Annual Review 2015 Consolidated Financial Statements of ...
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Summaries
Annual Review 2015Consolidated Financial Statements of the Nestlé Group 2015149th Financial Statements of Nestlé S.A.
Nestlé Group I Summary of the full Annual Report 20152
Contents
Highlights 2015Key figures (consolidated)Financial ReviewExtract from the Consolidated Financial StatementsConsolidated income statement for the year ended 31 December 2015Consolidated statement of comprehensive income for the year ended 31 December 2015Consolidated balance sheet as at 31 December 2015Consolidated cash flow statement for the year ended 31 December 2015Consolidated statement of changes in equity for the year ended 31 December 2015Report of the Statutory Auditor on the Consolidated Financial StatementsExtract from the Financial Statements of Nestlé S.A.Income statement for the year ended 31 December 2015Balance sheet as at 31 December 2015Proposed appropriation of profitReport of the Statutory AuditorShareholder information
All sections should be read in connection with the Consolidated Financial Statements of the Nestlé Group 2015 and the 149th Financial Statements of Nestlé S.A.
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 margin
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Following the changes in management responsibilities as from 1 January 2015, Zone Europe has been renamed Zone Europe, Middle East and North Africa (EMENA) and now includes the Maghreb, the Middle East, the North East Africa region, Turkey and Israel, which were formerly included in Zone Asia, Oceania and Africa. Zone Asia, Oceania and Africa has been renamed Zone Asia, Oceania and sub‑Saharan Africa (AOA). Nestlé Nutrition now includes Growing‑Up Milks business formerly included in the geographic Zones. Finally, Other businesses now includes the Bübchen business, formerly included in Nestlé Nutrition. Information by product has been modified following the main transfer of Growing‑Up Milks business in Milk products and Ice cream to Nutrition and Health Science. 2014 comparative information has been restated.
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Highlights 2015
Profitable growth at the higher end of the industry in a still challenging environment – Sales of CHF 88.8 billion. – 4.2% organic growth and 2.2% real internal growth. – Trading operating profit of 15.1%, down 20 basis points on a reported basis affected by the
strong Swiss Franc, up 10 basis points in constant currencies. – Net profit of CHF 9.1 billion, decreasing by CHF 5.4 billion versus last year mostly due to
the one‑off impact from the disposal in 2014 of part of the L’Oréal stake combined with the revaluation of the Galderma stake, as well as some effect from foreign exchange.
– Underlying earnings per share were up 6.5% in constant currencies. – Operating cash flow remained strong at CHF 14.3 billion and free cash flow of CHF 9.9 billion.
Strengthening the foundations of future growth – Increased support behind our brands, research and development and innovation. – Continuing focus on portfolio management. – Nestlé Skin Health and Nestlé Health Science expanding our existing food and beverage
business in line with our strategic ambition to be the world’s recognised leading Nutrition, Health and Wellness company.
– Further development of our platforms in E‑Commerce. – Full deployment of our Nestlé Business Excellence initiative, aggregating business
support services to better leverage our scale and free up resources to deliver growth. – On‑going focus on capital discipline, including all elements of working capital, capital
expenditure and a continuous focus on efficiencies and profitable growth.
Nestlé’s commitment to creating value for society and for shareholders – Responsible and sustainable investments, expanding our manufacturing footprint while
continuing to reduce the environmental impact of our business. – Proposed dividend of CHF 7.0 billion for 2015, CHF 2.25 per share, an increase of 2.3%.
2016 Outlook We anticipate that our trading environment in 2016 will be similar to previous years with even softer pricing. As such we expect to deliver organic growth in line with 2015, with improvements in margins and underlying earnings per share in constant currencies, and capital efficiency.
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Key figures (consolidated)
In millions of CHF (except for data per share and employees)
2015 2014
Results
Sales 88 785 91 612
Trading operating profit 13 382 14 019
as % of sales 15.1% 15.3%
Profit for the year attributable to shareholders of the parent (Net profit) 9 066 14 456
as % of sales 10.2% 15.8%
Balance sheet and Cash flow statement
Equity attributable to shareholders of the parent 62 338 70 130
Net financial debt 15 425 12 325
Ratio of net financial debt to equity (gearing) 24.7% 17.6%
Operating cash flow 14 302 14 700
as % of net financial debt 92.7% 119.3%
Free cash flow (a) 9 945 14 137
Capital expenditure 3 872 3 914
as % of sales 4.4% 4.3%
Data per share
Weighted average number of shares outstanding (in millions of units) 3 129 3 188
Basic earnings per share CHF 2.90 4.54
Underlying earnings per share (b) CHF 3.31 3.44
Dividend as proposed by the Board of Directors of Nestlé S.A. CHF 2.25 2.20
Market capitalisation, end December 229 947 231 136
Number of employees (in thousands) 335 339
(a) Operating cash flow less capital expenditure, expenditure on intangible assets, investments (net of divestments) in associates and joint ventures, and other investing cash flows.
(b) Profit per share for the year attributable to shareholders of the parent before impairments, restructuring costs, results on disposals and significant one-off items. The tax impact from the adjusted items is also adjusted for.
