Description
The Consolidated Financial Statements have been prepared on an accrual basis and under the historical cost convention, unless stated otherwise.
Consolidated Financial Statements
of the Nestlé Group 2011
Principal exchange rates
Consolidated income statement for the year ended 31 December 2011
Consolidated statement of comprehensive income
for the year ended 31 December 2011
Consolidated balance sheet as at 31 December 2011
Consolidated cash ?ow statement for the year ended 31 December 2011
Consolidated statement of changes in equity
for the year ended 31 December 2011
Notes
1. Accounting policies
2. Acquisitions, disposals and discontinued operations
3. Analyses by segment
4. Net other trading and operating income/(expenses)
5. Inventories
6. Trade and other receivables
7. Property, plant and equipment
8. Goodwill
9. Intangible assets
10. Employee bene?ts
11. Equity compensation plans
12. Provisions and contingencies
13. Net ?nancing cost and ?nancial instruments
14. Taxes
15. Associates
16. Earnings per share
17. Cash ?ow statement
18. Equity
19. Lease commitments
20. Transactions with related parties
21. Joint ventures
22. Guarantees
23. Group risk management
24. Events after the balance sheet date
25. Group companies
Report of the Statutory Auditor
on the Consolidated Financial Statements
Financial information – 5 year review
Companies of the Nestlé Group
45
46
47
48
50
51
52
52
64
68
75
76
76
77
78
81
82
86
90
91
104
106
107
107
108
111
112
113
114
114
115
115
116
118
120
Consolidated Financial Statements of the Nestlé Group 2011 45
Principal exchange rates
CHF per 2011 2010 2011 2010
Year ending rates Weighted average annual rates
1 US Dollar USD 0.940 0.938 0.887 1.045
1 Euro EUR 1.217 1.253 1.233 1.380
1 Pound Sterling GBP 1.450 1.454 1.421 1.606
100 Brazilian Reais BRL 50.124 56.291 52.935 59.141
100 Japanese Yen JPY 1.212 1.153 1.121 1.188
100 Mexican Pesos MXN 6.712 7.568 7.122 8.241
1 Canadian Dollar CAD 0.921 0.938 0.890 1.012
1 Australian Dollar AUD 0.954 0.955 0.913 0.957
100 Philippine Pesos PHP 2.144 2.146 2.048 2.313
100 Chinese Yuan Renminbi CNY 14.926 14.227 13.796 15.362
46 Consolidated Financial Statements of the Nestlé Group 2011
Consolidated income statement
for the year ended 31 December 2011
In millions of CHF Notes 2011 2010
(a)
2010
(a)
2010
(a)
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Sales 3 83 642 87 906 5 109 93 015
Other revenue 128 109 — 109
Cost of goods sold (44 127) (44 775) (1 074) (45 849)
Distribution expenses (7 602) (7 953) (125) (8 078)
Marketing and administration expenses (17 395) (19 846) (1 276) (21 122)
Research and development costs (1 423) (1 403) (478) (1 881)
Other trading income 4 51 168 — 168
Other trading expenses 4 (736) (1 530) — (1 530)
Trading operating pro?t 3 12 538 12 676 2 156 14 832
Other operating income 4 112 38 24 535 24 573
Other operating expenses 4 (179) (571) (14) (585)
Operating pro?t 12 471 12 143 26 677 38 820
Financial income 13 115 72 22 94
Financial expense 13 (536) (834) (13) (847)
Pro?t before taxes and associates 12 050 11 381 26 686 38 067
Taxes 14 (3 112) (3 343) (350) (3 693)
Share of results of associates 15 866 1 010 — 1 010
Pro?t for the year 9 804 9 048 26 336 35 384
of which attributable to non-controlling interests 317 271 880 1 151
of which attributable to shareholders of the parent (Net pro?t) 9 487 8 777 25 456 34 233
As percentages of sales
Trading operating pro?t 15.0% 14.4% 42.2% 15.9%
Pro?t for the year attributable to shareholders of the parent
(Net pro?t) 11.3% 36.8%
Earnings per share (in CHF)
Basic earnings per share 16 2.97 2.60 7.56 10.16
Diluted earnings per share 16 2.96 2.60 7.52 10.12
(a) 2010 restated following the changes in the Income Statement described in Note 1 – Accounting Policies.
(b) Detailed information related to Alcon discontinued operations is disclosed in Note 2.
Consolidated Financial Statements of the Nestlé Group 2011 47
Consolidated statement of comprehensive income
for the year ended 31 December 2011
In millions of CHF 2011 2010
Pro?t for the year recognised in the income statement 9 804 35 384
Currency retranslations (1 166) (4 801)
Fair value adjustments on available-for-sale ?nancial instruments
– Unrealised results (199) 227
– Recognition of realised results in the income statement 7 (10)
Fair value adjustments on cash ?ow hedges
– Recognised in hedging reserve (423) 704
– Removed from hedging reserve (42) (752)
Actuarial gains/(losses) on de?ned bene?t schemes (2 503) (153)
Share of other comprehensive income of associates 456 (89)
Taxes 859 268
Other comprehensive income for the year (3 011) (4 606)
Total comprehensive income for the year 6 793 30 778
of which attributable to non-controlling interests 284 941
of which attributable to shareholders of the parent 6 509 29 837
48 Consolidated Financial Statements of the Nestlé Group 2011
Consolidated balance sheet as at 31 December 2011
before appropriations
In millions of CHF Notes 2011 2010
Assets
Current assets
Cash and cash equivalents 13/17 4 938 8 057
Short-term investments 13 3 050 8 189
Inventories 5 9 255 7 925
Trade and other receivables 6/13 13 340 12 083
Prepayments and accrued income 900 748
Derivative assets 13 731 1 011
Current income tax assets 1 094 956
Assets held for sale 16 28
Total current assets 33 324 38 997
Non-current assets
Property, plant and equipment 7 23 971 21 438
Goodwill 8 29 008 27 031
Intangible assets 9 9 356 7 728
Investments in associates 15 8 629 7 914
Financial assets 13 7 161 6 366
Employee bene?ts assets 10 127 166
Current income tax assets 39 90
Deferred tax assets 14 2 476 1 911
Total non-current assets 80 767 72 644
Total assets 114 091 111 641
Consolidated Financial Statements of the Nestlé Group 2011 49
Consolidated balance sheet as at 31 December 2011 (continued)
In millions of CHF Notes 2011 2010
Liabilities and equity
Current liabilities
Financial debt 13 16 100 12 617
Trade and other payables 13 13 584 12 592
Accruals and deferred income 2 909 2 798
Provisions 12 576 601
Derivative liabilities 13 646 456
Current income tax liabilities 1 417 1 079
Liabilities directly associated with assets held for sale — 3
Total current liabilities 35 232 30 146
Non-current liabilities
Financial debt 13 6 207 7 483
Employee bene?ts liabilities 10 7 105 5 280
Provisions 12 3 094 3 510
Deferred tax liabilities 14 2 060 1 371
Other payables 13 2 119 1 253
Total non-current liabilities 20 585 18 897
Total liabilities 55 817 49 043
Equity 18
Share capital 330 347
Treasury shares (6 722) (11 108)
Translation reserve (16 927) (15 794)
Retained earnings and other reserves 80 116 88 422
Total equity attributable to shareholders of the parent 56 797 61 867
Non-controlling interests 1 477 731
Total equity 58 274 62 598
Total liabilities and equity 114 091 111 641
50 Consolidated Financial Statements of the Nestlé Group 2011
Consolidated cash ?ow statement
for the year ended 31 December 2011
In millions of CHF Notes 2011 2010
Operating activities
Pro?t for the year 9 804 35 384
Non-cash items of income and expense 17 3 039 (20 948)
Decrease/(increase) in working capital 17 (1 837) (632)
Variation of other operating assets and liabilities 17 (1 243) (196)
Operating cash ?ow
(a)
9 763 13 608
Investing activities
Capital expenditure 7 (4 779) (4 576)
Expenditure on intangible assets 9 (247) (408)
Sale of property, plant and equipment 111 113
Acquisition of businesses 2 (3 742) (5 582)
Disposal of businesses 2 7 27 715
Cash ?ows with associates 357 254
In?ows/(out?ows) from non-current ?nancial investments (1 802) (2 528)
Other investing cash ?ows (448) (439)
Cash ?ow from investing activities
(a)
(10 543) 14 549
Financing activities
Dividend paid to shareholders of the parent 18 (5 939) (5 443)
Purchase of treasury shares 17 (5 480) (12 135)
Sale of treasury shares 527 278
Cash ?ows with non-controlling interests (266) (791)
Bonds issued 595 1 219
Bonds repaid (1 751) (832)
In?ows from other non-current ?nancial liabilities 93 130
Out?ows from other non-current ?nancial liabilities (93) (225)
In?ows/(out?ows) from current ?nancial liabilities 3 504 (2 174)
In?ows/(out?ows) from short-term investments 6 452 (5 835)
Cash ?ow from ?nancing activities
(a)
(2 358) (25 808)
Currency retranslations 19 (117)
Increase/(decrease) in cash and cash equivalents (3 119) 2 232
Cash and cash equivalents at beginning of year 8 057 5 825
Cash and cash equivalents at end of year 17 4 938 8 057
(a) Detailed information related to Alcon discontinued operations is disclosed in Note 2. In 2010, even if Alcon's assets and liabilities were classi?ed as held for sale,
individual lines of the cash ?ow statement comprise Alcon's movements until disposal.
Consolidated Financial Statements of the Nestlé Group 2011 51
Consolidated statement of changes in equity
for the year ended 31 December 2011
In millions of CHF
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Equity as at 31 December 2009 365 (8 011) (11 175) 67 736 48 915 4 716 53 631
Pro?t for the year 34 233 34 233 1 151 35 384
Other comprehensive income for the year (4 619) 223 (4 396) (210) (4 606)
Total comprehensive income for the year (4 619) 34 456 29 837 941 30 778
Dividend paid to shareholders of the parent (5 443) (5 443) (5 443)
Dividends paid to non-controlling interests (729) (729)
Movement of treasury shares (net)
(a)
(11 859) 77 (11 782) (11 782)
Equity compensation plans 179 2 181 19 200
Changes in non-controlling interests (146) (146) (4 216) (4 362)
Adjustment for hyperin?ation
(b)
305 305 305
Reduction in share capital (18) 8 583 (8 565) — —
Total transactions with owners (18) (3 097) (13 770) (16 885) (4 926) (21 811)
Equity as at 31 December 2010 347 (11 108) (15 794) 88 422 61 867 731 62 598
Pro?t for the year 9 487 9 487 317 9 804
Other comprehensive income for the year (1 133) (1 845) (2 978) (33) (3 011)
Total comprehensive income for the year (1 133) 7 642 6 509 284 6 793
Dividend paid to shareholders of the parent (5 939) (5 939) (5 939)
Dividends paid to non-controlling interests (226) (226)
Movement of treasury shares (net)
(a)
(4 615) (355) (4 970) (4 970)
Equity compensation plans 175 5 180 180
Changes in non-controlling interests
(c)
(996) (996) 688 (308)
Adjustment for hyperin?ation
(b)
146 146 146
Reduction in share capital (17) 8 826 (8 809) — —
Total transactions with owners (17) 4 386 (15 948) (11 579) 462 (11 117)
Equity as at 31 December 2011 330 (6 722) (16 927) 80 116 56 797 1 477 58 274
(a) Movements reported under retained earnings and other reserves mainly relate to written put options on own shares.
(b) Relates to Venezuela, considered as a hyperin?ationary economy.
(c) Movements reported under retained earnings and other reserves include a put option for the acquisition of non-controlling interests.
52 Consolidated Financial Statements of the Nestlé Group 2011
Notes
1. Accounting policies
Accounting convention and accounting standards
The Consolidated Financial Statements comply with
International Financial Reporting Standards (IFRS) issued
by the International Accounting Standards Board (IASB)
and with the Interpretations issued by the International
Financial Reporting Interpretations Committee (IFRIC).
The Consolidated Financial Statements have been
prepared on an accrual basis and under the historical
cost convention, unless stated otherwise. All signi?cant
consolidated companies and associates have a 31 December
accounting year-end.
The preparation of the Consolidated Financial
Statements requires Group Management to exercise
judgement and to make estimates and assumptions that
affect the application of policies, reported amounts of
revenues, expenses, assets and liabilities and disclosures.
These estimates and associated assumptions are based
on historical experience and various other factors that are
believed to be reasonable under the circumstances. Actual
results may differ from these estimates.
The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the
period of the revision and future periods if the revision
affects both current and future periods. Those areas affect
mainly provisions, goodwill impairment tests, employee
bene?ts, allowance for doubtful receivables, share-based
payments and taxes, and key assumptions are detailed in
the related notes.
Scope of consolidation
The Consolidated Financial Statements comprise those
of Nestlé S.A. and of its af?liated companies, including
joint ventures and associates (the Group). The list of the
principal companies is provided in the section “Companies
of the Nestlé Group.”
Consolidated companies
Companies, in which the Group has the power to exercise
control, are fully consolidated. This applies irrespective of
the percentage of interest in the share capital. Control
refers to the power to govern the ?nancial and operating
policies of a company so as to obtain the bene?ts from
its activities. Non-controlling interests are shown as
a component of equity in the balance sheet and the share
of the pro?t attribu table to non-controlling interests is
shown as a component of pro?t for the year in the income
statement.
Proportionate consolidation is applied for companies
over which the Group exercises joint control with partners.
The individual assets, liabilities, income and expenses are
consolidated in proportion to the Nestlé participation in
their equity (usually 50%).
Newly acquired companies are consolidated from the
effective date of control, using the acquisition method.
Associates
Companies where the Group has the power to exercise
a signi?cant in?uence but does not exercise control are
accounted for using the equity method. The net assets
and results are adjusted to comply with the Group’s
accounting policies. The carrying amount of goodwill
arising from the acquisition of associates is included in
the carrying amount of investments in associates.
Venture funds
Investments in venture funds are recognised in accordance
with the consolidation methods described above, depending
on the level of control or signi?cant in?uence exercised.
Foreign currencies
The functional currency of the Group’s entities is the
currency of their primary economic environment.
In individual companies, transactions in foreign
currencies are recorded at the rate of exchange at the
date of the transaction. Monetary assets and liabilities in
foreign currencies are translated at year-end rates. Any
resulting exchange differences are taken to the income
statement.
On consolidation, assets and liabilities of Group entities
reported in their functional currencies are translated into
Swiss Francs, the Group’s presentation currency, at year-
end exchange rates. Income and expense items are
translated into Swiss Francs at the annual weighted
average rates of exchange or at the rate on the date of the
transaction for signi?cant items.
Differences arising from the retranslation of opening net
assets of Group entities, together with differences arising
from the restatement of the net results for the year of Group
entities, are recognised in other comprehensive income.
Consolidated Financial Statements of the Nestlé Group 2011 53
1. Accounting policies (continued)
The balance sheet and net results of Group entities
operating in hyperin?ationary economies are restated for
the changes in the general purchasing power of the local
currency, using of?cial indices at the balance sheet date,
before translation into Swiss Francs at year-end rates.
When there is a change of control in a foreign entity,
exchange differences that were recorded in equity are
recognised in the income statement as part of the gain
or loss on disposal.
Segment reporting
Operating segments re?ect the Group’s management
structure and the way ?nancial information is regularly
reviewed by the Group’s chief operating decision maker
(CODM), which is de?ned as the Executive Board.
The CODM considers the business from both
a geographic and product perspective, through three
geographic Zones and several Globally Managed
Businesses (GMB). Zones and GMB that meet the
quantitative threshold of 10% of sales, trading operating
pro?t or assets, are presented on a standalone basis as
reportable segments. Other GMB that do not meet the
threshold, like Nestlé Professional, Nespresso, Nestlé
Health Science and the Joint Ventures in the Food and
Beverages and Pharmaceutical activities are aggregated
and presented in Other. Therefore, the Group’s reportable
operating segments are:
– Zone Europe;
– Zone Americas;
– Zone Asia, Oceania and Africa;
– Nestlé Waters;
– Nestlé Nutrition;
– Other.
As some operating segments represent geographic zones,
information by product is also disclosed. The seven product
groups that are disclosed represent the highest categories
of products that are followed internally.
Finally, the Group provides information attributed to the
country of domicile of the Group’s parent company (Nestlé S.A.
– Switzerland) and to the ten most important countries in
terms of sales.
Segment results represent the contribution of the different
segments to central overheads, research and development
costs and the trading operating pro?t of the Group.
Speci?c corporate expenses as well as speci?c research
and development costs are allocated to the corresponding
segments.
Segment assets and liabilities are aligned with internal
repor ted information to the CODM. Segment assets comprise
property, plant and equipment, intangible assets, goodwill,
trade and other receivables, assets held for sale, inventories,
prepayments and accrued income as well as speci?c
?nancial assets associated to the reportable segments.
Segment liabilities comprise trade and other pay ables,
liabilities directly associated with assets held for sale,
some other payables as well as accruals and deferred
income. Eliminations represent inter-company balances
between the different segments.
Segment assets by operating segment represent the
situa tion at the end of the year. Assets and liabilities by
product represent the annual average, as this provides
a better indication of the level of invested capital for
management purposes.
Capital additions represent the total cost incurred to
acquire property, plant and equipment, intangible assets
and goodwill, including those arising from business
combinations. Capital expenditure represents the
investment in property, plant and equipment only.
Depreciation of segment assets includes depreciation
of property, plant and equipment and amortisation of
intangible assets. Impairment of assets includes impairment
related to property, plant and equipment, intangible assets
and goodwill.
Unallocated items represent non-speci?c items whose
allocation to a segment would be arbitrary. They mainly
comprise:
– corporate expenses and related assets/liabilities;
– research and development costs and related assets/
liabilities; and
– some goodwill and intangible assets.
Non-current assets by geography include property,
plant and equipment, intangible assets and goodwill that
are attributable to the ten most important countries and
the country of domicile of Nestlé S.A.
Valuation methods, presentation and de?nitions
Revenue
Revenue represents amounts received and receivable from
third parties for goods supplied to the customers and for
services rendered. Revenue from the sales of goods is
recognised in the income statement at the moment when
the signi?cant risks and rewards of ownership of the goods
have been transferred to the buyer, which is mainly upon
shipment. It is measured at the list price applicable to
54 Consolidated Financial Statements of the Nestlé Group 2011
a given distribution channel after deduction of returns,
sales taxes, pricing allowances, other trade discounts and
couponing and price promotions to consumers. Payments
made to the customers for commercial services received
are expensed.
Expenses
Cost of goods sold is determined on the basis of the cost
of production or of purchase, adjusted for the variation of
inventories. All other expenses, including those in respect
of advertising and promotions, are recognised when the
Group receives the risks and rewards of ownership of the
goods or when it receives the services.
Other trading income/(expenses)
These comprise mainly restructuring costs, impairment of
all assets except goodwill, litigations and onerous contracts,
result on disposal of property, plant and equipment, and
speci?c other income and expenses that fall within the
control of operating segments.
Restructuring costs are restricted to dismissal
indemnities and employee bene?ts paid to terminated
employees upon the reorganisation of a business.
Dismissal indemnities paid for normal attrition such as
poor performance, professional misconduct, etc. are part
of the expenses by functions.
Other operating income/(expenses)
These comprise impairment of goodwill, results on
disposals of businesses, acquisition-related costs and
other income and expenses that fall beyond the control of
operating segments and relate to events such as natural
disasters and expropriation of assets.
Net ?nancing cost
Net ?nancing cost includes the ?nancial expense on
borrowings from third parties as well as the ?nancial
income earned on funds invested outside the Group.
Net ?nancing cost also includes other ?nancial income
and expense, such as exchange differences on loans and
borrowings, results on foreign currency and interest rate
hedging instruments that are recognised in the income
statement. Certain borrowing costs are capitalised as
explained under the section on Property, plant and
equipment. Others are expensed.
Unwind of discount on provisions is presented in net
?nancing cost.
Taxes
The Group is subject to taxes in different countries all over
the world. Taxes and ?scal risks recognised in the
Consolidated Financial Statements re?ect Group
Management’s best estimate of the outcome based on the
facts known at the balance sheet date in each individual
country. These facts may include but are not limited to
change in tax laws and interpretation thereof in the
various jurisdictions where the Group operates. They may
have an impact on the income tax as well as the resulting
assets and liabilities. Any differences between tax
estimates and ?nal tax assessments are charged to the
income statement in the period in which they are in curred,
unless anticipated.
Taxes include current taxes on pro?t and other taxes
such as taxes on capital. Also included are actual or
potential withholding taxes on current and expected
transfers of income from Group companies and tax
adjustments relating to prior years. Income tax is
recognised in the income statement, except to the extent
that it relates to items directly taken to equity or other
comprehensive income, in which case it is recognised
against equity or other comprehensive income.
Deferred taxation is the tax attributable to the
temporary differences that arise when taxation authorities
recognise and measure assets and liabilities with rules that
differ from the principles of the Consolidated Financial
Statements. It also arises on temporary differences
stemming from tax losses carried forward.
Deferred taxes are calculated under the liability method
at the rates of tax expected to prevail when the temporary
differences reverse subject to such rates being substantially
enacted at the balance sheet date. Any changes of the tax
rates are recognised in the income statement unless related
to items directly recognised against equity or other
comprehensive income. Deferred tax liabilities are
recognised on all taxable temporary differences excluding
non-deductible goodwill. Deferred tax assets are
recognised on all deductible temporary differences
provided that it is probable that future taxable income will
be available.
For share-based payments, a deferred tax asset is
recognised in the income statement over the vesting
period, pro vided that a future reduction of the tax expense
is both probable and can be reliably estimated. The
deferred tax asset for the future tax deductible amount
exceeding the total share-based payment cost is
recognised in equity.
1. Accounting policies (continued)
Consolidated Financial Statements of the Nestlé Group 2011 55
Financial instruments
Classes of ?nancial instruments
The Group aggregates its ?nancial instruments into classes
based on their nature and characteristics. The details of
?nancial instruments by class are disclosed in the notes.
Financial assets
Financial assets are initially recognised at fair value plus
directly attributable transaction costs. However when
a ?nancial asset at fair value through pro?t or loss is
recognised, the transaction costs are expensed
immediately. Subsequent remeasurement of ?nancial
assets is determined by their classi?cation that is revisited
at each reporting date.
Derivatives embedded in other contracts are separated
and treated as stand-alone derivatives when their risks
and characteristics are not closely related to those of their
host contracts and the respective host contracts are not
carried at fair value.
In case of regular way purchase or sale (purchase or
sale under a contract whose terms require delivery within
the time frame established by regulation or convention in
the market place), the settlement date is used for both
initial recognition and subsequent derecognition.
At each balance sheet date, the Group assesses
whether its ?nancial assets are to be impaired. Impairment
losses are recognised in the income statement where
there is objective evidence of impairment, such as where
the issuer is in bankruptcy, default or other signi?cant
?nancial dif?culty. In addition, for an investment in an
equity security, a signi?cant or prolonged decline in its fair
value below its cost is objective evidence of impairment.
Impairment losses are reversed when the reversal can be
objectively related to an event occurring after the
recognition of the impairment loss. For debt instruments
measured at amortised cost or fair value, the reversal is
recognised in the income statement. For equity
instruments classi?ed as available for sale, the reversal is
recognised in other comprehensive income. Impairment
losses on ?nancial assets carried at cost because their fair
value cannot be reliably measured are never reversed.
Financial assets are derecognised (in full or partly)
when substantially all the Group’s rights to cash ?ows
from the respective assets have expired or have been
transferred and the Group has neither exposure to
substantially all the risks inherent in those assets nor
entitlement to rewards from them.
The Group classi?es its ?nancial assets into the following
categories: loans and receivables, held-for-trading assets
(?nan cial assets at fair value through pro?t and loss), held-
to-maturity investments and available-for-sale assets.
Loans and receivables
Loans and receivables are non-derivative ?nancial assets
with ?xed or determinable payments that are not quoted
in an active market. This category includes the following
classes of ?nancial assets: loans; trade and other
receivables and cash at bank and in hand.
Subsequent to initial measurement, loans and
receivables are carried at amortised cost using the
effective interest rate method less appropriate allowances
for doubtful receivables.
Allowances for doubtful receivables represent the
Group’s estimates of losses that could arise from the
failure or inability of customers to make payments when
due. These estimates are based on the ageing of
customers’ balances, speci?c credit circumstances and
the Group’s historical bad receivables experience.
Loans and receivables are further classi?ed as current
and non-current depending whether these will be realised
within twelve months after the balance sheet date or
beyond.
Held-for-trading assets
The Group does not apply the fair value option. Held-for-
trading assets are marketable securities and derivative
?nancial instruments.
Subsequent to initial measurement, held-for-trading
assets are carried at fair value and all their gains and
losses, realised and unrealised, are recognised in the
income statement.
Held-to-maturity investments
Held-to-maturity investments are non-derivative ?nancial
assets with ?xed or determinable payments and ?xed
maturities. Currently the Group does not have any
investments in this category.
Available-for-sale assets
Available-for-sale assets are those non-derivative ?nancial
assets that are either designated as such upon initial
recognition or are not classi?ed in any of the other
?nancial assets categories. This category includes the
following classes of ?nancial assets: bonds, equities,
commercial paper and bills, time deposits and other
1. Accounting policies (continued)
56 Consolidated Financial Statements of the Nestlé Group 2011
investments. They are included in non-current ?nancial
assets unless an investment matures or management
intends to dispose of it within 12 months of the end of the
reporting period. In that case it would be accounted for as
short-term investments, or cash and cash equivalents, as
appropriate.
Subsequent to initial measurement, available-for-sale
assets are stated at fair value with all unrealised gains or
losses recognised against other comprehensive income
until their disposal when such gains or losses are
recognised in the income statement.
Interest earned on available-for-sale assets is calculated
using the effective interest rate method and is recognised
in the income statement as part of interest income under
net ?nancing cost. Accrued interest on available-for-sale
?nancial assets is included in the balance sheet line
prepayments and accrued income.
Financial liabilities at amortised cost
Financial liabilities are initially recognised at the fair value of
consideration received less directly attributable transaction
costs.
Subsequent to initial measurement, ?nancial liabilities
are recognised at amortised cost unless they are part of
a fair value hedge relationship (refer to fair value hedges).
The difference between the initial carrying amount of the
?nancial liabilities and their redemption value is recognised
in the income statement over the contractual terms using
the effective interest rate method. This category includes
the following classes of ?nancial liabilities: trade and other
payables; commercial paper; bonds and other ?nancial
liabilities.
Financial liabilities at amortised cost are further classi?ed
as current and non-current depending whether these will
fall due within twelve months after the balance sheet date
or beyond.
Financial liabilities are derecognised (in full or partly)
when either the Group is discharged from its obligation,
they expire, are cancelled or replaced by a new liability
with substantially modi?ed terms.
Derivative ?nancial instruments
A derivative is a ?nancial instrument that changes its values
in response to changes in the underlying variable, requires
no or little net initial investment and is settled at a future
date. Derivatives are mainly used to manage exposures to
foreign exchange, interest rate and commodity price risk.
Whilst some derivatives are also acquired with the aim of
managing the return of marketable securities portfolios,
these derivatives are only acquired when there are
underlying ?nancial assets.
Derivatives are initially recognised at fair value. These
are subsequently remeasured at fair value on a regular
basis and at each reporting date as a minimum. The fair
values of exchange-traded derivatives are based on market
prices, while the fair value of the over-the-counter
derivatives are determined using accepted mathematical
models based on market data.
Derivatives are carried as assets when their fair value is
positive and as liabilities when their fair value is negative.
The Group’s derivatives mainly consist of currency
forwards, futures, options and swaps; commodity futures
and options; interest rate forwards, futures, options and
swaps.
The use of derivatives is governed by the Group’s
policies approved by the Board of Directors, which provide
written principles on the use of derivatives consistent with
the Group’s overall risk management strategy.
Hedge accounting
The Group designates and documents certain derivatives
as hedging instruments against changes in fair values of
recognised assets and liabilities (fair value hedges), highly
probable forecast transactions (cash ?ow hedges) and
hedges of net investments in foreign operations (net
investment hedges). The effectiveness of such hedges is
assessed at inception and veri?ed at regular intervals and
at least on a quarterly basis, using prospective and
retrospective testing.
Fair value hedges
The Group uses fair value hedges to mitigate foreign
currency and interest rate risks of its recognised assets
and liabilities.
The changes in fair values of hedging instruments are
recognised in the income statement. Hedged items are
also adjusted for the risk being hedged, with any gain or
loss being recognised in the income statement.
Cash ?ow hedges
The Group uses cash ?ow hedges to mitigate a particular
risk associated with a recognised asset or liability or highly
probable forecast transactions, such as anticipated future
export sales, purchases of equipment and raw materials,
as well as the variability of expected interest payments
and receipts.
1. Accounting policies (continued)
Consolidated Financial Statements of the Nestlé Group 2011 57
The effective part of the changes in fair value of hedging
instruments is recognised in other comprehensive income,
while any ineffective part is recognised immediately in the
income statement. When the hedged item results in the
recognition of a non-?nancial asset or liability, including
acquired businesses, the gains or losses previously
recognised in other comprehensive income are included in
the measurement of the cost of the asset or of the liability.
