Summaries Annual Review 2016 Consolidated Financial Statements of the Nestlé Group 2016 150th Financial Statements of Nestlé S.A.
2 Nestlé Group I Summary of the Annual Report 2016
Contents 5 6 8 17 18 19 20 22 24 25 25 26 27 30 Highlights 2016 Key figures (consolidated) Financial review Extract from the Consolidated Financial Statements Consolidated income statement for the year ended 31 December 2016 Consolidated statement of comprehensive income for the year ended 31 December 2016 Consolidated balance sheet as at 31 December 2016 Consolidated cash flow statement for the year ended 31 December 2016 Consolidated statement of changes in equity for the year ended 31 December 2016 Extract from the Financial Statements of Nestlé S.A. Income statement for the year ended 31 December 2016 Balance sheet as at 31 December 2016 Proposed appropriation of profit Shareholder information All sections should be read in connection with the Consolidated Financial Statements of the Nestlé Group 2016 and the 150th Financial Statements of Nestlé S.A. The Statutory Auditor s Report on Financial Statements are available on page 136 and 178 of the Corporate Governance Report 2016, Compensation Report 2016, Financial Statements 2016. 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 profit margin Nestlé Group I Summary of the Annual Report 2016 3
4 Nestlé Group I Summary of the Annual Report 2016
Highlights 2016 Organic growth at the high end of the industry but at the lower end of our expectations Sales of CHF 89.5 billion. 3.2% organic growth, continued strong real internal growth of 2.4%. Trading operating profit margin up 30 basis points in constant currency, reported trading operating profit margin up 20 basis points to 15.3%. Net profit of CHF 8.5 billion, impacted by several items, the largest one being a one-off non-cash adjustment to deferred taxes. Underlying earnings per share in constant currency increased by 3.4%. Operating cash flow improved by CHF 1.3 billion to CHF 15.6 billion (17.4% of sales) and free cash flow improved by CHF 200 million to CHF 10.1 billion (11.3% of sales). Continuing investing in future growth and operating efficiency Targeting mid-single digit organic growth and significant structural cost savings by 2020. Increase in restructuring costs. Investment in brand support, digital marketing, Research and Development, and in the new nutrition and health platforms. Maintaining a strong and resilient diversified portfolio. Nestlé s commitment to creating value for society and for shareholders Responsible and sustainable investments while continuing to reduce the environmental impact of our business. Proposed dividend of CHF 7.2 billion for 2016, CHF 2.30 per share, an increase of 2.2%. 2017 Outlook In 2017, we expect organic growth between 2% and 4%. In order to drive future profitability, we plan to increase restructuring costs considerably in 2017. As a result, the trading operating profit margin in constant currency is expected to be stable. Underlying earnings per share in constant currency and capital efficiency are expected to increase. Nestlé Group I Summary of the Annual Report 2016 5
Key figures (consolidated) In millions of CHF (except for data per share and employees) 2016 2015 Results Sales 89 469 88 785 Trading operating profit 13 693 13 382 as % of sales 15.3% 15.1% Profit for the year attributable to shareholders of the parent (Net profit) 8 531 9 066 as % of sales 9.5% 10.2% Balance sheet and Cash flow statement Equity attributable to shareholders of the parent 64 590 62 338 Net financial debt 13 913 15 425 Ratio of net financial debt to equity (gearing) 21.5% 24.7% Operating cash flow 15 582 14 302 as % of net financial debt 112.0% 92.7% Free cash flow (a) 10 108 9 945 Capital expenditure 4 010 3 872 as % of sales 4.5% 4.4% Data per share Weighted average number of shares outstanding (in millions of units) 3 091 3 129 Basic earnings per share CHF 2.76 2.90 Underlying earnings per share (b) CHF 3.40 3.31 Dividend as proposed by the Board of Directors of Nestlé S.A. CHF 2.30 2.25 Market capitalisation, end December 226 310 229 947 Number of employees (in thousands) 328 335 (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. 6 Nestlé Group I Summary of the Annual Report 2016
