Nestlé results brighten black week

Nestlé sold nearly SFr90 billion worth of products during 2002 Keystone

Nestlé, the world's biggest food group, saw net profits rise to a record SFr7.6 billion ($5.6 billion) during 2002.

The announcement brought a ray of sunshine to an otherwise black week, during which many of Switzerland’s largest companies filed disappointing results.

Profits were up by 13 per cent, and acquisitions and spin-offs provided nearly SFr4 billion for Nestlé’s coffers.

Last year the Swiss-based concern continued to expand globally and into new markets, snapping up frozen snack group Chef America for $2.6 billion, as well as strengthening its position in the bottled water and ice cream sectors.

Nestlé also digested its $10 billion acquisition of pet-food group Ralston Purina and concentrated on efficiency programmes designed to save the company SFr5.5 billion by 2006.

Nestlé’s appetite though for more large-scale acquisitions this year has shrunk.

“I think we have done most of the important strategic acquisitions where we had significant gaps,” finance chief, Wolfgang Riechenberger, told swissinfo.

“Even if we were hungry for a few acquisitions, today’s climate with the protection of consumer interests through anti-trust regulators makes it difficult to make major acquisitions so I don’t see anything major on the horizon.”

RIG

While free cash flow surged to SFr6.28 billion from SFr4.94 billion in 2001, Nestlé failed to meet its self-imposed target of four per cent real internal growth (RIG).

The maker of Perrier water, KitKat chocolate and Nescafé coffee blamed poor performances on the Latin American markets and in soft pet food sales. Core sales growth reached only 3.4 per cent.

Announcing the group’s 2002 results on Thursday, CEO Peter Brabeck said: “I don’t know whether we will achieve it [our growth target this year]. For 2003, our priority will be an improvement in margin.”

“I think Nestlé are doing a great job but that is not what the market wants to hear,” said Steven Frey, analyst at Bank Leu. “They didn’t make the estimates and people are selling.”

Top sales

Sales adjusted for currency movements increased by 5.3 per cent to SFr89 billion last year, demonstrating Nestlé’s ability to withstand last year’s difficult market conditions.

Beverages, milk products, nutrition and ice cream were the top product groups responsible for generating more than half of total sales of SFr47 billion.

Nestlé’s brands in these areas include Nescafé instant coffee, Perrier sparkling mineral water and Häagen Dazs ice cream.

But the company said it was cautious about what would happen over the next 12 months.

“I think we will have a slower start to the year,” said Brabeck, referring to the uncertain global economic climate.

However, Nestlé said it hoped to continue to grow during 2003, notwithstanding unforeseen events.

“In spite of political and economic turbulence and the continued strength of the Swiss franc, I am confident that in 2003 Nestlé will be able to further improve its performance,” Brabeck said.

The group’s top priority for 2003 will be to improve its margin, Riechenberger told swissinfo.

“We want to improve our margin through our efficiency programme… in operations and the administrative side. You will see more growth in the future if we stick to our strategy.”

swissinfo

Key facts

Henri Nestlé founded the world’s largest food company in 1866.
The company was born during Nestlé’s search for a healthy, economical alternative to breastfeeding.
Jules Monnerat purchased the firm in 1874, and soon acquired a Vevey-based company that produced chocolate milk.
The 1905 merger with Anglo-Swiss Milk Company saw Nestlé expand globally.
After WW1, Nestlé began adding new products to its repertoire – venturing beyond foods and into cosmetics in 1974.
It now owns some of the world’s top food and drink brands.