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Principal key figures in USD (illustrative)
Income statement figures translated at weighted average annual rate;
balance sheet figures at year-end rate
In millions of USD (except for data per share)
2015 2014
Sales 92 143 99 961
Trading operating profit 13 889 15 296
Profit for the year attributable to shareholders of the parent (Net profit) 9 409 15 774
Equity attributable to shareholders of the parent 63 012 70 863
Market capitalisation, end December 232 434 233 553
Data per share
Basic earnings per share USD 3.01 4.95
Principal key figures in EUR (illustrative)
Income statement figures translated at weighted average annual rate;
balance sheet figures at year-end rate
In millions of EUR (except for data per share)
2015 2014
Sales 83 153 75 431
Trading operating profit 12 533 11 543
Profit for the year attributable to shareholders of the parent (Net profit) 8 491 11 903
Equity attributable to shareholders of the parent 57 651 58 307
Market capitalisation, end December 212 658 192 170
Data per share
Basic earnings per share EUR 2.72 3.74
Key figures (consolidated)
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Group overview
IntroductionIn 2015 we delivered profitable growth at the higher end of the industry in what is still a challenging environment. This profitable growth was on the back of consistent performances in previous years. Our organic growth of 4.2% was supported by increased momentum in real internal growth combined with continued margin improvement. Additionally, we grew or maintained market share in the majority of our categories and markets.
At the same time we continued to invest for the future with increased support behind our brands and further development of our new platforms in nutrition and health as well as E‑commerce. We kept up the focus on portfolio management, turning around our frozen food business in the United States, disposing of non‑core businesses and forging a new partnership to create a leading player in ice cream.
Our free cash flow generation was again at the top end of the food industry at 11.2% of sales, as a result of our focus on margins with discipline in capital expenditure and working capital.
Group resultsIn 2015 Nestlé’s organic growth was 4.2%, composed of 2.2% real internal growth and 2.0% pricing. Sales were CHF 88.8 billion, with a foreign exchange impact of –7.4%. Acquisitions, net of divestitures, added 0.1% to sales. Organic growth was broad‑based across geographies and categories, 5.8% in the Americas (AMS), 3.5% in Europe, Middle East and North Africa (EMENA) and 1.9% in Asia, Oceania and sub‑Saharan Africa (AOA). Real internal growth was also broad‑based,
2.4% in AMS, 2.8% in EMENA and 1.2% in AOA.
We demonstrated our continued strength in developed markets with organic growth of 1.9% and in emerging markets with 7.0%. We increased or maintained market share in the majority of our categories and markets.
Trading operating profitTrading operating profit was CHF 13.4 billion, with a margin of 15.1%, down 20 basis points on a reported basis affected by the strong Swiss Franc, up 10 basis points in constant currencies. We delivered this margin improvement while increasing substantially our investment in brand support, digital, research and development, and in our new nutrition and health platforms and at the same time absorbing the cost of exceptional events like Maggi noodles in India.
Net profitNet profit was CHF 9.1 billion. The reduction of CHF 5.4 billion versus last year was mostly due to the one‑off impact from the disposal in 2014 of part of the L’Oréal stake combined with the revaluation of the Galderma stake. There was also some effect from foreign exchange. Reported earnings per share at CHF 2.90 were down by 36.1%, for the same reasons. Underlying earnings per share in constant currencies were up 6.5%.
Cash flow / Working capitalThe Group’s operating cash flow remained strong at CHF 14.3 billion and free cash flow was CHF 9.9 billion or 11.2% of sales. This was the result of our focus on margins and our discipline in capital expenditure and working capital, and shows Nestlé’s capability to deliver very strong cash flow despite the
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challenging foreign exchange environment. The average total working capital has improved by 60 basis points from 5.3% of sales to 4.7%.
Financial positionThe Group’s net debt was in line with historic levels, increasing from CHF 12.3 billion to CHF 15.4 billion, driven by our completion of the share buy‑back, an investment of CHF 6.5 billion in 2015. Our strong free cash flow during the year at CHF 9.9 billion more than offset the payment of dividends of CHF 6.9 billion.
Return on invested capitalThe Group’s return on invested capital was 10.9% including goodwill and intangible assets, up 10 basis points and it was 29.9% excluding goodwill and intangible assets, down 50 basis points, impacted by unfavourable foreign exchange.
DividendThe Board of Directors is proposing a dividend of CHF 2.25 per share, up from CHF 2.20 in 2014.
OutlookWe anticipate that our trading environment in 2016 will be similar to previous years with even softer pricing. As such we expect to deliver organic growth in line with 2015, with improvements in margins and underlying earnings per share in constant currencies, and capital efficiency.
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Sales by operating segment
In millions of CHF
2015 2014*
Zone EMENA 16 403 17 965
Zone AMS 25 844 26 625
Zone AOA 14 338 14 792
Nestlé Waters 7 625 7 390
Nestlé Nutrition 10 461 10 915
Other businesses (a) 14 114 13 925
Total Group 88 785 91 612
* 2014 figures have been restated - see Note on page 2.
(a) Mainly Nespresso, Nestlé Professional, Nestlé Health Science and Nestlé Skin Health.
Trading operating profit by operating segment
In millions of CHF
2015 2014*
Zone EMENA 2 572 2 735
Zone AMS 5 021 4 940
Zone AOA 2 632 2 834
Nestlé Waters 825 714
Nestlé Nutrition 2 361 2 343
Other businesses (a) 2 221 2 651
Unallocated items (b) (2 250) (2 198)
Total Group 13 382 14 019
* 2014 figures have been restated - see Note on page 2.