Otherwise the gains or losses previously recognised in
other comprehensive income are removed and recognised
in the income statement at the same time as the hedged
transaction.
Net investment hedges
The Group uses net investment hedges to mitigate
translation exposure on its net investments in af?liated
companies.
The changes in fair values of hedging instruments are
taken directly to other comprehensive income together
with gains or losses on the foreign currency translation of
the hedged investments. All of these fair value gains or
losses are deferred in equity until the investments are sold
or otherwise disposed of.
Undesignated derivatives
Undesignated derivatives are comprised of two categories.
The ?rst includes derivatives acquired in the frame of risk
management policies for which hedge accounting is not
applied. The second category relates to derivatives that
are acquired with the aim of delivering performance over
agreed benchmarks of marketable securities portfolios.
Subsequent to initial measurement, undesignated
derivatives are carried at fair value and all their gains and
losses, realised and unrealised, are recognised in the
income statement.
Fair value
The Group determines the fair value of its ?nancial
instruments on the basis of the following hierarchy.
i) The fair value of ?nancial instruments quoted in active
markets is based on their quoted closing price at the
balance sheet date. Examples include commodity
derivative assets and liabilities and other ?nancial assets
such as investments in equity and debt securities.
ii) The fair value of ?nancial instruments that are not
traded in an active market is determined by using
valuation techniques using observable market data.
Such valuation techniques include discounted cash
?ows, standard valuation models based on market
parameters, dealer quotes for similar instruments and
use of comparable arm’s length transactions. For
example, the fair value of forward exchange contracts,
currency swaps and interest rate swaps is determined
by discounting estimated future cash ?ows using a risk-
free interest rate.
iii) The fair value of ?nancial instruments that are
determined on the basis of entity speci?c valuations
using inputs that are not based on observable market
data (unobservable inputs). When the fair value of
unquoted instruments cannot be measured with
suf?cient reliability, the Group carries such instruments
at cost less impairment, if applicable.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in
hand and other short-term highly liquid investments with
maturities of three months or less from the initial
recognition.
Short-term investments
Short-term investments include investments from the
available-for-sale category if their maturity is more than
three months from the initial recognition and if they are due
within a period of 12 months or less; or there is no maturity
but the assets are expected to be realised within 12 months
after the reporting period.
Inventories
Raw materials and purchased ?nished goods are valued at
purchase cost. Work in progress and manufactured ?nished
goods are valued at production cost. Production cost
includes direct production costs and an appropriate
proportion of production overheads and factory depreciation.
Raw material inventories and purchased ?nished goods
are accounted for using the FIFO (?rst in, ?rst out) method.
The weighted average cost method is used for other
inventories.
An allowance is established when the net realisable
value of any inventory item is lower than the value
calculated above.
Prepayments and accrued income
Prepayments and accrued income comprise payments
made in advance relating to the following year, and
income relating to the current year, which will not be
invoiced until after the balance sheet date.
1. Accounting policies (continued)
58 Consolidated Financial Statements of the Nestlé Group 2011
Property, plant and equipment
Property, plant and equipment are shown in the balance
sheet at their historical cost. Depreciation is provided on
components that have homogenous useful lives by using
the straight-line method so as to depreciate the initial cost
down to the residual value over the estimated useful lives.
The residual values are 30% on head of?ces and nil for all
other asset types. The useful lives are as follows:
Buildings 20 – 40 years
Machinery and equipment 10 – 25 years
Tools, furniture, information technology
and sundry equipment 3 – 10 years
Vehicles 3 – 8 years
Land is not depreciated.
Useful lives, components and residual amounts are
reviewed annually. Such a review takes into consideration
the nature of the assets, their intended use including but
not limited to the closure of facilities and the evolution of
the techno logy and competitive pressures that may lead to
technical obsolescence.
Depreciation of property, plant and equipment is
allocated to the appropriate headings of expenses by
function in the income statement.
Borrowing costs incurred during the course of
construction are capitalised if the assets under
construction are signi?cant and if their construction
requires a substantial period to complete (typically more
than one year). The capitalisation rate is determined on the
basis of the short-term borrowing rate for the period of
construction. Premiums capitalised for leasehold land or
buildings are amortised over the length of the lease.
Government grants are recognised in accordance with the
deferral method, whereby the grant is set up as deferred
income which is released to the income statement over
the useful life of the related assets. Grants that are not
related to assets are credited to the income statement
when they are received.
Leased assets
Leasing agreements which transfer to the Group
substantially all the rewards and risks of ownership of an
asset are treated as ?nance leases. All other leases are
classi?ed as operating leases.
Assets acquired under ?nance leases are capitalised
and depreciated in accordance with the Group’s policy on
property, plant and equipment unless the lease term is
shorter. Land and building leases are recognised separately
provided an allocation of the lease payments between
these categories is reliable. The associated obligations are
included under ?nancial liabilities.
Rentals payable under operating leases are charged to
the income statement on a straight-line basis over the
period of the lease.
The costs of the agreements that do not take the legal
form of a lease but convey the right to use an asset are
separated into lease payments and other payments if the
entity has the control of the use or of the access to the
asset or takes essentially all the output of the asset. Then
the entity determines whether the lease component of the
agreement is a ?nance or an operating lease.
Business combinations and related goodwill
Business combinations are accounted for using the
acquisition method. Identi?able assets acquired and
liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at
the acquisition date. The consideration transferred is
measured at fair value and includes the fair value of any
contingent consideration. Subsequent changes in
contingent consideration, when not classi?ed as equity,
are recognised in pro?t or loss. The acquisition-related
costs are charged to the income statement in the period
in which they are incurred. Where not all of the equity of
a subsidiary is acquired the non-controlling interests are
recognised at the non-controlling interest’s share of the
acquiree’s net identi?able assets. Upon obtaining control
in a business combination achieved in stages, the Group
remeasures its previously held equity interest at fair value
and recognises a gain or a loss to the income statement.
Goodwill is recorded as the surplus of the consideration
transferred over the Group’s interest in the fair value of the
acquired net assets. Goodwill is not amortised but tested
for impairment at least annually and upon the occurrence
of an indication of impairment. The impairment testing
process is described in the appropriate section of these
policies. Goodwill is recorded in the functional currencies
of the acquired operations.
Acquisitions and disposals of non-controlling
interests
The Group treats transactions with non-controlling interests
that do not result in loss of control as transactions with
equity holders in their capacity as equity holders. For
purchases of shares from non-controlling interests, the
1. Accounting policies (continued)
Consolidated Financial Statements of the Nestlé Group 2011 59
difference between any consideration paid and the relevant
share acquired of the carrying amount of net assets of the
subsidiary is recorded in equity. The same principle is
applied to disposals of shares to non-controlling interests.
Intangible assets
This heading includes intangible assets that are internally
generated or acquired either separately or in a business
combination when they are identi?able and can be reliably
measured. Intangible assets are considered to be
identi?able if they arise from contractual or other rights, or
if they are separable (i.e. they can be disposed of either
individually or together with other assets). Intangible
assets comprise inde ?nite life intangible assets and ?nite
life intangible assets. Internally generated intangible assets
are capitalised, provided they generate future economic
bene?ts and their costs are clearly identi?able. Borrowing
costs incurred during the development of internally
generated intangible assets are capitalised if the assets are
signi?cant and if their develop ment requires a substantial
period to complete (typically more than one year).
Inde?nite life intangible assets are those for which there
is no foreseeable limit to their useful economic life as they
arise from contractual or other legal rights that can be
renewed without signi?cant cost and are the subject of
continuous marketing support. They are not amortised but
tested for impairment annually or more frequently if an
impairment indicator is triggered. They mainly comprise
certain brands, trademarks and intellectual property
rights. The assessment of the classi?cation of intangible
assets as inde?nite is reviewed annually.
Finite life intangible assets are those for which there is
an expectation of obsolescence that limits their useful
economic life or where the useful life is limited by
contractual or other terms. They are amortised over the
shorter of their contractual or useful economic lives. They
comprise mainly management information systems,
patents and rights to carry on an activity (e. g. exclusive
rights to sell products or to perform a supply activity).
Finite life intan gible assets are amortised on a straight-line
basis assuming a zero resi d ual value: management
information systems over a period ranging from 3 to
5 years; and other ?nite life intangible assets over 5 to
20 years. Useful lives and residual values are reviewed
annually. Amortisation of intangible assets is allocated to
the appropriate headings of expenses by function in the
income statement.
Research and development
Internal research costs are charged to the income
statement in the year in which they are incurred.
Development costs are also charged to the income
statement in the year in which they are incurred due to
uncertainties inherent in the development of new products
because the expected future economic bene?ts cannot be
reliably determined. As long as the products have not
reached the market place, there is no reliable evidence
that positive future cash ?ows would be obtained.
Payments made to third parties in order to in-license or
acquire intellectual property rights, compounds and
products are capitalised as they are separately identi?able
and are expected to generate future bene?ts.
Other development costs (essentially management
information system software) are capitalised provided that
there is an identi?able asset that will be useful in
generating future bene?ts in terms of savings, economies
of scale, etc.
Impairment of goodwill and inde?nite life intangible
assets
Goodwill and inde?nite life intangible assets are tested for
impairment at least annually and upon the occurrence of
an indication of impairment.
The impairment tests are performed annually at the
same time each year and at the cash generating unit
(CGU) level. The Group de?nes its CGU based on the way
that it monitors and derives economic bene?ts from the
acquired goodwill and intangibles. The impairment tests
are performed by comparing the carrying value of the
assets of these CGU with their recoverable amount, based
on their future projected cash ?ows discounted at an
appropriate pre-tax rate of return. Usually, the cash ?ows
correspond to estimates made by Group Management in
?nancial plans and business strategies covering a period
of ?ve years. They are then projected to 50 years using
a steady or declining growth rate given that the Group
businesses are of a long-term nature. The Group assesses
the uncertainty of these estimates by making sensitivity
analyses. The discount rate re?ects the current
assessment of the time value of money and the risks
speci?c to the CGU (essentially country risk). The business
risk is included in the determination of the cash ?ows.
Both the cash ?ows and the discount rates exclude
in?ation.
An impairment loss in respect of goodwill is never
subsequently reversed.
1. Accounting policies (continued)
60 Consolidated Financial Statements of the Nestlé Group 2011
Impairment of property, plant and equipment and
?nite life intangible assets
Consideration is given at each balance sheet date to
determine whether there is any indication of impairment
of the carrying amounts of the Group’s property, plant and
equipment and ?nite life intangible assets. Indication could
be unfavourable development of a business under
competitive pressures or severe economic slowdown in
a given market as well as reorganisation of the operations
to leverage their scale. If any indication exists, an asset’s
recoverable amount is estimated. An impairment loss is
recognised when ever the carrying amount of an asset
exceeds its recoverable amount. The recoverable amount
is the greater of the fair value less cost to sell and value in
use. In asses sing value in use, the estimated future cash
?ows are discounted to their present value, based on the
time value of money and the risks speci?c to the country
where the assets are located. The risks speci?c to the
asset are included in the determina tion of the cash ?ows.
Assets that suffered an impairment are tested for
possible reversal of the impairment at each reporting date
if indications exist that impairment losses recognised in
prior periods no longer exist or have decreased.
Assets held for sale and discontinued operations
Non-current assets held for sale (and disposal groups) are
presented separately in the current section of the balance
sheet. Immediately before the initial classi?cation of the
assets (and disposal groups) as held for sale, the carrying
amounts of the assets (or all the assets and liabilities in the
disposal groups) are measured in accordance with their
applicable accounting policy. Non-current assets held for
sale (and disposal groups) are subsequently measured at
the lower of their carrying amount and fair value less cost
to sell. Non-current assets held for sale (and disposal
groups) are no longer depreciated.
Upon occurrence of discontinued operations, the
income statement of the discontinued operations is
presented sepa ra tely in the consolidated income statement.
Comparative infor mation is restated accordingly. Balance
sheet and cash ?ow information related to discontinued
operations are disclosed separately in the notes.
Provisions
Provisions comprise liabilities of uncertain timing or
amount that arise from restructuring plans, environmental,
litigation and other risks. Provisions are recognised when
there exists a legal or constructive obligation stemming
from a past event and when the future cash out?ows can
be reliably estimated. Obligations arising from restructuring
plans are recognised when detailed formal plans have
been established and when there is a valid expectation
that such plans will be carried out by either starting to
implement them or announcing their main features.
Obligations under litigations re?ect Group Management’s
best estimate of the outcome based on the facts known at
the balance sheet date.
Contingent assets and liabilities
Contingent assets and liabilities are possible rights and
obligations that arise from past events and whose
existence will be con?rmed only by the occurrence or
non-occurrence of one or more uncertain future events
not fully within the control of the Group. They are
disclosed in the notes.
Post-employment bene?ts
The liabilities of the Group arising from de?ned bene?t
obligations, and the related current service cost, are
determined using the projected unit credit method.
Actuarial advice is provided both by external consultants
and by actuaries employed by the Group. The actuarial
assumptions used to calculate the de?ned bene?t
obligations vary according to the economic conditions of
the country in which the plan is located. Such plans are
either externally funded (in the form of independently
administered funds) or unfunded.
For the funded de?ned bene?t plans, the de?cit or
excess of the fair value of plan assets over the present
value of the de?ned bene?t obligation is recognised as
a liability or an asset in the balance sheet, taking into
account any unrecognised past service cost. However,
an excess of assets is recognised only to the extent that
it represents a future economic bene?t which is available
in the form of refunds from the plan or reductions in future
contributions to the plan. When these criteria are not met,
it is not recognised but is disclosed in the notes. Impacts
of minimum funding requirements in relation to past service
are considered when determining pension obligations.
Actuarial gains and losses arise mainly from changes in
actuarial assumptions and differences between actuarial
assumptions and what has actually occurred. They are
recognised in the period in which they occur in other
comprehensive income.
1. Accounting policies (continued)
Consolidated Financial Statements of the Nestlé Group 2011 61
For de?ned bene?t plans, the pension cost charged to
the income statement consists of current service cost,
interest cost, expected return on plan assets, effects of
early retirements, curtailments or settlements, and past
service cost. The past service cost for the enhancement of
pension bene?ts is accounted for when such bene?ts vest
or become a constructive obligation.
Some bene?ts are also provided by de?ned contribution
plans. Contributions to such plans are charged to the
income statement as incurred.
Equity compensation plans
The Group has equity-settled and cash-settled share-based
payment transactions.
Equity-settled share-based payment transactions are
recognised in the income statement with a corresponding
increase in equity over the vesting period. They are fair
valued at grant date and measured using generally
accepted pricing models. The cost of equity-settled
share-based payment transactions is adjusted annually
by the expec ta tions of vesting, for the forfeitures of the
participants’ rights that no longer satisfy the plan
conditions, as well as for early vesting.
Liabilities arising from cash-settled share-based payment
transactions are recognised in the income statement over
the vesting period. They are fair valued at each reporting
date and measured using generally accepted pricing
models. The cost of cash-settled share-based payment
transactions is adjusted for the forfeitures of the
participants’ rights that no longer satisfy the plan
conditions, as well as for early vesting.
Accruals and deferred income
Accruals and deferred income comprise expenses relating
to the current year, which will not be invoiced until after
the balance sheet date, and income received in advance
relating to the following year.
Dividend
In accordance with Swiss law and the Company’s Articles
of Association, dividend is treated as an appropriation of
pro?t in the year in which it is rati?ed at the Annual
General Meeting and subsequently paid.
Events occurring after the balance sheet date
The values of assets and liabilities at the balance sheet
date are adjusted if there is evidence that subsequent
adjusting events warrant a modi?cation of these values.
These adjustments are made up to the date of approval
of the Consolidated Financial Statements by the Board
of Directors. Other non-adjusting events are disclosed in
the notes.
Changes in presentation – Revenue
Certain allowances and discounts, granted to trade
chains, distributors, retailers and consumers for services
rendered to the Group concerning trade and consumer
promotions, selling, distribution, advertising etc. were
previously reported as expenses under marketing and
administration expenses as well as distribution expenses
on grounds that they are incurred to generate sales.
These allowances and discounts, as from 1 January 2011,
are disclosed as a deduction of sales in conformity with
the practice generally applied by consumer goods
companies. The impact of this change for the year ended
31 December 2010 is a reduction in distribution expenses
of CHF 432 million as well as marketing and administration
expenses of CHF 16 166 million. Moreover, a separate line
for other revenues such as license fees received from third
parties has been added to the Income Statement, for an
amount of CHF 109 million for this same period. The total
impact is a reduction in sales of CHF 16 707 million. 2010
comparatives have been restated accordingly.
Changes in presentation – Operating pro?t
Previously the Group Income Statement included EBIT
(Earnings before Interest, Taxes, Restructuring and
Impairments) and Pro?t before Interest and Taxes. As
from 2011, the Income Statement displays a Trading
Operating Pro?t that is after restructuring costs, impairment
of all assets except goodwill, litigations and onerous
contracts, result on disposal of property, plant and
equipment and speci?c other income and expenses that
fall within the control of operating segments. This
represents the new internal performance view that is also
utilised in the segment reporting. Finally the line Pro?t
before Interest and Taxes is renamed Operating Pro?t and
is after impairment of goodwill, results on disposals of
businesses, acquisition-related costs and other income
and expenses that fall beyond the control of operating
segments and relate to events such as natural disasters
and expropriation of assets. 2010 comparatives have been
restated accordingly.
1. Accounting policies (continued)
62 Consolidated Financial Statements of the Nestlé Group 2011
Changes in presentation – Analyses by segment
The scope of the operating segments has been modi?ed
following on the changes in management responsibilities:
HealthCare Nutrition, now managed by Nestlé Health
Science, is reported under “Other”. Moreover Pharma
is reported under “Other” as a result of the disposal of
Alcon. Information by product has been modi?ed
accordingly. 2010 comparatives have been restated.
Changes in accounting policies
The accounting policies are the same as those applied in
the Consolidated Financial Statements for the year ended
31 December 2010. The revised standards and the new or
revised interpretations that are effective for the 2011
reporting year are either not applicable to the Group, or do
not have a material impact on the Consolidated Financial
Statements.
Changes in IFRS that may affect the Group after
31 December 2011
The following standards and amendments to existing
standards have been published and are mandatory as well
as applicable for the Group’s accounting period beginning
on 1 January 2013, unless otherwise stated. The Group
will not early adopt them.
IFRS 9 – Financial Instruments
The standard addresses the classi?cation, measurement
and derecognition of ?nancial assets and ?nancial liabilities.
The standard will affect the Group’s accounting for its
available-for-sale ?nancial assets, as IFRS 9 only permits
the recognition of fair value gains and losses in other
comprehensive income if they relate to equity investments
that are not held for trading. Such gains and losses are
never reclassi?ed to the Income Statement at a later date.
There will be no impact on the Group’s accounting for
?nancial liabilities, as the new requirements only affect the
accounting for ?nancial liabilities that are designated at fair
value through pro?t or loss, and the Group does not have
any such liabilities. This standard is effective for the
Group’s accounting period beginning on 1 January 2015.
IFRS 10 – Consolidated Financial Statements
This standard introduces a new single control model as
the basis for consolidation applicable to all investees. It
also introduces a changed de?nition of control. It is not
expected to have a material impact on the Group Financial
Statements.
IFRS 11 – Joint Arrangements
This standard establishes principles for the ?nancial
reporting by parties to a joint arrangement. The standard
will affect the Group’s accounting for companies over
which the Group exercises joint control with partners.
The current proportionate consolidation method will be
replaced by the equity method and this change will affect
almost all Financial Statement line items resulting in
decreasing revenues and expenses, assets and liabilities.
Nevertheless, pro?t for the period and equity will remain
unchanged.
IFRS 12 – Disclosure of Interests in Other Entities
This standard combines, enhances and replaces disclosure
requirements for subsidiaries, joint arrangements,
associates and unconsolidated structured entities. The
Group will modify its disclosures accordingly.
IFRS 13 – Fair Value Measurement
This standard applies when other IFRS require or permit
fair value measurements. It de?nes fair value, sets out in
a single IFRS a framework for measuring fair value and
requires disclosures about fair value measurements. It is
not expected to have a material impact on the Group
Financial Statements.
IAS 19 Revised 2011 – Employee Bene?ts
The amendments that are expected to have the most
signi?cant impact include:
– replacement of the expected return on plan assets and
interests costs on the de?ned bene?t obligation with
a single net interest component which is calculated by
applying the discount rate to the net de?ned bene?ts
asset or liability;
– past-service costs that will be recognised in the period
of a plan amendment and unvested bene?ts that will no
longer be spread over a future period until the bene?ts
become vested.
1. Accounting policies (continued)
Consolidated Financial Statements of the Nestlé Group 2011 63
These changes will affect the pro?t for the period and the
earnings per share by increasing employee bene?t costs
of the Group. It will also impact the amounts presented in
other comprehensive income, and the net employee
bene?ts liabilities/(assets) in the Balance Sheet.
Improvements and other amendments to IFRS/IAS
A number of standards have been modi?ed on
miscellaneous points. Such changes include
IAS 1 – Presentation of Financial Statements, which
requires entities to separate items presented in Other
Comprehensive Income into two groups, based on
whether or not they may be recycled to the Income
Statement in the future. None of these amendments
are expected to have a material effect on the Group’s
Financial Statements.
1. Accounting policies (continued)
64 Consolidated Financial Statements of the Nestlé Group 2011
2. Acquisitions, disposals and discontinued operations
2.1 Modi?cation of the scope of consolidation
The scope of consolidation has been affected by acquisitions and disposals made in 2011.
Main acquisitions
Full consolidation
Hsu Fu Chi, China, confectionery products, 60% (December).
Yinlu Foods Group, China, ready-to-drink peanut milk and ready-to-eat canned rice porridge, 60% (November).
Prometheus, USA, HealthCare, 100% (July).
Proportionate consolidation
Q-Med, Sweden, HealthCare, 100% (March), acquired by our joint-venture Galderma.
Disposals
There were no major disposals in 2011.
2.2 Acquisitions of businesses
The major classes of assets acquired and liabilities assumed at the acquisition date are:
In millions of CHF 2011 2010
(a)
Hsu Fu Chi
Yinlu Foods
Group
Other
acquisitions
Property, plant and equipment 396 427 200 1 023 342
Intangible assets
(b)
479 694 724 1 897 2 134
Inventories and other assets 670 254 373 1 297 292
Assets held for sale
(c)
— — — — 845
Financial debt (81) (185) (16) (282) (18)
Employee bene?ts, deferred taxes and provisions (175) (171) (114) (460) (35)
Other liabilities (326) (250) (229) (805) (74)
Liabilities directly associated with assets held for sale
(c)
— — — — (177)
Fair value of identi?able net assets 963 769 938 2 670 3 309
(a) Mainly Kraft Foods' frozen pizza.
(b) Mainly Brands and intellectual property rights.
(c) Alcon's acquisitions.
Since the valuation of the assets and liabilities of recently acquired businesses is still in process, the values are determined
provisionally.
Consolidated Financial Statements of the Nestlé Group 2011 65
2. Acquisitions, disposals and discontinued operations (continued)
The goodwill arising on acquisitions and the cash out?ow are:
In millions of CHF 2011 2010
(a)
Hsu Fu Chi
Yinlu Foods
Group
Other
acquisitions
Fair value of consideration transferred 1 489 1 150 1 423 4 062 5 740
Non-controlling interests
(b)
385 308 11 704 6
Fair value of pre-existing interests
(c)
— — 48 48 —
Fair value of identi?able net assets (963) (769) (938) (2 670) (3 309)
Goodwill 911 689 544 2 144 2 437
(a) Mainly Kraft Foods' frozen pizza.
(b) Non-controlling interests have been measured in accordance with the accounting principle described in Note 1 – Business combinations and related goodwill.
(c) The remeasurement to fair value of pre-existing interests in one of the business acquisitions resulted in a gain of CHF 34 million and has been recognised under
other operating income in the income statement (Note 4.2).
In millions of CHF 2011 2010
(a)
Hsu Fu Chi
Yinlu Foods
Group
Other
acquisitions
Fair value of consideration transferred 1 489 1 150 1 423 4 062 5 740
Cash and cash equivalents acquired (132) (34) (134) (300) (41)
Consideration payable — (25) (16) (41) (135)
Payment of consideration payable on prior years acquisitions — — 21 21 18
Cash out?ow on acquisitions 1 357 1 091 1 294 3 742 5 582
(a) Mainly Kraft Foods' frozen pizza.
The consideration transferred consists of payments made in cash with some consideration remaining payable.
Hsu Fu Chi acquisition
On 22 December 2011, the Group acquired a 60% share in Hsu Fu Chi in China. Hsu Fu Chi is a leading manufacturer
and distributor of confectionery products in China. It will complement Nestlé’s existing product portfolio in China, which
includes culinary products, coffee, confectionery, bottled water, milk powder and products for the foodservice industry.
The goodwill arising on this acquisition includes elements that cannot be recognised as intangible assets such as
synergies, complementary market share and competitive position. The goodwill arising from this acquisition is expected
to be deductible for tax purposes. Because the impact of the activity of 10 days in December 2011 on sales and pro?t of
Hsu Fu Chi being insigni?cant for the Group, it has been consolidated for the ?rst time on 31 December 2011. The Group’s
total sales and pro?t for the year 2011 would have amounted respectively to CHF 84 457 million and CHF 9917 million if
the acquisition had been effective 1 January 2011. These amounts have been determined based on the assumption that
the fair value adjustments at the acquisition date, determined provisionally, would have been the same at 1 January.
Yinlu Foods Group acquisition
On 17 November 2011, the Group acquired a 60% share in the Yinlu Foods Group (Yinlu) in China. Yinlu is a signi?cant
marketer for ready-to-drink peanut milk and ready-to-eat canned rice porridge in China. It will complement Nestlé’s
existing product portfolio in China.
The goodwill arising on this acquisition includes elements that cannot be recognised as intangible assets such as
synergies, complementary market share and competitive position. The goodwill arising from this acquisition is expected
to be deductible for tax purposes. Sales and pro?t for the year 2011 of Yinlu Foods Group included in the Consolidated
Financial Statements amount respectively to CHF 123 million and CHF 13 million. The Group’s total sales and pro?t for
66 Consolidated Financial Statements of the Nestlé Group 2011
the year 2011 would have amounted respectively to CHF 84 782 million and CHF 9926 million if the acquisition had been
effective 1 January 2011. These amounts have been determined based on the assumption that the fair value adjustments
at the acquisition date, determined provisionally, would have been the same at 1 January.
Other acquisitions
There were other cash out?ows in 2011 related to several individually non signi?cant acquisitions, of which the main
ones are Q-Med by Galderma and Prometheus. The Group’s sales and pro?t for the year are not signi ?cantly impacted by
them. Cash out?ows of the comparative period were impacted by the Kraft Foods’ frozen pizza acquisition (cash out?ow
of CHF 3969 million) and other several non signi?cant acquisitions.
Acquisition-related costs
2011 acquisition-related costs have been recognised under Other operating expenses in the income statement (Note 4.2)
for an amount of CHF 34 million (2010: CHF 23 million).
2.3 Disposals of businesses
In millions of CHF 2011 2010
(a)
Property, plant and equipment 1 4
Goodwill and intangible assets — 1
Other assets 10 8
Non-controlling interests — (4 352)
Other liabilities (3) (31)
Alcon net assets held for sale disposed of — 8 936
Net assets and non-controlling interests disposed of 8 4 566
Cumulative other comprehensive income items, net, reclassi?ed to income statement — 899
Pro?t/(loss) on current year disposals (3) 24 472
Total disposal consideration 5 29 937
Cash and cash equivalents disposed of (1) (2 242)
Consideration receivable (2) (2)
Receipt of consideration receivable on prior years disposals 5 22
Cash in?ow on disposals 7 27 715
(a) 2010 impacted by Alcon disposal (refer to Note 2.4).
2.4 Discontinued operations – Alcon
On 4 January 2010, Novartis exercised its call option to acquire the remaining 52% of Alcon outstanding capital from
Nestlé, at a price of USD 181.– per share. The transaction received regulatory approval and was completed on
25 August 2010.
The cash in?ow on Alcon disposal was as follows:
In millions of CHF 2010
Consideration received 29 926
Cash and cash equivalents disposed of (2 242)
Cash in?ow on Alcon disposal 27 684
2. Acquisitions, disposals and discontinued operations (continued)
Consolidated Financial Statements of the Nestlé Group 2011 67
The consideration received included the disposal price as per the selling agreement and interests due from the date
of the exercise of the call to the regulatory approval, as well as the results on hedges of the cash proceeds.
In accordance with IFRS 5, Alcon’s related assets and liabilities were classi?ed as a disposal group in Assets held for sale
and Liabilities directly associated with assets held for sale as at 31 December 2009 and until the disposal date.
Consequently, the depreciation and amortisation of non-current assets had been stopped as from 1 January 2010.
Additionally, Alcon operations were presented separately in the income statement as discontinued operations.
The assets held for sale and liabilities directly associated with assets held for sale related to the Alcon discontinued
operations were the following:
In millions of CHF 2010
(a)
Cash, cash equivalents and short-term investments 2 950
Inventories 664
Trade and other receivables 1 474
Property, plant and equipment 1 435
Goodwill and intangible assets 4 188
Other assets 1 127
Assets held for sale 11 838
Financial debt (395)
Trade and other payables (530)
Employee bene?ts and provisions (763)
Other liabilities (1 214)
Liabilities directly associated with assets held for sale (2 902)
Net assets held for sale from discontinued operations 8 936
(a) Represent the amounts at the date of the disposal. The non-controlling interests disposed of amounted to CHF 4.4 billion.
