. As a result, the trading operating
profit margin in constant currency is expected to be stable. Underlying earnings per share in
constant currency and capital efficiency are expected to increase.
C
O
C
Broad-based growth
Developed Emerging
Group EMENA AMS AOA Markets Markets
Sales (in billions of CHF) 89.5 26.8 40.2 22.5 52.1 37.4
RIG % + 2.4% + 2.4% + 2.0% + 3.0% + 2.3% + 2.4%
Pricing % + 0.8% – 0.5% + 2.5% – 0.2% – 0.6% + 2.9%
OG % + 3.2% + 1.9% + 4.5% + 2.8% + 1.7% + 5.3%
Trading operating profit more than offset the payment of the dividend
Trading operating profit was CHF 13.7 billion of CHF 6.9 billion.
with a margin of 15.3%, up 20 basis points
on a reported basis and up 30 basis points in Return on invested capital
constant currency. We achieved this margin The Group’s return on invested capital
improvement while increasing investment in including goodwill and intangible assets
brand support, digital marketing, Research improved by 30 basis points to 11.2%.
and Development, and in the new nutrition Return on invested capital before goodwill
and health platforms. Consumer-facing and intangible assets improved by 180 basis
marketing spend increased by 6.3% in points to 31.7%.
constant currency. Restructuring costs
doubled to CHF 300 million in 2016 to Dividend
support structural cost-saving initiatives. The Board of Directors is proposing a dividend
of CHF 2.30 per share, up from CHF 2.25
Net profit last year.
Net profit of CHF 8.5 billion was impacted by
several items, the largest one being a one- Outlook
off non-cash adjustment to deferred taxes. In 2017, we expect organic growth between
Reported earnings per share decreased by 2% and 4%. In order to drive future profitability,
4.8% to CHF 2.76, for the same reasons. we plan to increase restructuring costs
Underlying earnings per share in constant considerably in 2017. As a result, the trading
currency increased by 3.4%. operating profit margin in constant currency
is expected to be stable. Underlying earnings
Cash flow and working capital per share in constant currency and capital
Operating cash flow improved by efficiency are expected to increase.
CHF 1.3 billion to CHF 15.6 billion (17.4% of
sales) due in part to the reduction of working
capital. Free cash flow improved by
CHF 200 million to CHF 10.1 billion (11.3% of
sales). This demonstrates our ability to
generate strong cash flow consistently even in
a challenging foreign exchange environment.
Average working capital decreased by
190 basis points from 4.7% to 2.8% of sales
(average of last five quarters).
Financial position
The Group’s net debt decreased from
CHF 15.4 billion to CHF 13.9 billion in 2016.
Our strong free cash flow of CHF 10.1 billion
In millions of CHF
2016 2015
Zone EMENA 16 249 16 403
Zone AMS 26 356 25 844
Zone AOA 14 493 14 338 A
Nestlé Waters 7 926 7 625
Nestlé Nutrition 10 326 10 461
Other businesses (a) 14 119 14 114 E
Total Group 89 469 88 785
(a) Mainly Nestlé Professional, Nespresso, Nestlé Health Science and Nestlé Skin Health.
A
(
In millions of CHF
2016 2015
Zone EMENA 2 712 2 572
Zone AMS 5 074 5 021
Zone AOA 2 756 2 632
Nestlé Waters 946 825
Nestlé Nutrition 2 342 2 361
Other businesses (a) 2 144 2 221
Unallocated items (b) (2 281) (2 250)
Total Group 13 693 13 382
(a) Mainly Nestlé Professional, Nespresso, Nestlé Health Science and Nestlé Skin Health.
(b) Mainly corporate expenses as well as research and development costs.