Key figures (consolidated) 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) 2016 2015 Sales 90 796 92 143 Trading operating profit 13 896 13 889 Profit for the year attributable to shareholders of the parent (Net profit) 8 658 9 409 Equity attributable to shareholders of the parent 63 156 63 012 Market capitalisation, end December 221 287 232 434 Data per share Basic earnings per share USD 2.80 3.01 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) 2016 2015 Sales 82 055 83 153 Trading operating profit 12 558 12 533 Profit for the year attributable to shareholders of the parent (Net profit) 7 824 8 491 Equity attributable to shareholders of the parent 60 075 57 651 Market capitalisation, end December 210 490 212 658 Data per share Basic earnings per share EUR 2.53 2.72 Nestlé Group I Summary of the Annual Report 2016 7
Financial review Group overview Introduction Our 2016 organic growth was at the high end of the industry but at the lower end of our expectations. We saw a solid trading operating profit margin improvement and our cash flow grew significantly. In 2017, we expect organic growth between 2% and 4%. In order to drive future profitability, we plan to increase restructuring costs considerably in 2017. As a result, the trading operating profit margin in constant currency is expected to be stable. Underlying earnings per share in constant currency and capital efficiency are expected to increase. Group results In 2016, sales increased by 0.8% to CHF 89.5 billion, with a foreign exchange impact of 1.6%. Acquisitions net of divestitures reduced sales by 0.8%. Organic growth was 3.2%, with real internal growth reaching a three-year high of 2.4%. Pricing was limited at 0.8%, with some improvement in the second half of the year and we expect pricing to improve further for the full year 2017. Organic and real internal growth were broad-based, highlighting the strength and resilience of our diversified portfolio. Innovation supported volume growth, with 30% of sales coming from products introduced or renovated in the last 3 years. E-commerce accounted for 5% of sales, up 18% year-on-year. Broad-based growth Group EMENA AMS AOA Developed Markets Emerging Markets Sales (in billions of CHF) 89.5 26.8 40.2 22.5 52.1 37.4 RIG % + 2.4% + 2.4% + 2.0% + 3.0% + 2.3% + 2.4% Pricing % + 0.8% 0.5% + 2.5% 0.2% 0.6% + 2.9% OG % + 3.2% + 1.9% + 4.5% + 2.8% + 1.7% + 5.3% 8 Nestlé Group I Summary of the Annual Report 2016
Financial review Trading operating profit Trading operating profit was CHF 13.7 billion with a margin of 15.3%, up 20 basis points on a reported basis and up 30 basis points in constant currency. We achieved this margin improvement while increasing investment in brand support, digital marketing, Research and Development, and in the new nutrition and health platforms. Consumer-facing marketing spend increased by 6.3% in constant currency. Restructuring costs doubled to CHF 300 million in 2016 to support structural cost-saving initiatives. Net profit Net profit of CHF 8.5 billion was impacted by several items, the largest one being a oneoff non-cash adjustment to deferred taxes. Reported earnings per share decreased by 4.8% to CHF 2.76, for the same reasons. Underlying earnings per share in constant currency increased by 3.4%. Cash flow and working capital Operating cash flow improved by CHF 1.3 billion to CHF 15.6 billion (17.4% of sales) due in part to the reduction of working capital. Free cash flow improved by CHF 200 million to CHF 10.1 billion (11.3% of sales). This demonstrates our ability to generate strong cash flow consistently even in a challenging foreign exchange environment. Average working capital decreased by 190 basis points from 4.7% to 2.8% of sales (average of last five quarters). more than offset the payment of the dividend of CHF 6.9 billion. Return on invested capital The Group s return on invested capital including goodwill and intangible assets improved by 30 basis points to 11.2%. Return on invested capital before goodwill and intangible assets improved by 180 basis points to 31.7%. Dividend The Board of Directors is proposing a dividend of CHF 2.30 per share, up from CHF 2.25 last year. Outlook In 2017, we expect organic growth between 2% and 4%. In order to drive future profitability, we plan to increase restructuring costs considerably in 2017. As a result, the trading operating profit margin in constant currency is expected to be stable. Underlying earnings per share in constant currency and capital efficiency are expected to increase. Financial position The Group s net debt decreased from CHF 15.4 billion to CHF 13.9 billion in 2016. Our strong free cash flow of CHF 10.1 billion Nestlé Group I Summary of the Annual Report 2016 9