(a) Mainly Nespresso, Nestlé Professional, Nestlé Health Science and Nestlé Skin Health.(b) Mainly corporate expenses as well as research and development costs.
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Sales by
geographic area
Employees by
geographic area
Factories by
geographic area
44.1% 32.5% 161AMS (2014: 43.0%) (2014: 32.7%) (2014: 163)
30.9% 34.7% 166EMENA (a) (2014*: 32.5%) (2014*: 34.6%) (2014*: 170)
25.0% 32.8% 109AOA (2014*: 24.5%) (2014*: 32.7%) (2014*: 109)
* 2014 figures have been restated – see Note on page 2.(a) 10 885 employees in Switzerland in 2015.
Employees by activity
In thousands
2015 2014
Factories 170 175
Administration and sales 165 164
Total 335 339
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Zone Americas (AMS)
Sales CHF 25.8 billion
OG +5.5%
RIG +1.6%
Margin 19.4%
+80 basis points
Growth in the Zone picked up momentum through the year and market shares grew broadly in both North and Latin America.
In North America growth accelerated, led by the turnaround in the frozen meals business. Sales of the new ranges of Lean Cuisine and Stouffer’s were strong, supported by positive consumption trends. Pizza’s positive momentum also accelerated, driven by innovation. In ice cream, Häagen-Dazs and snacks continued to drive growth with new product launches. Coffee-mate maintained its good momentum through constant innovation and renovation of flavours and packaging as well as new distribution. Petcare in North America continued to grow with strong performances from Fancy Feast, Purina One and cat litter. Increased brand support is helping the recovery of Beneful.
In Latin America we saw good performances in many countries in spite of the volatile environment. In Brazil, our business achieved positive organic and real internal growth despite the challenging, recessionary environment. Nescafé soluble coffee and Nescafé Dolce Gusto, KitKat and Nesfit were the growth drivers. Mexico delivered good growth across the entire portfolio, helped by strong performances in creamers, Nescafé Dolce Gusto, Nescafé soluble coffee and ambient culinary. Other highlights were Chile, driven by ice cream and biscuits, Colombia with ambient culinary,
Peru with Nescafé, and the Plata Region and Ecuador with growth across their portfolios. Petcare continued its very good growth momentum across Latin America, benefiting from expanded capacity in Argentina and Mexico.
We increased investment in consumer‑ facing marketing support while improving the trading operating profit margin thanks to a favourable product mix, operational efficiencies, lower input costs and low restructuring and litigation costs.
Zone Europe, Middle East and North Africa (EMENA)
Sales CHF 16.4 billion
OG +3.7%
RIG +2.5%
Margin 15.7%
+50 basis points
The Zone continued to outperform the markets in its main categories with positive contributions from all geographies, with good evolution of market shares despite the economic and political volatility.
The exceptional performance relative to the environment in Western Europe was driven by successful innovation and renovation. Petcare continued to deliver growth across the region with Felix and Purina One dry cat food. Nescafé Dolce Gusto and frozen pizza with the Wagner and Buitoni brands were the other growth drivers. Culinary was impacted by the competitive retail environment and softness in the category. Overall France, Germany and Benelux were the highlights, and Spain accelerated.
Solid growth in Central and Eastern Europe was driven by Russia, Ukraine and
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Poland. Petcare, Nescafé Dolce Gusto, Nescafé soluble coffee and confectionery all delivered very good growth across the region, leveraging strong market positions. Despite the difficult business context, Russia had a good year with positive growth and market share gains, especially in premium coffee.
In the Middle East and North Africa there was a solid performance despite the unstable environment. There was good growth in Nescafé soluble coffee, confectionery and petcare that was partially offset by softer trading in ambient dairy. Saudi Arabia, Kuwait, Qatar and Iran contributed to an overall solid performance. Nescafé soluble coffee and chocolate drove the strong growth in Turkey. The difficult conditions in Yemen, Libya and Syria had an impact.
The trading operating profit margin improvement was the result of careful pricing and significant cost reductions which were partly reinvested in promotional and marketing activities to generate future growth.
Zone Asia, Oceania and sub-Saharan Africa (AOA)
Sales CHF 14.3 billion
OG +0.5%
RIG –0.1%
Margin 18.4%
–80 basis points
The Zone’s performance was seriously impacted by the Maggi noodles issue in India.
The emerging markets improved gradually, with China showing increased momentum towards the end of the year. In China, our reinvestment in Nescafé soluble coffee and Nescafé ready‑to‑drink products led the
growth together with Totole in culinary and Shark wafers in confectionery. Hsu Fu Chi delivered a solid performance in a very difficult economic environment. Yinlu improved but needs more time. In India, we halted production and sales of Maggi noodles for five months while we dealt with allegations made against the product. We began the return to the market in November. Vietnam and Indonesia were the highlights among the other Asian markets. Sub‑Saharan Africa delivered solid growth despite the pressure from lower oil prices in several countries. South Africa performed well.