The cumulative income or expense recognised in other comprehensive income related to Alcon discontinued operations
were as follows:
In millions of CHF 2010
(a)
Currency retranslations, net of taxes (902)
Fair value adjustments on available-for-sale ?nancial instruments, net of taxes 3
Actuarial gains/(losses) on de?ned bene?t schemes, net of taxes (82)
Cumulative income or expense recognised in other comprehensive income (981)
(a) Represent the amounts at the date of the disposal.
The main elements of the cash ?ow of the Alcon discontinued operations were as follows:
In millions of CHF 2010
Cash ?ow from discontinued operations
Operating cash ?ow 1 884
Cash ?ow from investing activities (1 035)
Cash ?ow from ?nancing activities (1 650)
2. Acquisitions, disposals and discontinued operations (continued)
68 Consolidated Financial Statements of the Nestlé Group 2011
3.1 Operating segments
In millions of CHF
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Impairment of goodwill (4) (4) (18) (204) (105) (2) — (337) — (337)
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of which impairment of assets other than goodwill (86) (17) (21) (31) (9) (30) — (194) — (194)
of which restructuring costs (245) (72) (14) (83) (16) (33) (6) (469) — (469)
Assets
Segment assets 10 935 22 312 8 765 6 596 12 006 8 887 10 924 (1 757) 78 668 — 78 668
Non-segment assets 32 973
Total assets 111 641
of which goodwill and intangible assets 2 453 9 862 1 862 1 665 6 395 3 461 9 061 34 759 — 34 759
Other information
Capital additions 1 075 5 678 877 529 470 685 232 9 546 1 168 10 714
of which capital expenditure 906 1 127 840 413 378 509 211 4 384 192 4 576
Depreciation and amortisation of segment assets 679 931 468 561 155 283 105 3 182 — 3 182
(a) 2010 comparatives have been restated following the changes in the Income Statement described in Note 1 – Accounting Policies. Moreover, the scope of the
operating segments has been reviewed to be aligned with the changes of management responsibility as of 1 January 2011. HealthCare Nutrition has been
reclassi?ed under "Other" as now managed as part of Nestlé Health Science. As a result of the disposal of Alcon, Pharma has been reclassi?ed under "Other" as
now managed together with the Food and Beverages Joint Ventures.
(b) Mainly Nespresso, Nestlé Professional, Nestlé Health Science, Food and Beverages Joint Ventures and Pharma Joint Ventures managed on a worldwide basis.
(c) Refer to the Segment reporting section of Note 1 – Accounting policies for the de?nition of unallocated items.
(d) Detailed information related to Alcon discontinued operations is disclosed in Note 2. In 2010, goodwill and intangible assets are included in Assets held for sale
in the Balance Sheet, before being disposed of.
(e) Inter-segment sales are not signi?cant.
3. Analyses by segment
2
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(
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Consolidated Financial Statements of the Nestlé Group 2011 69
3.1 Operating segments
In millions of CHF
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Impairment of goodwill (4) (4) (18) (204) (105) (2) — (337) — (337)
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of which impairment of assets other than goodwill (86) (17) (21) (31) (9) (30) — (194) — (194)
of which restructuring costs (245) (72) (14) (83) (16) (33) (6) (469) — (469)
Assets
Segment assets 10 935 22 312 8 765 6 596 12 006 8 887 10 924 (1 757) 78 668 — 78 668
Non-segment assets 32 973
Total assets 111 641
of which goodwill and intangible assets 2 453 9 862 1 862 1 665 6 395 3 461 9 061 34 759 — 34 759
Other information
Capital additions 1 075 5 678 877 529 470 685 232 9 546 1 168 10 714
of which capital expenditure 906 1 127 840 413 378 509 211 4 384 192 4 576
Depreciation and amortisation of segment assets 679 931 468 561 155 283 105 3 182 — 3 182
(a) 2010 comparatives have been restated following the changes in the Income Statement described in Note 1 – Accounting Policies. Moreover, the scope of the
operating segments has been reviewed to be aligned with the changes of management responsibility as of 1 January 2011. HealthCare Nutrition has been
reclassi?ed under "Other" as now managed as part of Nestlé Health Science. As a result of the disposal of Alcon, Pharma has been reclassi?ed under "Other" as
now managed together with the Food and Beverages Joint Ventures.
(b) Mainly Nespresso, Nestlé Professional, Nestlé Health Science, Food and Beverages Joint Ventures and Pharma Joint Ventures managed on a worldwide basis.
(c) Refer to the Segment reporting section of Note 1 – Accounting policies for the de?nition of unallocated items.
(d) Detailed information related to Alcon discontinued operations is disclosed in Note 2. In 2010, goodwill and intangible assets are included in Assets held for sale
in the Balance Sheet, before being disposed of.
(e) Inter-segment sales are not signi?cant.
3. Analyses by segment (continued)
70 Consolidated Financial Statements of the Nestlé Group 2011
3.1 Operating segments (continued)
In millions of CHF
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Net other operating income/(expenses) excluding impairment of goodwill (51)
Operating pro?t 12 471
Net ?nancing cost (421)
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of which restructuring costs (43) (21) (12) (1) (9) (14) — (100)
Assets
Segment assets 11 561 23 081 13 806 6 602 12 848 10 936 11 117 (2 140) 87 811
Non-segment assets 26 280
Total assets 114 091
of which goodwill and intangible assets 2 304 9 831 4 561 1 720 6 486 4 438 9 024 38 364
Other information
Capital additions 971 1 267 4 819 594 590 1 595 254 10 090
of which capital expenditure 871 1 102 1 142 407 477 537 243 4 779
Depreciation and amortisation of segment assets (574) (783) (441) (474) (198) (338) (117) (2 925)
(a) Mainly Nespresso, Nestlé Professional, Nestlé Health Science, Food and Beverages Joint Ventures and Pharma Joint Ventures managed on a worldwide basis.
(b) Refer to the Segment reporting section of Note 1 – Accounting policies for the de?nition of unallocated items.
(c) Inter-segment sales are not signi?cant.
3. Analyses by segment (continued)
2
0
1
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Consolidated Financial Statements of the Nestlé Group 2011 71
3.1 Operating segments (continued)
In millions of CHF
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Sales
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Impairment of goodwill — — (9) (5) — (2) — (16)
Net other operating income/(expenses) excluding impairment of goodwill (51)
Operating pro?t 12 471
Net ?nancing cost (421)
Pro?t before taxes and associates 12 050
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of which impairment of assets other than goodwill (66) (18) (31) (8) (18) (9) — (150)
of which restructuring costs (43) (21) (12) (1) (9) (14) — (100)
Assets
Segment assets 11 561 23 081 13 806 6 602 12 848 10 936 11 117 (2 140) 87 811
Non-segment assets 26 280
Total assets 114 091
of which goodwill and intangible assets 2 304 9 831 4 561 1 720 6 486 4 438 9 024 38 364
Other information
Capital additions 971 1 267 4 819 594 590 1 595 254 10 090
of which capital expenditure 871 1 102 1 142 407 477 537 243 4 779
Depreciation and amortisation of segment assets (574) (783) (441) (474) (198) (338) (117) (2 925)
(a) Mainly Nespresso, Nestlé Professional, Nestlé Health Science, Food and Beverages Joint Ventures and Pharma Joint Ventures managed on a worldwide basis.
(b) Refer to the Segment reporting section of Note 1 – Accounting policies for the de?nition of unallocated items.
(c) Inter-segment sales are not signi?cant.
3. Analyses by segment (continued)
72 Consolidated Financial Statements of the Nestlé Group 2011
3.2 Products
In millions of CHF
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Sales 18 114 7 215 17 202 10 098 14 899 9 735 10 643 87 906 5 109 93 015
Trading operating pro?t 4 150 513 2 409 1 906 1 884 1 443 2 176 (1 805) 12 676 2 156 14 832
Impairment of goodwill (2) (204) (1) (105) (19) (4) (2) — (337) — (337)
Net other operating income/(expenses) excluding impairment of goodwill (196) 24 521 24 325
Operating pro?t 12 143 26 677 38 820
Net ?nancing cost (762) 9 (753)
Pro?t before taxes and associates 11 381 26 686 38 067
Net other trading income/(expenses) included in Trading operating pro?t (179) (157) (213) (135) (344) (224) (88) (22) (1 362) — (1 362)
of which impairment of assets other than goodwill (7) (31) (25) (38) (62) (31) — — (194) — (194)
of which restructuring costs (44) (83) (67) (35) (178) (42) (14) (6) (469) — (469)
Assets 9 219 7 477 13 333 16 669 12 995 6 112 14 510 974 81 289 4 370 85 659
of which goodwill and intangible assets 432 1 959 4 579 10 038 6 285 850 9 956 2 389 36 488 2 131 38 619
Liabilities 3 693 1 894 3 466 2 939 2 901 2 181 1 509 (2 388) 16 195 701 16 896
Revenues and results
Sales 18 204 6 526 16 406 9 744 13 933 9 065 9 764 83 642 83 642
Trading operating pro?t 4 129 520 2 251 1 820 2 016 1 524 2 008 (1 730) 12 538 12 538
Impairment of goodwill (2) (5) (5) — — (4) — — (16) (16)
Net other operating income/(expenses) excluding impairment of goodwill (51) (51)
Operating pro?t 12 471 12 471
Net ?nancing cost (421) (421)
Pro?t before taxes and associates 12 050 12 050
Net other trading income/(expenses) included in Trading operating pro?t (151) (19) (211) (55) (69) (136) (8) (36) (685) (685)
of which impairment of assets other than goodwill (35) (8) (37) (20) (18) (30) (2) — (150) (150)
of which restructuring costs (40) (1) (25) (16) (9) (11) 2 — (100) (100)
Assets 9 770 6 640 13 496 16 837 12 922 6 482 13 569 911 80 627 80 627
of which goodwill and intangible assets 393 1 678 4 397 9 762 6 308 1 023 9 141 2 184 34 886 34 886
Liabilities 3 872 1 747 3 456 2 959 2 703 2 034 1 514 (2 614) 15 671 15 671
(a) 2010 comparatives have been restated following the changes in the Income Statement described in Note 1 – Accounting Policies.
(b) Include Pharmaceutical products, previously disclosed separately.
(c) Refer to the Segment reporting section of Note 1 – Accounting policies for the de?nition of unallocated items.
(d) Detailed information related to Alcon discontinued operations is disclosed in Note 2. In 2010, goodwill and intangible assets are included in Assets held for sale
in the Balance Sheet, before being disposed of.
3. Analyses by segment (continued)
2
0
1
0
(
a
)
2
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1
1
Consolidated Financial Statements of the Nestlé Group 2011 73
3.2 Products
In millions of CHF
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Revenues and results
Sales 18 114 7 215 17 202 10 098 14 899 9 735 10 643 87 906 5 109 93 015
Trading operating pro?t 4 150 513 2 409 1 906 1 884 1 443 2 176 (1 805) 12 676 2 156 14 832
Impairment of goodwill (2) (204) (1) (105) (19) (4) (2) — (337) — (337)
Net other operating income/(expenses) excluding impairment of goodwill (196) 24 521 24 325
Operating pro?t 12 143 26 677 38 820
Net ?nancing cost (762) 9 (753)
Pro?t before taxes and associates 11 381 26 686 38 067
Net other trading income/(expenses) included in Trading operating pro?t (179) (157) (213) (135) (344) (224) (88) (22) (1 362) — (1 362)
of which impairment of assets other than goodwill (7) (31) (25) (38) (62) (31) — — (194) — (194)
of which restructuring costs (44) (83) (67) (35) (178) (42) (14) (6) (469) — (469)
Assets 9 219 7 477 13 333 16 669 12 995 6 112 14 510 974 81 289 4 370 85 659
of which goodwill and intangible assets 432 1 959 4 579 10 038 6 285 850 9 956 2 389 36 488 2 131 38 619
Liabilities 3 693 1 894 3 466 2 939 2 901 2 181 1 509 (2 388) 16 195 701 16 896
Revenues and results
Sales 18 204 6 526 16 406 9 744 13 933 9 065 9 764 83 642 83 642
Trading operating pro?t 4 129 520 2 251 1 820 2 016 1 524 2 008 (1 730) 12 538 12 538
Impairment of goodwill (2) (5) (5) — — (4) — — (16) (16)
Net other operating income/(expenses) excluding impairment of goodwill (51) (51)
Operating pro?t 12 471 12 471
Net ?nancing cost (421) (421)
Pro?t before taxes and associates 12 050 12 050
Net other trading income/(expenses) included in Trading operating pro?t (151) (19) (211) (55) (69) (136) (8) (36) (685) (685)
of which impairment of assets other than goodwill (35) (8) (37) (20) (18) (30) (2) — (150) (150)
of which restructuring costs (40) (1) (25) (16) (9) (11) 2 — (100) (100)
Assets 9 770 6 640 13 496 16 837 12 922 6 482 13 569 911 80 627 80 627
of which goodwill and intangible assets 393 1 678 4 397 9 762 6 308 1 023 9 141 2 184 34 886 34 886
Liabilities 3 872 1 747 3 456 2 959 2 703 2 034 1 514 (2 614) 15 671 15 671
(a) 2010 comparatives have been restated following the changes in the Income Statement described in Note 1 – Accounting Policies.
(b) Include Pharmaceutical products, previously disclosed separately.
(c) Refer to the Segment reporting section of Note 1 – Accounting policies for the de?nition of unallocated items.
(d) Detailed information related to Alcon discontinued operations is disclosed in Note 2. In 2010, goodwill and intangible assets are included in Assets held for sale
in the Balance Sheet, before being disposed of.
3. Analyses by segment (continued)
74 Consolidated Financial Statements of the Nestlé Group 2011
3.3 Customers
There is no single customer amounting to 10% or more of Group’s revenues.
3.4 Geography (top ten countries and Switzerland)
In millions of CHF 2011 2010
Sales
Non-current
assets
(a)
Sales
(b)
Non-current
assets
(a)
USA 21 474 17 115 24 075 16 661
France 5 646 1 722 5 958 1 727
Brazil 5 418 1 242 5 602 1 228
Germany 3 444 1 356 3 656 1 406
Mexico 2 962 596 3 005 612
United Kingdom 2 678 877 2 900 900
Greater China Region 2 509 4 298 2 173 578
Italy 2 273 895 2 397 960
Australia 2 101 1 080 2 070 1 030
Canada 2 017 452 2 139 438
Switzerland
(c)
1 799 2 636 1 750 2 480
Rest of the world and unallocated items 31 321 30 066 32 181 28 177
Total continuing operations 83 642 62 335 87 906 56 197
Discontinued operations 5 109
Total 83 642 62 335 93 015 56 197
(a) Relate to property, plant and equipment, intangible assets and goodwill.
(b) 2010 comparatives have been restated following the changes in the Income Statement described in Note 1 – Accounting Policies.
(c) Country of domicile of Nestlé S.A.
The analysis of sales by geographic area is stated by customer location.
3. Analyses by segment (continued)
Consolidated Financial Statements of the Nestlé Group 2011 75
4. Net other trading and operating income/(expenses)
4.1 Net other trading income/(expenses)
In millions of CHF Notes 2011 2010
(a)
Pro?t on disposal of property, plant and equipment 18 41
Miscellaneous trading income 33 127
Other trading income 51 168
Loss on disposal of property, plant and equipment (15) (9)
Restructuring costs (100) (469)
Impairment of assets other than goodwill 7/9 (150) (194)
Litigations and onerous contracts
(b)
(341) (584)
Miscellaneous trading expenses (130) (274)
Other trading expenses (736) (1 530)
Net other trading income/(expenses) of continuing operations (685) (1 362)
Net other trading income/(expenses) of discontinued operations
(c)
—
Total net other trading income/(expenses) (685) (1 362)
(a) 2010 comparatives have been restated following the changes in the Income Statement described in Note 1 – Accounting Policies.
(b) It relates mainly to numerous separate legal cases (for example labour, civil and tax litigations) as well as several separate onerous contracts, predominantly in
Latin America.
(c) Detailed information related to Alcon discontinued operations is disclosed in Note 2.
4.2 Net other operating income/(expenses)
In millions of CHF Notes 2011 2010
(a)
Pro?t on disposal of businesses 2 4 10
Miscellaneous operating income 108 28
Other operating income 112 38
Loss on disposal of businesses 2 (7) (13)
Impairment of goodwill 8 (16) (337)
Miscellaneous operating expenses (156) (221)
Other operating expenses (179) (571)
Net other operating income/(expenses) of continuing operations (67) (533)
Net other operating income/(expenses) of discontinued operations
(b)
24 521
Total net other operating income/(expenses) (67) 23 988
(a) 2010 comparatives have been restated following the changes in the Income Statement described in Note 1 – Accounting Policies.
(b) Detailed information related to Alcon discontinued operations is disclosed in Note 2.
76 Consolidated Financial Statements of the Nestlé Group 2011
5. Inventories
In millions of CHF 2011 2010
Raw materials, work in progress and sundry supplies 3 904 3 243
Finished goods 5 488 4 812
Allowance for write-down at net realisable value (137) (130)
9 255 7 925
Inventories amounting to CHF 227 million (2010: CHF 169 million) are pledged as security for ?nancial liabilities.
6. Trade and other receivables
6.1 By type
In millions of CHF 2011 2010
Trade receivables 9 541 8 899
Other receivables 3 799 3 184
13 340 12 083
The ?ve major customers represent 9% (2010: 9%) of trade and other receivables, none of them exceeding 5% (2010: 4%).
6.2 Past due and impaired receivables
In millions of CHF 2011 2010
Not past due 11 326 10 522
Past due 1–30 days 1 119 742
Past due 31–60 days 353 273
Past due 61–90 days 100 121
Past due 91–120 days 90 107
Past due more than 120 days 724 727
Allowance for doubtful receivables (372) (409)
13 340 12 083
6.3 Allowance for doubtful receivables
In millions of CHF 2011 2010
At 1 January 409 451
Currency retranslations (15) (52)
Allowance made during the year 59 94
Amounts used and reversal of unused amounts (81) (84)
At 31 December 372 409
Based on the historic trend and expected performance of the customers, the Group believes that the above allowance for
doubtful receivables suf?ciently covers the risk of default.
Consolidated Financial Statements of the Nestlé Group 2011 77
7. Property, plant and equipment
In millions of CHF
Land and
buildings
Machinery
and
equipment
Tools,
furniture
and other
equipment
Vehicles
Total
Gross value
At 1 January 2010 12 931 25 562 7 717 876 47 086
Currency retranslations (961) (2 722) (670) (95) (4 448)
Capital expenditure
(a)
872 2 468 893 151 4 384
Disposals (137) (688) (541) (65) (1 431)
Reclassi?ed as held for sale (48) (31) (5) — (84)
Modi?cation of the scope of consolidation 148 186 (9) 2 327
At 31 December 2010 12 805 24 775 7 385 869 45 834
Currency retranslations (104) (719) (187) (21) (1 031)
Capital expenditure
(a)
1 022 2 643 950 164 4 779
Disposals (140) (624) (507) (65) (1 336)
Reclassi?ed as held for sale — 5 1 — 6
Modi?cation of the scope of consolidation 526 392 86 14 1 018
At 31 December 2011 14 109 26 472 7 728 961 49 270
Accumulated depreciation and impairments
At 1 January 2010 (5 014) (14 596) (5 384) (493) (25 487)
Currency retranslations 434 1 461 512 52 2 459
Depreciation (370) (1 319) (765) (98) (2 552)
Impairments (38) (131) (17) — (186)
Disposals 107 641 492 56 1 296
Reclassi?ed as held for sale 30 29 4 — 63
Modi?cation of the scope of consolidation — 1 10 — 11
At 31 December 2010 (4 851) (13 914) (5 148) (483) (24 396)
Currency retranslations 76 286 125 14 501
Depreciation (341) (1 263) (728) (90) (2 422)
Impairments (51) (81) (17) (1) (150)
Disposals 99 525 490 56 1 170
Reclassi?ed as held for sale — (5) (1) — (6)
Modi?cation of the scope of consolidation — 3 1 — 4
At 31 December 2011 (5 068) (14 449) (5 278) (504) (25 299)
Net at 31 December 2010 7 954 10 861 2 237 386 21 438
Net at 31 December 2011 9 041 12 023 2 450 457 23 971
(a) Including borrowing costs.
At 31 December 2011, property, plant and equipment include CHF 1267 million of assets under construction
(2010: CHF 802 million). Net property, plant and equipment held under ?nance leases amount to CHF 194 million
(2010: CHF 240 million). Net property, plant and equipment of CHF 323 million are pledged as security for ?nancial
liabilities (2010: CHF 112 million). Fire risks, reasonably estimated, are insured in accordance with domestic
requirements.
78 Consolidated Financial Statements of the Nestlé Group 2011
Impairment
Impairment of property, plant and equipment arises mainly from the plans to optimise industrial manufacturing
capacities by closing or selling inef?cient production facilities.
Commitments for expenditure
At 31 December 2011, the Group was committed to expenditure amounting to CHF 734 million (2010: CHF 624 million).
8. Goodwill
In millions of CHF Notes 2011 2010
Gross value
At 1 January 29 003 29 282
Currency retranslations (196) (2 716)
Goodwill from acquisitions 2 2 144 2 437
At 31 December 30 951 29 003
Accumulated impairments
At 1 January (1 972) (1 780)
Currency retranslations 45 145
Impairments (16) (337)
At 31 December (1 943) (1 972)
Net at 31 December 29 008 27 031
Goodwill impairment reviews have been conducted for more than 200 goodwill items allocated to some 50 Cash
Generating Units (CGU).
Detailed results of the impairment tests are presented below for the three largest goodwill items, representing more
than 50% of the net book value at 31 December 2011. For the purpose of the tests, they have been allocated to the
following CGU: PetCare by geographical zone, Infant Nutrition, Frozen Pizza and Ice Cream USA. For each of the CGU,
the recoverable amount is higher than its carrying amount. The recoverable amount has been determined based upon
a value-in-use calculation. De?ated cash ?ow projections covering the next 50 years, discounted at a de?ated pre-tax
weighted average rate, were used in this calculation. The cash ?ows for the ?rst ?ve years were based upon ?nancial
plans approved by Group Management; years six to ten were based upon Group Management’s best expectations,
which are consistent with the Group’s approved strategy for this period. Cash ?ows were assumed to be ?at for years
eleven to 50, although Group Management expects continuing growth. Cash ?ows have been adjusted to re?ect the
speci?c business risks.
7. Property, plant and equipment (continued)
Consolidated Financial Statements of the Nestlé Group 2011 79
8.1 PetCare
The goodwill related to the acquisition of Ralston Purina in 2001 is allocated for impairment tests purpose to three
distinct CGU corresponding to the three operating segments that are covering geogra phically the PetCare business:
Zone Europe, Zone Americas and Zone Asia, Oceania and Africa.
As at 31 December, the carrying amounts of the PetCare goodwill and intangible assets with inde?nite useful life,
expressed in various currencies, represent an equivalent of:
In millions of CHF 2011 2010
T
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Z
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s
Goodwill 8 982 1 762 7 148 9 006 1 802 7 131
Intangible assets with inde?nite useful life 197 — 158 197 — 158
9 179 1 762 7 306 9 203 1 802 7 289
Assumptions
The main assumptions for the two most important CGU, PetCare Zone Europe and PetCare Zone Americas, were the
following:
Zone
Europe
Zone
Americas
De?ated pre-tax weighted average discount rate 6.5% 7.4%
Annual sales growth over the ?rst ten-year period between 3.0 and 6.4% between 4.0 and 4.4%
Trading operating pro?t margin
(a)
evolution over the ?rst ten-year period
steady improvement
in a range of 20–40
basis points per year
stable
Assumptions used in the calculations are consistent with the expected long-term average growth rate of the PetCare
businesses in the Zones concerned. The margin evolu tion is consistent with sales growth and portfolio rationalisation.
Sensitivity analyses
The key sensitivity for the impairment tests is the growth in sales and trading operating pro?t margin
(a)
. For Zone Americas
and Zone Europe, assuming no sales growth and no improvement in trading operating pro?t margin
(a)
over the entire
period would not result in the carrying amount exceeding the recoverable amount. An increase of 100 basis points in the
discount rate assump tion would not change the conclusions of the impairment tests.
(a) Before net other trading income/(expenses).
8. Goodwill (continued)
80 Consolidated Financial Statements of the Nestlé Group 2011
8.2 Infant Nutrition
Goodwill and intangible assets with inde?nite useful life related to the 2007 acquisition of Gerber have been allocated for
the impairment test to the CGU of the Infant Nutrition businesses on a worldwide basis. As at 31 December 2011, the
carrying amounts, expressed in various currencies, represent an equivalent of CHF 3580 million (2010: CHF 3557 million)
for the goodwill and CHF 1250 million (2010: CHF 1248 million) for the intangible assets with inde?nite useful life.
Assumptions
A de?ated pre-tax weighted average discount rate of 7.8% was used in this calculation.
Main assumptions, based on past experiences and current initiatives, were the following:
– sales: annual growth between 4.7 and 7.0% for North America over the ?rst ten-year period, and between 4.5 and 6.0%
for the rest of the world over the ?rst six-year period and ?at thereafter;
– trading operating pro?t margin
(a)
evolution: steadily improving trading operating pro?t margin
(a)
over the ?rst six-year
period, in a range of 20 to 60 basis points per year and then declining or stable from a range of –10 to 0 basis points
per year from year seven to ten.
Sensitivity analyses
The key sensitivity for the impairment test is the growth in sales and trading operating pro?t margin
(a)
. Assuming no
sales growth and no improvement in trading operating pro?t margin
(a)
over the entire period would not result in the
carrying amount exceeding the recoverable amount. An increase of 100 basis points in the discount rate assumption
would not change the conclusions of the impairment test.
8.3 Frozen Pizza and Ice Cream USA
Goodwill and intangible assets with inde?nite useful life related to the Group’s Ice cream businesses in the USA (Nestlé
Ice Cream Company and Dreyer’s) and related to the acquisition in March 2010 of the Kraft Food’s frozen pizza business
in the USA have been allocated to the CGU Frozen Pizza and Ice Cream USA. As at 31 December 2011, the carrying
amounts, expressed in USD, represent an equivalent of CHF 4274 million (2010: CHF 4263 million) for the goodwill and
CHF 1683 million (2010: CHF 1679 million) for the intangible assets with inde?nite useful life.
Assumptions
A de?ated pre-tax weighted average discount rate of 7.2% was used in this calculation.
Main assumptions, based on past experiences and current initiatives, were the following:
– sales: annual growth between 3.9 and 5.1% over the ?rst ten-year period;
– trading operating pro?t margin
(a)
evolution: steadily improving trading operating pro?t margin
(a)
over the ?rst four-year
period, in a range of 110 to 210 basis points per year and then from a range of 30 to 70 basis points per year from year
?ve to ten.
Sensitivity analyses
The key sensitivity for the impairment test is the growth in sales and trading operating pro?t margin
(a)
. Assuming no
sales growth and no trading operating pro?t margin
(a)
improvement after the ?rst ?ve-year period would not result in the
carrying amount exceeding the recoverable amount. An increase of 90 basis points in the discount rate assumption would
not change the conclusions of the impairment test.
(a) Before net other trading income/(expenses).
8. Goodwill (continued)
Consolidated Financial Statements of the Nestlé Group 2011 81
9. Intangible assets
In millions of CHF
Brands and
intellectual
property rights
Operating
rights
and others
Management
information
systems Total
of which
internally
generated
Gross value
At 1 January 2010 4 662 959 4 034 9 655 3 696
of which inde?nite useful life 4 100 — — 4 100 —
Currency retranslations (494) (97) (341) (932) (300)
Expenditure 6 124 119 249 94
Disposals — (14) (20) (34) —
Modi?cation of the scope of consolidation 2 057 78 (5) 2 130 (4)
At 31 December 2010 6 231 1 050 3 787 11 068 3 486
of which inde?nite useful life
(a)
5 689 — — 5 689 —
Currency retranslations 23 (14) (87) (78) (85)
Expenditure 13 113 121 247 97
Disposals — (104) (2) (106) (2)
Modi?cation of the scope of consolidation 1 846 51 (2) 1 895 (2)
At 31 December 2011 8 113 1 096 3 817 13 026 3 494
of which inde?nite useful life
(a)
7 272 — — 7 272 —
Accumulated amortisation and impairments
At 1 January 2010 (256) (288) (2 453) (2 997) (2 190)
Currency retranslations 11 35 216 262 183
Amortisation (30) (79) (521) (630) (506)
Impairments (8) — — (8) —
Disposals — 11 19 30 —
Modi?cation of the scope of consolidation — — 3 3 3
At 31 December 2010 (283) (321) (2 736) (3 340) (2 510)
Currency retranslations 1 (1) 65 65 63
Amortisation (44) (67) (392) (503) (371)
Disposals — 104 2 106 2
Modi?cation of the scope of consolidation — — 2 2 2
At 31 December 2011 (326) (285) (3 059) (3 670) (2 814)
Net at 31 December 2010 5 948 729 1 051 7 728 976
Net at 31 December 2011 7 787 811 758 9 356 680
(a) Yearly impairment tests are performed together with goodwill items (refer to Note 8).