Financial review Sales by operating segment In millions of CHF 2016 2015 Zone EMENA 16 249 16 403 Zone AMS 26 356 25 844 Zone AOA 14 493 14 338 Nestlé Waters 7 926 7 625 Nestlé Nutrition 10 326 10 461 Other businesses (a) 14 119 14 114 Total Group 89 469 88 785 (a) Mainly Nestlé Professional, Nespresso, Nestlé Health Science and Nestlé Skin Health. Trading operating profit by operating segment In millions of CHF 2016 2015 Zone EMENA 2 712 2 572 Zone AMS 5 074 5 021 Zone AOA 2 756 2 632 Nestlé Waters 946 825 Nestlé Nutrition 2 342 2 361 Other businesses (a) 2 144 2 221 Unallocated items (b) (2 281) (2 250) Total Group 13 693 13 382 (a) Mainly Nestlé Professional, Nespresso, Nestlé Health Science and Nestlé Skin Health. (b) Mainly corporate expenses as well as research and development costs. 10 Nestlé Group I Summary of the Annual Report 2016
Financial review Sales by geographic area Employees by geographic area Factories by geographic area 44.9% 33.2% 158 AMS (2015: 44.1%) (2015: 32.5%) (2015: 161) 30.0% 33.2% 151 EMENA (a) (2015: 30.9%) (2015: 34.7%) (2015: 166) 25.1% 33.6% 109 AOA (2015: 25.0%) (2015: 32.8%) (2015: 109) (a) 10 046 employees in Switzerland in 2016. Employees by activity In thousands 2016 2015 Factories 168 170 Administration and sales 160 165 Total 328 335 Nestlé Group I Summary of the Annual Report 2016 11
Financial review Zone Americas (AMS) Sales CHF 26.4 billion OG + 4.2% RIG + 1.3% Margin 19.3% 10 basis points The Zone reported good and consistent organic growth. In North America growth accelerated yearon-year. In PetCare, innovation supported good growth across the cat food range. In dog food, the premium portfolio performed well as Merrick, Purina ONE and Pro Plan all delivered double-digit growth. Beneful stabilised as there was progress in restaging the brand. Coffee Mate sustained good momentum through innovations such as 64 oz. and new flavours in natural bliss. Lean Cuisine and Stouffer s Fit Kitchen delivered strong organic growth supported by new line extensions. The performance of Confectionery in the US was disappointing, impacted by the competitive environment and low growth in the mainstream chocolate market. In Latin America strong organic growth was led by price increases following currency depreciation, as real internal growth slowed. In Brazil, we had high single-digit organic growth. Significant price increases at the end of the first half of the year impacted volumes in the short term. Nescafé Dolce Gusto and KitKat continued to grow in double digits. In Mexico, there was another year of good growth, which was broad-based across dairy, coffee creamers, soluble coffee, Nescafé Dolce Gusto and chocolate. PetCare continued to deliver strong growth across the region. The trading operating profit margin decreased by 10 basis points, due to an increase in restructuring costs. The profitability improved in North America, but Latin America was largely affected by high cost inflation caused by currency depreciation and commodity prices. Zone Europe, Middle East and North Africa (EMENA) Sales CHF 16.2 billion OG + 2.0% RIG + 2.7% Margin 16.7% + 100 basis points The Zone delivered strong real internal growth, accelerating for a fourth consecutive year and gaining market share, showing the ability to innovate. In Western Europe, positive organic growth was due to solid real internal growth. Pricing was negative, affected by sustained low commodity prices, trade pressure and intense competition. PetCare, Nescafé and pizza continued to be the key sources of growth across most markets. In Germany and France, we had solid real internal growth, while there was good organic and real internal growth in Southern Europe. In the UK, on the other hand, it was a particularly challenging year with both volume and pricing declining slightly. Central and Eastern Europe continued to deliver strong organic growth on the basis of good real internal growth and positive pricing. In Russia, we achieved double-digit organic growth with positive real internal growth. This included strong growth in Nescafé soluble coffee, especially Barista. Russia was Nestlé s strongest performing market in PetCare globally, led by Felix cat food. Inflation in 12 Nestlé Group I Summary of the Annual Report 2016