The developed markets had another good year with growth across most categories. In Japan, the main growth drivers in beverages were Nescafé Dolce Gusto and the barista machine for Nescafé soluble coffee. KitKat remained the highlight in confectionery, driven by innovation in novel flavours and formats. Growth in Oceania was driven by confectionery, mainly KitKat, and by Nescafé soluble coffee and Nescafé Dolce Gusto. Also, there were benefits from improved management of trade terms.
The Zone’s trading operating profit margin remained strong and accretive to the Group, despite the withdrawal and destruction costs of noodles product in India. The evolution in favourable input costs enabled increased investment in consumer‑facing marketing support.
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Nestlé Waters
Sales CHF 7.6 billion
OG +6.7%
RIG +6.7%
Margin 10.8%
+110 basis points
Nestlé Waters delivered good broad‑based organic and real internal growth in all geographies, driven by category dynamics and innovation. There was a strong performance for our flagship brand for healthy hydration, Nestlé Pure Life. The premium international brands Perrier and S.Pellegrino, continued their good growth momentum, creating additional value in the category. Complementing these performances, our strong local brands also contributed good growth, especially Poland Spring in the United States, Buxton in the United Kingdom, Erikli in Turkey, and Sta.María in Mexico.
The improvement in the trading operating profit margin was due to a combination of volume growth, continuous cost improvement and lower input costs that also allowed for increased investment behind our brands.
Nestlé Nutrition
Sales CHF 10.5 billion
OG +3.1%
RIG +1.4%
Margin 22.6%
+110 basis points
Nestlé Nutrition’s solid organic growth was supported by an increased real internal growth momentum during the year. Infant formula, including growing‑up milks, delivered good growth. Wyeth Infant Nutrition remained the key driver with its premium brand illuma. There
was a positive contribution from the emerging markets, in particular China and Mexico. In the developed markets, Spain and Germany were the highlights, helped by successful innovation in NAN. Baby food delivered broad‑based growth. Infant cereals performed well, with share gains in particular in Latin America and the United States. Tough comparisons and softer pricing due to lower input costs and moderating category growth across Asia had an impact.
The increase in trading operating profit margin was driven by strict control of fixed costs, lower input costs, the results of portfolio management and lower impairment charges. At the same time, there was increased investment behind our brands.
Other businesses
Sales CHF 14.1 billion
OG +5.3%
RIG +3.7%
Margin 15.7%
–330 basis points
The growth for Nestlé Professional was driven by emerging markets, particularly Turkey, the Middle East Region, Russia, Mexico, the South Asia Region and China. Western Europe continued to face challenges in the out‑of‑home environment. The strategic growth drivers, beverage solutions and savoury flavours, continued to perform well. The divestment of Davigel was completed in November.
Nespresso delivered solid growth in all regions in 2015, affirming its strong position in European markets and continued to build momentum in Asia and the Americas. In the USA, sales of the recently launched VertuoLine system accelerated on the back
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of the new varieties of machine and Grands Crus, and the new communication campaign. Global growth was supported by innovations and significant investments in the coffee, machine and service pipeline, as well as in sustainability activities, brand awareness and geographic expansion in new and existing markets.
Nestlé Health Science reported good growth, driven by strong performances in Europe, AOA, and in the USA. Consumer Care was the growth engine, driven by Boost and Carnation Breakfast Essentials and the continuing roll‑out of the Meritene range in Europe. Medical Nutrition saw good growth, notably from the allergy portfolio (Alfaré, Althéra, Alfamino) across all geographies and particularly in China. Growth was also supported by Vitaflo’s geographic expansion and the continuing roll‑out of the product range. Novel Therapeutic Nutrition made strategic investments in Seres Therapeutics, a leading microbiome therapeutics company, while generic competition impacted Lotronex.
Nestlé Skin Health delivered good growth. There were very good results in Aesthetic & Corrective, driven by Restylane and Azzalure, and in Self‑medication, driven by Cetaphil cleansers and moisturisers, the acne treatment Benzac and by continued roll‑out of line extensions. The Prescription business successfully launched the rosacea treatment Soolantra and the higher strength acne drug Epiduo Forte, but faced pressure from some generic entrants in the US and in Europe. There was an impact from the business’ decision to take a more conservative approach to its prescription rebate policy in the US, which required a one‑off charge in the third quarter.
The trading operating profit margin of the Other businesses was impacted by the rebate
adjustments in Nestlé Skin Health, the effect of the strong Swiss Franc on Nespresso and the generic competition on Lotronex. These impacts overshadow good underlying profit improvement across the businesses.
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Nestlé Group I Summary of the full Annual Report 201514
Principal risks and uncertainties
Group Risk ManagementThe Nestlé Group Enterprise Risk Management Framework (ERM) is designed to identify, communicate, and mitigate risks in order to minimise their potential impact on the Group. Nestlé has adopted a dual approach in identifying and assessing risks. A top‑down assessment is performed at Group level once a year to create a good understanding of the company’s mega‑risks, to allocate ownership to drive specific actions around them and take any relevant steps to address them. A bottom‑up assessment occurs in parallel and focuses on the global risk portfolio in the businesses/corporate functions. It involves the aggregation of individual assessments by the Zones, Globally Managed Businesses and all markets. It is intended to provide a high‑level risk mapping and allows Group Management to make sound decisions on the future operations of the company and ensure that any risk growing in importance within the organisation is captured and addressed in Nestlé’s ERM agenda. Nestlé engages with external stakeholders to better understand issues that are of most concern to them with the aim of assessing any potential gaps between internal and external perception of risks and their impact on reputation. Recommendations from stakeholders are reported on in the Nestlé in society report along with the issues stakeholders consider to be material to the company.