F
A
T
Employees by activity
In thousands
2016 2015
Factories 168 170
Administration and sales 160 165
Total 328 335
Russia and Ukraine drove positive pricing in 260 basis points. In China, the double-digit
the region, whilst all other markets decline of Yinlu affected overall growth.
experienced deflationary pricing. Several initiatives to turn around the business
Business remained resilient in the Middle are in place and stabilisation is expected in
East and North Africa with positive organic 2017. Dairy (excluding Yinlu) and
growth, but the unstable environment and confectionery grew positively and Nescafé
deflationary pressure slowed momentum. performed well. South East Asia was strong
Events in Iraq, Yemen, Libya and Syria with double-digit growth in Vietnam and
continued to have an effect. There was also Indonesia, especially from dairy and Milo. The
deflationary pressure on dairy in the region. Philippines also performed well with high
In Turkey, Nescafé and confectionery drove single-digit growth, particularly due to Bear
double-digit growth. The North Africa market Brand in dairy. There was good growth in
also did well. sub-Saharan Africa. Real internal growth
The trading operating profit margin remained positive despite price increases to
improved by 100 basis points even as offset currency depreciation. There was
restructuring costs and marketing investment double-digit growth in Central and West
increased. Profitability improved across most Africa (including Ghana, Côte d’Ivoire and
categories as a result of premiumisation, Nigeria) and in Equatorial Africa (including
volume leverage, efficiency savings and Angola), with Maggi and Nido doing well. Our
favourable input costs. Portfolio management business in India grew strongly despite some
also contributed positively with the creation disruptive impact from demonetisation at the
of the Froneri joint venture in ice cream. end of the year. Maggi noodles continued to
regain market share. Confectionery also did
Zone Asia, Oceania and sub-Saharan well with KitKat. There was also strong
Africa (AOA) growth in Pakistan from dairy, ready-to-drink
and other categories.
Sales CHF 14.5 billion In the developed markets there was good
OG + 3.2% growth in Japan and solid real internal growth
RIG + 2.9% in Oceania. Japan’s organic growth was
Margin 19.0% above the Zone and Group averages, balanced
+ 60 basis points evenly between real internal growth and
pricing. This was based on innovation and
The Zone saw real internal growth and premiumisation across Nescafé and KitKat. In
organic growth gain increasing momentum Oceania, there was solid real internal growth
throughout the year, with market shares in line with the Group, which was largely
recovering and almost all markets offset by continuing deflationary pressure.
contributing. The Zone improved its trading operating
The Zone’s emerging markets had a good profit margin by 60 basis points while also
year overall with growth accelerating in most increasing marketing investment. Positive
businesses. Yinlu was the main exception, gross margin development was helped by
decreasing the Zone’s organic growth by favourable input costs, particularly in dairy,
time, marketing investment behind brands the year. Increased competition and
increased. pressure from generics affected the US
prescription business.
Other businesses The trading operating profit margin of
this segment was impacted by Nestlé Skin
Sales CHF 14.1 billion Health. Adjustment of trade inventories and
OG + 3.7% higher restructuring and litigation costs
RIG + 3.4% affected profitability. Nestlé Health Science
Margin 15.2% also absorbed higher restructuring costs.
– 50 basis points Nestlé Professional and Nespresso both
improved their profitability, helped by
Nestlé Professional continued to grow, led favourable input costs.
by mid-single-digit growth in emerging
markets with strong growth in Russia and
Mexico, and solid growth in China. The US
also had good organic growth while business
in Canada and Western Europe declined. As
from 2017, Nestlé Professional is integrated
into the Zones due to increasing demand for
more customised products and services on
a local and regional basis.
Nespresso continued to grow in its
30th year. The US and Canada saw strong
momentum from the continued success of
the VertuoLine system. Sales in France also
benefitted from the launch of VertuoLine at
the end of the year. The UK saw strong
acceleration following brand investment and
the launch of a subscription model. In Asia,
both China and Korea performed well.
Nestlé Health Science maintained a good
pace of growth. Consumer Care was once
again the key source of growth including
the Boost range of products, Carnation
Breakfast Essentials and, in Europe,
Meritene. Medical Nutrition benefitted from
strong contributions from the allergy
portfolio (especially in China), Vitaflo and
oral nutritional supplements in key markets.
