Nestlé achieves medium-term plan ahead of schedule as sales hit US$94.8bn

SWITZERLAND – Nestlé closed its 2019 financial year with a 1.2% rise in total sales to CHF 92.6 billion (US$94.72bn) and an organic growth of 3.5%, with the company releasing its medium-term plan one year ahead.

In a statement while presenting its 2019 full year results, the food and beverage giant said that it has already reached its 2020 profitability target range, supported by strong momentum in the United States and Purina PetCare globally.

During the year, net profit increased by 24.4% to CHF 12.6 billion (US$12.89bn), and earnings per share increased by 28.0% to CHF4.30. The company’s performance benefited from the sale of Nestlé Skin Health.

Nestlé divested the Nestlé Skin Health in 2019 and announced the sale of its U.S. ice cream business for US$4 billion to Froneri, a transaction which closed on January 31, 2020.

Nestlé also agreed to sell a 60% stake in its Herta charcuterie (cold cuts and meat-based products) business to Casa Tarradellas. According to the company, portfolio rotation over the past three years amounts to 12% of total 2017 sales.

Other strategic developments that the company conducted during the year included the transition of the US pizza and ice cream businesses from a Direct-Store-Delivery network to a warehouse distribution model.

The transition was launched in May 2019 and successfully completed at the end of 2019, six months ahead of schedule.

In October 2019, Nestlé announced the integration of its Waters business into the Group’s three geographical Zones, effective January 1, 2020.

By so doing, Nestlé said that the move will help utilize the company’s strong local expertise, better respond to rapidly-changing consumer preferences and create synergies.

The company has also unveiled that it will take further steps to improve profitable growth in Waters and to address underperformance in certain segments of this business.

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Comparing performance by markets, the Americas zone posted an organic growth of 3.9%, with positive contributions from both North and Latin America. Reported sales in Zone Americas increased by 7.0% to CHF 33.2 billion (US$33.96bn).

The Asia, Oceana and Sub-Saharan Africa region reported a 3.2% organic growth benefiting from a high single-digit organic growth in Sub-Saharan Africa. Reported sales in the zone increased by 1.3% to CHF 21.6 billion (US$22.1bn).

The Europe, Middle East and North America zone recorded a 2.7% organic growth while total reported sales decreased by 0.5% to CHF 18.8 billion (US$19.23bn).

“We saw strong progress in 2019, with key operating and financial metrics improving significantly for the second consecutive year. Organic growth accelerated, fueled by strong momentum in the United States and Purina PetCare globally,” Mark Schneider, Nestlé CEO, commented.

“Profitability improved again and reached our guided range one year ahead of plan. Cash flow was strong, while underlying earnings per share and returns to shareholders reached record levels.”

In total, CHF 16.9 billion (US$17.07bn) was returned to shareholders in 2019 through a combination of dividend and share buybacks and completed the CHF 20 billion share buyback program initiated in July 2017.

In January 2020, the company has started a new share buyback program of up to CHF 20 billion (US$20.46bn).

Looking ahead to 2020, Mark said that the company expects continued increase in organic sales growth, expecting further acceleration in 2021/2022 towards sustainable mid single-digit growth.

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