Internally generated intangible assets consist mainly of management information systems.
Commitments for expenditure
At 31 December 2011, the Group was committed to expen diture amounting to CHF 35 million (2010: CHF 36 mil lion).
82 Consolidated Financial Statements of the Nestlé Group 2011
10. Employee bene?ts
Salaries and welfare expenses
The Group’s total salaries and welfare expenses (continuing operations) amount to CHF 13 643 million
(2010: CHF 14 738 million). They are allocated to the appropriate headings of expenses by function.
Pensions and retirement bene?ts
The majority of Group employees are eligible for retirement bene?ts under de?ned bene?t schemes based on
pensionable remuneration and length of service.
Post-employment medical bene?ts and other employee bene?ts
Group companies, principally in the Americas, maintain medical bene?ts plans, which cover eligible retired employees.
The obligations for other employee bene?ts consist mainly of end of service indemnities, which do not have the character
of pensions.
10.1 Reconciliation of assets and liabilities recognised in the balance sheet
In millions of CHF 2011 2010 2009 2008 2007
D
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Present value of funded obligations 22 733 69 22 802 21 394 22 006 19 139 23 098
Fair value of plan assets (19 526) (42) (19 568) (19 852) (19 545) (17 228) (24 849)
Excess of liabilities/(assets) over funded obligations 3 207 27 3 234 1 542 2 461 1 911 (1 751)
Present value of unfunded obligations 650 2 007 2 657 2 499 2 334 2 337 2 693
Unrecognised past service cost of non-vested bene?ts (12) 21 9 9 (18) 7 5
Unrecognised assets and minimum funding requirements 81 — 81 35 62 91 1 171
De?ned bene?ts net liabilities/(assets) 3 926 2 055 5 981 4 085 4 839 4 346 2 118
Liabilities from de?ned contribution plans
and non-current deferred compensation 937 943 1 081 960 1 369
Liabilities from cash-settled share-based transactions
(a)
60 86 99 98 165
Net liabilities 6 978 5 114 6 019 5 404 3 652
Re?ected in the balance sheet as follows:
Employee bene?ts assets (127) (166) (230) (60) (1 513)
Employee bene?ts liabilities 7 105 5 280 6 249 5 464 5 165
Net liabilities 6 978 5 114 6 019 5 404 3 652
(a) The intrinsic value of liabilities from cash-settled share-based transactions that are vested amounts to CHF 31 million (2010: CHF 42 million;
2009: CHF 29 million; 2008: CHF 34 million; 2007: CHF 72 million).
Consolidated Financial Statements of the Nestlé Group 2011 83
10. Employee bene?ts (continued)
10.2 Movement in fair value of de?ned bene?t plan assets
In millions of CHF 2011 2010
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At 1 January (19 805) (47) (19 852) (19 443) (102) (19 545)
Currency retranslations 217 2 219 1 521 14 1 535
Expected return on plan assets (1 328) (2) (1 330) (1 348) (3) (1 351)
Employees' contributions (117) — (117) (120) — (120)
Employer contributions (524) (4) (528) (819) (6) (825)
Actuarial (gains)/losses 1 025 1 1 026 (609) (1) (610)
Bene?ts paid on funded de?ned bene?t schemes 1 005 7 1 012 1 080 8 1 088
Reclassi?ed as held for sale — — — 109 — 109
Transfer (from)/to de?ned contribution plans 1 1 2 (176) 43 (133)
At 31 December (19 526) (42) (19 568) (19 805) (47) (19 852)
The plan assets include property occupied by af?liated companies with a fair value of CHF 13 million (2010: CHF 13 million)
and assets loaned to af?liated companies with a fair value of CHF 34 million (2010: CHF 24 million). The actual return on
plan assets is positive in 2011 by CHF 304 million (2010: positive by CHF 1961 million). The Group expects to contribute
CHF 622 million to its funded de?ned bene?t schemes in 2012.
The major categories of plan assets as a percentage of total plan assets are as follows:
At 31 December 2011 2010
Equities 36% 39%
Bonds 32% 32%
Real estate 7% 6%
Alternative investments 21% 20%
Cash/Deposits 4% 3%
The overall investment policy and strategy for the Group’s funded de?ned bene?t schemes is guided by the objective of
achieving an investment return which, together with the contributions paid, is suf?cient to maintain reasonable control
over the various funding risks of the plans. The investment advisors appointed by plan trustees are responsible for
determining the mix of asset types and target allocations which are reviewed by the plan trustees on an ongoing basis.
Actual asset allocation is determined by a variety of current economic and market conditions and in consideration of
speci?c asset class risk.
The expected long-term rates of return on plan assets are based on long-term expected in?ation, interest rates, risk
premiums and targeted asset class allocations. These estimates take into consideration historical asset class returns and
are determined together with the plans’ investment and actuarial advisors.
84 Consolidated Financial Statements of the Nestlé Group 2011
10.3 Movement in the present value of de?ned bene?t obligations
In millions of CHF 2011 2010
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At 1 January 21 936 1 957 23 893 22 471 1 869 24 340
of which funded de?ned bene?t schemes 21 320 74 21 394 21 863 143 22 006
of which unfunded de?ned bene?t schemes 616 1 883 2 499 608 1 726 2 334
Currency retranslations (231) (65) (296) (1 672) (186) (1 858)
Current service cost 632 73 705 640 74 714
Interest cost 972 114 1 086 1 097 116 1 213
Early retirements, curtailments and settlements (11) (2) (13) (66) (7) (73)
Past service cost of vested bene?ts (103) (110) (213) 4 (2) 2
Past service cost of non-vested bene?ts 1 (3) (2) (1) (24) (25)
Actuarial (gains)/losses 1 200 230 1 430 543 197 740
Bene?ts paid on funded de?ned bene?t schemes (1 005) (7) (1 012) (1 080) (8) (1 088)
Bene?ts paid on unfunded de?ned bene?t schemes (35) (115) (150) (46) (131) (177)
Reclassi?ed as held for sale — — — (152) — (152)
Modi?cation of the scope of consolidation 30 1 31 — 16 16
Transfer from/(to) de?ned contribution plans (3) 3 — 198 43 241
At 31 December 23 383 2 076 25 459 21 936 1 957 23 893
of which funded de?ned bene?t schemes 22 733 69 22 802 21 320 74 21 394
of which unfunded de?ned bene?t schemes 650 2 007 2 657 616 1 883 2 499
10.4 Actuarial gains/(losses) of de?ned bene?t schemes recognised in other comprehensive income
In millions of CHF 2011 2010 2009 2008 2007
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Experience adjustments on plan assets (1 025) (1) (1 026) 610 744 (5 719) 421
Experience adjustments on plan liabilities (154) (99) (253) 71 (303) 95 (297)
Change of assumptions on plan liabilities (1 046) (131) (1 177) (811) (2 146) 1 471 955
Transfer from/(to) unrecognised assets and other (47) — (47) 23 33 1 014 (806)
Actuarial gains/(losses) on de?ned bene?t schemes (2 272) (231) (2 503) (107) (1 672) (3 139) 273
At 31 December 2011, the net cumulative actuarial losses on de?ned bene?t schemes recognised in equity amount to
CHF 7859 million (2010: CHF 5419 million).
10. Employee bene?ts (continued)
Consolidated Financial Statements of the Nestlé Group 2011 85
10. Employee bene?ts (continued)
10.5 Expenses recognised in the income statement
In millions of CHF 2011 2010
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Current service cost 632 73 705 640 74 714
Employee contributions (117) — (117) (120) — (120)
Interest cost 972 114 1 086 1 097 116 1 213
Expected return on plan assets (1 328) (2) (1 330) (1 348) (3) (1 351)
Early retirements, curtailments and settlements (11) (2) (13) (66) (7) (73)
Past service cost of vested bene?ts (103) (110) (213) 4 (2) 2
Past service cost of non-vested bene?ts 1 (1) — 2 2 4
Total de?ned bene?t expenses 46 72 118 209 180 389
Total de?ned contribution expenses 240 259
Expenses from discontinued operations 117
Total 358 765
The expenses for de?ned bene?t and de?ned contribution plans are allocated to the appropriate headings of expenses
by function.
10.6 Principal ?nancial actuarial assumptions
The principal ?nancial actuarial assumptions are presented by geographic area. Each item is a weighted average in
relation to the relevant underlying component.
At 31 December 2011 2010
Discount rates
Europe 3.5% 4.0%
Americas 5.7% 6.3%
Asia, Oceania and Africa 4.7% 5.2%
Expected long-term rates of return on plan assets
Europe 6.0% 6.3%
Americas 8.8% 8.8%
Asia, Oceania and Africa 7.1% 7.4%
Expected rates of salary increases
Europe 2.9% 3.1%
Americas 3.0% 3.0%
Asia, Oceania and Africa 3.6% 3.7%
Expected rates of pension adjustments
Europe 1.8% 1.9%
Americas 0.9% 0.9%
Asia, Oceania and Africa 1.7% 2.0%
Medical cost trend rates
Americas 7.0% 7.1%
86 Consolidated Financial Statements of the Nestlé Group 2011
10. Employee bene?ts (continued)
10.7 Mortality tables and life expectancies for the major schemes
Country Mortality table
Life expectancy at age 65
for a male member
currently aged 65 (in years)
Life expectancy at age 65
for a female member
currently aged 65 (in years)
At 31 December 2011 2010 2011 2010
Switzerland LPP 2010 19.0 18.9 21.5 21.4
United Kingdom S1NA 2008, CMI 2009 20.8 20.8 21.7 21.6
United States RP–2000 19.1 19.0 21.0 20.9
Germany Heubeck Richttafeln 1998 21.3 21.3 22.8 22.8
Netherlands AG Prognosetafel 2010–2060 21.3 21.6 23.9 23.5
Life expectancy is re?ected in the de?ned bene?t obligations by using mortality tables of the country in which the plan is
located. When those tables no longer re?ect recent experience, they are adjusted by appropriate loadings.
10.8 Sensitivity analysis on medical cost trend rates
A one percentage point increase in assumed medical cost trend rates would increase the de?ned bene?t obligations by
CHF 143 million and increase the aggregate of current service cost and interest cost by CHF 14 million.
A one percentage point decrease in assumed medical cost trend rates would decrease the de?ned bene?t obligations by
CHF 115 million and decrease the aggregate of current service cost and interest cost by CHF 11 million.
11. Equity compensation plans
Select Group employees are eligible to receive long-term incentives in the form of equity compensation plans. Members
of the Executive Board are entitled to Management Stock Option Plan (MSOP) and Performance Share Unit Plan (PSUP),
whereas members of Group Management are entitled to Restricted Stock Unit Plans (RSUP) or Share Appreciation
Rights (SAR).
Equity compensation plans are settled either by remittance of Nestlé S.A. shares (accounted for as equity-settled share-
based payment transactions) or by the payment of an equivalent amount in cash (accounted for as cash-settled share-
based payment transactions).
The following share-based payment costs are allocated to the appropriate headings of expenses by function in the
income statement:
In millions of CHF 2011 2010
Equity-settled share-based payment costs 158 158
Cash-settled share-based payment costs 21 46
Total share-based payment costs from continuing operations 179 204
Total share-based payment costs from discontinued operations 39
Total share-based payment costs 179 243
Consolidated Financial Statements of the Nestlé Group 2011 87
The share-based payment costs from continuing operations are composed of the following plans:
In millions of CHF 2011 2010
RSUP 166 180
MSOP 9 9
PSUP 8 5
SAR (4) 10
Total share-based payment costs from continuing operations 179 204
11.1 Restricted Stock Unit Plan (RSUP)
Members of Group Management are awarded Restricted Stock Units (RSU) that entitle participants to receive freely
disposable Nestlé S.A. shares (accounted for as equity-settled share-based payment transactions) or an equivalent amount
in cash (accounted for as cash-settled share-based payment transactions) at the end of a three-year restriction period.
Number of RSU in millions of units 2011 2010
Outstanding at 1 January 10.7 11.1
Granted 3.5 3.5
Settled (3.4) (3.8)
Forfeited (0.2) (0.1)
Outstanding at 31 December 10.6 10.7
of which vested at 31 December 0.5 0.5
of which cash-settled at 31 December 1.4 1.4
The fair value of equity-settled RSU is determined on the basis of the market price of Nestlé S.A. shares at grant date,
discounted at a risk-free interest rate and adjusted for the dividends that participants are not entitled to receive during
the restricted period of three years. The weighted average fair value of the equity-settled RSU granted in 2011 is
CHF 48.75 (2010: CHF 50.74).
For cash-settled outstanding RSU, the liability is re-measured at each reporting date based on subsequent changes in
the market price of Nestlé S.A. shares. The average fair value of the cash-settled RSU outstanding at 31 December 2011
is CHF 52.23 (2010: CHF 53.43).
11.2 Management Stock Option Plan (MSOP)
Members of Executive Board are awarded Management Stock Option Plan (MSOP) that provides non-tradable options
on Nestlé S.A. shares (accounted for as equity-settled share-based payment transactions). Each option gives the right
to purchase at the exercise price one Nestlé S.A. share. The stock options vest three years after the grant. Upon vesting,
the options have an exercise period of four years before they expire.
11. Equity compensation plans (continued)
88 Consolidated Financial Statements of the Nestlé Group 2011
11. Equity compensation plans (continued)
The weighted average exercise price (in CHF) and the number of options (in millions of units) are the following:
2011 2010 2011 2010
Weighted average
exercise price
Weighted average
exercise price
Number
of options
Number
of options
Outstanding at 1 January 42.16 35.37 8.3 15.4
Granted 52.58 53.29 1.4 1.6
Exercised 32.85 32.12 (1.8) (8.7)
Forfeited — — — —
Outstanding at 31 December 46.25 42.16 7.9 8.3
of which exercisable at 31 December 43.38 37.10 2.7 3.7
At 31 December 2011, the exercise prices of the outstanding options range from CHF 30.92 to CHF 53.29 and their
weighted average remaining contractual life is 4 years. Those options can be divided as follows: 0.8 million options are
exercisable at prices ranging from CHF 30.92 to CHF 40.– with a weighted average remaining contractual life of 1 year,
4.1 million at prices ranging from CHF 40.– to CHF 50.– with a weighted average remaining contractual life of 3.4 years
and 3 million at prices ranging from CHF 50.– to CHF 53.29 with a remaining contractual life of 5.6 years.
The fair value of the options granted in 2011 is CHF 5.54 (2010: CHF 6.70) and was estimated using a Black and Scholes
model. The inputs to the model at grant date were as follows:
2011 2010
Market price of Nestlé S.A. shares (in CHF) 52.60 53.85
Exercise price (in CHF) 52.58 53.29
Expected volatility 18.42% 19.05%
Expected dividend yield 3.52% 2.97%
Risk-free interest rate 1.59% 1.54%
Grant date 03/03/2011 05/03/2010
Expiry date 02/03/2018 04/03/2017
The exercise price corresponds to the average market price of Nestlé S.A. shares of the last ten trading days preceding
the grant date. The expected volatility is based upon historical volatility of the market price of Nestlé S.A. shares and
adjusted for any expected changes to future volatility due to publicly available information.
In 2011, the weighted average market price of Nestlé S.A. shares at the date of exercise was CHF 52.86 (2010: CHF 53.43).
Consolidated Financial Statements of the Nestlé Group 2011 89
11.3 Performance Share Unit Plan (PSUP)
Members of the Executive Board are also awar d ed Performance Share Unit Plan (PSUP) that provides units (PSU) which
entitle participants to receive freely disposable Nestlé S.A. shares (accoun ted for as equity-settled share-based payment
transactions) at the end of a three-year restriction period. Upon vesting, the number of shares delivered ranges from
0% to 200% of the initial grant and is determined by the degree by which the performance measure of the PSUP has
been met. The performance measure is the relative Total Shareholder Return of the Nestlé S.A. share compared to the
STOXX Europe 600 Food & Beverage Index.
Number of PSU in millions of units 2011 2010
Outstanding at 1 January 0.3 0.2
Granted 0.1 0.1
Settled — —
Forfeited (0.1) —
Outstanding at 31 December 0.3 0.3
The fair value of the PSU granted in 2011 is CHF 53.63 (2010: CHF 55.81) and was estimated at the grant date using
a Monte Carlo simulation approach. The inputs incorporated into the valuation model comprise the market price of
Nestlé S.A. shares at grant date, a risk-free interest rate and the expected dividends that participants are not entitled to
receive during the restricted period of three years.
11.4 Share Appreciation Rights (SAR)
Key members of Management of some US af?liates are awarded Share Appreciation Rights (SAR). Those plans give the
right, upon exercise, to the payment in cash of the difference between the market price of a Nestlé S.A. share and the
exercise price (accounted for as cash-settled share-based payment transactions).
The weighted average exercise price (in CHF) and the number of SAR (in millions of units) are the following:
2011 2010 2011 2010
Weighted average
exercise price
Weighted average
exercise price
Number
of SAR
Number
of SAR
Outstanding at 1 January 29.70 29.27 0.6 1.9
Granted — — — —
Exercised 28.39 29.99 (0.5) (1.3)
Forfeited — — — —
Outstanding at 31 December 29.69 29.70 0.1 0.6
of which exercisable at 31 December 29.69 29.70 0.1 0.6
The rights outstanding at 31 December 2011 expire at the beginning of 2012. In 2011, the weighted average market price
of Nestlé S.A. shares at the date of exercise was CHF 51.70 (2010: CHF 52.88).
11. Equity compensation plans (continued)
90 Consolidated Financial Statements of the Nestlé Group 2011
12. Provisions and contingencies
12.1 Provisions
In millions of CHF
Restructuring Environmental Litigation Other Total
At 1 January 2010 730 30 2 694 411 3 865
Currency retranslations (115) 1 (183) (35) (332)
Provisions made during the year
(a)
433 6 633 280 1 352
Amounts used (224) (3) (242) (126) (595)
Unused amounts reversed (26) (5) (131) (25) (187)
Modi?cation of the scope of consolidation — — 2 6 8
At 31 December 2010 798 29 2 773 511 4 111
of which expected to be settled within 12 months 601
Currency retranslations (33) — (39) (16) (88)
Provisions made during the year
(a)
115 5 194 162 476
Amounts used (187) (5) (85) (146) (423)
Unused amounts reversed (61) (2) (327) (34) (424)
Modi?cation of the scope of consolidation — — 18 — 18
At 31 December 2011 632 27 2 534 477 3 670
of which expected to be settled within 12 months 576
(a) Including discounting of provisions (refer Note 13).
Restructuring
Restructuring provisions arise from a number of projects across the Group. These include plans to optimise production,
sales and administration structures, mainly in Europe. Restructuring provisions are expected to result in future cash
out?ows when implementing the plans (usually over the following two to three years).
Litigation
Litigation provisions have been set up to cover tax, legal and administrative proceedings that arise in the ordinary course
of the business. These provisions cover numerous separate cases whose detailed disclosure could be detrimental to the
Group interests. The Group does not believe that any of these litigation proceedings will have a material adverse impact
on its ?nancial position. The timing of out?ows is uncertain as it depends upon the outcome of the proceedings. In that
instance, these provisions are not discounted because their present value would not represent meaningful information.
Group Manage ment does not believe it is possible to make assumptions on the evolution of the cases beyond the balance
sheet date.
Other
Other provisions are mainly constituted by onerous contracts and various damage claims having occurred during the year
but not covered by insurance companies. Onerous contracts result from unfavourable leases, breach of contracts or supply
agreements above market prices in which the unavoidable costs of meeting the obligations under the contracts exceed
the economic bene?ts expected to be received or for which no bene?ts are expected to be received.
Consolidated Financial Statements of the Nestlé Group 2011 91
12. Provisions and contingencies (continued)
12.2 Contingencies
The Group is exposed to contingent liabilities amounting to a maximum potential payment of CHF 1363 million
(2010: CHF 1121 million) representing potential litigations of CHF 1344 million (2010: CHF 1110 million) and other items of
CHF 19 million (2010: CHF 11 million). Potential litigations relate mainly to labour, civil and tax litigations in Latin America.
Contingent assets for litigation claims in favour of the Group amount to a maximum potential recoverable of
CHF 281 million (2010: CHF 247 million).
13. Net ?nancing cost and ?nancial instruments
13.1 Net ?nancing cost
In millions of CHF 2011 2010
Interest income 87 58
Gains on investments at fair value to income statement 28 14
Financial income 115 72
Interest expense (527) (828)
Unwind of the discount on provisions (9) (6)
Financial expense (536) (834)
Net ?nancing cost of continuing operations (421) (762)
Net ?nancing cost of discontinued operations 9
Total net ?nancing cost (421) (753)
92 Consolidated Financial Statements of the Nestlé Group 2011
13.2 Financial assets and liabilities
13.2a By class and by category
2011 2010
Classes L
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Cash at bank and in hand 3 591 3 591 2 460 2 460
Commercial paper and bills 474 474 11 259 11 259
Time deposits 2 085 2 085 1 958 1 958
Trading portfolios 553 553 542 542
Bonds 1 274 1 274 —
Other ?nancial assets – current 11 11 27 27
Liquid assets
(b)
3 591 553 3 844 7 988 2 460 542 13 244 16 246
Trade and other receivables 13 340 13 340 12 083 12 083
Bonds 3 026 3 026 3 522 3 522
Equity instruments 1 737 1 737 1 138 1 138
Other ?nancial assets – non-current 438 1 960 2 398 289 1 417 1 706
Financial assets – non-current 438 6 723 7 161 289 6 077 6 366
Derivative assets
(c)
731 731 1 011 1 011
Total ?nancial assets 17 369 1 284 10 567 29 220 14 832 1 553 19 321 35 706
Trade and other payables (15 703) (15 703) (13 845) (13 845)
Financial debt (22 307) (22 307) (20 100) (20 100)
Derivative liabilities
(c)
(646) (646) (456) (456)
Total ?nancial liabilities (38 010) (646) — (38 656) (33 945) (456) — (34 401)
Net ?nancial position (20 641) 638 10 567 (9 436) (19 113) 1 097 19 321 1 305
of which at fair value 638 10 567 11 205 1 097 19 321 20 418
(a) Carrying amount of these instruments is a reasonable approximation of their fair value. For bonds included in ?nancial debt, see section 13.2c.
(b) Liquid assets are composed of cash and cash equivalents (CHF 4938 million) and short-term investments (CHF 3050 million).
(c) Include derivatives that are undesignated and under hedge accounting.
13. Net ?nancing cost and ?nancial instruments (continued)
Consolidated Financial Statements of the Nestlé Group 2011 93
13. Net ?nancing cost and ?nancial instruments (continued)
13.2b Fair value hierarchy of ?nancial instruments
In millions of CHF 2011 2010
Trading portfolios 551 445
Derivative assets 18 102
Bonds 2 366 1 940
Equity instruments 1 433 1 102
Other ?nancial assets 405 342
Derivative liabilities (244) (70)
Prices quoted in active markets (Level 1) 4 529 3 861
Commercial paper and bills 474 11 259
Time deposits 2 085 1 958
Derivative assets 713 909
Bonds 1 908 1 557
Other ?nancial assets 1 313 694
Derivative liabilities (402) (386)
Valuation techniques based on observable market data (Level 2) 6 091 15 991
Other ?nancial assets 585 566
Valuation techniques based on unobservable input (Level 3) 585 566
Total ?nancial instruments at fair value 11 205 20 418
There have been no signi?cant transfers between the different hierarchy levels in 2011.
94 Consolidated Financial Statements of the Nestlé Group 2011
13. Net ?nancing cost and ?nancial instruments (continued)
13.2c Bonds
In millions of CHF 2011 2010
Issuer
Face value
in millions Coupon
Effective
interest
rate
Year of
issue/
maturity Comments Carrying amount
Nestlé Holdings, Inc., USA USD 500 4.75% 4.90% 2007–2011 470
AUD 600 7.25% 7.63% 2008–2011 576
CHF 300 2.25% 2.30% 2008–2011 301
NOK 1000 5.00% 5.55% 2008–2011 161
USD 750 4.00% 3.87% 2008–2011 711
CHF 675 3.00% 2.86% 2007–2012
(a)
687 699
AUD 350 6.00% 6.24% 2009–2013
(b)
333 334
CHF 450 2.50% 2.57% 2006–2013
(c)
468 472
USD 275 2.00% 2.26% 2009–2013
(d)
259 259
USD 550 2.13% 2.13% 2010–2014 517 516
CHF 250 2.63% 2.66% 2007–2018
(c)
276 264
AUD 275 5.50% 5.69% 2011–2016
(c)
270
USD 200 2.00% 2.06% 2011–2016 188
NOK 1000 3.38% 3.59% 2011–2016
(c)
156
Nestlé Purina PetCare Company, USA USD 48 7.75% 6.25% 1995–2015 47 47
USD 63 9.30% 6.46% 1991–2021 71 72
USD 79 8.63% 6.46% 1992–2022 86 87
USD 44 8.13% 6.47% 1993–2023 47 47
USD 51 7.88% 6.45% 1995–2025 54 54
Nestlé Finance International Ltd, Luxembourg CHF 1075 1.25% 1.40% 2009–2012
(e)
1 076 1 078
CHF 1200 2.00% 2.04% 2009–2013
(f)
1 199 1 199
CHF 425 2.00% 2.03% 2009–2014
(f)
425 425
CHF 275 2.13% 2.13% 2009–2014
(f)
275 275
AUD 450 5.75% 5.81% 2010–2014
(c)
444 431
NOK 1250 2.50% 2.73% 2010–2014
(c)
192 200
CHF 350 2.13% 2.20% 2009–2015
(f)
349 349
Other bonds 90 7
Total 7 509 9 034
of which due within one year 1 788 2 218
of which due after one year 5 721 6 816
Consolidated Financial Statements of the Nestlé Group 2011 95
13. Net ?nancing cost and ?nancial instruments (continued)
The fair value of bonds amounts to CHF 7866 million (2010: CHF 9358 million). This value includes accrued interest of
CHF 88 million (2010: CHF 153 million).
Most of the bonds are hedged by currency and/or interest derivatives. The fair value of these derivatives is shown under
derivative assets for CHF 544 million (2010: CHF 832 million) and under derivative liabilities for CHF 7 million
(2010: CHF 11 million).
(a) This bond is composed of:
– CHF 200 million issued in 2007 subject to an interest rate and currency swap that creates a liability at ?oating rates in the currency of the issuer;
– CHF 150 million issued in 2008 subject to an interest rate and currency swap that creates a liability at ?xed rates in the currency of the issuer; and
– CHF 325 million issued in 2008 subject to an interest rate and currency swap that creates a liability at ?oating rates in the currency of the issuer.
(b) Subject to an interest rate and currency swap that creates a liability at ?xed rates in the currency of the issuer.
(c) Subject to an interest rate and/or currency swap that creates a liability at ?oating rates in the currency of the issuer.
(d) This bond is composed of:
– USD 150 million issued in 2009; and
– USD 125 million issued in 2009 subject to an interest rate swap that creates a liability at ?oating rates in the currency of the issuer.
(e) This bond is composed of:
– CHF 525 million issued in 2009 subject to interest rate and currency swaps that create a liability at ?oating rates in the currency of the issuer; and
– CHF 550 million issued in 2009 subject to currency swaps that hedge the CHF face value exposure.
(f) Subject to currency swaps that hedge the CHF face value exposure.
96 Consolidated Financial Statements of the Nestlé Group 2011
13. Net ?nancing cost and ?nancial instruments (continued)
13.2d Derivative assets and liabilities
By type
In millions of CHF 2011 2010
Contractual
or notional
amounts
Fair
value
assets
Fair
value
liabilities
Contractual
or notional
amounts
Fair
value
assets
Fair
value
liabilities
Fair value hedges
Currency forwards, futures and swaps 7 730 108 3 9 144 198 194
Interest rate forwards, futures and swaps 901 12 3 1 814 60 —
Interest rate and currency swaps 3 257 502 26 3 642 598 15
Cash ?ow hedges
Currency forwards, futures, swaps and options 4 920 87 95 3 756 44 68
Interest rate forwards, futures and swaps 2 730 — 250 2 100 6 109
Commodity futures and options 1 935 17 237 910 82 26
Undesignated derivatives
Currency forwards, futures, swaps and options 1 256 4 8 888 17 7
Interest rate and currency swaps — — — 378 5 5
Interest rate forwards, futures, swaps and options 187 — 17 626 — 31
Commodity futures and options 8 1 7 8 1 1
22 924 731 646 23 266 1 011 456
Some derivatives, while complying with the Group’s ?nancial risk management policies of managing the risks of the
volatility of the ?nancial markets, do not qualify for hedge accounting and are therefore classi?ed as undesignated
derivatives.
Impact on the income statement of fair value hedges
In millions of CHF 2011 2010
on hedged items (82) (1 005)
on hedging instruments 74 1 004
Ineffective portion of gains/(losses) of cash ?ow hedges and net investment hedges is not signi?cant.