Nestlé Skin Health performed well in
consumer care. However, we adjusted
inventory levels in the trade at the end of
CHF per
2016 2015 2016 2015
Weighted
Year ending rates average annual rates
1 US Dollar USD 1.023 0.989 0.985 0.964
1 Euro EUR 1.075 1.081 1.090 1.068
100 Chinese Yuan Renminbi CNY 14.715 15.239 14.838 15.325
100 Brazilian Reais BRL 31.383 25.337 28.583 29.004
100 Philippine Pesos PHP 2.064 2.109 2.075 2.115
1 Pound Sterling GBP 1.255 1.467 1.331 1.474
100 Mexican Pesos MXN 4.938 5.690 5.279 6.074
1 Canadian Dollar CAD 0.758 0.713 0.745 0.752
100 Japanese Yen JPY 0.874 0.822 0.907 0.798
1 Australian Dollar AUD 0.738 0.723 0.733 0.723
100 Russian Rubles RUB 1.685 1.347 1.485 1.579
In millions of CHF I
2016 2015
Sales 89 469 88 785 P
As percentages of sales
Trading operating profit 15.3% 15.1%
Profit for the year attributable to shareholders of the parent (Net profit) 9.5% 10.2%
In millions of CHF
2016 2015
Profit for the year recognised in the income statement 8 883 9 467
In millions of CHF I
2016 2015
Assets L
Current assets C
Cash and cash equivalents 7 990 4 884 F
Short-term investments 1 306 921 T
Inventories 8 401 8 153 A
Trade and other receivables 12 411 12 252 P
Prepayments and accrued income 573 583 D
Derivative assets 550 337 C
Current income tax assets 786 874 L
Assets held for sale 25 1 430 T
Total current assets 32 042 29 434
N
Non-current assets F
Property, plant and equipment 27 554 26 576 E
Goodwill 33 007 32 772 P
Intangible assets 20 397 19 236 D
Investments in associates and joint ventures 10 709 8 675 O
Financial assets 5 719 5 419 T
Employee benefits assets 310 109
Current income tax assets 114 128 T
Deferred tax assets 2 049 1 643
Total non-current assets 99 859 94 558 E
S
Total assets 131 901 123 992 T
T
O
R
T
N
T
In millions of CHF
2016 2015
Liabilities and equity
Current liabilities
Financial debt 12 118 9 629
Trade and other payables 18 629 17 038
Accruals and deferred income 3 855 3 673
Provisions 620 564
Derivative liabilities 1 068 1 021
Current income tax liabilities 1 221 1 124
Liabilities directly associated with assets held for sale 6 272
Total current liabilities 37 517 33 321
Non-current liabilities
Financial debt 11 091 11 601
Employee benefits liabilities 8 420 7 691
Provisions 2 640 2 601
Deferred tax liabilities 3 865 3 063
Other payables 2 387 1 729
Total non-current liabilities 28 403 26 685
Equity
Share capital 311 319
Treasury shares (990) (7 489)
Translation reserve (18 799) (19 851)
Other reserves 1 198 1 345
Retained earnings 82 870 88 014
Total equity attributable to shareholders of the parent 64 590 62 338
Non-controlling interests 1 391 1 648
Total equity 65 981 63 986
In millions of CHF I
2016 2015
Operating activities F
Operating profit 13 163 12 408 D
Depreciation and amortisation 3 132 3 178 D
Impairment 640 576 A
Net result on disposal of businesses — 422 P
Other non-cash items of income and expense 35 172
Cash flow before changes in operating assets and liabilities 16 970 16 756
Decrease/(increase) in working capital 1 801 741
Variation of other operating assets and liabilities 54 (248)
Cash generated from operations 18 825 17 249
Net cash flows from treasury activities (327) (93)
Taxes paid (3 435) (3 310)
Dividends and interest from associates and joint ventures 519 456
Operating cash flow 15 582 14 302 (
Investing activities
Capital expenditure (4 010) (3 872)
Expenditure on intangible assets (682) (422)
Acquisition of businesses (585) (530)
Disposal of businesses 271 213
Investments (net of divestments) in associates and joint ventures (748) (44)
Inflows/(outflows) from treasury investments (335) 521
Other investing activities (34) (19)
Investing cash flow (6 123) (4 153)
In millions of CHF
2016 2015
Financing activities
Dividend paid to shareholders of the parent (6 937) (6 950)
Dividends paid to non-controlling interests (432) (424)
Acquisition (net of disposal) of non-controlling interests (1 208) —
Purchase (net of sale) of treasury shares (a) 760 (6 377)
Inflows from bonds and other non-current financial debt 1 695 1 381
Outflows from bonds and other non-current financial debt (1 430) (508)
Inflows/(outflows) from current financial debt 1 368 643
Financing cash flow (6 184) (12 235)
Currency retranslations (169) (478)
Increase/(decrease) in cash and cash equivalents 3 106 (2 564)
Cash and cash equivalents at beginning of year 4 884 7 448
Cash and cash equivalents at end of year 7 990 4 884
(a) In 2015, mostly relates to the Share Buy-Back Programme launched in 2014.
