Press Release: Nestle: Nestlé reports full-year results for 2022

[Ad hoc announcement pursuant to Art. 53 LR]

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Vevey, February 16, 2023

Nestlé reports full-year results for 2022

-- Total reported sales increased by 8.4% to CHF 94.4 billion. Net

acquisitions had a positive impact of 1.1%. Foreign exchange decreased

sales by 0.9%.

-- Organic growth reached 8.3%. Pricing was 8.2%, reflecting significant

cost inflation. Real internal growth (RIG) was positive at 0.1%. Organic

growth was broad-based across most geographies and categories.

-- The underlying trading operating profit (UTOP) margin was 17.1%,

decreasing by 30 basis points on a reported basis and by 40 basis points

in constant currency. The trading operating profit (TOP) margin was

unchanged at 14.0%.

-- Underlying earnings per share increased by 9.4% in constant currency and

by 8.4% on a reported basis to CHF 4.80. Earnings per share decreased by

43.5% to CHF 3.42 on a reported basis, mainly reflecting the 2021 gain on

the disposal of L'Oréal shares.

-- Free cash flow was CHF 6.6 billion, as working capital increased

temporarily in the context of supply chain constraints and capital

expenditure remained above historic trendlines.

-- Board proposes a dividend of CHF 2.95 per share, an increase of 15

centimes, marking 28 consecutive years of dividend growth. In total, CHF

18.2 billion were returned to shareholders in 2022 through a combination

of dividend and share buybacks.

-- 2023 outlook: we expect organic sales growth between 6% and 8% and

underlying trading operating profit margin between 17.0% and 17.5%.

Underlying earnings per share in constant currency is expected to

increase between 6% and 10%.

-- 2025 targets fully confirmed: we expect sustainable mid single-digit

organic sales growth and a return to an underlying trading operating

profit margin range of 17.5% to 18.5% by 2025. We expect annual

underlying earnings per share growth to be in the range of 6% to 10% in

constant currency.

Mark Schneider, Nestlé CEO, commented:"Last year brought many challenges and tough choices for families, communities and businesses. Inflation surged to unprecedented levels, cost of living pressures intensified, and the effects of geopolitical tensions were felt around the world.

The entire Nestlé team demonstrated dependability, as we navigated this difficult environment. Organic growth was solid, margins continued to be resilient, and our underlying earnings per share development was strong. At the same time, we ensured access to nutritious products and affordable offerings globally.

During 2022, we also confirmed our longstanding nutrition strategy, with Good for You, Good for the Planet at its heart. We took important actions to further strengthen our industry-leading responsible marketing practices and to provide transparency on the nutritional value of our global portfolio. At the same time, we also advanced the implementation of our climate roadmap.

Looking to 2023, we expect another year of robust organic growth, with a focus on restoring our gross margin, stepping up marketing investments and increasing free cash flow. Nestlé's value creation model puts us in a strong position to achieve our 2025 targets and to generate reliable, sustainable shareholder returns."

Group Results

Zone Zone Zone Nestlé

Total North Zone Zone Latin Greater Health Other

Group America Europe AOA America China Nespresso Science Businesses

Sales

FY-2022

(CHF m) 94 424 26 328 19 128 18 484 11 819 5 351 6 448 6 602 264

Sales

FY-2021

(CHF m)* 87 088 23 693 18 794 17 894 10 086 5 175 6 418 4 822 206

Real

internal

growth

(RIG)** 0.1% - 1.3% 0.9% 0.1% 1.5% 1.0% - 1.7% 0.6% 25.2%

Pricing** 8.2% 11.6% 6.4% 8.1% 11.6% 2.5% 5.2% 3.4% 3.2%

Organic

growth** 8.3% 10.3% 7.2% 8.2% 13.1% 3.5% 3.5% 4.0% 28.4%

Net M&A** 1.1% - 3.8% 2.1% - 0.1% 0.1% 0.0% - 0.3% 31.5% 0.0%

Foreign

exchange** - 0.9% 4.7% - 7.6% - 4.9% 4.0% - 0.1% - 2.7% 1.5% - 0.1%

Reported

sales

growth 8.4% 11.1% 1.8% 3.3% 17.2% 3.4% 0.5% 36.9% 28.3%

FY-2022

Underlying

TOP

Margin 17.1% 21.0% 16.4% 22.9% 21.2% 16.1% 21.5% 13.6% - 6.1%

FY-2021

Underlying

TOP

Margin* 17.4% 20.3% 18.3% 24.0% 21.9% 13.5% 23.0% 13.6% - 15.6%

(*) 2021 figures restated following the creation of Zone North America (NA) and Zone Greater China (GC) as of January 1, 2022. Zone AOA includes Middle East and North Africa (MENA) previously included in Zone EMENA

(**) RIG, pricing and organic growth figures exclude the Russia region, with a corresponding impact on the M&A and foreign exchange lines

Group sales

Organic growth was 8.3%. Pricing increased to 8.2%, reflecting significant cost inflation. RIG was positive at 0.1%, following a high base of comparison in 2021, supply constraints and portfolio optimization actions.

Organic growth was 7.1% in developed markets, driven by pricing. In emerging markets, organic growth was 10.0%, supported by both pricing and RIG.

By product category, Purina PetCare was the largest contributor to organic growth, with continued momentum for science-based and premium brands Purina Pro Plan, Purina ONE and Fancy Feast, as well as veterinary products. Sales in coffee grew at a high single-digit rate, with broad-based growth across brands and geographies, supported by a strong recovery of out-of-home channels. Sales of Starbucks products grew by 12.9% to reach CHF 3.6 billion, generating over CHF 1.5 billion of incremental sales compared with 2018. Infant Nutrition saw double-digit growth, with broad-based contributions across geographies and brands. Confectionery posted high single-digit growth, reflecting particular strength for KitKat, seasonal products and key local brands. Dairy reported mid single-digit growth, with continued momentum for coffee creamers, affordable fortified milks and home-baking products. Water recorded double-digit growth, with a sales decrease in the fourth quarter as a result of temporary capacity constraints. Prepared dishes and cooking aids posted low single-digit growth, following a high base of comparison in 2021, with continued strong demand for Maggi. Sales in vegetarian and plant-based food grew at a mid single-digit rate. Garden Gourmet in Europe continued to see double-digit growth, while sales for Sweet Earth in North America were impacted by SKU optimization. Nestlé Health Science reported mid single-digit growth, driven by Medical Nutrition and healthy-aging products.

By channel, organic growth in retail sales remained robust at 7.2%. E-commerce sales grew by 9.2%, reaching 15.8% of total Group sales. Organic growth of out-of-home channels reached 23.5%, with sales exceeding 2019 levels. In the fourth quarter, RIG for out-of-home channels moderated to a mid single-digit rate as a result of post-pandemic normalization.

Net acquisitions increased sales by 1.1%, largely related to the acquisitions of the core brands of The Bountiful Company and Orgain. The impact on sales from foreign exchange was negative at -0.9%. Total reported sales increased by 8.4% to CHF 94.4 billion.

Underlying Trading Operating Profit

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February 16, 2023 01:15 ET (06:15 GMT)