TEST 2

 

 

¨          Constant currency sales up test percent, driven by strong organic growth of test percent

¨          Sales in Swiss francs amounting to CHF test, down test percent due to adverse foreign exchange impact of test percent

¨          EBITA margin up 30 basis points to test percent (up 70 basis points to test percent in constant currencies) with improved performance in all geographic zones and in Nestlé Waters

¨          Operating cash flow up test percent, free cash flow up test percent in Swiss francs

¨          Net profit of CHF test and a net margin of test

¨          Underlying earnings test percent in Swiss francs and test percent in constant currencies

 

Half-Year Figures at a Glance
			Margins
	January-June 2003	January-June 2002	January-June 2003	January-June 2002
Sales	test	test
EBITA	test	test	test	test
Net profit *	test	test	test	test
EPS *	test	test
Operating Cash Flow	test	test
Organic Growth	test

 

 

Vevey, August 20, 2003  -  During the first half of 2003, the Nestlé Group's consolidated sales amounted to CHF test, resulting in a net profit of test and a net margin of test. The EBITA margin improved by 30 basis points to test (test in 2002) and operating cash flow grew almost test percent from test million test million. These results were achieved in an unfavorable eco­nomic and political environment and despite a markedly adverse evolution of foreign currencies for the Group, which reports in Swiss francs.

 

 

At constant currencies, sales improved test percent, clearly above market growth rates. Strong organic growth of test percent, combining real internal growth of test, accelerated over the first quarter, but could not compensate the negative currency impact test percent, resulting in an overall decline of reported sales in Swiss francs of test percent. The significant organic growth demonstrates on the one hand the strength of the Group's brands on a global scale and on the other the special efforts made in inflationary countries to protect the margins.

Eastern Europe, Latin America and the Caribbean, as well as Africa, clearly exceed the Group average organic growth. Most product groups, with the exception of chocolate and confectionery and petcare, contributed to the positive development, with soluble coffees, chilled culinary and water showing excellent progress. This is also the case for Beverage Partners Worldwide and for Alcon.

The strength of the Swiss franc against most currencies, with the exception of the Euro, reduced the Group's consolidated sales by test percent, while acquisitions, net of divestitures, had a positive impact test. With a sales growth of test at constant exchange rates, the Group continues to grow faster than the food industry.

 

Sales and EBITA Margin by Management Responsibilities and Geographic Areas
	January- June 2003	January-June 2002	Organic Growth January-June 2003	January-June 2003	January-June 2002
	Sales in CHF millions		%	Margins %	Margins %
Food
Europe	test	test	test	test	test
Americas	test	test	test	test	test
Asia, Oceania and Africa	test	test	test	test	test
Nestlé Waters	test	test	test	test	test
Other Activities (a)	test	test	test	test	test
Group Totals	test	test	test	test	test

 

Sales and EBITA Margin by Product Groups
	January-June 2003	January-June 2002		RIG January-June 2003	Margins January-June 2003	Margins January-June 2002
	Sales in CHF millions			%	%	%
Beverages	test	test		test	test	test
Milk Products, Nutrition and Ice Cream	test	test		test	test	test
Prepared Dishes and Cooking Aids	test	test		test	test	test
Petcare	test	test		test	test	test
Chocolate, Confectionery and Biscuits	test	test		test	test	test
Pharmaceutical Products	test	test		test	test	test
Group Totals	test		test	test	test	test

 

 

 

With the EBITA margin up 30 basis points to test, the Group showed its capacity to improve operating efficiency even in difficult circumstances and an unfavorable currency environment. Nestlé proved able to maintain or improve its margins by passing on rising raw material costs or inflationary pressures. At constant exchange rates, the EBITA margin shows an improvement of 70 basis points, to test. The progress is noticeable in all geographic zones, as well as in Nestlé Waters, with Zone Europe generating a significant improvement of 80 basis points. In Latin America, the Group's companies focused on protecting their margins, contributing to the Zone Americas' EBITA margin improvement of 30 basis points. Building on the good per­formance of 2002, Zone Asia, Oceania and Africa managed to improve its margin by 40 basis points.

The product categories performed well, with improvements in EBITA margins in milk products, nutrition and ice cream, prepared dishes and cooking aids, and petcare. The EBITA margin in beverages dipped slightly. The margins in chocolate, confectionery and biscuits, meanwhile, reflect the seasonality of that business.

Cost of goods sold dropped by 100 basis points to test of sales. Overall marketing and administration expenses increased test basis points, reflecting continued investment in the Group's brands, while administration expenditures as such fell by 10 basis points.

Continuing lower interest rates and an efficient management of debt and liquidities account for the sharp drop in net financing costs to test (CHF test 002). The strength of the Swiss franc also reduced the weight of the debt, which is held largely in US dollars.

The net profit and earnings per share comparisons between 2002 and 2003 have to be seen in the light of the one-off gains in 2002, which resulted from the IPO of Alcon and disposal of FIS, and totaled over CHF test, as well as by extraordinary restructuring costs and the impairments of goodwill and assets in 2002, which totaled test. On an underlying basis, the net profit increased by test constant currencies.

 

                        

 

 

Nestlé continues to benefit from an exceptionally healthy financial position. Operating cash flow, with an increase of nearly test, grew significantly faster than EBITA, despite negative foreign exchange rates. Capital expenditure remained at 1st half 2002 levels as a percentage of sales, underscoring the declining trend over several years. Net indebtedness rose from test at the year-end 2002 to CHF 21.1 billion, mainly as a result of the Group's decision to carry the Dreyer's outstanding shares repurchasing scheme as a long-term debt. The ratio of net debt to equity now stands at test.

The Group actively pursued its streamlining of product groups, concentrating on businesses with demonstrated profitable growth opportunities. At the end of June, the merger with Dreyer's, the leading premium ice cream business in the USA, was successfully concluded, following the important acquisition of Powwow, the European Home and Office Delivery Water group and the acquisition of the Mövenpick ice cream activities in Europe. Also during the period Nestlé divested several businesses such as Ortega (Mexican style food, USA), Mont Blanc (milk-based desserts, France) as well as chilled milk products and sweetened condensed milk in Germany. The Group furthermore reduced its participation in the German roast and ground specialty coffee company Dallmayr to test percent.

 

 

After a challenging first half, the Group looks forward to a more favorable trading environment. It expects the initiatives already taken will ensure the Group's competitive position in the remaining months and beyond. Nestlé's broad presence across geography and businesses positions it well to take advantage of any improve­ment in the economic climate. The Group has shown that, even in a tough trading environment, good organic growth, as well as improvements in EBITA margin and cash flow, are achievable and expects to be able to deliver these for 2003 as a whole.