Press Release: Nestle: Solid 2024 performance; -2-

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A key element of improving our performance is strengthening our value propositions to consumers and customers. We are increasing investment to deliver superior product taste and quality, unbeatable value, unmissable visibility and compelling brand communication. Price competitiveness is a priority in the context of the high inflationary environment for certain commodities, most notably coffee and cocoa. We are taking an agile approach to passing on input cost increases, selectively investing in price as we focus on restoring competitiveness. To strengthen brand communication, we are stepping up investment and improving efficiency and effectiveness. Advertising and marketing spend as a percentage of sales fell from 9.0% in 2019 to a low of 6.6% in H2-2022; in 2024, this recovered to 8.1% and is planned to increase further to 9% by the end of 2025.

Efficiency and productivity

At our Capital Markets Day in November 2024, we announced a new three-year cost reduction program we have called Fuel for Growth, which is in addition to existing cost efficiency initiatives. We target CHF 2.5 billion run-rate cost savings from the new program by the end of 2027, and these savings will be used to fund increased investment in growth.

The Fuel for Growth program is expected to drive in-year savings of CHF 0.7 billion in 2025, CHF 1.4 billion in 2026 and CHF 2.3 billion in 2027. By the end of 2027, we expect to have reached the full run-rate savings of CHF 2.5 billion. In 2025, CHF 300 million of the savings impact this year only, with the further CHF 400 million being recurring savings that reduce the cost base on an ongoing basis. Over CHF 300 million of the expected CHF 0.7 billion cost savings for 2025 have already been secured.

Approximately three-quarters of the total savings in Fuel for Growth will come in procurement, with the remainder coming from operational efficiencies and commercial investments. Within procurement, the most significant savings will come from AI-powered procurement and supplier management, spend consolidation and aggregation, and e-sourcing expansion and automation. Within operational efficiencies and commercial investments, key initiatives include reviewing operating models as well as opportunities in manufacturing and logistics. The savings in procurement and commercial investments are expected to have limited costs to achieve; operational efficiencies will typically incur one-off costs of approximately 2 times the annual savings.

These Fuel for Growth savings are in addition to over CHF 1 billion per annum of ongoing efficiencies from existing Nestlé Continuous Excellence initiatives.

Expected phasing of Fuel for Growth cost savings program:

In CHF billion 2025 2026 2027

2025 non-recurring 0.3

2025 recurring savings 0.4 0.4 0.4

2026 recurring savings 1.0 1.0

2027 recurring savings 0.9

Total in-year savings 0.7 1.4 2.3

Run-rate savings at end of 2027 2.5

Strengthening foundations

Nestlé's success depends on alignment and in-market execution, and people are critical to that. 2024 was an important year of change in our leadership. Our new leadership team moved quickly to align and refocus the organization. We have simplified the Group's structure and reorganized Nestlé Waters and premium beverages into a global, standalone business. This is complemented by the introduction of a more aligned performance management framework -- our 'Operational Master Plan' -- to increase Group-wide performance and drive pace of execution across the organization. We have also accelerated our digital transformation as we move to becoming a real-time, end-to-end connected enterprise, powered by data and artificial intelligence.

Operating sustainably is an important foundation for Nestlé, and we made progress across multiple areas. In particular, we delivered our 2025 greenhouse gas emission reduction target one year ahead of plan and made strong progress with our regenerative agriculture agenda.

Guidance

Our 2025 guidance is in line with the outlook we provided at the Capital Markets Day, with accelerated delivery of cost efficiencies offsetting recent increases in key commodity prices, especially in coffee and cocoa. In 2025, organic sales growth is expected to improve compared to 2024, strengthening through the year as we continue to deliver on our growth plans. UTOP margin is expected to be at or above 16.0% as we invest for growth. Guidance assumes no significant change in key macroeconomic variables.

Our objective remains to deliver superior, sustainable and profitable growth. In the medium term, we continue to expect organic sales growth to be at 4% plus in a normal operating environment, with an underlying operating profit margin at 17.0% plus.