Financial review Russia and Ukraine drove positive pricing in the region, whilst all other markets experienced deflationary pricing. Business remained resilient in the Middle East and North Africa with positive organic growth, but the unstable environment and deflationary pressure slowed momentum. Events in Iraq, Yemen, Libya and Syria continued to have an effect. There was also deflationary pressure on dairy in the region. In Turkey, Nescafé and confectionery drove double-digit growth. The North Africa market also did well. The trading operating profit margin improved by 100 basis points even as restructuring costs and marketing investment increased. Profitability improved across most categories as a result of premiumisation, volume leverage, efficiency savings and favourable input costs. Portfolio management also contributed positively with the creation of the Froneri joint venture in ice cream. Zone Asia, Oceania and sub-saharan Africa (AOA) Sales CHF 14.5 billion OG + 3.2% RIG + 2.9% Margin 19.0% + 60 basis points The Zone saw real internal growth and organic growth gain increasing momentum throughout the year, with market shares recovering and almost all markets contributing. The Zone s emerging markets had a good year overall with growth accelerating in most businesses. Yinlu was the main exception, decreasing the Zone s organic growth by 260 basis points. In China, the double-digit decline of Yinlu affected overall growth. Several initiatives to turn around the business are in place and stabilisation is expected in 2017. Dairy (excluding Yinlu) and confectionery grew positively and Nescafé performed well. South East Asia was strong with double-digit growth in Vietnam and Indonesia, especially from dairy and Milo. The Philippines also performed well with high single-digit growth, particularly due to Bear Brand in dairy. There was good growth in sub-saharan Africa. Real internal growth remained positive despite price increases to offset currency depreciation. There was double-digit growth in Central and West Africa (including Ghana, Côte d Ivoire and Nigeria) and in Equatorial Africa (including Angola), with Maggi and Nido doing well. Our business in India grew strongly despite some disruptive impact from demonetisation at the end of the year. Maggi noodles continued to regain market share. Confectionery also did well with KitKat. There was also strong growth in Pakistan from dairy, ready-to-drink and other categories. In the developed markets there was good growth in Japan and solid real internal growth in Oceania. Japan s organic growth was above the Zone and Group averages, balanced evenly between real internal growth and pricing. This was based on innovation and premiumisation across Nescafé and KitKat. In Oceania, there was solid real internal growth in line with the Group, which was largely offset by continuing deflationary pressure. The Zone improved its trading operating profit margin by 60 basis points while also increasing marketing investment. Positive gross margin development was helped by favourable input costs, particularly in dairy, Nestlé Group I Summary of the Annual Report 2016 13