An annual compliance risk assessment is performed in the Group Compliance Committee. Risk assessments are the responsibility of line management; this applies equally to a business, a market or a function, and any mitigating actions identified in the assessments are the responsibility of the
individual line management. If Group‑level intervention is required, responsibility for mitigating actions will generally be determined by the Executive Board.
The results of the Group ERM are presented annually to the Executive Board and to the Audit Committee, and conclusions reported to the Board of Directors.
Factors affecting resultsNestlé’s reputation is based on consumers’ trust. Any major event triggered by a serious food safety or other compliance issue could have a negative effect on Nestlé’s reputation or brand image. The Group has policies, processes, controls and regular monitoring (dedicated dashboard with relevant KPIs) in place to prevent such events.
The success of the Nestlé Group depends on its ability to anticipate consumer preferences and to offer high‑quality, appealing products. The Group’s business is subject to some seasonality, and adverse weather conditions may impact sales.
The food industry as a whole is faced with the global challenge of increasing obesity. The Group makes all its products available in a range of sizes and varieties designed to meet all needs and all occasions.
Nestlé is dependent on the sustainable supply of a number of raw materials, packaging materials and services/utilities. Any major event triggered by natural hazards (drought, flood, etc.), change in macro‑economic environment (shift in production patterns, biofuels, excessive trading, etc.), resulting in input price volatilities and/or capacity constraints, could potentially impact Nestlé’s financial results. The Group has policies, processes, controls and regular monitoring in place to (if ever possible)
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Financial Review
anticipate such events and adequately mitigate against them.
In particular, Nestlé manages risks and opportunities related to climate change and water resources proactively given the impact it may have on agriculture and food production systems. Details of the Group’s climate change and water strategies are available in Nestlé’s response to the CDP Climate Change and Water Investor Information Requests and also in the Nestlé in society report.
The Group’s liquidities/liabilities (currency fluctuation, interest rate, derivatives, and/or hedging, pension funding obligations/retirement benefits, banking/commercial credit, and cost of capital, etc.) could be impacted by any major event in the financial markets. Again, Nestlé has the appropriate risk mitigation measures in place.
Nestlé is dependent on sustainable manufacturing/supply of finished goods for all product categories. A major event in one of Nestlé’s key plants, at a key supplier, contract manufacturer, co‑packer, and/or warehouse facility could potentially lead to a supply disruption and impact Nestlé’s financial results. Business continuity plans are established and regularly maintained in order to mitigate against such an event.
The Group depends on accurate, timely information and numerical data from key software applications, without disruption, to enable day‑to‑day decision making.
The Group is subject to environmental regimes applying in all countries where it operates and has put controls in place to comply with legislation concerning the protection of the environment, including the use of natural resources, release of air emissions and waste water, and the generation, storage, handling, transportation, treatment and disposal of waste materials.
Nestlé is subject to health and safety regimes in all countries where it operates and has procedures in place to comply with legislation concerning the protection of the health and welfare of employees and contractors.
Our Group companies are party to a variety of legal proceedings arising out of the normal course of business. The relevant companies believe that there are valid defences for the claims, and such companies intend to defend any such litigation.
Nestlé has factories in 85 countries and sales in 189 countries around the world. Security, political instability, legal and regulatory, fiscal, macroeconomic, foreign trade, labour and/or infrastructure risks could potentially impact Nestlé’s ability to do business in a country or region. Events such as infectious disease could also impact the Group’s ability to operate. Any of these events could lead to a supply disruption and impact Nestlé’s financial results. Regular monitoring and ad hoc business continuity plans are established in order to mitigate against such events.
One of the most valuable assets of Nestlé is the Group‑wide geographical and product category spreads, which represent a tremendous natural hedge.