In millions of CHF I
Non-controlling
attributable to
I
of the parent
shareholders
Total equity
P
interests
O
equity
F
Total
T
Equity as at 31 December 2014 70 130 1 754 71 884
Profit for the year 9 066 401 9 467 E
Other comprehensive income for the year (3 854) (84) (3 938) P
Total comprehensive income for the year 5 212 317 5 529 O
Dividends (6 950) (424) (7 374) W
Movement of treasury shares (6 283) — (6 283) F
Equity compensation plans 183 — 183 T
Changes in non-controlling interests (21) 1 (20) T
Total transactions with owners (13 071) (423) (13 494)
Other movements 67 — 67 P
Equity as at 31 December 2015 62 338 1 648 63 986
Profit for the year 8 531 352 8 883
Other comprehensive income for the year 750 (9) 741
Total comprehensive income for the year 9 281 343 9 624
Dividends (6 937) (432) (7 369)
Movement of treasury shares 776 — 776
Equity compensation plans 180 — 180
Changes in non-controlling interests (a) (991) (168) (1 159)
Total transactions with owners (6 972) (600) (7 572)
Other movements (57) — (57)
Equity as at 31 December 2016 64 590 1 391 65 981
(a) Includes the impact of the acquisitions during the period (see Note 2.5)
as well as a put option for the acquisition of non-controlling interests.
In millions of CHF
2016 2015
Income from Group companies 10 626 12 315
Profit on disposal of assets 716 59
Other income 114 107
Financial income 220 174
Total income 11 676 12 655
In millions of CHF I
2016 2015
Assets R
Current assets P
Cash and cash equivalents 1 115 100 P
Other current receivables 737 875
Prepayments and accrued income 77 14
Total current assets 1 929 989 W
Non-current assets D
Financial assets 8 763 8 459 o
Shareholdings 31 175 32 488
Property, plant and equipment 1 1
Intangible assets 142 189
Total non-current assets 40 081 41 137
Total assets 42 010 42 126 (
Liabilities and equity
Current liabilities
(
Interest-bearing liabilities 2 050 —
Other current liabilities 1 645 4 224
Accruals and deferred income 48 3
Provisions 760 827 P
Total current liabilities 4 503 5 054 M
Non-current liabilities o
Interest-bearing liabilities 132 154 d
Provisions 501 498 a
Total non-current liabilities 633 652
Total liabilities 5 136 5 706
Equity T
Share capital 311 319
Legal retained earnings C
– General legal reserve 1 924 1 917
Voluntary retained earnings
– Special reserve 23 288 28 711
– Profit brought forward 5 821 4 998
– Profit for the year 6 448 7 825
Treasury shares (918) (7 350)
Total equity 36 874 36 420
Total liabilities and equity 42 010 42 126
In CHF
2016 2015
Retained earnings
Profit brought forward 5 820 737 716 4 997 707 777
Profit for the year 6 448 462 989 7 825 389 939
12 269 200 705 12 823 097 716
Provided that the proposal of the Board of Directors is approved by the Annual General
Meeting, the gross dividend will amount to CHF 2.30 per share, representing a net amount
of CHF 1.4950 per share after payment of the Swiss withholding tax of 35%. The last trading
day with entitlement to receive the dividend is 7 April 2017. The shares will be traded ex-dividend
as of 10 April 2017. The net dividend will be payable as from 12 April 2017.
1
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Important dates
6 April 2017
150th Annual General Meeting,
Beaulieu Lausanne,
Lausanne (Switzerland)
7 April 2017
Last trading day with entitlement
to dividend
10 April 2017
Ex-dividend date
12 April 2017
Payment of the dividend
20 April 2017
2017 First quarter sales figures
27 July 2017
2017 Half-yearly Results
19 October 2017
2017 Nine months sales figures
15 February 2018
2017 Full Year Results
12 April 2018
151st Annual General Meeting,
Beaulieu Lausanne,
Lausanne (Switzerland)