Financial review as well as cost efficiencies and improved volumes and product mix. The effect of an increase in restructuring spend was more than offset by lower one-off costs related to Maggi in India. Nestlé Waters Sales CHF 7.9 billion OG + 4.5% RIG + 4.5% Margin 11.9% + 110 basis points Nestlé Waters maintained its good organic growth momentum based on real internal growth. Pricing remained flat. In the US, international premium brands saw another year of dynamic growth and there were contributions above the Group and Nestlé Waters averages from regional brands Poland Spring, Ice Mountain and Deer Park. The shutdown of a factory in Texas following a tornado in April had a negative impact. In Europe, the majority of markets maintained growth after 2015 had been a strong year due to the heatwave. There were good contributions from the UK, Spain and Germany. Of the other markets, South East Asia, Mexico and North Africa did well. Further strong growth came from the international premium sparkling brands Perrier and S.Pellegrino, which grew twice as fast as the mainstream portfolio. The flagship international brand Nestlé Pure Life made a good contribution, with organic growth above the Nestlé Waters average. There was a strong trading operating profit margin improvement of 110 basis points while marketing investment also increased. This was possible due to a combination of volume growth, positive product mix through premiumisation, operational cost efficiencies and favourable input costs. Nestlé Nutrition Sales CHF 10.3 billion OG + 1.5% RIG + 0.9% Margin 22.7% + 10 basis points Nestlé Nutrition grew in the context of changed category dynamics, particularly in China, and deflationary pressure owing to sustained low milk prices. Market dynamics in China were weak ahead of the implementation of new regulation, resulting in adjustments of trade inventory levels in both mainland China and Hong Kong. Low dairy prices and intense competition had an impact on pricing, particularly in the premium segment. At the same time, illuma had another strong year of growth, gaining share to become the leading brand in its category in China. We also strengthened our capabilities in e-commerce, winning market share in this important channel. Growth in the US was slow during the year. We started to renovate the Gerber brand and made improvements to product packaging and recipes, including many organic offerings. Latin America saw strong momentum led by innovations such as Mucilon Iron Plus cereals in Brazil and NAN Optipro in Mexico. Growth in South East Asia was also solid with the Philippines doing well. The improvement in trading operating profit margin was broad-based across infant formula, as well as baby food, due to sustained low dairy prices. At the same 14 Nestlé Group I Summary of the Annual Report 2016
Financial review time, marketing investment behind brands increased. Other businesses Sales CHF 14.1 billion OG + 3.7% RIG + 3.4% Margin 15.2% 50 basis points Nestlé Professional continued to grow, led by mid-single-digit growth in emerging markets with strong growth in Russia and Mexico, and solid growth in China. The US also had good organic growth while business in Canada and Western Europe declined. As from 2017, Nestlé Professional is integrated into the Zones due to increasing demand for more customised products and services on a local and regional basis. Nespresso continued to grow in its 30th year. The US and Canada saw strong momentum from the continued success of the VertuoLine system. Sales in France also benefitted from the launch of VertuoLine at the end of the year. The UK saw strong acceleration following brand investment and the launch of a subscription model. In Asia, both China and Korea performed well. Nestlé Health Science maintained a good pace of growth. Consumer Care was once again the key source of growth including the Boost range of products, Carnation Breakfast Essentials and, in Europe, Meritene. Medical Nutrition benefitted from strong contributions from the allergy portfolio (especially in China), Vitaflo and oral nutritional supplements in key markets. Nestlé Skin Health performed well in consumer care. However, we adjusted inventory levels in the trade at the end of the year. Increased competition and pressure from generics affected the US prescription business. The trading operating profit margin of this segment was impacted by Nestlé Skin Health. Adjustment of trade inventories and higher restructuring and litigation costs affected profitability. Nestlé Health Science also absorbed higher restructuring costs. Nestlé Professional and Nespresso both improved their profitability, helped by favourable input costs. Nestlé Group I Summary of the Annual Report 2016 15
16 Nestlé Group I Summary of the Annual Report 2016