Consolidated Financial Statements of the Nestlé Group 2011 97
13. Net ?nancing cost and ?nancial instruments (continued)
13.3 Financial risks
In the course of its business, the Group is exposed to a number of ?nancial risks: credit risk, liquidity risk, market risk
(including foreign currency risk and interest rate risk), commodity price risk and other risks (including equity price risk
and settlement risk). This note presents the Group’s objectives, policies and processes for managing its ?nancial risk
and capital.
Financial risk management is an integral part of the way the Group is managed. The Board of Directors establishes the
Group’s ?nancial policies and the Chief Executive Of?cer establishes objectives in line with these policies. An Asset and
Liability Management Committee (ALMC), under the supervision of the Chief Financial Of?cer, is then responsible for
setting ?nancial strategies, which are executed by the Centre Treasury, the Regional Treasury Centres and, in speci ?c
local circumstances, by the af?liated companies. The activities of the Centre Treasury and of the various Regio nal
Treasury Centres are supervised by an independent Middle Of?ce, which veri?es the compliance of the strategies
proposed and/or operations executed within the approved guidelines and limits set by the ALMC. Approved Treasury
Management Guidelines de?ne and classify risks as well as determine, by category of transaction, speci?c approval,
limit and monitoring procedures. In accordance with the aforementioned policies, the Group only enters into derivative
transactions relating to assets, liabilities or anticipated future transactions.
13.3a Credit risk
Credit risk management
Credit risk arises because a counterparty may fail to perform its obligations. The Group is exposed to credit risk on
?nancial instruments such as liquid assets, non-current ?nancial assets, derivative assets and trade receivable portfolios.
The Group sets credit limits based on a counterparty value computed with a probability of default. The methodology
used to set the list of counterparty limits includes Enterprise Value (EV), counterparty Credit Ratings (CR) and Credit
Default Swaps (CDS). Evolution of counterparties is monitored daily, taking into consideration EV, CR and CDS evolution.
As a result of this daily review, changes on investment limits and risk allocation are carried out. The Group avoids the
concentration of credit risk on its liquid assets by spreading them over several institutions and sectors.
Trade receivables are subject to credit limits, control and approval procedures in all the af?liated companies. Due to its
large geographic base and number of customers, the Group is not exposed to material concentrations of credit risk on
its trade receivables (refer to Note 6). Never theless global commercial counterparties are constantly monitored following
the same methodology used for ?nancial counterparties.
The maximum exposure to credit risk resulting from ?nancial activities, without considering netting agreements and
without taking into account any collateral held or other credit enhancements, is equal to the carrying amount of the
Group’s ?nancial assets.
98 Consolidated Financial Statements of the Nestlé Group 2011
13. Net ?nancing cost and ?nancial instruments (continued)
Credit rating of ?nancial assets
This includes cash at bank and in hand, held for trading and available for sale ?nancial assets.
In millions of CHF 2011 2010
Investment grade A– and above
(a)
11 356 20 846
Investment grade BBB+, BBB and BBB– 1 881 1 728
Non-investment grade (BB+ and below) 171 80
Not rated
(b)
2 034 680
15 442 23 334
(a) 2010 includes Swiss National Bank bills which implicitly bene?t from the AAA-rating of Switzerland.
(b) Mainly equity securities and other investments for which no credit rating is available.
The source of the credit ratings is Standard & Poor’s; if not available, the Group uses other credit rating equivalents. The
Group deals essentially with ?nancial institutions located in Switzerland, the European Union and North America.
13.3b Liquidity risk
Liquidity risk management
Liquidity risk arises when a company encounters dif?culties to meet commitments associated with liabilities and other
payment obligations. Such risk may result from inadequate market depth or disruption or re?nancing problems. The
Group’s objective is to manage this risk by limiting exposures in instruments that may be affected by liquidity problems
and by maintaining suf?cient back-up facilities. The Group does not expect any re?nancing issues and has successfully
completed a EUR 4.5 billion one year revolving credit facility replacing an older facility of EUR 2 billion. The facility currently
serves primarily as a backstop to its global commercial paper programme. In total, the Group’s revolving credit facilities
amount to EUR 9.5 billion.
Consolidated Financial Statements of the Nestlé Group 2011 99
13. Net ?nancing cost and ?nancial instruments (continued)
Maturity of ?nancial instruments
In millions of CHF 2010
I
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Cash at bank and in hand 2 460 2 460 2 460
Commercial paper and bills 11 259 11 259 11 259
Time deposits 1 958 1 958 1 958
Trade and other receivables 12 083 12 083 12 083
Trading portfolios 542 542 542
Other ?nancial assets 27 1 227 1 099 2 617 4 970 4 970
28 329 1 227 1 099 2 617 33 272 33 272
Financial investments without contractual maturities 1 423
Financial assets 28 329 1 227 1 099 2 617 33 272 34 695
Trade and other payables (12 592) (273) (39) (992) (13 896) (13 845)
Commercial paper
(a)
(7 520) (7 520) (7 516)
Bonds
(a)
(2 413) (1 938) (4 770) (646) (9 767) (9 034)
Other ?nancial debt (3 292) (283) (256) (265) (4 096) (3 550)
Total ?nancial debt (13 225) (2 221) (5 026) (911) (21 383) (20 100)
Financial liabilities (25 817) (2 494) (5 065) (1 903) (35 279) (33 945)
Non-currency derivative assets 118 (1) 1 30 148 149
Non-currency derivative liabilities (89) (45) (37) 25 (146) (167)
Gross amount receivable from currency derivatives 15 765 1 182 1 528 270 18 745 18 596
Gross amount payable from currency derivatives (15 671) (988) (1 254) (290) (18 203) (18 023)
Net derivatives 123 148 238 35 544 555
Net ?nancial position 2 635 (1 119) (3 728) 749 (1 463) 1 305
of which derivatives under cash ?ow hedges
(b)
(33) (47) (24) 55 (49) (71)
(a) Commercial paper (liabilities) of CHF 6393 million and bonds of CHF 1305 million have maturities of less than three months.
(b) The periods when the cash ?ow hedges affect the income statement do not differ signi?cantly from the maturities disclosed above.
100 Consolidated Financial Statements of the Nestlé Group 2011
13. Net ?nancing cost and ?nancial instruments (continued)
Maturity of ?nancial instruments
In millions of CHF 2011
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Cash at bank and in hand 3 591 3 591 3 591
Commercial paper and bills 474 474 474
Time deposits 2 085 2 085 2 085
Trade and other receivables 13 340 13 340 13 340
Trading portfolios 553 553 553
Other ?nancial assets 1 285 1 228 366 2 468 5 347 5 348
21 328 1 228 366 2 468 25 390 25 391
Financial investments without contractual maturities 3 098
Financial assets 21 328 1 228 366 2 468 25 390 28 489
Trade and other payables (13 584) (48) (1 095) (1 123) (15 850) (15 703)
Commercial paper
(a)
(10 540) (10 540) (10 535)
Bonds
(a)
(1 985) (2 419) (3 119) (626) (8 149) (7 509)
Other ?nancial debt (3 931) (195) (170) (228) (4 524) (4 263)
Total ?nancial debt (16 456) (2 614) (3 289) (854) (23 213) (22 307)
Financial liabilities (30 040) (2 662) (4 384) (1 977) (39 063) (38 010)
Non-currency derivative assets 29 2 — — 31 30
Non-currency derivative liabilities (326) (72) (91) (36) (525) (514)
Gross amount receivable from currency derivatives 14 869 960 1 152 263 17 244 17 058
Gross amount payable from currency derivatives (14 644) (758) (1 004) (196) (16 602) (16 489)
Net derivatives (72) 132 57 31 148 85
Net ?nancial position (8 784) (1 302) (3 961) 522 (13 525) (9 436)
of which derivatives under cash ?ow hedges
(b)
(307) (69) (77) (36) (489) (478)
(a) Commercial paper (liabilities) of CHF 7576 million and bonds of CHF 54 million have maturities of less than three months.
(b) The periods when the cash ?ow hedges affect the income statement do not differ signi?cantly from the maturities disclosed above.
Consolidated Financial Statements of the Nestlé Group 2011 101
13. Net ?nancing cost and ?nancial instruments (continued)
13.3c Market risk
The Group is exposed to risk from movements in foreign currency exchange rates, interest rates and market prices that
affect its assets, liabilities and anticipated future transactions.
Foreign currency risk
Foreign currency risk management
The Group is exposed to foreign currency risk from transactions and translation. Transac tional exposures are managed
within a prudent and systematic hedging policy in accordance with the Group’s speci?c business needs. Translation
exposure arises from the consolidation of the ?nancial statements of foreign operations in Swiss francs, which is, in
principle, not hedged. The Group’s objective is to manage its foreign currency exposure through the use of currency
forwards, futures, swaps and options.
Exchange differences recorded in the income statement represented a loss of CHF 113 million in 2011 (2010: loss of
CHF 380 million). They are allocated to the appropriate headings of expenses by function.
Financial instruments by currency
Transaction exposure arises because af?liated companies undertake transactions in foreign currencies.
In millions of CHF 2010
Currency of ?nancial instruments
CHF USD EUR GBP CAD Other Total
CHF 602 323 50 263 2 1 240
USD (23) (10) (5) 9 134 105
EUR 58 (20) 84 (2) 19 139
GBP (10) 9 (67) — (1) (69)
Other exposed (119) (375) (306) (25) — (82) (907)
Total exposed (94) 216 (60) 104 270 72 508
Not exposed 5 041 3 002 (4 939) (284) (417) (1 606) 797
Total 4 947 3 218 (4 999) (180) (147) (1 534) 1 305
In millions of CHF 2011
Currency of ?nancial instruments
CHF USD EUR GBP CAD Other Total
CHF 378 104 (78) 131 101 636
USD 2 (28) (5) (50) 575 494
EUR (50) 24 (1) (5) 7 (25)
GBP (12) 5 21 — — 14
Other exposed (140) (828) (217) (34) (3) (51) (1 273)
Total exposed (200) (421) (120) (118) 73 632 (154)
Not exposed 1 447 (2 082) (5 196) (455) (371) (2 625) (9 282)
Total 1 247 (2 503) (5 316) (573) (298) (1 993) (9 436)
F
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102 Consolidated Financial Statements of the Nestlé Group 2011
13. Net ?nancing cost and ?nancial instruments (continued)
Interest rate risk
Interest risk management
Interest rate risk comprises the interest price risk that results from borrowings at ?xed rates and the interest cash ?ow
risk that results from borrowings at variable rates. The ALMC is responsible for setting the overall duration and interest
management targets. The Group’s objective is to manage its interest rate exposure through the use of interest rate
forwards, futures and swaps.
Interest structure of non-current ?nancial debt (including interest effects of derivatives)
In millions of CHF 2011 2010
Financial debt at ?xed rates 2 042 2 712
Financial debt at variable rates 4 165 4 771
6 207 7 483
Price risk
Commodity price risk
Commodity price risk arises from transactions on the world commodity markets for securing the supplies of green coffee,
cocoa beans and other commodities necessary for the manufacture of some of the Group‘s products.
The Group’s objective is to minimise the impact of commo d ity price ?uctuations and this exposure is hedged in
accordance with the commodity risk management policies set by the Board of Directors. The regional Commodity
Purchasing Competence Centres are responsible for managing commodity price risk on the basis of internal directives
and centrally determined limits. They ensure that the Group bene?ts from guaranteed ?nan cial hedges through the use
of exchange traded commodity derivatives. The commodity price risk exposure of anticipated future purchases is
managed using a combination of derivatives (futures and options) and executory contracts (differentials and ratios).
The vast majority of these contracts are for phy sical delivery, while cash-settled contracts are treated as undesignated
derivatives. As a result of the short product business cycle of the Group, the majority of the anticipated future raw material
transactions outstanding at the balance sheet date are expected to occur in the next period.
Equity price risk
The Group is exposed to equity price risk on investments held as trading and available-for-sale assets. To manage the
price risk arising from investments in secur ities, the Group diversi?es its portfolios in accordance with the Guidelines set
by the Board of Directors. The Group’s external investments are in principle only with publicly traded counterparties that
have an investment grade rating by one of the recognised rating agencies.
13.3d Settlement risk
Settlement risk results from the fact that the Group may not receive ?nancial instruments from its counterparties at the
expected time. This risk is managed by monitoring counterparty activity and settlement limits.
Consolidated Financial Statements of the Nestlé Group 2011 103
13. Net ?nancing cost and ?nancial instruments (continued)
13.3e Value at Risk (VaR)
Description of the method
The VaR is a single measure to assess market risk. The VaR estimates the size of losses given current positions and
possible changes in ?nancial markets. The Group uses simulation to calculate VaR based on the historic data for
a 250 days period. The VaR calculation is based on 95% con?dence level and, accordingly, does not take into account
losses that might occur beyond this level of con?dence. The VaR is calculated on the basis of unhedged exposures
outstanding at the close of business and does not necessarily re?ect intra-day exposures.
Objective of the method
The Group uses the described VaR analysis to estimate the potential one-day loss in the fair value of its ?nancial and
commodity instruments. The Group cannot predict the actual future movements in market rates and prices, therefore
the below VaR numbers neither represent actual losses nor consider the effects of favourable movements in underlying
variables. Accordingly, these VaR numbers may only be considered indicative of future movements to the extent the
historic market patterns repeat in the future.
VaR ?gures
The VaR computation includes the Group’s ?nancial assets and liabilities that are subject to foreign currency, interest
rate and price risk.
The estimated potential one-day loss from the Group’s foreign currency, interest rate and security price risk sensitive
instruments, as calculated using the above described historic VaR model, is as follows:
In millions of CHF 2011 2010
Foreign currency 3 10
Interest rate 4 17
Security price 144 204
Foreign currency, interest rate and security price combined 122 207
The estimated potential one-day loss from the Group’s commodity price risk sensitive instruments, as calculated using
the above described historic VaR model, is not signi?cant.
13.3f Capital risk management
The Group’s capital management is driven by the impact on shareholders of the level of total capital employed. It is the
Group’s policy to maintain a sound capital base to support the continued development of its business.
The Board of Directors seeks to maintain a prudent balance between different components of the Group’s capital. The
ALMC monitors capital on the basis of operating cash ?ow as a percentage of net ?nancial debt. Net ?nancial debt is
de?ned as current and non-current ?nancial liabilities less liquid assets (refer to section 13.2a).
The operating cash ?ow-to-net ?nancial debt ratio highlights the ability of a business to repay its debts. As at
31 December 2011, the ratio was 68.2% (2010: 353.2%
(a)
). The Group’s subsidiaries have complied with local statu tory
capital requirements as appropriate.
(a) Impacted by the pro?t on disposal of 52% of Alcon outstanding capital.
104 Consolidated Financial Statements of the Nestlé Group 2011
14. Taxes
14.1 Taxes recognised in the income statement
In millions of CHF 2011 2010
Components of taxes
Current taxes
(a)
2 554 2 917
Deferred taxes (301) 181
Taxes reclassi?ed to other comprehensive income 859 248
Taxes reclassi?ed to equity — (3)
Taxes from continuing operations 3 112 3 343
Taxes from discontinued operations 350
Total taxes 3 112 3 693
Reconciliation of taxes
Expected tax expense at weighted average applicable tax rate 3 054 2 882
Tax effect of non-deductible or non-taxable items (202) (10)
Prior years’ taxes (215) (129)
Transfers to unrecognised deferred tax assets 83 53
Transfers from unrecognised deferred tax assets (123) (20)
Changes in tax rates 23 9
Withholding taxes levied on transfers of income 313 353
Other, incl. taxes on capital 179 205
Taxes from continuing operations 3 112 3 343
(a) Current taxes related to prior years represent a tax expense of CHF 35 million (2010: tax expense of CHF 25 million).
The expected tax expense at weighted average applicable tax rate is the result from applying the domestic statutory tax
rates to pro?ts before taxes of each entity in the country it operates. For the Group, the weighted average applicable tax
rate varies from one year to the other depending on the relative weight of the pro?t of each individual entity in the
Group’s pro?t as well as the changes in the statutory tax rates.
14.2 Taxes recognised in other comprehensive income
In millions of CHF 2011 2010
Tax effects relating to
Currency retranslations 64 195
Fair value adjustments on available-for-sale ?nancial instruments (29) (11)
Fair value adjustments on cash ?ow hedges 159 21
Actuarial gains/(losses) on de?ned bene?t schemes 665 63
859 268
Consolidated Financial Statements of the Nestlé Group 2011 105
14. Taxes (continued)
14.3 Reconciliation of deferred taxes by type of temporary differences recognised in the balance sheet
In millions of CHF
Property,
plant and
equipment
Goodwill
and
intangible
assets
Employee
bene?ts
Inventories,
receivables,
payables
and
provisions
Unused tax
losses and
unused tax
credits
Other
Total
At 1 January 2010 (1 068) (1 089) 1 965 822 307 (139) 798
Currency retranslations 116 87 (149) (88) (28) (18) (80)
Deferred tax (expense)/income (134) (157) (98) 101 39 68 (181)
Modi?cation of the scope of consolidation (7) (7) 8 2 — 7 3
At 31 December 2010 (1 093) (1 166) 1 726 837 318 (82) 540
Currency retranslations 5 (12) (24) (24) (15) 4 (66)
Deferred tax (expense)/income (223) (46) 408 10 62 90 301
Modi?cation of the scope of consolidation (36) (360) 10 14 1 12 (359)
At 31 December 2011 (1 347) (1 584) 2 120 837 366 24 416
In millions of CHF 2011 2010
Re?ected in the balance sheet as follows:
Deferred tax assets 2 476 1 911
Deferred tax liabilities (2 060) (1 371)
Net assets 416 540
14.4 Unrecognised deferred taxes
The deductible temporary differences as well as the unused tax losses and tax credits for which no deferred tax assets
are recognised expire as follows:
In millions of CHF 2011 2010
Within one year 20 56
Between one and ?ve years 314 276
More than ?ve years 1 479 1 648
1 813 1 980
At 31 December 2011, the unrecognised deferred tax assets amount to CHF 464 million (2010: CHF 544 million).
In addition, the Group has not recognised deferred tax liabilities in respect of unremitted earnings that are consi dered
inde?nitely reinvested in foreign subsidiaries. At 31 December 2011, these earnings amount to CHF 12.9 bil lion
(2010: CHF 13.3 billion). They could be subject to withholding and other taxes on remittance.
106 Consolidated Financial Statements of the Nestlé Group 2011
15. Associates
In millions of CHF 2011 2010
At 1 January 7 914 8 693
Currency retranslations (240) (1 446)
Investments 60 106
Share of results 866 1 010
Dividends received (417) (360)
Share of other comprehensive income 456 (89)
Other (10) —
At 31 December 8 629 7 914
of which L'Oréal 7 708 6 954
15.1 L’Oréal
The Group holds 178 381 021 shares in L’Oréal, representing a 30.0% participation in its equity after consideration of its
own shares (2010: 178 381 021 shares representing a 30.3% participation). At 31 December 2011, the market value of the
shares held amounts to CHF 17 514 million (2010: CHF 18 569 million).
15.2 Key ?nancial data of the main associates
The following items are an aggregate of the Financial Statements of the main associates:
In millions of CHF 2011 2010
Total current assets 10 023 9 375
Total non-current assets 24 081 22 222
Total assets 34 104 31 597
Total current liabilities 9 263 8 842
Total non-current liabilities 2 621 3 334
Total liabilities 11 884 12 176
Total equity 22 220 19 421
Total sales 26 469 28 554
Total results 2 969 3 165
Consolidated Financial Statements of the Nestlé Group 2011 107
16. Earnings per share
2011 2010
Basic earnings per share (in CHF) 2.97 10.16
Net pro?t (in millions of CHF) 9 487 34 233
Weighted average number of shares outstanding (in millions of units) 3 196 3 371
Diluted earnings per share (in CHF) 2.96 10.12
Net pro?t, net of effects of dilutive potential ordinary shares (in millions of CHF) 9 487 34 233
Weighted average number of shares outstanding, net of effects of dilutive potential ordinary shares
(in millions of units) 3 205 3 382
Reconciliation of weighted average number of shares outstanding (in millions of units)
Weighted average number of shares outstanding used to calculate basic earnings per share 3 196 3 371
Adjustment for share-based payment schemes, where dilutive 9 11
Weighted average number of shares outstanding used to calculate diluted earnings per share 3 205 3 382
17. Cash ?ow statement
17.1 Non-cash items of income and expense
In millions of CHF 2011 2010
Share of results of associates (866) (1 010)
Depreciation of property, plant and equipment 2 422 2 552
Impairment of property, plant and equipment 150 186
Impairment of goodwill 16 337
Amortisation of intangible assets 503 630
Impairment of intangible assets — 8
Net result on disposal of businesses 3 (24 472)
Net result on disposal of assets 25 (29)
Non-cash items in ?nancial assets and liabilities 39 157
Deferred taxes (301) 236
Taxes in other comprehensive income and equity 859 266
Equity compensation plans 158 187
Other 31 4
3 039 (20 948)
17.2 Decrease/(increase) in working capital
In millions of CHF 2011 2010
Inventories (1 280) (899)
Trade receivables (628) (463)
Trade payables 497 718
Other current assets (1 113) (1 015)
Other current liabilities 687 1 027
(1 837) (632)
108 Consolidated Financial Statements of the Nestlé Group 2011
17. Cash ?ow statement (continued)
17.3 Variation of other operating assets and liabilities
In millions of CHF 2011 2010
Variation of employee bene?ts assets and liabilities (602) (543)
Variation of provisions (371) 566
Other (270) (219)
(1 243) (196)
17.4 Purchase of treasury shares
In 2011, out of the CHF 5.5 billion (2010: CHF 12.1 billion) of purchase of treasury shares, the Group invested CHF 4.8 billion
on its Share Buy-Back Programme (2010: CHF 10.1 billion).
17.5 Cash and cash equivalents at end of year
In millions of CHF 2011 2010
Cash at bank and in hand 3 591 2 460
Time deposits
(a)
1 334 1 209
Commercial paper
(a)
13 4 388
4 938 8 057
(a) With maturity of three months or less as from the initial recognition.
17.6 Interest, taxes and dividends
The following items are allocated to the appropriate headings in the cash ?ow statement:
In millions of CHF 2011 2010
Interest paid (491) (510)
Interest received 49 59
Taxes paid (2 555) (2 958)
Dividends paid (6 165) (6 172)
Dividends received 437 380
18. Equity
18.1 Share capital issued
The ordinary share capital of Nestlé S.A. authorised, issued and fully paid is composed of 3 300 000 000 registered
shares with a nominal value of CHF 0.10 each (2010: 3 465 000 000 registered shares). Each share confers the right
to one vote. No shareholder may be registered with the right to vote for shares which it holds, directly or indirectly,
in excess of 5% of the share capital. Shareholders have the right to receive dividends.
The share capital changed twice in the last two ?nancial years as a consequence of the Share Buy-Back Programmes.
The cancellation of shares was approved at the Annual General Meetings of 15 April 2010 and 14 April 2011. In 2010,
the share capital was reduced by 185 000 000 shares from CHF 365 million to CHF 347 mil lion. In 2011, the share capital
was further reduced by 165 000 000 shares from CHF 347 million to CHF 330 million.
Consolidated Financial Statements of the Nestlé Group 2011 109
18.2 Conditional share capital
The conditional capital of Nestlé S.A. amounts to CHF 10 mil lion as in the preceding year. It confers the right to increase
the ordinary share capital, through the exercise of conversion or option rights in connection with debentures and other
?nancial market instruments, by a maximum of CHF 10 mil lion by the issue of a maximum of 100 000 000 registered shares
with a nominal value of CHF 0.10 each. Thus the Board of Directors has at its disposal a ?exible instrument enabling it, if
necessary, to ?nance the activities of the Company through convertible debentures.
18.3 Treasury shares
Number of shares in millions of units Notes 2011 2010
Purpose of holding
Trading 34 40
Share Buy-Back Programme 75 149
Long-Term Incentive Plans 11 19 19
128 208
At 31 December 2011, the treasury shares held by the Group represent 3.9% of the share capital (2010: 6.0%). Their market
value amounts to CHF 6913 million (2010: CHF 11 393 million).
18.4 Number of shares outstanding
Number of shares in millions of units
Shares
issued
Treasury
shares
Outstanding
shares
At 1 January 2010 3 650 (178) 3 472
Purchase of treasury shares (227) (227)
Treasury shares delivered in respect of options exercised 9 9
Treasury shares delivered in respect of equity compensation plans 3 3
Treasury shares cancelled (185) 185 —
At 31 December 2010 3 465 (208) 3 257
Purchase of treasury shares (99) (99)
Sale of treasury shares 9 9
Treasury shares delivered in respect of options exercised 2 2
Treasury shares delivered in respect of equity compensation plans 3 3
Treasury shares cancelled (165) 165 —
At 31 December 2011 3 300 (128) 3 172
18.5 Translation reserve
The translation reserve comprises the cumulative gains and losses arising from translating the ?nancial statements of
foreign operations that use functional currencies other than Swiss francs. It also includes the changes in the fair value
of hedging instruments used for net investments in foreign operations.
18. Equity (continued)
110 Consolidated Financial Statements of the Nestlé Group 2011
18. Equity (continued)
18.6 Retained earnings and other reserves
Retained earnings represent the cumulative pro?ts, share premium, as well as actuarial gains and losses on de?ned
bene?t plans attributable to shareholders of the parent. Other reserves comprise the fair value reserve and the hedging
reserve attributable to shareholders of the parent.
The fair value reserve includes the gains and losses on remeasuring available-for-sale ?nancial instruments.
At 31 December 2011, the reserve is positive of CHF 254 million (2010: positive of CHF 450 million).
The hedging reserve consists of the effective portion of the gains and losses on hedging instruments related to hedged
transactions that have not yet occurred. At 31 December 2011, the reserve is negative of CHF 447 million (2010: positive
of CHF 30 million).
18.7 Non-controlling interests
The non-controlling interests comprise the portion of equity of subsidiaries that are not owned, directly or indirectly,
by Nestlé S.A.
18.8 Other comprehensive income
In millions of CHF
T
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t
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e
s
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Currency retranslations (4 619) (4 619) (182) (4 801)
Fair value adjustments on available-for-sale
?nancial instruments 230 230 (13) 217
Fair value adjustments on cash ?ow hedges (48) (48) — (48)
Actuarial gains/(losses) on de?ned bene?t schemes (128) (128) (25) (153)
Share of other comprehensive income of associates (89) (89) (89)
Taxes 258 258 10 268
Other comprehensive income for the year (4 619) 223 (4 396) (210) (4 606)
Currency retranslations (1 133) (1 133) (33) (1 166)
Fair value adjustments on available-for-sale
?nancial instruments (192) (192) — (192)
Fair value adjustments on cash ?ow hedges (465) (465) — (465)
Actuarial gains/(losses) on de?ned bene?t schemes (2 503) (2 503) — (2 503)
Share of other comprehensive income of associates 456 456 456
Taxes 859 859 — 859
Other comprehensive income for the year (1 133) (1 845) (2 978) (33) (3 011)
2
0
1
0
2
0
1
1
Consolidated Financial Statements of the Nestlé Group 2011 111
18. Equity (continued)
18.9 Dividend
The dividend related to 2010 was paid on 21 April 2011 in conformity with the decision taken at the Annual General
Meeting on 14 April 2011. Shareholders approved the proposed dividend of CHF 1.85 per share, resulting in a total
dividend of CHF 5939 million.
Dividend payable is not accounted for until it has been rati?ed at the Annual General Meeting. At the meeting
on 19 April 2012, a dividend of CHF 1.95 per share will be proposed, resulting in a total dividend of CHF 6279 million.
For further details, refer to the Financial Statements of Nestlé S.A.
The Financial Statements for the year ended 31 Decem ber 2011 do not re?ect this proposed distribution, which will be
treated as an appropriation of pro?t in the year ending 31 December 2012.
19. Lease commitments
19.1 Operating leases
In millions of CHF 2011 2010
Minimum lease payments
Future value
Within one year 595 600
In the second year 442 467
In the third to the ?fth year 866 939
After the ?fth year 516 569
2 419 2 575
Lease commitments refer mainly to buildings, industrial equipment, vehicles and IT equipment. Operating lease charge
for the year 2011 amounts to CHF 657 million (2010: CHF 701 mil lion).
19.2 Finance leases
In millions of CHF 2011 2010
Minimum lease payments
Present
value
Future
value
Present
value
Future
value
Within one year 57 63 68 74
In the second year 50 61 57 68
In the third to the ?fth year 90 136 106 155
After the ?fth year 51 101 69 145
248 361 300 442
The difference between the future value of the minimum lease payments and their present value represents the discount
on the lease obligations.
112 Consolidated Financial Statements of the Nestlé Group 2011
20. Transactions with related parties
20.1 Compensation of the Board of Directors and the Executive Board
Board of Directors
With the exception of the Chairman and the CEO, members of the Board of Directors receive an annual compensation
that varies with the Board and the Committee responsibilities as follows:
– Board members: CHF 280 000;
– members of the Chairman’s and Corporate Governance Committee: additional CHF 200 000;
– members of the Compensation Committee: additional CHF 40 000 (Chair CHF 100 000);
– members of the Nomination Committee: additional CHF 40 000 (Chair CHF 100 000); and
– members of the Audit Committee: additional CHF 100 000 (Chair CHF 150 000).