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CHF per
2015 2014 2015 2014
Year ending ratesWeighted
average annual rates
1 US Dollar USD 0.989 0.990 0.964 0.916
1 Euro EUR 1.081 1.203 1.068 1.215
100 Chinese Yuan Renminbi CNY 15.239 15.957 15.325 14.875
100 Brazilian Reais BRL 25.337 37.262 29.004 38.898
1 Pound Sterling GBP 1.467 1.540 1.474 1.508
100 Mexican Pesos MXN 5.690 6.716 6.074 6.885
100 Philippine Pesos PHP 2.109 2.208 2.115 2.062
1 Canadian Dollar CAD 0.713 0.852 0.752 0.830
1 Russian Ruble RUB 0.013 0.017 0.016 0.024
1 Australian Dollar AUD 0.723 0.810 0.723 0.826
100 Japanese Yen JPY 0.822 0.827 0.798 0.862
Extract from the Consolidated Financial StatementsPrincipal exchange rates
Nestlé Group I Summary of the full Annual Report 201518
In millions of CHF
2015 2014
Sales 88 785 91 612
Other revenue 298 253
Cost of goods sold (44 730) (47 553)
Distribution expenses (7 899) (8 217)
Marketing and administration expenses (20 744) (19 651)
Research and development costs (1 678) (1 628)
Other trading income 78 110
Other trading expenses (728) (907)
Trading operating profit 13 382 14 019
Other operating income 126 154
Other operating expenses (1 100) (3 268)
Operating profit 12 408 10 905
Financial income 101 135
Financial expense (725) (772)
Profit before taxes, associates and joint ventures 11 784 10 268
Taxes (3 305) (3 367)
Income from associates and joint ventures 988 8 003
Profit for the year 9 467 14 904 of which attributable to non-controlling interests 401 448
of which attributable to shareholders of the parent (Net profit) 9 066 14 456
As percentages of sales
Trading operating profit 15.1% 15.3%
Profit for the year attributable to shareholders of the parent (Net profit) 10.2% 15.8%
Earnings per share (in CHF)
Basic earnings per share 2.90 4.54
Diluted earnings per share 2.89 4.52
Extract from the Consolidated Financial Statements
Consolidated income statement for the year ended 31 December 2015
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Extract from the Consolidated Financial Statements
Consolidated statement of comprehensive income for the year ended 31 December 2015
In millions of CHF
2015 2014
Profit for the year recognised in the income statement 9 467 14 904
Currency retranslations
– Recognised in translation reserve (4 061) 2 660
– Reclassified from translation reserve to income statement 102 1 003
Fair value adjustments on available-for-sale financial instruments
– Recognised in fair value reserve (134) 191
– Reclassified from fair value reserve to income statement (75) (4)
Fair value adjustments on cash flow hedges
– Recognised in hedging reserve (5) 31
– Reclassified from hedging reserve 83 (87)
Taxes 237 5
Share of other comprehensive income of associates and joint ventures
– Recognised in the reserves 165 83
– Reclassified from the reserves to income statement — (436)
Items that are or may be reclassified subsequently to the income statement (3 688) 3 446
Remeasurement of defined benefit plans (370) (1 745)
Taxes 8 352
Share of other comprehensive income of associates and joint ventures 112 (153)
Items that will never be reclassified to the income statement (250) (1 546)
Other comprehensive income for the year (3 938) 1 900
Total comprehensive income for the year 5 529 16 804 of which attributable to non-controlling interests 317 556
of which attributable to shareholders of the parent 5 212 16 248
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Extract from the Consolidated Financial Statements
Consolidated balance sheet as at 31 December 2015before appropriations
In millions of CHF
2015 2014
Assets
Current assets
Cash and cash equivalents 4 884 7 448
Short-term investments 921 1 433
Inventories 8 153 9 172
Trade and other receivables 12 252 13 459
Prepayments and accrued income 583 565
Derivative assets 337 400
Current income tax assets 874 908
Assets held for sale 1 430 576
Total current assets 29 434 33 961
Non-current assets
Property, plant and equipment 26 576 28 421
Goodwill 32 772 34 557
Intangible assets 19 236 19 800
Investments in associates and joint ventures 8 675 8 649
Financial assets 5 419 5 493
Employee benefits assets 109 383
Current income tax assets 128 128
Deferred tax assets 1 643 2 058
Total non-current assets 94 558 99 489
Total assets 123 992 133 450
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In millions of CHF
2015 2014
Liabilities and equity
Current liabilities
Financial debt 9 629 8 810
Trade and other payables 17 038 17 437
Accruals and deferred income 3 673 3 759
Provisions 564 695
Derivative liabilities 1 021 757
Current income tax liabilities 1 124 1 264
Liabilities directly associated with assets held for sale 272 173
Total current liabilities 33 321 32 895
Non-current liabilities
Financial debt 11 601 12 396
Employee benefits liabilities 7 691 8 081
Provisions 2 601 3 161
Deferred tax liabilities 3 063 3 191
Other payables 1 729 1 842
Total non-current liabilities 26 685 28 671
Total liabilities 60 006 61 566
Equity
Share capital 319 322
Treasury shares (7 489) (3 918)
Translation reserve (21 129) (17 255)
Retained earnings and other reserves 90 637 90 981
Total equity attributable to shareholders of the parent 62 338 70 130
Non-controlling interests 1 648 1 754
Total equity 63 986 71 884
Total liabilities and equity 123 992 133 450
Extract from the Consolidated Financial Statements
Consolidated balance sheet as at 31 December 2015before appropriations
Nestlé Group I Summary of the full Annual Report 201522
Extract from the Consolidated Financial Statements
Consolidated cash flow statement for the year ended 31 December 2015
In millions of CHF
2015 2014
Operating activities
Operating profit 12 408 10 905
Depreciation and amortisation 3 178 3 058
Impairment 576 2 067
Net result on disposal of businesses 422 509
Other non-cash items of income and expense 172 689
Cash flow before changes in operating assets and liabilities 16 756 17 228 Decrease/(increase) in working capital 741 (114)
Variation of other operating assets and liabilities (248) 85
Cash generated from operations 17 249 17 199 Net cash flows from treasury activities (93) (356)
Taxes paid (3 310) (2 859)
Dividends and interest from associates and joint ventures 456 716
Operating cash flow 14 302 14 700 Investing activities
Capital expenditure (3 872) (3 914)
Expenditure on intangible assets (422) (509)
Acquisition of businesses (530) (1 986)
Disposal of businesses 213 321
Investments (net of divestments) in associates and joint ventures (a) (44) 3 958
Inflows/(outflows) from treasury investments 521 (844)
Other investing activities (19) (98)
Investing cash flow (4 153) (3 072)
Nestlé Group I Summary of the full Annual Report 2015 23
Extract from the Consolidated Financial Statements
Consolidated cash flow statement for the year ended 31 December 2015 (continued)
In millions of CHF
2015 2014
Financing activities
Dividend paid to shareholders of the parent (6 950) (6 863)
Dividends paid to non-controlling interests (424) (356)
Acquisition (net of disposal) of non-controlling interests — (49)
Purchase (net of sale) of treasury shares (b) (6 377) (1 617)
Inflows from bonds and other non-current financial debt 1 381 2 202
Outflows from bonds and other non-current financial debt (508) (1 969)
Inflows/(outflows) from current financial debt 643 (1 985)
Financing cash flow (12 235) (10 637)Currency retranslations (478) 42
Increase/(decrease) in cash and cash equivalents (2 564) 1 033 Cash and cash equivalents at beginning of year 7 448 6 415
Cash and cash equivalents at end of year 4 884 7 448
(a) In 2014, mainly relates to the partial disposal of L’Oréal shares. The Group sold part of its shares to L’Oréal for a price of CHF 7342 million (see Note 15) in exchange for the remaining 50% stake in Galderma for an equity value of CHF 3201 million (see Note 2) and cash of CHF 4141 million.