Extract from the Consolidated Financial Statements Principal exchange rates CHF per 2016 2015 2016 2015 Year ending rates Weighted average annual rates 1 US Dollar USD 1.023 0.989 0.985 0.964 1 Euro EUR 1.075 1.081 1.090 1.068 100 Chinese Yuan Renminbi CNY 14.715 15.239 14.838 15.325 100 Brazilian Reais BRL 31.383 25.337 28.583 29.004 100 Philippine Pesos PHP 2.064 2.109 2.075 2.115 1 Pound Sterling GBP 1.255 1.467 1.331 1.474 100 Mexican Pesos MXN 4.938 5.690 5.279 6.074 1 Canadian Dollar CAD 0.758 0.713 0.745 0.752 100 Japanese Yen JPY 0.874 0.822 0.907 0.798 1 Australian Dollar AUD 0.738 0.723 0.733 0.723 100 Russian Rubles RUB 1.685 1.347 1.485 1.579 Nestlé Group I Summary of the Annual Report 2016 17
Extract from the Consolidated Financial Statements Consolidated income statement for the year ended 31 December 2016 In millions of CHF 2016 2015 Sales 89 469 88 785 Other revenue 317 298 Cost of goods sold (44 199) (44 730) Distribution expenses (8 059) (7 899) Marketing and administration expenses (21 485) (20 744) Research and development costs (1 736) (1 678) Other trading income 99 78 Other trading expenses (713) (728) Trading operating profit 13 693 13 382 Other operating income 354 126 Other operating expenses (884) (1 100) Operating profit 13 163 12 408 Financial income 121 101 Financial expense (758) (725) Profit before taxes, associates and joint ventures 12 526 11 784 Taxes (4 413) (3 305) Income from associates and joint ventures 770 988 Profit for the year 8 883 9 467 of which attributable to non-controlling interests 352 401 of which attributable to shareholders of the parent (Net profit) 8 531 9 066 As percentages of sales Trading operating profit 15.3% 15.1% Profit for the year attributable to shareholders of the parent (Net profit) 9.5% 10.2% Earnings per share (in CHF) Basic earnings per share 2.76 2.90 Diluted earnings per share 2.75 2.89 18 Nestlé Group I Summary of the Annual Report 2016
Extract from the Consolidated Financial Statements Consolidated statement of comprehensive income for the year ended 31 December 2016 In millions of CHF 2016 2015 Profit for the year recognised in the income statement 8 883 9 467 Currency retranslations, net of taxes 1 033 (3 771) Fair value adjustments on available-for-sale financial instruments, net of taxes 16 (144) Fair value adjustments on cash flow hedges, net of taxes (1) 62 Share of other comprehensive income of associates and joint ventures (154) 165 Items that are or may be reclassified subsequently to the income statement 894 (3 688) Remeasurement of defined benefit plans, net of taxes (143) (362) Share of other comprehensive income of associates and joint ventures (10) 112 Items that will never be reclassified to the income statement (153) (250) Other comprehensive income for the year 741 (3 938) Total comprehensive income for the year 9 624 5 529 of which attributable to non-controlling interests 343 317 of which attributable to shareholders of the parent 9 281 5 212 Nestlé Group I Summary of the Annual Report 2016 19
Extract from the Consolidated Financial Statements Consolidated balance sheet as at 31 December 2016 before appropriations In millions of CHF Assets 2016 2015 Current assets Cash and cash equivalents 7 990 4 884 Short-term investments 1 306 921 Inventories 8 401 8 153 Trade and other receivables 12 411 12 252 Prepayments and accrued income 573 583 Derivative assets 550 337 Current income tax assets 786 874 Assets held for sale 25 1 430 Total current assets 32 042 29 434 Non-current assets Property, plant and equipment 27 554 26 576 Goodwill 33 007 32 772 Intangible assets 20 397 19 236 Investments in associates and joint ventures 10 709 8 675 Financial assets 5 719 5 419 Employee benefits assets 310 109 Current income tax assets 114 128 Deferred tax assets 2 049 1 643 Total non-current assets 99 859 94 558 Total assets 131 901 123 992 20 Nestlé Group I Summary of the Annual Report 2016