Half of the compensation is paid through the granting of Nestlé S.A. shares at the ex-dividend closing price. These
shares are subject to a three-year blocking period.
With the exception of the Chairman and the CEO, members of the Board of Directors also receive an annual expense
allowance of CHF 15 000 each. This allowance covers travel and hotel accommodation in Switzerland, as well as sundry
out-of-pocket expenses. For Board members from outside Europe, the Company reimburses additionally the airline
tickets. When the Board meets outside of Switzerland, all expenses are borne and paid directly by the Company.
The Chairman is entitled to a cash compensation, as well as Nestlé S.A. shares which are blocked for three years.
Executive Board
The total annual remuneration of the members of the Executive Board comprises a salary, a bonus (based on the
individual’s performance and the achievement of the Group’s objectives), equity compensation and other bene?ts.
Members of the Executive Board can choose to receive part or all of their bonus in Nestlé S.A. shares at the average
closing price of the last ten trading days of January of the year of the payment of the bonus. These shares are subject
to a three-year blocking period.
In millions of CHF 2011 2010
Board of Directors
(a)
Chairman's compensation 10 9
Other Board members
Remuneration – cash 3 3
Shares 2 2
Executive Board
(a)
Remuneration – cash 15 16
Bonus – cash 8 10
Bonus – shares 7 9
Equity compensation plans
(b)
15 14
Pension 5 4
(a) Refer to Note 25 of the Financial Statements of Nestlé S.A. for the detailed disclosures, regarding the remunerations of the Board of Directors and the Executive
Board, that are required by Swiss law.
(b) Equity compensation plans are equity-settled share-based payment transactions whose cost is recognised over the vesting period as required by IFRS 2.
Consolidated Financial Statements of the Nestlé Group 2011 113
20. Transactions with related parties (continued)
20.2 Intra-Group transactions and transactions with associated companies
Intra-Group transactions are eliminated on consolidation:
– when it is between the parent and the fully consolidated af?liates or between fully consolidated af?liates; or
– in proportion to the Nestlé participation in the equity of the joint ventures (usually 50%) when it is between the parent
and the joint ventures, or between fully consolidated af?liates and joint ventures. There were no signi?cant transactions
between the Group companies and associated companies.
20.3 Other transactions
Nestlé Capital Advisers SA (NCA), one of the Group’s subsidiaries, is an unregulated investment and actuarial adviser,
based in Switzerland. Further to actuarial advice, NCA renders investment consulting services to some of the Group’s
pension funds, either directly or indirectly via the Robusta mutual fund umbrella, but NCA never executes trading and
investment transactions. The fees received by NCA in 2011 for those activities amounted to CHF 11.0 million
(2010: CHF 7.1 million).
Nestlé Capital Management Ltd (NCM), a 100% subsidiary of NCA, is an asset manager authorised and regulated by
the Financial Services Authority, in the United Kingdom. NCM manages some of the assets of the Group’s pension
funds. In this function, NCM executes trading and investment transactions on behalf of these pension funds directly
or for the Robusta mutual funds pension investment vehicles. The fees received by NCM in 2011 for those activities
amounted to CHF 15.6 million (2010: CHF 14.6 million). The assets under direct management represented an amount
of CHF 13.2 billion at 31 December 2011 (2010: CHF 9.6 billion).
In addition, Robusta Asset Management Ltd (RAML), a 100% subsidiary of NCA, is in charge of selecting and monitoring
investment managers for the Robusta mutual funds pension investment vehicles. RAML has delegated most its activities
to third-parties, including NCA and hence no fee income is generated by RAML. Any remaining expenses are covered by
means of fees deducted from its assets under management. The assets under supervision of RAML amounted to
CHF 8.6 billion at 31 December 2011 (2010: CHF 9.3 billion). Of this amount CHF 5.4 billion (2010: CHF 4.9 billion) of assets
are under direct management of NCM.
Furthermore, throughout 2011, no director had a personal interest in any transaction of signi?cance for the business of
the Group.
21. Joint ventures
In millions of CHF 2011 2010
Share of assets and liabilities consolidated in the balance sheet
Total current assets 924 775
Total non-current assets 1 612 1 134
Total current liabilities 1 752 1 270
Total non-current liabilities 285 208
Share of income and expenses consolidated in the income statement
Total sales 2 426 2 437
Total expenses (2 154) (2 141)
114 Consolidated Financial Statements of the Nestlé Group 2011
22. Guarantees
At 31 December 2011, the Group has given guarantees to third parties for an amount of CHF 852 million
(2010: CHF 698 million). The most signi?cant balance relates to the Nestlé UK pension fund.
23. Group risk management
The Nestlé Group Enterprise Risk Management (ERM) is a process applied across the enterprise, designed to identify
potential events that may affect the Company, to manage risk to be within its risk appetite, and to provide reasonable
assurance regarding the achievement of objectives. Risk management is an integral element of the Governance, Risk
management and Compliance (GRC) model.
GRC is an integrated, holistic approach ensuring that the organisation acts in accordance with its risk appetite, internal
policies and guidelines, and external regulations. GRC is thereby promoting a proactive risk management and the
effectiveness of internal controls.
ERM enables Nestlé’s management to raise risk awareness, to anticipate risks early and to make sound business decisions
throughout the Group by understanding relative business impact of different types of risks, root causes and correlations
among interdependent risks or major impact of the Company on its social and physical environment.
A global risk appetite is de?ned by the Executive Board and reviewed and validated on an annual basis by the Board of
Directors.
The complexity of the Nestlé Group requires a two-tiered (centralised and decentralised) approach to the evaluation of
risk. To allow for this complexity, the ERM has been developed using both “Top-Down” and “Bottom-Up” assessments.
Implementation of this Framework has allowed the Group to achieve the following objectives:
– identi?cation and quanti?cation of tangible (?nancial, operational, physical, human assets, etc.) and intangible
(reputation, brand image, intellectual property, etc.) risks in a transparent manner;
– development of a common language for communicating and consolidating risk; and
– prioritisation and identi?cation of where to focus management resources and activity.
The “Top-Down” assessment occurs annually and focuses on the Group’s global risk portfolio. It involves the aggregation
of individual “Top-Down” assessments of Zones, Globally Managed Businesses, and all markets. It is intended to provide
a high-level mapping of Group risk and allow Group Management to make sound decisions on the future operations of
the Company. Risk assessments are the responsibility of line management; this applies equally to a business, a market
or a function, and any mitigating actions identi?ed in the assessments are the responsibility of the individual line
management. If a Group-level intervention is required, responsibility for mitigating actions will generally be determined
by the Executive Board.
The “Bottom-Up” process includes assessments performed at an individual component level (business unit, function,
department or project). The reason for performing these component level risk assessments is to highlight localised
issues where risks can be mitigated quickly and ef?ciently. The timing of these assessments varies, and any mitigating
actions required are the responsibility of the line management of the individual component unit.
Consolidated Financial Statements of the Nestlé Group 2011 115
Overall Group ERM reporting combines the total results of the “Top-Down” assessment and the compilations of the
individual “Bottom-Up” assessments. The results of the Group ERM are presented to the Executive Board, Audit
Committee and Board of Directors annually. In the case of an individual risk assessment identifying a risk which requires
action at Group level, an ad hoc presentation is made to the Executive Board.
Financial risks management is described in more details in Note 13.
24. Events after the balance sheet date
At 15 February 2012, date of approval of the Financial Statements by the Board of Directors, the Group had no
subsequent events that warrant a modi?cation of the value of the assets and liabilities or an additional disclosure.
25. Group companies
The list of companies appears in the section Companies of the Nestlé Group.
23. Group risk management (continued)
116 Consolidated Financial Statements of the Nestlé Group 2011
Report of the Statutory Auditor
on the Consolidated Financial Statements
to the General Meeting of Nestlé S.A.
As statutory auditor, we have audited the consolidated ?nancial statements (income statement, statement of
comprehensive income, balance sheet, cash ?ow statement, statement of changes in equity and notes on pages 46
to 115) of the Nestlé Group for the year ended 31 December 2011.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation and fair presentation of the consolidated ?nancial 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
and fair presentation of consolidated ?nancial 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 responsibility
Our responsibility is to express an opinion on these consoli dated ?nancial 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
?nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
?nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks
of material misstatement of the consolidated ?nancial 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 and fair presentation
of the consolidated ?nancial 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 ?nancial statements. We believe that
the audit evidence we have obtained is suf?cient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated ?nancial statements for the year ended 31 December 2011 give a true and fair view of
the ?nancial position, the results of operations and the cash ?ows in accordance with International Financial Reporting
Standards (IFRS) and comply with Swiss law.
Consolidated Financial Statements of the Nestlé Group 2011 117
Report of the Statutory auditor on the Consolidated Financial Statements (continued)
Report on other legal requirements
We con?rm 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 con?rm that an internal
control system exists, which has been designed for the preparation of consolidated ?nancial statements according to the
instructions of the Board of Directors.
We recommend that the consolidated ?nancial statements submitted to you be approved.
KPMG SA
Mark Baillache Fabien Lussu
Licensed Audit Expert Licensed Audit Expert
Auditor in charge
Geneva, 15 February 2012
118 Consolidated Financial Statements of the Nestlé Group 2011
Financial information – 5 year review
In millions of CHF (except for per share data and personnel) 2011 2010 2009 2008 2007
Results Results
Sales
(a)
83 642 93 015 Sales
(a)
Trading operating pro?t
(a)
12 538 14 832 Trading operating pro?t
(a)
as % of sales
(a)
15.0% 15.9% as % of sales
(a)
Sales 109 722 107 618 109 908 107 552 Sales
EBIT * 16 194 15 699 15 676 15 024 EBIT *
as % of sales 14.8% 14.6% 14.3% 14.0% as % of sales
Taxes 3 112 3 693 3 362 3 787 3 416 Taxes
Pro?t for the year attributable to shareholders of the parent (Net pro?t) 9 487 34 233
(f)
10 428 18 039
(g)
10 649 Pro?t for the year attributable to shareholders of the parent (Net pro?t)
as % of sales
(a)
11.3% 36.8%
(f)
9.7% 16.4%
(g)
9.9% as % of sales
(a)
Total amount of dividend 6 279
(e)
5 939 5 443 5 047 4 573 Total amount of dividend
Depreciation of property, plant and equipment 2 422 2 552 2 713 2 625 2 620 Depreciation of property, plant and equipment
Balance sheet and Cash ?ow statement Balance sheet and Cash ?ow statement
Current assets 33 324 38 997 39 870 33 048 35 770 Current assets
of which liquid assets 7 988 16 246 5 319 7 131 9 496 of which liquid assets
Non-current assets 80 767 72 644 71 046 73 167 79 591
(h)
Non-current assets
Total assets 114 091 111 641 110 916 106 215 115 361
(h)
Total assets
Current liabilities 35 232 30 146 36 083 33 640 43 326 Current liabilities
Non-current liabilities 20 585 18 897 21 202 17 659 17 259
(h)
Non-current liabilities
Equity attributable to shareholders of the parent 56 797 61 867 48 915 50 774 52 627
(h)
Equity attributable to shareholders of the parent
Non-controlling interests 1 477 731 4 716 4 142 2 149 Non-controlling interests
Net ?nancial debt 14 319 3 854 18 085 14 596 21 174 Net ?nancial debt
Operating cash ?ow 9 763 13 608 17 934 10 763 13 439 Operating cash ?ow
as % of net ?nancial debt 68.2% 353.2%
(f)
99.2% 73.7% 63.5% as % of net ?nancial debt
Free cash ?ow
(b)
4 491 7 761 12 369 5 033 8 231 Free cash ?ow
(b)
Capital expenditure 4 779 4 576 4 641 4 869 4 971 Capital expenditure
as % of sales
(a)
5.7% 4.9% 4.3% 4.4% 4.6% as % of sales
(a)
Data per share
(c)
Data per share
(c)
Weighted average number of shares outstanding (in millions of units) 3 196 3 371 3 572 3 705 3 829 Weighted average number of shares outstanding (in millions of units)
Total basic earnings per share 2.97 10.16
(f)
2.92 4.87
(g)
2.78 Total basic earnings per share
Equity attributable to shareholders of the parent 17.77 18.35 13.69 13.71 13.75
(h)
Equity attributable to shareholders of the parent
Dividend 1.95
(e)
1.85 1.60 1.40 1.22 Dividend
Pay-out ratio based on Total basic earnings per share 65.7%
(e)
18.2% 54.8% 28.8% 43.9% Pay-out ratio based on Total basic earnings per share
Stock prices (high) 55.45 56.90 51.25 52.95 55.35 Stock prices (high)
Stock prices (low) 43.50 48.18 35.04 38.02 42.65 Stock prices (low)
Yield
(d)
3.5/4.5
(e)
3.3/3.8 3.1/4.6 2.6/3.7 2.2/2.9 Yield
(d)
Market capitalisation 171 287 178 316 174 294 150 409 195 661 Market capitalisation
Number of personnel (in thousands) 328 281 278 283 276 Number of personnel (in thousands)
* Earnings Before Interest, Taxes, restructuring and impairments.
(a) 2010 restated following the changes in the Income Statement described in Note 1 – Accounting Policies.
(b) Operating cash ?ow less capital expenditure, disposal of tangible assets, purchase and disposal of intangible assets, movements with associates as well as with
non-controlling interests, and other investing cash ?ows.
(c) 2007 has been restated following 1-for-10 share split effective on 30 June 2008.
Consolidated Financial Statements of the Nestlé Group 2011 119
Financial information – 5 year review
In millions of CHF (except for per share data and personnel) 2011 2010 2009 2008 2007
Results Results
Sales
(a)
83 642 93 015 Sales
(a)
Trading operating pro?t
(a)
12 538 14 832 Trading operating pro?t
(a)
as % of sales
(a)
15.0% 15.9% as % of sales
(a)
Sales 109 722 107 618 109 908 107 552 Sales
EBIT * 16 194 15 699 15 676 15 024 EBIT *
as % of sales 14.8% 14.6% 14.3% 14.0% as % of sales
Taxes 3 112 3 693 3 362 3 787 3 416 Taxes
Pro?t for the year attributable to shareholders of the parent (Net pro?t) 9 487 34 233
(f)
10 428 18 039
(g)
10 649 Pro?t for the year attributable to shareholders of the parent (Net pro?t)
as % of sales
(a)
11.3% 36.8%
(f)
9.7% 16.4%
(g)
9.9% as % of sales
(a)
Total amount of dividend 6 279
(e)
5 939 5 443 5 047 4 573 Total amount of dividend
Depreciation of property, plant and equipment 2 422 2 552 2 713 2 625 2 620 Depreciation of property, plant and equipment
Balance sheet and Cash ?ow statement Balance sheet and Cash ?ow statement
Current assets 33 324 38 997 39 870 33 048 35 770 Current assets
of which liquid assets 7 988 16 246 5 319 7 131 9 496 of which liquid assets
Non-current assets 80 767 72 644 71 046 73 167 79 591
(h)
Non-current assets
Total assets 114 091 111 641 110 916 106 215 115 361
(h)
Total assets
Current liabilities 35 232 30 146 36 083 33 640 43 326 Current liabilities
Non-current liabilities 20 585 18 897 21 202 17 659 17 259
(h)
Non-current liabilities
Equity attributable to shareholders of the parent 56 797 61 867 48 915 50 774 52 627
(h)
Equity attributable to shareholders of the parent
Non-controlling interests 1 477 731 4 716 4 142 2 149 Non-controlling interests
Net ?nancial debt 14 319 3 854 18 085 14 596 21 174 Net ?nancial debt
Operating cash ?ow 9 763 13 608 17 934 10 763 13 439 Operating cash ?ow
as % of net ?nancial debt 68.2% 353.2%
(f)
99.2% 73.7% 63.5% as % of net ?nancial debt
Free cash ?ow
(b)
4 491 7 761 12 369 5 033 8 231 Free cash ?ow
(b)
Capital expenditure 4 779 4 576 4 641 4 869 4 971 Capital expenditure
as % of sales
(a)
5.7% 4.9% 4.3% 4.4% 4.6% as % of sales
(a)
Data per share
(c)
Data per share
(c)
Weighted average number of shares outstanding (in millions of units) 3 196 3 371 3 572 3 705 3 829 Weighted average number of shares outstanding (in millions of units)
Total basic earnings per share 2.97 10.16
(f)
2.92 4.87
(g)
2.78 Total basic earnings per share
Equity attributable to shareholders of the parent 17.77 18.35 13.69 13.71 13.75
(h)
Equity attributable to shareholders of the parent
Dividend 1.95
(e)
1.85 1.60 1.40 1.22 Dividend
Pay-out ratio based on Total basic earnings per share 65.7%
(e)
18.2% 54.8% 28.8% 43.9% Pay-out ratio based on Total basic earnings per share
Stock prices (high) 55.45 56.90 51.25 52.95 55.35 Stock prices (high)
Stock prices (low) 43.50 48.18 35.04 38.02 42.65 Stock prices (low)
Yield
(d)
3.5/4.5
(e)
3.3/3.8 3.1/4.6 2.6/3.7 2.2/2.9 Yield
(d)
Market capitalisation 171 287 178 316 174 294 150 409 195 661 Market capitalisation
Number of personnel (in thousands) 328 281 278 283 276 Number of personnel (in thousands)
* Earnings Before Interest, Taxes, restructuring and impairments.
(a) 2010 restated following the changes in the Income Statement described in Note 1 – Accounting Policies.
(b) Operating cash ?ow less capital expenditure, disposal of tangible assets, purchase and disposal of intangible assets, movements with associates as well as with
non-controlling interests, and other investing cash ?ows.
(c) 2007 has been restated following 1-for-10 share split effective on 30 June 2008.
Financial information – 5 year review (continued)
(d) Calculated on the basis of the dividend for the year concerned, which is paid in the following year, and on high/low stock prices.
(e) As proposed by the Board of Directors of Nestlé S.A.
(f) Impacted by the pro?t on disposal of 52% of Alcon outstanding capital.
(g) Impacted by the pro?t on disposal of 24.8% of Alcon outstanding capital.
(h) 2007 comparatives have been restated following ?rst application of IFRIC 14.
120 Consolidated Financial Statements of the Nestlé Group 2011
Companies
% capital
City shareholdings Currency Capital
Companies of the Nestlé Group
Principal af?liated and associated companies
(a)
which operate in the Food and Beverages business, with the exception
of those marked with an ° which are engaged in health and beauty activities.
(a)
In the context of the SIX Swiss Exchange Directive on Information relating to Corporate Governance, the disclosure criteria are as follows:
– operating companies are disclosed if their sales exceed CHF 10 million or equivalent;
– ?nancial companies are disclosed if either their equity exceed CHF 10 million or equivalent and/or the total
balance sheet is higher than CHF 50 million or equivalent.
Countries within the continents are listed according to the alphabetical order of the country names.
Percentage of capital shareholding corresponds to voting powers unless stated otherwise.
All companies listed below are fully consolidated unless stated otherwise.
1)
Af?liated companies for which the method of proportionate consolidation is used.
2)
Associated companies for which the equity method is used.
?
Companies listed on the stock exchange
?
Sub-holding, ?nancial and property companies
Europe
Austria
C.P.A. Cereal Partners Handelsgesellschaft
M.B.H. & Co. OHG
1)
Wien 50% EUR 145 346
Nespresso Österreich GmbH & Co. OHG Wien 100% EUR 35 000
Nestlé Austria Holding GmbH
?
Wien 100% EUR 7 270 000
Nestlé Österreich GmbH Wien 100% EUR 3 000 000
Schöller Lebensmittel GmbH Wien 100% EUR 7 231 000
Belgium
Centre de Coordination Nestlé S.A.
?
Bruxelles 100% EUR 3 298 971 818
Davigel Belgilux S.A. Bruxelles 100% EUR 1 487 361
Nespresso Belgique S.A. Bruxelles 100% EUR 550 000
Nestlé Belgilux S.A. Bruxelles 100% EUR 8 924 200
Nestlé Catering Services N.V. Bruxelles 100% EUR 14 035 500
Nestlé Waters Benelux S.A. Etalle 100% EUR 19 924 000
Bosnia and Herzegovina
Nestlé Adriatic B&H d.o.o. Sarajevo 100% BAM 2 000
Bulgaria
Nestlé Bulgaria A.D. So?a 100% BGN 10 234 933
Croatia
Nestlé Adriatic d.o.o. Zagreb 100% HRK 14 685 500
Czech Republic
Cereal Partners Czech Republic
1)
Praha 50% CZK 23 100 000
Nestlé Cesko s.r.o. Praha 100% CZK 1 154 000 000
Consolidated Financial Statements of the Nestlé Group 2011 121
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Denmark
Nestlé Danmark A/S Copenhagen 100% DKK 44 000 000
Nestlé Waters Powwow (Denmark) Holdings A/S
?
Copenhagen 100% DKK 15 000 000
Oscar A/S Rønnede 100% DKK 10 990 000
Finland
Puljonki Oy Juuka 100% EUR 16 000
Suomen Nestlé Oy Helsinki 100% EUR 10 000 000
France
Centres de Recherche et Développement Nestlé S.A.S. Beauvais 100% EUR 3 138 230
Cereal Partners France SNC
1)
Noisiel 50% EUR 3 000 000
Davigel S.A.S. Martin Eglise 100% EUR 7 681 250
Eau Minérale Naturelle de Plancoët
«Source Sassay» S.A.S. Plancoët 100% EUR 430 028
Galderma International S.A.S.°
1)
Courbevoie 50% EUR 931 905
Galderma Research and Development SNC°
1)
Biot 50% EUR 70 518 259
Herta S.A.S. Noisiel 100% EUR 12 908 610
Houdebine S.A.S. Noyal Pontivy 50% EUR 726 000
Jenny Craig France S.A.S. La Baule-Escoublac 100% EUR 1 000 000
? L’Oréal S.A.°
2)
Paris 30% EUR 120 596 816
Listed on the Paris stock exchange, market capitalisation EUR 48.7 billion, quotation code (ISIN) FR0000120321
Laboratoires Galderma S.A.S.°
1)
Alby-sur-Chéran 50% EUR 14 015 454
Laboratoires Innéov SNC°
1)
Nanterre 50% EUR 650 000
Lactalis Nestlé Produits Frais S.A.S.
2)
Laval 40% EUR 69 208 832
Nespresso France S.A.S. Paris 100% EUR 1 360 000
Nestlé Clinical Nutrition France S.A.S. Noisiel 100% EUR 57 943 072
Nestlé Entreprises S.A.S.
?
Noisiel 100% EUR 739 559 392
Nestlé France S.A.S. Noisiel 100% EUR 130 925 520
Nestlé Grand Froid S.A. Noisiel 100% EUR 3 120 000
Nestlé HomeCare S.A.S. Noisiel 100% EUR 5 550 979
Nestlé Purina PetCare France S.A.S. Rueil-Malmaison 100% EUR 21 091 872
Nestlé Waters S.A.S.
?
Issy-les-Moulineaux 100% EUR 154 893 080
Nestlé Waters France S.A.S.
?
Issy-les-Moulineaux 100% EUR 44 856 149
Nestlé Waters Management & Technology S.A.S. Issy-les-Moulineaux 100% EUR 38 113
Nestlé Waters Marketing & Distribution S.A.S. Issy-les-Moulineaux 100% EUR 26 740 940
Nestlé Waters Supply Centre S.A.S. Issy-les-Moulineaux 100% EUR 2 577 000
Nestlé Waters Supply Est S.A.S. Issy-les-Moulineaux 100% EUR 17 539 660
Nestlé Waters Supply Sud S.A.S. Issy-les-Moulineaux 100% EUR 8 130 105
S.A. des Eaux Minérales de Ribeauvillé Ribeauvillé 99.6% EUR 846 595
Schöller Glaces et Desserts S.A.S. Vitry-sur-Seine 100% EUR 104 400
Société de Bouchages Emballages
Conditionnement Moderne S.A.S.
2)
Lavardac 50% EUR 10 200 000
Société des Produits Alimentaires de Caudry S.A.S. Noisiel 100% EUR 1 440 000
Société Française des Eaux Régionales S.A.S.
?
Issy-les-Moulineaux 100% EUR 1 490 098
Société Immobilière de Noisiel S.A.
?
Noisiel 100% EUR 22 753 550
Société Industrielle de Transformation
de Produits Agricoles S.A.S. Noisiel 100% EUR 9 718 000
122 Consolidated Financial Statements of the Nestlé Group 2011
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Germany
Alois Dallmayr Kaffee OHG
2)
München 25% EUR 10 250 000
C.P.D. Cereal Partners Deutschland GmbH & Co. OHG
1)
Frankfurt am Main 50% EUR 511 292
Distributa Gesellschaft für Lebensmittel-Logistik mbH Postdam 94% EUR 515 000
Erlenbacher Backwaren GmbH Darmstadt 100% EUR 2 582 024
Galderma Laboratorium GmbH°
1)
Düsseldorf 50% EUR 800 000
Herta GmbH Recklinghausen 100% EUR 51 129
Innéov Deutschland GmbH°
1)
Karlsruhe 50% EUR 25 000
Nespresso Deutschland GmbH Düsseldorf 100% EUR 25 000
Nestlé Deutschland AG Frankfurt am Main 100% EUR 214 266 628
Nestlé Product Technology Centre
Lebensmittelforschung GmbH Singen 100% EUR 52 000
Nestlé Purina PetCare Deutschland GmbH Euskirchen 100% EUR 30 000
Nestlé Schöller GmbH Nürnberg 100% EUR 100 000
Nestlé Schöller Produktions GmbH Nürnberg 100% EUR 30 000
Nestlé Unternehmungen Deutschland GmbH
?
Frankfurt am Main 100% EUR 60 000 000
Nestlé Versorgungskasse GmbH
?
Frankfurt am Main 100% EUR 60 000
Nestlé Waters Deutschland GmbH Mainz 100% EUR 10 566 000
Nestlé Waters Direct Deutschland GmbH Neuss 100% EUR 31 000
PowerBar Europe GmbH München 100% EUR 25 000
Q-Med GmbH°
1)
Bensheim 50% EUR 26 000
Trinks GmbH
2)
Goslar 25% EUR 2 360 000
Trinks Süd GmbH
2)
München 25% EUR 260 000
Wagner Tiefkühlprodukte GmbH Saarbrücken 74% EUR 511 292
WCO Kinderkost GmbH Conow Schwerin 100% EUR 26 000
Greece
C.P.W. Hellas Breakfast Cereals S.A.
1)
Maroussi 50% EUR 201 070
Nespresso Hellas S.A. Maroussi 100% EUR 500 000
Nestlé Hellas S.A. Maroussi 100% EUR 18 656 726
Hungary
Cereal Partners Hungária Kft.
1)
Budapest 50% HUF 22 000 000
Kékkúti Ásvànyvíz Zrt. Budapest 100% HUF 238 326 000
Nestlé Hungária Kft. Budapest 100% HUF 6 000 000 000
Italy
Fastlog S.p.A. Milano 100% EUR 154 935
Galderma Italia S.p.A.°
1)
Milano 50% EUR 112 000
Koiné S.p.A. Madone (Bergamo) 51% EUR 258 230
Nespresso Italiana S.p.A. Milano 100% EUR 250 000
Nestlé ltaliana S.p.A. Milano 100% EUR 25 582 492
Q-Med ICT S.r.l.°
1)
Codogno 50% EUR 10 000
Sanpellegrino S.p.A. Milano 100% EUR 58 742 145
Kazakhstan
Nestlé Food Kazakhstan LLP Almaty 100% KZT 91 900
Consolidated Financial Statements of the Nestlé Group 2011 123
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Lithuania
UAB “Nestlé Baltics” Vilnius 100% LTL 110 000
Luxemburg
Compagnie Financière du Haut-Rhin S.A.
?
Luxembourg 100% EUR 105 200 000
Nespresso Luxembourg Sàrl Luxembourg 100% EUR 12 525
Nestlé Finance International Ltd
?
Luxembourg 100% EUR 440 000
NTC-Europe S.A.
?
Luxembourg 100% EUR 3 565 000
Macedonia
Nestlé Adriatik Makedonija d.o.o.e.l. Skopje-Karpos 100% MKD 31 065 780
Malta
Nestlé Malta Ltd Lija 100% EUR 116 469
Netherlands
East Springs International N.V.
?
Amsterdam 100% EUR 25 370 000
Nespresso Nederland B.V. Amsterdam 100% EUR 680 670
Nestlé Nederland B.V. Amsterdam 100% EUR 11 346 000
Norway
A/S Nestlé Norge Oslo 100% NOK 81 250 000
Kaffeknappen Norge AS Oslo 75% NOK 100 000
Poland
Cereal Partners Poland Torun-Paci?c Sp. Z o.o.
1)
Torun 50% PLN 14 572 838
Galderma Polska Z o.o.°
1)
Warszawa 50% PLN 50 000
Nestlé Polska S.A. Warszawa 100% PLN 50 000 000
Nestlé Waters Polska S.A. Warszawa 100% PLN 46 100 000
Portugal
Cereal Associados Portugal A.E.I.E.