(b) Mostly relates to the Share Buy-Back Programme launched in 2014.
Nestlé Group I Summary of the full Annual Report 201524
Extract from the Consolidated Financial Statements
Consolidated statement of changes in equity for the year ended 31 December 2015
In millions of CHF
Tota
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Equity as at 31 December 2013 62 575 1 564 64 139 Profit for the year 14 456 448 14 904
Other comprehensive income for the year 1 792 108 1 900
Total comprehensive income for the year 16 248 556 16 804
Dividend paid to shareholders of the parent (6 863) — (6 863)
Dividends paid to non-controlling interests — (356) (356)
Movement of treasury shares (1 739) — (1 739)
Equity compensation plans 173 — 173
Changes in non-controlling interests (297) (10) (307)
Total transactions with owners (8 726) (366) (9 092)
Other movements 33 — 33
Equity as at 31 December 2014 70 130 1 754 71 884 Profit for the year 9 066 401 9 467
Other comprehensive income for the year (3 854) (84) (3 938)
Total comprehensive income for the year 5 212 317 5 529
Dividend paid to shareholders of the parent (6 950) — (6 950)
Dividends paid to non-controlling interests — (424) (424)
Movement of treasury shares (6 283) — (6 283)
Equity compensation plans 183 — 183
Changes in non-controlling interests (21) 1 (20)
Total transactions with owners (13 071) (423) (13 494)
Other movements 67 — 67
Equity as at 31 December 2015 62 338 1 648 63 986
Nestlé Group I Summary of the full Annual Report 2015 25
Extract from the Consolidated Financial Statements
Report of the Statutory Auditor on the Consolidated Financial Statements to the General Meeting of Nestlé S.A., Cham & Vevey
As statutory auditor, we have audited the consolidated financial statements (income statement, statement of comprehensive income, balance sheet, cash flow statement, statement of changes in equity and notes on pages 60 to 134) of Nestlé S.A. for the year ended 31 December 2015.
Board of Directors’ responsibilityThe Board of Directors is responsible for the preparation of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
Auditor’s responsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards as well as International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements for the year ended 31 December 2015 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.
Report on other legal requirementsWe confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
KPMG SA
Scott CormackLicensed Audit ExpertAuditor in charge
Geneva, 17 February 2016
Lukas MartyLicensed Audit Expert
Nestlé Group I Summary of the full Annual Report 201526
Extract from the Financial Statements of Nestlé S.A.Income statement for the year ended 31 December 2015
In millions of CHF
2015 2014
Income from Group companies 12 315 8 977
Profit on disposal of assets 59 7 449
Other income 107 100
Financial income 174 305
Total income 12 655 16 831
Expenses recharged from Group companies (a) (2 470) (2 361)
Personnel expenses (a) (122) (106)
Other expenses (a) (322) (154)
Write-downs and amortisation (1 156) (2 200)
Financial expense (362) (53)
Taxes (398) (457)
Total expenses (4 830) (5 331)
Profit for the year 7 825 11 500
(a) 2014 comparative figures have been presented according to the new structure; refer to Note 1.
Nestlé Group I Summary of the full Annual Report 2015 27
Extract from the Financial Statements of Nestlé S.A.