Extract from the Consolidated Financial Statements Consolidated balance sheet as at 31 December 2016 before appropriations In millions of CHF Liabilities and equity 2016 2015 Current liabilities Financial debt 12 118 9 629 Trade and other payables 18 629 17 038 Accruals and deferred income 3 855 3 673 Provisions 620 564 Derivative liabilities 1 068 1 021 Current income tax liabilities 1 221 1 124 Liabilities directly associated with assets held for sale 6 272 Total current liabilities 37 517 33 321 Non-current liabilities Financial debt 11 091 11 601 Employee benefits liabilities 8 420 7 691 Provisions 2 640 2 601 Deferred tax liabilities 3 865 3 063 Other payables 2 387 1 729 Total non-current liabilities 28 403 26 685 Total liabilities 65 920 60 006 Equity Share capital 311 319 Treasury shares (990) (7 489) Translation reserve (18 799) (19 851) Other reserves 1 198 1 345 Retained earnings 82 870 88 014 Total equity attributable to shareholders of the parent 64 590 62 338 Non-controlling interests 1 391 1 648 Total equity 65 981 63 986 Total liabilities and equity 131 901 123 992 Nestlé Group I Summary of the Annual Report 2016 21
Extract from the Consolidated Financial Statements Consolidated cash flow statement for the year ended 31 December 2016 In millions of CHF 2016 2015 Operating activities Operating profit 13 163 12 408 Depreciation and amortisation 3 132 3 178 Impairment 640 576 Net result on disposal of businesses 422 Other non-cash items of income and expense 35 172 Cash flow before changes in operating assets and liabilities 16 970 16 756 Decrease/(increase) in working capital 1 801 741 Variation of other operating assets and liabilities 54 (248) Cash generated from operations 18 825 17 249 Net cash flows from treasury activities (327) (93) Taxes paid (3 435) (3 310) Dividends and interest from associates and joint ventures 519 456 Operating cash flow 15 582 14 302 Investing activities Capital expenditure (4 010) (3 872) Expenditure on intangible assets (682) (422) Acquisition of businesses (585) (530) Disposal of businesses 271 213 Investments (net of divestments) in associates and joint ventures (748) (44) Inflows/(outflows) from treasury investments (335) 521 Other investing activities (34) (19) Investing cash flow (6 123) (4 153) 22 Nestlé Group I Summary of the Annual Report 2016
Extract from the Consolidated Financial Statements Consolidated cash flow statement for the year ended 31 December 2016 (continued) In millions of CHF 2016 2015 Financing activities Dividend paid to shareholders of the parent (6 937) (6 950) Dividends paid to non-controlling interests (432) (424) Acquisition (net of disposal) of non-controlling interests (1 208) Purchase (net of sale) of treasury shares (a) 760 (6 377) Inflows from bonds and other non-current financial debt 1 695 1 381 Outflows from bonds and other non-current financial debt (1 430) (508) Inflows/(outflows) from current financial debt 1 368 643 Financing cash flow (6 184) (12 235) Currency retranslations (169) (478) Increase/(decrease) in cash and cash equivalents 3 106 (2 564) Cash and cash equivalents at beginning of year 4 884 7 448 Cash and cash equivalents at end of year 7 990 4 884 (a) In 2015, mostly relates to the Share Buy-Back Programme launched in 2014. Nestlé Group I Summary of the Annual Report 2016 23
Extract from the Consolidated Financial Statements Consolidated statement of changes in equity for the year ended 31 December 2016 In millions of CHF Total equity attributable to shareholders of the parent Non-controlling interests Total equity 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 Dividends (6 950) (424) (7 374) 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 Profit for the year 8 531 352 8 883 Other comprehensive income for the year 750 (9) 741 Total comprehensive income for the year 9 281 343 9 624 Dividends (6 937) (432) (7 369) Movement of treasury shares 776 776 Equity compensation plans 180 180 Changes in non-controlling interests (a) (991) (168) (1 159) Total transactions with owners (6 972) (600) (7 572) Other movements (57) (57) Equity as at 31 December 2016 64 590 1 391 65 981 (a) Includes the impact of the acquisitions during the period (see Note 2.5) as well as a put option for the acquisition of non-controlling interests. 24 Nestlé Group I Summary of the Annual Report 2016