1)
Oeiras 50% EUR 99 760
Nestlé Portugal S.A. Linda-a-Velha 100% EUR 30 000 000
Nestlé Waters direct Portugal, comércio e
distribuição de produtos alimentares, S.A. Loures 100% EUR 1 000 000
Prolacto-Lacticinios de São Miguel S.A. Ponta Delgada 100% EUR 700 000
Republic of Ireland
Nestlé (lreland) Ltd Dublin 100% EUR 3 530 600
Republic of Serbia
Centro-Spice d.o.o. Surcin, Beograd 100% EUR 15 039 495
Nestlé Adriatic Foods d.o.o. Beograd 100% EUR 13 844 950
Nestlé Ice Cream Srbija d.o.o. Stara Pazova Stara Pazova 100% EUR 41 792 988
Romania
Nestlé Romania S.R.L. Bucharest 100% RON 77 906 800
124 Consolidated Financial Statements of the Nestlé Group 2011
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Russia
Cereal Partners Russia LLC
1)
Moscow 50% RUB 20 420 000
LLC Nestlé Watercoolers Service Moscow 100% RUB 20 372 926
Nestlé Kuban LLC Timashevsk 100% RUB 48 675
Nestlé Rossiya LLC Moscow 100% RUB 717 730 776
Slovak Republic
Cereal Partners Slovak Republic s.r.o.
1)
Prievidza 50% EUR 165 970
Nestlé Slovensko s.r.o. Prievidza 100% EUR 13 277 568
Spain
Aquarel Iberica S.A. Barcelona 100% EUR 300 505
Cereal Partners España A.E.I.E.
1)
Esplugues de Llobregat (Barcelona) 50% EUR 120 202
Davigel España S.A. Sant Just Desvern (Barcelona) 100% EUR 984 000
Helados y Postres S.A. Vitoria (Alava) 100% EUR 140 563 200
Innéov España S.A.°
1)
Madrid 50% EUR 120 000
Laboratorios Galderma, S.A.°
1)
Madrid 50% EUR 432 480
Nestlé España S.A. Esplugues de Llobregat (Barcelona) 100% EUR 100 000 000
Nestlé Healthcare Nutrition, S.A. Esplugues de Llobregat (Barcelona) 100% EUR 300 000
Nestlé Purina PetCare España S.A. Castellbisbal (Barcelona) 100% EUR 12 000 000
Nestlé Waters España, S.A. Barcelona 100% EUR 14 700 000
Productos del Café S.A. Reus (Tarragona) 100% EUR 6 600 000
Sweden
Galderma Holding AB°
1) ?
Bromma 50% SEK 50 000
Galderma Nordic AB°
1)
Bromma 50% SEK 31 502 698
Hemglass AB Stockholm 100% SEK 14 000 000
Jede AB Mariestad 100% SEK 7 000 000
Kaffeknappen AB
?
Stockholm 100% SEK 100 000
Kaffeknappen Sverige AB Stockholm 100% SEK 100 000
Nestlé Sverige AB Helsingborg 100% SEK 20 000 000
Q-Med AB°
1)
Uppsala 50% SEK 24 845 500
Q-Med Production AB°
1)
Uppsala 50% SEK 100 000
Switzerland
Beverage Partners Worldwide (Europe) AG
1)
Zürich 50% CHF 2 000 000
Beverage Partners Worldwide S.A.
1) ?
Zürich 50% CHF 14 000 000
CPW Operations Sàrl
1)
Prilly 50% CHF 20 000
CPW S.A.
1)
Prilly 50% CHF 10 000 000
Eckes-Granini (Suisse) S.A.
1)
Henniez 49% CHF 2 000 000
Emaro S.A.
?
Romanel-sur-Lausanne 100% CHF 300 000
Entreprises Maggi S.A.
?
Cham 100% CHF 100 000
Galderma Pharma S.A.°
1) ?
Lausanne 50% CHF 48 900 000
Galderma S.A.°
1)
Cham 50% CHF 100 000
Intercona Re AG
?
Châtel-St-Denis 100% CHF 35 000 000
Life Ventures S.A.
?
La Tour-de-Peilz 100% CHF 30 000 000
Nestec S.A. Vevey 100% CHF 5 000 000
Nestlé Finance S.A.
?
Cham 100% CHF 30 000 000
Nestlé International Travel Retail S.A. Vevey 100% CHF 3 514 000
Consolidated Financial Statements of the Nestlé Group 2011 125
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Switzerland (continued)
Nestlé Nespresso S.A. Lausanne 100% CHF 2 000 000
Nestlé Operational Services Worldwide S.A. Bussigny-près-Lausanne 100% CHF 100 000
Nestlé Suisse S.A. Vevey 100% CHF 250 000
Nestlé Waters (Suisse) S.A. Henniez 100% CHF 5 000 000
Nestrade S.A. La Tour-de-Peilz 100% CHF 6 500 000
Nutrition-Wellness Venture AG
?
Vevey 100% CHF 100 000
Rive-Reine S.A.
?
La Tour-de-Peilz 100% CHF 2 000 000
S.I. En Bergère Vevey S.A.
?
Vevey 100% CHF 19 500 000
Société des Produits Nestlé S.A. Vevey 100% CHF 54 750 000
So?nol S.A. Manno 100% CHF 3 000 000
Turkey
Balaban Gida Sanayi ve Ticaret Anonim Sirketi Sakarya 50.9% TRY 21 424 364
Cereal Partners Gida Ticaret Limited Sirketi
1)
Istanbul 50% TRY 20 000
Erikli Dagitim ve Pazarlama A.S. Bursa 80% TRY 3 849 975
Erikli Su ve Mesrubat Sanayi ve Ticaret A.S. Bursa 80% TRY 12 700 000
NDB Gida Sanayi ve Ticaret Anonim Sirketi
?
Istanbul 50.9% TRY 66 611 123
Nestlé Turkiye Gida Sanayi A.S. Istanbul 99.9% TRY 35 000 000
Nestlé Waters Gida ve Mesrubat Sanayi Ticaret A.S. Bursa 75% TRY 8 000 000
Ukraine
LLC Nestlé Ukraine Kyiv 100% USD 150 000
LLC Technocom Kharkiv 100% UAH 119 658 066
PJSC "Lviv Confectionery Factory Svitoch” Lviv 97% UAH 88 111 060
PRJSC Volynholding Torchyn 100% UAH 100 000
United Kingdom
Cereal Partners UK
1)
Welwyn Garden 50% GBP —
Galderma (UK) Ltd°
1)
Watford 50% GBP 1 500 000
Nespresso UK Ltd Croydon 100% GBP 275 000
Nestec York Ltd York 100% GBP 500 000
Nestlé Holdings (UK) PLC
?
Croydon 100% GBP 77 940 000
Nestlé Purina PetCare (UK) Ltd Croydon 100% GBP 44 000 000
Nestlé UK Ltd Croydon 100% GBP 129 972 342
Nestlé Waters (UK) Holdings Ltd
?
Croydon 100% GBP 6 500 002
Nestlé Waters UK Ltd Croydon 100% GBP 640
Raw Products Ltd Croydon 100% GBP 200 000
Schöller Ice-Cream Ltd Guildford 100% GBP 1 584 626
Vita?o (International) Ltd Liverpool 100% GBP 625 379
126 Consolidated Financial Statements of the Nestlé Group 2011
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Africa
Algeria
Nestlé Algérie SpA Alger 70% DZD 7 000 000
Nestlé Waters Algérie SpA Blida 100% DZD 1 622 551 965
Angola
Nestlé Angola Lda Luanda 100% AOA 24 000 000
Burkina Faso
Nestlé Burkina S.A. Ouagadougou 100% XOF 50 000 000
Cameroon
Nestlé Cameroun Douala 100% XAF 650 000 000
Côte d'Ivoire
? Nestlé Côte d’Ivoire Abidjan 86.5% XOF 5 517 600 000
Listed on the Abidjan stock exchange, market capitalisation XOF 53.0 billion, quotation code (ISIN) CI0009240728
Democratic Republic of Congo
Nestlé Congo s.p.r.l. Kinshasa 100% USD 3 200 000
Egypt
Nestlé Egypt S.A.E. Giza 100% EGP 80 722 000
Nestlé Waters Distribution Company Cairo 64% EGP 15 200 000
Nestlé Waters Egypt S.A.E. Cairo 63.7% EGP 81 500 000
Gabon
Nestlé Gabon Libreville 90% XAF 344 000 000
Ghana
Nestlé Central and West Africa Ltd Accra 100% GHS 46 000
Nestlé Ghana Ltd Accra 76% GHS 100 000
Guinea
Nestlé Guinée S.A. Conakry 99% GNF 3 424 000 000
Kenya
Nestlé Equatorial African Region Limited Nairobi 100% KES 132 000 000
Nestlé Kenya Ltd Nairobi 100% KES 89 625 000
Mali
Nestlé Mali S.A.U. Bamako 100% XOF 10 000 000
Mauritius
Nestlé SEA Trading Ltd Port Louis 100% USD 2
Nestlé’s Products (Mauritius) Ltd Port Louis 100% BSD 71 500
Consolidated Financial Statements of the Nestlé Group 2011 127
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Morocco
Nestlé Maghreb S.A. Casablanca 100% MAD 300 000
Nestlé Maroc S.A. El Jadida 94.5% MAD 156 933 000
Mozambique
Nestlé Mocambique Lda Maputo 100% MZN 400 004 000
Niger
Nestlé Niger Niamey 75% XOF 50 000 000
Nigeria
? Nestlé Nigeria Plc Ilupeju 63.2% NGN 396 328 125
Listed on the Lagos stock exchange, market capitalisation NGN 353.3 billion, quotation code (ISIN) NGNESTLE0006
Senegal
Nestlé Sénégal Dakar 100% XOF 1 620 000 000
South Africa
Cereal Partners South Africa
1)
Randburg 50% ZAR 4 999 000
Galderma Laboratories South Africa (Pty) Ltd°
1)
Randburg 50% ZAR 375 000
Nestlé (South Africa) (Pty) Ltd Johannesburg 100% ZAR 53 400 000
Specialised Protein Products (Pty) Ltd Bryanston 100% ZAR 4 000
Togo
Nestlé Togo S.A.U. Lome 100% XOF 50 000 000
Tunisia
Nestlé Tunisie Distribution S.A. Tunis 99.5% TND 100 000
Nestlé Tunisie S.A. Tunis 99.5% TND 8 438 280
Zimbabwe
Nestlé Zimbabwe (Private) Ltd Harare 100% USD 2 000 000
128 Consolidated Financial Statements of the Nestlé Group 2011
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Americas
Argentina
Dairy Partners Americas Argentina S.A.
1)
Buenos Aires 50% ARS 98 808
Dairy Partners Americas Manufacturing Argentina S.A.
1)
Buenos Aires 50% ARS 272 500
Eco de Los Andes S.A. Buenos Aires 50.9% ARS 92 524 285
Nestlé Argentina S.A. Buenos Aires 100% ARS 10 809 000
Nestlé Waters Argentina S.A. Buenos Aires 100% ARS 6 420 838
Barbados
Lacven Corporation
1) ?
Barbados 50% USD 65 159 192
Bermuda
Centram Holdings Ltd
?
Hamilton 100% USD 12 000
DPA Manufacturing Holdings Ltd
1) ?
Hamilton 50% USD 23 639 630
Bolivia
Nestlé Bolivia S.A. Santa Cruz 100% BOB 191 900
Fagal Srl Santa Cruz 100% BOB 126 100 000
Brazil
ASB-Bebidas e Alimentos Ltda São Paulo 100% BRL 1 000
Chocolates Garoto S.A. Vila Velha 100% BRL 161 450 000
CPW Brasil Ltda
1)
São Paulo 50% BRL 7 885 520
Dairy Partners Americas Brasil Ltda
1)
São Paulo 50% BRL 27 606 368
Dairy Partners Americas Manufacturing Brasil Ltda
1)
São Paulo 50% BRL 39 468 974
Dairy Partners Americas Nordeste – Produtos
Alimentícios Ltda
1)
Garanhuns 50% BRL 100 000
Galderma Brasil Ltda°
1)
São Paulo 50% BRL 19 741 602
Innéov Brasil Nutricosmeticos Ltda°
1)
Duque de Caxias 50% BRL 201 160
Nestlé Brasil Ltda São Paulo 100% BRL 450 092 396
Nestlé Nordeste Alimentos e Bebidas Ltda Feira de Santana 100% BRL 12 713 641
Nestlé Sul Alimentos e Bebidas Ltda Carazinho 100% BRL 100 000
Nestlé Waters Brasil – Bebidas e Alimentos Ltda São Paulo 100% BRL 87 248 341
Canada
G. Production Canada Inc.°
1)
Baie D'Urfé (Québec) 50% CAD 100
Galderma Canada Inc.°
1)
New Brunswick 50% CAD 100
Jenny Craig Weight Loss Centres (Canada) Company Halifax (Nova Scotia) 100% CAD 10 000
Nestlé Canada Inc. Toronto (Ontario) 100% CAD 47 165 540
Nestlé Capital Canada Ltd
?
Toronto (Ontario) 100% CAD 1 010
Nestlé Globe Inc. Toronto (Ontario) 100% CAD 106 000 100
Cayman Islands
Hsu Fu Chi International Limited Grand Cayman 60% SGD 7 950 000
Chile
Aguas CCU – Nestlé Chile S.A.
2)
Santiago de Chile 49.7% CLP 49 799 375 321
Cereales CPW Chile Ltda
1)
Santiago de Chile 50% CLP 3 026 156 114
Comercializadora de Productos Nestlé S.A. Santiago de Chile 99.7% CLP 1 000 000
Consolidated Financial Statements of the Nestlé Group 2011 129
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Chile (continued)
Gerber Chile S.A. Santiago de Chile 100% CLP 4 009 604 142
Nestlé Chile S.A. Santiago de Chile 99.7% CLP 11 832 926 000
Colombia
Comestibles La Rosa S.A. Bogotá 100% COP 126 397 400
Dairy Partners Americas Manufacturing Colombia Ltda
1)
Bogotá 50% COP 200 000 000
Nestlé de Colombia S.A. Bogotá 100% COP 1 291 305 400
Nestlé Purina PetCare de Colombia S.A. Bogotá 100% COP 17 030 000 000
Costa Rica
Compañía Nestlé Costa Rica S.A. Barreal de Heredia 100% CRC 18 000 000
Gerber Ingredients, S.A. San José 100% CRC 10 000
Cuba
Coralac S.A. La Habana 60% USD 6 350 000
Los Portales S.A. La Habana 50% USD 24 110 000
Dominican Republic
Nestlé Dominicana S.A. Santo Domingo 97.2% DOP 48 500 000
Silsa Dominicana S.A. Santo Domingo 97.2% DOP 10 000
Ecuador
Ecuajugos S.A.
1)
Quito 50% USD 232 000
Industrial Surindu S.A. Quito 100% USD 3 000 000
Nestlé Ecuador S.A. Quito 100% USD 1 776 760
El Salvador
Nestlé El Salvador, S.A. de C.V. San Salvador 100% USD 4 457 200
Guatemala
Malher S.A. Guatemala 92% GTQ 100 000 000
Nestlé Guatemala S.A. Mixco 100% GTQ 23 460 600
Honduras
Nestlé Hondureña S.A. Tegucigalpa 100% PAB 200 000
Jamaica
Nestlé Jamaica Ltd Kingston 100% JMD 49 200 000
Mexico
Cereal Partners México, S.A. de C.V.
1)
México, D.F. 50% MXN 500 000
CPW México, S. de R.L. de C.V.
1)
México, D.F. 50% MXN 43 138 000
Galderma México, S.A. de C.V.°
1)
México, D.F. 50% MXN 2 385 000
Manantiales La Asunción, S.A.P.I. de C.V. México, D.F. 40% MXN 1 205 827 492
Marcas Nestlé, S.A. de C.V. México, D.F. 100% MXN 500 050 000
Nescalín, S.A. de C.V.
?
México, D.F. 100% MXN 445 826 740
Nespresso México, S.A. de C.V. México, D.F. 100% MXN 10 050 000
Nestlé México, S.A. de C.V. México, D.F. 100% MXN 607 532 730
130 Consolidated Financial Statements of the Nestlé Group 2011
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Mexico (continued)
Nestlé Servicios Corporativos, S.A. de C.V. México, D.F. 100% MXN 170 100 000
Nestlé Servicios Industriales, S.A. de C.V. México, D.F. 100% MXN 1 050 000
Productos Gerber, S.A. de C.V. México, D.F. 100% MXN 5 252 440
Ralston Purina México, S.A. de C.V. México, D.F. 100% MXN 9 257 112
Waters Partners Services México, S.A.P.I. de C.V. México, D.F. 40% MXN 620 000
Nicaragua
Compañía Centroaméricana de Productos Lácteos, S.A. Managua 92.6% NIO 10 294 900
Nestlé Nicaragua, S.A. Managua 100% USD 150 000
Panama
Food Products (Holdings), S.A.
?
Panamá City 100% PAB 286 000
Garma Enterprises, S.A.
?
Panamá City 92% PAB 0
Lacteos de Centroamérica, S.A. Panamá City 100% USD 1 500 000
Nestlé Panamá, S.A. Panamá City 100% PAB 17 500 000
Unilac, Inc.
?
Panamá City 100% USD 750 000
Paraguay
Nestlé Paraguay S.A. Asunción 100% PYG 100 000 000
Peru
Nestlé Marcas Perú, S.A.C. Lima 100% PEN 1 000
Nestlé Perú, S.A. Lima 99.6% PEN 120 683 387
Puerto Rico
Nestlé Puerto Rico, Inc. Cataño 100% USD 500 000
Payco Foods Corporation Bayamon 100% USD 890 000
SWIRL Corporation Guaynabo 100% USD 1 000 000
Trinidad and Tobago
Nestlé Caribbean, Inc. Valsayn 100% USD 100 000
Nestlé Trinidad and Tobago Ltd Valsayn 100% TTD 35 540 000
CPW Trinidad & Tobago Limited
1)
Valsayn 50% USD 50 000
United States
Beverage Partners Worldwide (North America)
1)
Wilmington (Delaware) 50% USD —
Checkerboard Holding Company, Inc.
?
Wilmington (Delaware) 100% USD 1 001
Dreyer’s Grand Ice Cream Holdings, Inc.
?
Wilmington (Delaware) 100% USD 10
Galderma Laboratories, Inc.°
1)
Fort Worth (Texas) 50% USD 981
Galderma Research and Development, Inc.°
1)
Dover (New Hampshire) 50% USD 2 050 000
Gerber Finance Company
?
Wilmington (Delaware) 100% USD 1
Gerber Life Insurance Company New York 100% USD 148 500 000
Gerber Products Company Fremont (Michigan) 100% USD 1 000
Jenny Craig Holdings, Inc.
?
Wilmington (Delaware) 100% USD 0
Jenny Craig Operations, Inc. Los Angeles (California) 100% USD 0
Jenny Craig Weight Loss Centres, Inc.
?
Wilmington (Delaware) 100% USD 2
Jenny Craig, Inc.
?
Wilmington (Delaware) 100% USD 0
Nespresso USA, Inc. Wilmington (Delaware) 100% USD 1 000
Consolidated Financial Statements of the Nestlé Group 2011 131
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
United States (continued)
Nestlé Capital Corporation
?
Wilmington (Delaware) 100% USD 1 000 000
Nestlé Dreyer's Ice Cream Company Wilmington (Delaware) 100% USD 1
Nestlé Holdings, Inc.
?
Wilmington (Delaware) 100% USD 100 000
Nestlé Nutrition R&D Centers, Inc. Wilmington (Delaware) 100% USD 10 000
Nestlé Prepared Foods Company Philadelphia (Pennsylvania) 100% USD 476 760
Nestlé Purina PetCare Company St. Louis (Missouri) 100% USD 1 000
Nestlé Purina PetCare Global Resources, Inc. Wilmington (Delaware) 100% USD 1 000
Nestlé R&D Center, Inc. Wilmington (Delaware) 100% USD 10 000
Nestlé Transportation Company Wilmington (Delaware) 100% USD 100
Nestlé USA, Inc. Wilmington (Delaware) 100% USD 1 000
Nestlé Waters North America Holdings, Inc.
?
Wilmington (Delaware) 100% USD 10 000 000
Nestlé Waters North America, Inc. Wilmington (Delaware) 100% USD 10 700 000
Prometheus Laboratories Inc. Los Angeles (California) 100% USD 100
Sweet Leaf Tea Company Austin (Texas) 100% USD 10
The Stouffer Corporation
?
Cleveland (Ohio) 100% USD 0
Tradewinds Beverage Company Cinccinati (Ohio) 100% USD 0
TSC Holdings, Inc.
?
Wilmington (Delaware) 100% USD 100 000
Vitality Foodservice Holding Corporation
?
Dover (Delaware) 100% USD 58 865
Vitality Foodservice, Inc. Dover (Delaware) 100% USD 1 240
Waggin' Train LLC Greenville (South Carolina) 100% USD —
Uruguay
Nestlé del Uruguay S.A. Montevideo 100% UYU 9 495 189
Venezuela
Corporación Inlaca, C.A.
1)
Caracas 50% VEF 6 585
Laboratorios Galderma Venezuela, S.A.°
1)
Caracas 50% VEF 5
Nestlé Cadipro, S.A. Caracas 100% VEF 50 634
Nestlé Venezuela, S.A. Caracas 100% VEF 517
Novartis Nutrition de Venezuela, S.A. Caracas 100% VEF 1 125
132 Consolidated Financial Statements of the Nestlé Group 2011
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Asia
Bahrain
Nestlé Bahrain Trading WLL Manama 49% BHD 200 000
Bangladesh
Nestlé Bangladesh Ltd Dhaka 100% BDT 100 000 000
Greater China Region
Beverage Partners Worldwide (Paci?c) Limited
1)
Hong Kong 50% HKD 1 000 000
CPW Hong Kong Limited
1)
Hong Kong 50% HKD 402 773 606
CPW Tianjin Limited
1)
Tianjin 50% CNY 305 000 000
Dongguan Andegu Plastic Packaging Material Limited Dongguan 60% HKD 10 000 000
Dongguan Hsu Chi Food Co., Limited Dongguan 60% HKD 700 000 000
Galderma Hong Kong Limited°
1)
Hong Kong 50% HKD 10 000
Guangzhou Refrigerated Foods Limited Guangzhou 95.5% CNY 390 000 000
Henan Hsu Fu Chi Foods Co., Limited Zhumadian 60% CNY 210 000 000
Hsu Fu Chi International Holdings Limited
?
Hong Kong 60% HKD 1 500 000 000
Hubei Yinlu Foods Co., Limited Hanchuan 60% CNY 278 000 000
Nestlé (China) Limited Beijing 100% CNY 250 000 000
Nestlé Dongguan Limited Dongguan 100% CNY 472 000 000
Nestlé Hong Kong Limited Hong Kong 100% HKD 250 000 000
Nestlé Hulunbeir Limited Erguna 100% CNY 55 000 000
Nestlé Purina PetCare Tianjin Limited Tianjin 100% CNY 40 000 000
Nestlé Qingdao Limited Laixi 100% CNY 930 000 000
Nestlé R&D Centre Beijing Limited Beijing 100% CNY 40 000 000
Nestlé Shanghai Limited Shanghai 95% CNY 200 000 000
Nestlé Shuangcheng Limited Shuangcheng 97% CNY 435 000 000
Nestlé Sources Shanghai Limited Shanghai 100% CNY 211 000 000
Nestlé Sources Tianjin Limited Tianjin 95% CNY 204 000 000
Nestlé Taiwan Limited Taipei 100% TWD 100 000 000
Nestlé Tianjin Limited Tianjin 100% CNY 785 000 000
Shandong Yinlu Foods Co. Limited Zhangqiu 60% CNY 71 880 000
Shanghai Fuller Foods Co. Limited Shanghai 100% CNY 384 000 000
Shanghai Nestlé Product Services Limited Shanghai 97% CNY 83 000 000
Shanghai Totole First Food Limited Shanghai 80% CNY 72 000 000
Shanghai Totole Food Limited Shanghai 80% USD 7 800 000
Sichuan Haoji Food Co. Limited Chengdu 80% CNY 80 000 000
Xiamen Yinlu Foods Group Co., Limited Xiamen 60% CNY 311 590 000
Yunnan Dashan Drinks Co., Limited Kunming 70% CNY 35 000 000
India
Galderma India Private Ltd°
1)
Mumbai 50% INR 24 156 000
? Nestlé India Ltd New Delhi 62.8% INR 964 157 160
Listed on the Mumbai stock exchange, market capitalisation INR 402.3 billion, quotation code (ISIN) INE239A01016
Indonesia
P. T. Beverage Partners Worldwide Indonesia
1)
Jakarta 50% IDR 2 210 500
P. T. Cereal Partners Indonesia
1)
Jakarta 50% IDR 956 500 000
Consolidated Financial Statements of the Nestlé Group 2011 133
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Indonesia (continued)
P. T. Nestlé Indofood Citarasa Indonesia
1)
Jakarta 50% IDR 200 000 000 000
P. T. Nestlé Indonesia Jakarta 90.2% IDR 152 753 440 000
Iran
Anahita Polour Industrial Mineral Water Company Tehran 100% IRR 35 300 000
Nestlé Iran (Private Joint Stock Company) Tehran 89.7% IRR 358 538 000 000
Israel
Nespresso Israel Ltd Tel-Aviv 100% ILS 1 000
? OSEM Investments Ltd Shoham 53.8% ILS 110 644 444
Listed on the Tel-Aviv stock exchange, market capitalisation ILS 6.2 billion, quotation code (ISIN) IL0003040149
Japan
Galderma K.K.°
1)
Tokyo 50% JPY 10 000 000
Nestlé Japan Ltd Kobe 100% JPY 20 000 000 000
Nestlé Nespresso K.K. Kobe 100% JPY 10 000 000
Jordan
Ghadeer Mineral Water Co. WLL Amman 75% JOD 1 785 000
Nestlé Jordan Trading Co. Ltd Amman 77.8% JOD 410 000
Kuwait
Nestlé Kuwait General Trading Co. WLL Safat 49% KWD 300 000
Lebanon
Société des Eaux Minérales Libanaises S.A.L. Hazmieh 100% LBP 1 610 000 000
Société pour l’Exportation des Produits Nestlé S.A. Baabda 100% CHF 1 750 000
SOHAT Distribution S.A.L. Hazmieh 100% LBP 160 000 000
Malaysia
Cereal Partners (Malaysia) Sdn. Bhd.
1)
Petaling Jaya 50% MYR 1 025 000
? Nestlé (Malaysia) Bhd. Petaling Jaya 72.6% MYR 234 500 000
Listed on the Kuala Lumpur stock exchange, market capitalisation MYR 13.2 billion, quotation code (ISIN) MYL4707OO005
Nestlé Asean (Malaysia) Sdn. Bhd. Petaling Jaya 72.6% MYR 42 000 000
Nestlé Manufacturing (Malaysia) Sdn. Bhd. Petaling Jaya 72.6% MYR 132 500 000
Nestlé Products Sdn. Bhd. Petaling Jaya 72.6% MYR 25 000 000
Purina PetCare (Malaysia) Sdn. Bhd. Petaling Jaya 100% MYR 1 100 000
Oman
Nestlé Oman Trading LLC Muscat 49% OMR 300 000
Pakistan
? Nestlé Pakistan Ltd Lahore 59% PKR 453 495 840
Listed on the Karachi and the Lahore stock exchanges, market capitalisation PKR 163.1 billion, quotation code (ISIN) PK0025101012
Palestinian Territories
Nestlé Trading Private Limited Company Bethlehem 97.5% JOD 200 000
134 Consolidated Financial Statements of the Nestlé Group 2011
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Philippines
Beverage Partners Worldwide (Philippines) Inc.
1)
Makati City 50% PHP 10 224 600
CPW Philippines, Inc.
1)
Makati City 50% PHP 7 500 000
Nestlé Business Services AOA, Inc. Bulacan 100% PHP 70 000 000
Nestlé Philippines, Inc. Cabuyao 100% PHP 2 300 927 400
Penpro, Inc. Makati City 88.5% PHP 630 000 000
Qatar
Al Manhal Water Factory Co. Ltd WLL Doha 51% QAR 5 500 000
Nestlé Qatar Trading LLC Doha 49% QAR 1 680 000
Republic of Korea
Beverage Partners Worldwide Korea Limited Seoul 50% KRW 50 000 000
Galderma Korea Ltd°
1)
Seoul 50% KRW 500 000 000
Nestlé Korea Ltd Seoul 100% KRW 21 141 560 000
Pulmuone Waters Co., Ltd Goesan-Gun, Chunbuk 51% KRW 6 778 760 000
Saudi Arabia
Al Anhar Water Factory Co. Ltd Jeddah 64% SAR 7 500 000
Al Manhal Water Factory Co. Ltd Riyadh 64% SAR 7 000 000
Nestlé Saudi Arabia LLC Jeddah 75% SAR 27 000 000
Nestlé Water Factory Co. Ltd Riyadh 64% SAR 15 000 000
Saudi Food Industries Co. Ltd Jeddah 51% SAR 51 000 000
SHAS Company for Water Services Ltd Riyadh 64% SAR 13 500 000
Springs Water Factory Co. Ltd Dammam 64% SAR 5 000 000
Singapore
Galderma Singapore Private Ltd°
1)
Singapore 50% SGD 1 387 000
Nestlé R&D Center (Pte) Ltd Singapore 100% SGD 20 000 000
Nestlé Singapore (Pte) Ltd Singapore 100% SGD 1 000 000
Nestlé TC Asia Paci?c Pte Ltd
?