Balance sheet as at 31 December 2015before appropriations
In millions of CHF
2015 2014
Assets
Current assets
Cash and cash equivalents 100 2 221
Other current receivables 875 1 007
Prepayments and accrued income 14 11
Total current assets 989 3 239 Non-current assets
Financial assets (a) 8 459 13 990
Shareholdings (a) 32 488 31 390
Property, plant and equipment 1 1
Intangible assets 189 —
Total non-current assets 41 137 45 381 Total assets 42 126 48 620 Liabilities and equity
Current liabilities
Interest-bearing liabilities (a) — 1 965
Other current liabilities (a) 4 224 2 234
Accruals and deferred income 3 6
Provisions (a) 827 837
Total current liabilities 5 054 5 042 Non-current liabilities
Interest-bearing liabilities 154 162
Provisions (a) 498 498
Total non-current liabilities 652 660 Total liabilities 5 706 5 702 Equity
Share capital 319 322
Legal retained earnings
– General legal reserve 1 917 1 913
– Reserve for treasury shares — 988
Voluntary retained earnings
– Special reserve 28 711 30 146
– Profit brought forward 4 998 536
– Profit for the year 7 825 11 500
Treasury shares (a) (7 350) (2 487)
Total equity 36 420 42 918 Total liabilities and equity 42 126 48 620
(a) 2014 comparative figures have been presented according to the new structure; refer to Note 1.
Nestlé Group I Summary of the full Annual Report 201528
In CHF
2015 2014
Retained earnings
Profit brought forward 4 997 707 777 536 179 231
Profit for the year 7 825 389 939 11 500 096 775
12 823 097 716 12 036 276 006
We propose the following appropriation:
Dividend for 2015, CHF 2.25 per share on 3 112 160 000 shares (a) (2014: CHF 2.20 on 3 199 349 195 shares) (b)
7 002 360 000
7 038 568 229
7 002 360 000 7 038 568 229
Profit to be carried forward 5 820 737 716 4 997 707 777
(a) Depending on the number of shares issued as of the last trading day with entitlement to receive the dividend (8 April 2016). No dividend is paid on own shares held by the Nestlé Group. The respective amount will be attributed to the special reserve.
(b) The amount of CHF 88 947 650, representing the dividend on 40 430 750 own shares held at the date of the dividend payment, has been transferred to the special reserve.
Provided that the proposal of the Board of Directors is approved by the Annual General Meeting, the gross dividend will amount to CHF 2.25 per share, representing a net amount of CHF 1.4625 per share after payment of the Swiss withholding tax of 35%. The last trading day with entitlement to receive the dividend is 8 April 2016. The shares will be traded ex‑dividend as of 11 April 2016. The net dividend will be payable as from 13 April 2016.
The Board of Directors
Cham and Vevey, 17 February 2016
Extract from the Financial Statements of Nestlé S.A.
Proposed appropriation of profit
Nestlé Group I Summary of the full Annual Report 2015 29
Extract from the Financial Statements of Nestlé S.A.
Report of the Statutory Auditorto the General Meeting of Nestlé S.A., Cham & Vevey
As statutory auditor, we have audited the financial statements (income statement, balance sheet and notes to the annual accounts on pages 161 to 172) of Nestlé S.A. for the year ended 31 December 2015.
Board of Directors’ responsibilityThe Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the Company’s Articles of Association. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of
the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the financial statements for the year ended 31 December 2015 comply with Swiss law and the Company’s Articles of Association.
Report on other legal requirementsWe confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors.
We further confirm that the proposed appropriation of available earnings complies with Swiss law and the Company’s Articles of Association. We recommend that the financial statements submitted to you be approved.
KPMG SA
Scott CormackLicensed Audit ExpertAuditor in Charge
Geneva, 17 February 2016
Lukas MartyLicensed Audit Expert
Nestlé Group I Summary of the full Annual Report 201530
Shareholder information
Stock exchange listingAt 31 December 2015, Nestlé S.A. shares are listed on the SIX Swiss Exchange, Zurich (ISIN code: CH0038863350). American Depositary Receipts (ISIN code: US6410694060) representing Nestlé S.A. shares are offered in the USA by Citibank, N.A., New York.
Registered OfficesNestlé S.A.Avenue Nestlé 55CH‑1800 Vevey (Switzerland)tel. +41 (0)21 924 21 11
Nestlé S.A. (Share Transfer Office)Zugerstrasse 8CH‑6330 Cham (Switzerland)tel. +41 (0)41 785 20 20
Further informationFor additional information, contact: Nestlé S.A. Investor RelationsAvenue Nestlé 55 CH‑1800 Vevey (Switzerland)tel. +41 (0)21 924 35 09fax +41 (0)21 924 48 00e‑mail: [email protected]
As to information concerning the share register (registrations, transfers, dividends, etc.), please contact:Nestlé S.A. (Share Transfer Office)Zugerstrasse 8 CH‑6330 Cham (Switzerland)tel. +41 (0)41 785 20 20fax +41 (0)41 785 20 24e‑mail: [email protected]
The Annual Review is available online as a PDF in English, French and German. The consolidated income statement, balance sheet and cash flow statement are also available as Excel files.
www.nestle.com
Nestlé Group I Summary of the full Annual Report 2015 31
Important dates7 April 2016149th Annual General Meeting, Beaulieu Lausanne, Lausanne (Switzerland)
8 April 2016Last trading day with entitlement to dividend
11 April 2016Ex‑dividend date
13 April 2016Payment of the dividend
14 April 20162016 First quarter sales figures
18 August 20162016 Half‑yearly Results
20 October 20162016 Nine months sales figures
16 February 20172016 Full Year Results
6 April 2017150th Annual General Meeting, Beaulieu Lausanne, Lausanne (Switzerland)
Shareholder information