Extract from the Financial Statements of Nestlé S.A. Income statement for the year ended 31 December 2016 In millions of CHF 2016 2015 Income from Group companies 10 626 12 315 Profit on disposal of assets 716 59 Other income 114 107 Financial income 220 174 Total income 11 676 12 655 Expenses recharged from Group companies (2 501) (2 470) Personnel expenses (120) (122) Other expenses (195) (322) Write-downs and amortisation (1 835) (1 156) Financial expense (35) (362) Taxes (542) (398) Total expenses (5 228) (4 830) Profit for the year 6 448 7 825 Nestlé Group I Summary of the Annual Report 2016 25
Extract from the Financial Statements of Nestlé S.A. Balance sheet as at 31 December 2016 before appropriations In millions of CHF 2016 2015 Assets Current assets Cash and cash equivalents 1 115 100 Other current receivables 737 875 Prepayments and accrued income 77 14 Total current assets 1 929 989 Non-current assets Financial assets 8 763 8 459 Shareholdings 31 175 32 488 Property, plant and equipment 1 1 Intangible assets 142 189 Total non-current assets 40 081 41 137 Total assets 42 010 42 126 Liabilities and equity Current liabilities Interest-bearing liabilities 2 050 Other current liabilities 1 645 4 224 Accruals and deferred income 48 3 Provisions 760 827 Total current liabilities 4 503 5 054 Non-current liabilities Interest-bearing liabilities 132 154 Provisions 501 498 Total non-current liabilities 633 652 Total liabilities 5 136 5 706 Equity Share capital 311 319 Legal retained earnings General legal reserve 1 924 1 917 Voluntary retained earnings Special reserve 23 288 28 711 Profit brought forward 5 821 4 998 Profit for the year 6 448 7 825 Treasury shares (918) (7 350) Total equity 36 874 36 420 Total liabilities and equity 42 010 42 126 26 Nestlé Group I Summary of the Annual Report 2016
Extract from the Financial Statements of Nestlé S.A. Proposed appropriation of profit In CHF 2016 2015 Retained earnings Profit brought forward 5 820 737 716 4 997 707 777 Profit for the year 6 448 462 989 7 825 389 939 12 269 200 705 12 823 097 716 We propose the following appropriation: Dividend for 2016, CHF 2.30 per share on 3 112 160 000 shares (a) (2015: CHF 2.25 on 3 112 160 000 shares) (b) 7 157 968 000 7 002 360 000 7 157 968 000 7 002 360 000 Profit to be carried forward 5 111 232 705 5 820 737 716 (a) Depending on the number of shares issued as of the last trading day with entitlement to receive the dividend (7 April 2017). 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 65 468 057, representing the dividend on 29 096 914 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 2.30 per share, representing a net amount of CHF 1.4950 per share after payment of the Swiss withholding tax of 35%. The last trading day with entitlement to receive the dividend is 7 April 2017. The shares will be traded ex-dividend as of 10 April 2017. The net dividend will be payable as from 12 April 2017. The Board of Directors Cham and Vevey, 15 February 2017 Nestlé Group I Summary of the Annual Report 2016 27
Notes 28 Nestlé Group I Summary of the Annual Report 2016
Notes Nestlé Group I Summary of the Annual Report 2016 29
Shareholder information Stock exchange listing At 31 December 2016, 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 Offices Nestlé S.A. Avenue Nestlé 55 CH-1800 Vevey (Switzerland) tel. +41 (0)21 924 21 11 Nestlé S.A. (Share Transfer Office) Zugerstrasse 8 CH-6330 Cham (Switzerland) tel. +41 (0)41 785 20 20 Further information For additional information, contact: Nestlé S.A. Investor Relations Avenue Nestlé 55 CH-1800 Vevey (Switzerland) tel. +41 (0)21 924 35 09 fax +41 (0)21 924 48 00 e-mail: ir@nestle.com 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 20 fax +41 (0)41 785 20 24 e-mail: shareregister@nestle.com 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 30 Nestlé Group I Summary of the Annual Report 2016
Shareholder information Important dates 6 April 2017 150th Annual General Meeting, Beaulieu Lausanne, Lausanne (Switzerland) 7 April 2017 Last trading day with entitlement to dividend 10 April 2017 Ex-dividend date 12 April 2017 Payment of the dividend 20 April 2017 2017 First quarter sales figures 27 July 2017 2017 Half-yearly Results 19 October 2017 2017 Nine months sales figures 15 February 2018 2017 Full Year Results 12 April 2018 151st Annual General Meeting, Beaulieu Lausanne, Lausanne (Switzerland) Nestlé Group I Summary of the Annual Report 2016 31
2017, Nestlé S.A., Cham and Vevey (Switzerland) NES022E