Financial review

Sales

Total reported sales decreased by 1.8% to CHF 91.4 billion, including negative impacts of 3.7% from foreign exchange movements and 0.3% from net divestitures. Organic growth was 2.2%. Pricing was 1.5%, reflecting a reduction in inflation across most categories after two years of high input cost and price increases. RIG returned to positive growth at 0.8% and was still impacted by soft consumer demand in many markets, including consumer hesitancy towards global brands in certain markets. Additionally, actions taken to reduce customer inventory in the second half of the year reduced full-year RIG by approximately 20 basis points.

By geography, organic growth was driven by emerging markets and Europe, which together more than offset a decrease in North America. In developed markets, organic growth was 1.2%, with positive pricing and RIG. In emerging markets, organic growth was 3.7%, led by pricing with positive RIG.

Organic growth by product category was as follows:

-- Coffee was the largest growth contributor with mid single-digit growth,

supported by the three leading coffee brands: Nescafé, Nespresso and

Starbucks.

-- Sales in confectionery grew at a mid single-digit rate, led by KitKat and

key local brands.

-- PetCare delivered low single-digit growth, driven by continued momentum

for science-based premium brands Purina ProPlan, Purina ONE and Friskies.

-- Nestlé Health Science achieved mid single-digit growth, with

double-digit growth in the second half of the year.

-- Water reported low single-digit growth, with solid growth for

S.Pellegrino and supported by the successful launch of Maison Perrier.

-- Infant Nutrition sales grew at a low single-digit rate, supported by

continued momentum for NAN and Lactogen.

-- Dairy posted negative growth, as a decline in coffee creamers and ambient

dairy more than offset growth for affordable milks and dairy culinary

solutions.

-- Culinary reported negative growth, with mid single-digit growth in Maggi

more than offset by a decline in frozen food in North America.

By channel, organic growth in retail sales was 2.1%. Organic growth of out-of-home channels was 3.2%. E-commerce sales grew organically by 11.3%, reaching 18.9% of total Group sales.

Gross profit and operating profit

Gross profit was flat at CHF 42.7 billion, and the gross profit margin increased by 80 bps to 46.7%. The gross profit margin reached 47.2% in H1, then declined 90 bps sequentially to 46.3% in H2, driven by higher input costs in coffee and cocoa.

Distribution expenses as a percentage of sales was flat versus the prior year at 8.3%. Marketing and administration expenses as a percentage of sales increased by 90 bps to 19.8%. This comprised: advertising and marketing expenses as a percentage of sales up 40 bps to 8.1%, as we began to step up investment; and administration expenses as a percentage of sales up 50 bps to 11.7% of sales, largely reflecting higher labor costs, the appreciation of the Swiss Franc and one-off items. Research and development costs as a percentage of sales was flat versus the prior year at 1.8%.

Underlying trading operating profit was CHF 15.7 billion, a decrease of 2.2% on a reported basis and an increase of 1.3% in constant currency. The underlying trading operating profit margin was 17.2%, a decrease of 10 bps on a reported basis and flat in constant currency.

Restructuring and net other trading items was CHF 1.1 billion compared with CHF 1.5 billion in the prior year, with the reduction mainly due to lower restructuring costs. Trading operating profit increased by 0.8% to CHF 14.6 billion. The trading operating profit margin reached 16.0%, an increase of 40 bps on a reported basis and 50 bps in constant currency.

Constant currency

As % of sales 2024 2023 Reported change change

Sales 100.0% 100.0% -

Cost of goods sold -53.3% -54.1% 80 bps

Gross profit margin 46.7% 45.9% 80 bps

Other revenue 0.4% 0.4% 0 bps

Distribution expenses - 8.3% - 8.3% 0 bps

Marketing and

administration

expenses - 19.8% - 18.9% - 90 bps

Research and

development costs - 1.8% - 1.8% 0 bps

Underlying trading

operating profit

margin 17.2% 17.3% -10 bps 0 bps

Other trading income 0.1% 0.1% 0 bps

Other trading

expenses -1.3% -1.8% 50 bps

Trading operating

profit margin 16.0% 15.6% 40 bps 50 bps

Other operating

income 0.5% 0.3% 20 bps

Other operating

expenses -0.4% -0.8% 40 bps

Operating profit

margin 16.1% 15.1% 100 bps

Net financial expenses and income tax

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February 13, 2025 01:00 ET (06:00 GMT)