Singapore 100% JPY
SGD
10 000 000 000
2
Sri Lanka
? Nestlé Lanka PLC Colombo 90.8% LKR 537 254 630
Listed on the Colombo stock exchange, market capitalisation LKR 47.1 billion, quotation code (ISIN) LK0128N00005
Syria
Nestlé Syria S.A. Damascus 100% SYP 800 000 000
Thailand
Nestlé (Thai) Ltd Bangkok 100% THB 880 000 000
Perrier Vittel (Thailand) Ltd Bangkok 100% THB 235 000 000
Quality Coffee Products Ltd Bangkok 50% THB 500 000 000
United Arab Emirates
CP Middle East FZCO
1)
Dubai 50% AED 600 000
Nestlé Dubai Manufacturing LLC Dubai 49% AED 300 000
Nestlé Middle East FZE Dubai 100% AED 3 000 000
Consolidated Financial Statements of the Nestlé Group 2011 135
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
United Arab Emirates (continued)
Nestlé Treasury Centre-Middle East & Africa Ltd
?
Dubai 100% USD 6 650 500 000
Nestlé UAE LLC Dubai 49% AED 2 000 000
Nestlé Waters Factory H&O LLC Dubai 48% AED 22 300 000
Nestlé Waters Middle East Investments FZCO
?
Dubai 100% AED 600 000
Uzbekistan
Nestlé Uzbekistan MChJ Namangan 95.9% USD 32 565 463
Vietnam
La Vie Limited Liability Company Long An 65% USD 2 663 400
Nestlé Vietnam Ltd Dongnai 100% USD 75 266 000
136 Consolidated Financial Statements of the Nestlé Group 2011
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Oceania
Australia
Cereal Partners Australia Pty Ltd
1)
Sydney 50% AUD 107 800 000
Galderma Australia Pty Ltd°
1)
Sydney 50% AUD 2 500 300
Jenny Craig Weight Loss Centres Pty Ltd
?
Melbourne 100% AUD 210 562
Nestlé Australia Ltd Sydney 100% AUD 274 000 000
Fiji
Nestlé (Fiji) Ltd Lami 100% FJD 3 000 000
French Polynesia
Nestlé Polynésie S.A.S. Papeete 100% XPF 5 000 000
New Caledonia
Nestlé Nouvelle-Calédonie S.A.S. Nouméa 100% XPF 250 000 000
New Zealand
CPW New Zealand
1)
Auckland 50% NZD —
Jenny Craig Weight Loss Centres (NZ) Ltd
?
Auckland 100% NZD 10 000
Nestlé New Zealand Limited Auckland 100% NZD 300 000
Papua New Guinea
Nestlé (PNG) Ltd Lae 100% PGK 11 850 000
Consolidated Financial Statements of the Nestlé Group 2011 137
City of operations
Switzerland
Nestec S.A. Vevey TA
Technical, scienti?c, commercial and business assistance company whose units, specialised in all areas of the
business, supply permanent know-how and assistance to operating companies in the Group within the framework of
licence and equivalent contracts. It is also responsible for all scienti?c research and technological development,
which it undertakes itself or through af?liated companies.
The units involved are:
CPW R&D Centre
1)
Orbe R&D
Nestle Institute of Health Sciences Ecublens R
Nestlé Product Technology Centre Konol?ngen PTC
Nestlé Product Technology Centre Orbe PTC
Nestlé R&D Centre Broc R&D
Nestlé R&D Centre Orbe R&D
Nestlé Research Centre Lausanne R
Nestlé System Technology Centre Orbe PTC
Australia
CPW R&D Centre
1)
Rutherglen R&D
Chile
Nestlé R&D Centre Santiago de Chile R&D
Côte d'Ivoire
Nestlé R&D Centre Abidjan R&D
France
Galderma R&D Centre°
1)
Biot R&D
Nestlé Product Technology Centre Beauvais PTC
Nestlé Product Technology Centre Lisieux PTC
Nestlé Product Technology Centre Vittel PTC
Nestlé R&D Centre Aubigny R&D
Nestlé R&D Centre Tours R&D
Germany
Nestlé Product Technology Centre Singen PTC
Technical assistance, research and development units
Technical Assistance TA
Research centres R
Research & Development centres R&D
Product Technology centres PTC
138 Consolidated Financial Statements of the Nestlé Group 2011
City of operations
Technical assistance, research and development units (continued)
Greater China Region
Nestlé R&D Centre Beijing R&D
Nestlé R&D Centre Shanghai R&D
Israel
Nestlé R&D Centre Sderot R&D
Italy
Nestlé R&D Centre Sansepolcro R&D
Mexico
Nestlé R&D Centre Queretaro R&D
Singapore
Nestlé R&D Centre Singapore R&D
Sweden
Galderma R&D Centre° Uppsala R&D
United Kingdom
Nestlé Product Technology Centre York PTC
United States
Galderma R&D Centre°
1)
Cranbury (New Jersey) R&D
Nestlé Product Technology Centre Fremont (Michigan) PTC
Nestlé Product Technology Centre Marysville (Ohio) PTC
Nestlé Product Technology Centre St. Louis (Missouri) PTC
Nestlé R&D Centre Bakers?eld (California) R&D
Nestlé R&D Centre Minneapolis (Minnesota) R&D
Nestlé R&D Centre San Diego (California) R&D
Nestlé R&D Centre Solon (Ohio) R&D
Nestlé R&D Centre St. Joseph (Missouri) R&D
145th Financial Statements of Nestlé S.A.
140 145th Financial Statements of Nestlé S.A.
Income statement for the year ended 31 December 2011
Balance sheet as at 31 December 2011
Notes to the annual accounts
1. Accounting policies
2. Income from Group companies
3. Financial income
4. Pro?t on disposal of ?xed assets
5. Investment write downs
6. Administration and other expenses
7. Financial expense
8. Taxes
9. Liquid assets
10. Receivables
11. Financial assets
12. Participations in Group companies
13. Loans to Group companies
14. Own shares
15. Intangible assets
16. Tangible ?xed assets
17. Short-term payables
18. Long-term payables
19. Provisions
20. Share capital
21. Changes in equity
22. Reserve for own shares
23. Contingencies
24. Risk assessment
25. Additional information
Proposed appropriation of pro?t
Report of the statutory auditors
141
142
143
143
145
145
145
145
145
146
146
146
146
147
147
147
148
148
148
149
149
149
150
150
151
151
151
152
156
157
145th Financial Statements of Nestlé S.A. 141
Income statement for the year ended 31 December 2011
In millions of CHF Notes 2011 2010
Income
Income from Group companies 2 6 460 10 119
Financial income 3 148 —
Pro?t on disposal of ?xed assets 4 2 29 923
Other income 118 104
Total income 6 728 40 146
Expenses
Investment write downs 5 (843) (1 511)
Administration and other expenses 6 (242) (212)
Financial expense 7 (65) (540)
Total expenses before taxes (1 150) (2 263)
Pro?t before taxes 5 578 37 883
Taxes 8 (378) (389)
Pro?t for the year 21 5 200 37 494
142 145th Financial Statements of Nestlé S.A.
Balance sheet as at 31 December 2011
before appropriations
In millions of CHF Notes 2011 2010
Assets
Current assets
Liquid assets 9 2 396 9 189
Receivables 10 1 242 947
Prepayments and accrued income 11 9
Total current assets 3 649 10 145
Fixed assets
Financial assets 11 46 214 51 532
Intangible assets 15 1 102 1 469
Tangible ?xed assets 16 — —
Total ?xed assets 47 316 53 001
Total assets 50 965 63 146
Liabilities and equity
Liabilities
Short-term payables 17 5 589 8 300
Accruals and deferred income 35 67
Long-term payables 18 153 153
Provisions 19 878 751
Total liabilities 6 655 9 271
Equity
Share capital 20/21 330 347
Legal reserves 21 8 470 12 777
Special reserve 21 28 546 2 859
Pro?t brought forward 21 1 764 398
Pro?t for the year 21 5 200 37 494
Total equity 44 310 53 875
Total liabilities and equity 50 965 63 146
145th Financial Statements of Nestlé S.A. 143
Notes to the annual accounts
1. Accounting policies
General
Nestlé S.A. (the Company) is the ultimate holding company
of the Nestlé Group which comprises subsidiaries,
associated companies and joint ventures throughout the
world. The accounts are prepared in accordance with
accounting principles required by Swiss law. They are
prepared under the historical cost convention and on the
accruals basis.
Foreign currency translation
Transactions in foreign currencies are recorded at the rate
of exchange at the date of the transaction or, if hedged
forward, at the rate of exchange under the related forward
contract. Non-monetary assets and liabilities are carried at
historical rates. Monetary assets and liabilities in foreign
currencies are translated at year-end rates. Any resulting
exchange differences are included in the respective income
statement captions depending upon the nature of the
underlying transactions. The aggregate unrealised exchange
difference is calculated by reference to original transaction
date exchange rates and includes hedging transactions.
Where this gives rise to a net loss, it is charged to the
income statement whilst a net gain is deferred.
Hedging
The Company uses forward foreign exchange contracts,
options, ?nancial futures and currency swaps to hedge
foreign currency ?ows and positions. Unrealised foreign
exchange differences on hedging instruments are matched
and accounted for with those on the underlying asset or
liability. Long-term loans, in foreign currencies, used to
?nance investments in participations are generally not
hedged.
The Company also uses interest rate swaps to manage
interest rate risk. The swaps are accounted for at fair value
at each balance sheet date and changes in the market
value are recorded in the income statement.
Income statement
Not currently transferable income is recognised only upon
receipt. Dividends paid out of pre-acquisition pro?ts are
not included under income from Group companies; instead
they are credited against the carrying value of the
participation.
In accordance with Swiss law and the Company’s
Articles of Association, dividends are treated as
an appropriation of pro?t in the year in which they are
rati?ed at the Annual General Meeting rather than as
an appropriation of pro?t in the year to which they relate.
Taxes
This caption includes taxes on pro?t, capital and
withholding taxes on transfers from Group companies.
Financial assets
The carrying value of participations and loans comprises
the cost of investment, excluding the incidental costs of
acquisition, less any write downs.
Participations located in countries where the political,
economic or monetary situation might be considered to
carry a greater than normal level of risk are carried at
a nominal value of one franc.
Participations and loans are written down on
a conservative basis, taking into account the pro?tability
of the company concerned.
Marketable securities are valued at the lower of cost
and market value.
Own shares held to cover option rights in favour of
members of the Group’s Management are carried at
exercise price if lower than cost. Own shares held for
trading purposes are carried at cost as are own shares
earmarked to cover other Long-Term Incentive Plans. Own
shares repurchased for the Share Buy-Back Programme
are carried at cost. All gains and losses on own shares are
recorded in the income statement.
144 145th Financial Statements of Nestlé S.A.
1. Accounting policies (continued)
Intangible assets
Trademarks and other industrial property rights are written
off on acquisition or exceptionally over a longer period. In
the Consolidated Financial Statements of the Nestlé Group
this item has a different treatment.
Tangible ?xed assets
The Company owns land and buildings which have been
depreciated in the past to one franc. Of?ce furniture and
equipment are fully depreciated on acquisition.
Provisions
Provisions recognise contingencies which may arise and
which have been prudently provided. A provision for
uninsured risks is constituted to cover general risks not
insured with third parties, such as consequential loss.
Provisions for Swiss taxes are made on the basis of the
Company’s taxable capital, reserves and pro?t for the year.
A general provision is maintained to cover possible foreign
taxes liabilities.
Employee bene?ts
Employees are eligible for retirement bene?ts under
a de?ned bene?t plan with a retirement pension objective
expressed as a percentage of the base salary. Those
bene?ts are mainly provided through separate pension
funds.
Prepayments and accrued income
Prepayments and accrued income comprise payments
made in advance relating to the following year, and income
relating to the current year which will not be received until
after the balance sheet date (such as interest receivable
on loans or deposits). Revaluation gains on open forward
exchange contracts at year-end rates, as well as the result
of the valuation of interest rate swaps, are also included in
this caption.
Accruals and deferred income
Accruals and deferred income comprise expenses relating
to the current year which will not be paid until after the
balance sheet date and income received in advance,
relating to the following year. Net revaluation losses on
open forward exchange contracts at year-end rates, as
well as the result of the valuation of interest rate swaps,
are also included in this caption.
145th Financial Statements of Nestlé S.A. 145
2. Income from Group companies
This represents dividends of the current and prior years and other net income from Group companies.
3. Financial income
In millions of CHF 2011 2010
Net result on loans to Group companies 90 —
Other ?nancial income 58 —
148 —
In 2010 substantial exchange losses on long-term loans to Group companies and investments were recorded as a result
of the strengthening of the Swiss Franc against most foreign currencies. The interest income arising on these loans and
investments partially compensated the exchange losses. The net charge was included under “Financial expense” in
Note 7.
4. Pro?t on disposal of ?xed assets
This represents mainly the net gains realised on the sale of trademarks and other industrial property rights previously
written down. In 2010, this included the net gains realised on the sale of the remaining 52% of Alcon Inc. to Novartis
(CHF 29 903 million).
5. Investment write downs
In millions of CHF 2011 2010
Participations and loans 351 639
Trademarks and other industrial property rights 492 872
843 1 511
The write down of trademarks and other industrial property rights in 2011 includes a ?fth of the amount paid for the
acquisition of Kraft Foods frozen pizza (CHF 367 million).
In 2010, trademarks linked to the acquisition of Kraft Foods frozen pizza were amortised by one ?fth of the amount paid
(CHF 367 million), as well as the balance of the amount paid in 2008 in respect of Gerber North America’s Intellectual
Property Rights (CHF 286 million).
6. Administration and other expenses
In millions of CHF 2011 2010
Salaries and welfare expenses 105 104
Other expenses 137 108
242 212
146 145th Financial Statements of Nestlé S.A.
7. Financial expense
In millions of CHF 2011 2010
Net result on loans from Group companies (see Note 3) 65 501
Other ?nancial expenses (see Note 3) — 39
65 540
8. Taxes
This includes withholding taxes on income from foreign sources, as well as Swiss taxes for which adequate provisions
have been established.
9. Liquid assets
In millions of CHF 2011 2010
Cash and cash equivalents 1 997 5 346
Marketable securities 399 3 843
2 396 9 189
Cash and cash equivalents include deposits of CHF 650 million with maturities of less than three months.
Marketable securities of CHF 399 million consist of commercial papers with maturities from three to six months.
10. Receivables
In millions of CHF 2011 2010
Amounts owed by Group companies (current accounts) 1 064 763
Other receivables 178 184
1 242 947
145th Financial Statements of Nestlé S.A. 147
11. Financial assets
In millions of CHF Notes 2011 2010
Participations in Group companies 12 28 131 28 865
Loans to Group companies 13 13 233 13 845
Own shares 14 4 798 8 764
Other investments 52 58
46 214 51 532
12. Participations in Group companies
In millions of CHF 2011 2010
At 1 January 28 865 15 441
Net increase/(decrease) (491) 14 010
Write downs (243) (586)
At 31 December 28 131 28 865
The increase in participations is mainly due to the acquisitions made in China. It was overcompensated by the capital
decrease in one af?liate resulting in a net decrease for 2011.
The carrying value of participations continues to represent a conservative valuation having regard to both the income
received by the Company and the net assets of the Group companies concerned.
A list of the most important companies held, either directly by Nestlé S.A. or indirectly through other Group companies,
with the percentage of the capital controlled, is given in the Consolidated Financial Statements of the Nestlé Group.
13. Loans to Group companies
In millions of CHF 2011 2010
At 1 January 13 845 11 588
New loans 5 438 5 340
Repayments and write downs (6 112) (1 515)
Realised exchange differences (1 602) (779)
Unrealised exchange differences 1 664 (789)
At 31 December 13 233 13 845
Loans granted to Group companies are usually long-term to ?nance investments in participations.
148 145th Financial Statements of Nestlé S.A.
14. Own shares
In millions of CHF 2011 2010
Number Amount Number Amount
Share Buy-Back Programme 75 200 000 3 930 148 730 000 7 962
Management Stock Option Plan 7 862 930 353 8 257 590 338
Restricted Stock Unit Plan 9 449 256 439 9 510 199 412
Performance Share Unit Plan 363 170 17 301 530 13
Future Long-Term Incentive Plans 1 275 135 59 891 771 39
94 150 491 4 798 167 691 090 8 764
The share capital of the Company changed twice in the last two ?nancial years as a consequence of the cancellation of
registered shares purchased as part of the various Share Buy-Back Programmes. In 2010, the share capital was reduced
by 185 000 000 shares from CHF 365 million to CHF 347 million. In 2011, the share capital was further reduced by
165 000 000 shares from CHF 347 million to CHF 330 million. The purchase value of those cancelled shares amount to
CHF 8826 million. During the year, 91 470 000 shares were purchased as part of the Share Buy-Back Programme for
CHF 4794 million.
The Company held 7 862 930 shares to cover management option rights and 11 087 561 shares to cover the other
incentives plans. The Management Stock Option Plan is valued at strike price if lower than acquisition cost, while the
shares held for the other plans are valued at acquisition cost. During the year 5 250 599 shares were delivered as part of
the Nestlé Group remuneration plans for a total value of CHF 235 million.
15. Intangible assets
This amount represents the balance of the trademarks and other industrial property rights capitalised value linked with
the acquisition of Kraft Foods’ frozen pizza. A ?fth of the initial value has been amortised during the period.
In 2010, this amount represented the balance of the trademarks and other industrial property rights capitalised value
linked with the acquisition of Kraft Foods frozen pizza, amortised over a ?ve year period (refer to Note 5).
16. Tangible ?xed assets
These are principally the land and buildings at Cham and at La Tour-de-Peilz. Nestlé Suisse S.A., the principal operating
company in the Swiss market, is the tenant of the building at La Tour-de-Peilz. The “En Bergère” head of?ce building in
Vevey is held by a property company, which is wholly owned by Nestlé S.A.
The ?re insurance value of buildings, furniture and of?ce equipment at 31 December 2011 amounted to CHF 24 million
(2010: CHF 24 million).
145th Financial Statements of Nestlé S.A. 149
17. Short-term payables
In millions of CHF 2011 2010
Amounts owed to Group companies 5 478 7 898
Other payables 111 402
5 589 8 300
18. Long-term payables
Amounts owed to Group companies represent a long-term loan issued in 1989.
19. Provisions
In millions of CHF 2011 2010
Uninsured
risks
Exchange
risks
Swiss &
foreign
taxes Other Total Total
At 1 January 475 — 172 104 751 1 035
Provisions made in the period — 172 101 48 321 155
Amounts used — — (149) (44) (193) (416)
Unused amounts reversed — — — (1) (1) (23)
At 31 December 475 172 124 107 878 751
150 145th Financial Statements of Nestlé S.A.
20. Share capital
The share capital of the Company has been reduced by CHF 16 500 000 through the cancellation of 165 000 000
registered shares purchased as part of the Share Buy-Back Programme. As a result, the share capital of Nestlé S.A. is
now structured as follows:
2011 2010
Number of registered shares of nominal value CHF 0.10 each 3 300 000 000 3 465 000 000
In millions of CHF 330 347
According to article 5 of the Company’s Articles of Association, no person or entity shall be registered with voting rights
for more than 5% of the share capital as recorded in the commercial register. This limitation on registration also applies
to persons who hold some or all of their shares through nominees pursuant to this article. In addition, article 11 provides
that no person may exercise, directly or indirectly, voting rights, with respect to own shares or shares represented by
proxy, in excess of 5% of the share capital as recorded in the commercial register.
At 31 December 2011, the share register showed 142 059 registered shareholders. If unprocessed applications for
registration, the indirect holders of shares under American Depositary Receipts and the bene?cial owners of
shareholders registered as nominees are also taken into account, the total number of shareholders probably exceeds
250 000. The Company was not aware of any shareholder holding, directly or indirectly, 5% or more of the share capital.
Group companies were holding together 3.9% of the Nestlé S.A. share capital as at 31 December 2011.
Conditional share capital
According to the Articles of Association, the share capital may be increased in an amount not to exceed CHF 10 000 000
(ten million Swiss francs) by issuing up to 100 000 000 registered shares with a nominal value of CHF 0.10 each, which
shall be fully paid up, through the exercise of conversion rights and/or option rights granted in connection with the
issuance by Nestlé S.A. or one of its subsidiaries of newly or already issued convertible debentures, debentures with
option rights or other ?nancial market instruments.
Concerning the share capital in general, refer also to the Corporate Governance Report.
21. Changes in equity
In millions of CHF
Share
capital
General
reserve
(a)
Reserve
for own
shares
(a)(b)
Special
reserve
Retained
earnings Total
At 1 January 2011 347 1 888 10 889 2 859 37 892 53 875
Cancellation of 165 000 000 shares
(ex Share Buy-Back Programme) (17) 17 (8 826) (8 826)
Transfer to the special reserve — — — 30 000 (30 000) —
Pro?t for the year — — — — 5 200 5 200
Dividend for 2010 — — — — (5 939) (5 939)
Movement of own shares — — 4 502 (4 502) — —
Dividend on own shares held
on the payment date of 2010 dividend — — — 189 (189) —
At 31 December 2011 330 1 905 6 565 28 546 6 964 44 310
(a) The general reserve and the reserve for own shares constitute the legal reserves.
(b) Refer to Note 22.
145th Financial Statements of Nestlé S.A. 151
22. Reserve for own shares
At 31 December 2010, the reserve for own shares amounting to CHF 10 889 million represented the cost of 18 961 090
shares earmarked to cover the Nestlé Group remuneration plans and 40 403 169 shares held for trading purposes.
Another 148 730 000 shares were held as part of the Share Buy-Back Programme.
During the year, an additional 91 470 000 shares have been acquired at a cost of CHF 4 794 million under the Share
Buy-Back Programmes while 165 000 000 shares were cancelled. A total of 5 250 599 shares have been delivered to
the bene?ciaries of the Nestlé Group remuneration plans. In addition, 2 077 200 shares have been acquired at a cost
of CHF 111 million for trading purposes and 5 240 000 shares at a cost of CHF 274 million to cover Nestlé Group
remuneration plans and 8 610 781 shares have been sold for a total amount of CHF 466 million.
Another Group company holds 33 869 588 Nestlé S.A. shares. The total of own shares of 128 020 079 held by Group
companies at 31 December 2011 represents 3.9% of the Nestlé S.A. share capital (208 094 259 own shares held
at 31 December 2010, representing 6.0% of the Nestlé S.A. share capital).
23. Contingencies
At 31 December 2011, the total of the guarantees mainly for credit facilities granted to Group companies and commercial
paper programmes, together with the buy-back agreements relating to notes issued, amounted to CHF 19 610 million
(2010: CHF 17 877 million).
24. Risk assessment
Nestlé Management considers that the risks for Nestlé S.A. are the same as the ones identi?ed at Group level, as the
holding is an ultimate aggregation of all the entities of the Group.
Therefore, we refer to the Nestlé Group Enterprise Risk Management Framework (ERM) described in the Note 23 of the
Consolidated Financial Statements.
152 145th Financial Statements of Nestlé S.A.
25. Additional information requested by the Swiss Code of Obligations on remuneration
Annual remuneration of members of the Board of Directors
2011
Cash
in CHF
(a)
Number
of shares
Discounted
value of shares
in CHF
(b)
Total
remuneration
Peter Brabeck-Letmathe, Chairman
(c)
1 600 000 122 606 5 373 821 6 973 821
Paul Bulcke, Chief Executive Of?cer
(c)
— — — —
Andreas Koopmann, 1st Vice Chairman 325 000 5 939 260 306 585 306
Rolf Hänggi, 2nd Vice Chairman 330 000 6 035 264 514 594 514
Jean-René Fourtou 275 000 4 981 218 317 493 317
Daniel Borel 205 000 3 640 159 541 364 541
Jean-Pierre Meyers 175 000 3 066 134 383 309 383
André Kudelski 205 000 3 640 159 541 364 541
Carolina Müller-Möhl 175 000 3 066 134 383 309 383
Steven G. Hoch 175 000 3 066 134 383 309 383
Naïna Lal Kidwai 205 000 3 640 159 541 364 541
Beat Hess 205 000 3 640 159 541 364 541
Titia de Lange 155 000 2 682 117 552 272 552
Jean-Pierre Roth 155 000 2 682 117 552 272 552
Ann M. Veneman 155 000 2 682 117 552 272 552
Total for 2011 4 340 000 171 365 7 510 927 11 850 927
Total for 2010 4 185 000 127 407 8 867 028
(d)
13 052 028
(a) The cash amount includes the expense allowance of CHF 15 000. The Chairman receives no expense allowance.
(b) Nestlé S.A. shares received as part of the Board membership and the Committee fees are valued at the closing price of the share on the SIX Swiss Exchange on
the ex-dividend date, discounted by 16.038% to account for the blocking period of three years.
(c) The Chairman and the Chief Executive Of?cer receive neither Board membership or Committee fees nor expense allowance.
(d) Including the fair value of stock options granted to the Chairman in 2010.
During 2011, one new Board member (Ms. Ann M. Veneman) joined the Board.
Peter Brabeck-Letmathe, in his capacity as active Chairman, received a cash compensation as well as Nestlé S.A.
shares, which are blocked for three years. This in particular re?ects certain responsibilities for the direction and control
of the Group including the Nestlé Health Science Company and the direct leadership of Nestlé’s interests in L’Oréal,
Galderma and Laboratoires inneov. He also represents Nestlé at the European Round Table of Industrialists and at the
Foundation Board of the World Economic Forum (WEF). All corresponding compensation is included in the disclosed
amount. His total compensation was:
2011 2010
Number
Value
in CHF
Number
Value
in CHF
Cash Compensation 1 600 000 1 600 000
Blocked Shares (discounted value) 122 606 5 373 821 80 475 3 526 424
Stock options (fair value at grant) — — 477 600 3 199 920
Total 6 973 821 8 326 344
145th Financial Statements of Nestlé S.A. 153
Loans to members of the Board of Directors
There are no loans outstanding to executive and non-executive members of the Board of Directors or closely related
parties.
Additional fees and remunerations of the Board of Directors
There are no additional fees or remunerations paid by Nestlé S.A. or one of its Group companies, directly or indirectly,
to members of the governing body or closely related parties, except for CHF 35 000 paid to Mrs. T. de Lange who serves
as a member of the Nestlé Nutritional Council (NNC).
Compensations and loans for former members of the Board of Directors
There is no compensation conferred during 2011 on former members of the Board of Directors who gave up their
function during the year preceding the year under review or earlier. Similarly, there are no loans outstanding to former
members of the Board of Directors.
Shares and stock options ownership of the non-executive members of the Board of Directors and
closely related parties as at 31 December 2011
Number of
shares held
(a)
Number of
options held
(b)
Peter Brabeck-Letmathe, Chairman 2 237 853 2 733 600
Andreas Koopmann, 1st Vice Chairman 72 973 —
Rolf Hänggi, 2nd Vice Chairman 72 440 —
Jean-René Fourtou 27 754 —
Daniel Borel 225 426 —
Jean-Pierre Meyers 1 425 574 —
André Kudelski 50 036 —
Carolina Müller-Möhl 168 008 —
Steven G. Hoch 213 844 —
Naïna Lal Kidwai 16 216 —
Beat Hess 15 816 —
Titia de Lange 5 414 —
Jean-Pierre Roth 5 414 —
Ann M. Veneman 2 682 —
Total as at 31 December 2011 4 539 450 2 733 600
Total as at 31 December 2010 4 048 300 3 093 600
(a) Including blocked shares.
(b) The ratio is one option for one Nestlé S.A. share.
25. Additional information requested by the Swiss Code of Obligations on remuneration (continued)
154 145th Financial Statements of Nestlé S.A.
Annual remuneration of members of the Executive Board
The total remuneration of members of the Executive Board amounts to CHF 43 513 350 for the year 2011
(CHF 48 809 452 for the year 2010). Remuneration principles are described in Appendix 1 of the Corporate Governance
Report.
The valuation of equity compensation plans mentioned in this Note differs in some respect from compensation
disclosures in Note 20.1 of the Consolidated Financial Statements of the Nestlé Group, which have been prepared in
accordance with International Financial Reporting Standards (IFRS).
The Company also made contributions of CHF 3 883 588 toward future pension bene?ts of the Executive Board
members in line with Nestlé’s Pension Bene?t Policy (CHF 3 689 774 in 2010).
Highest total compensation for a member of the Executive Board
In 2011, the highest total compensation for a member of the Executive Board was conferred to Paul Bulcke, CEO.
2011 2010
Number
Value
in CHF
Number
Value
in CHF
Annual Base Salary 2 000 000 2 000 000
Short-term Bonus (cash) 856 045 520 019
Short-term Bonus (discounted value of the share) 64 095 2 874 661 89 672 3 929 427
Stock Options (fair value at grant) 361 000 1 999 940 298 500 1 999 950
Performance Share Units (fair value at grant) 38 040 2 040 085 37 530 2 094 549
Other bene?ts 28 884 28 548
Total 9 799 615 10 572 493
The Company also made a contribution of CHF 949 676 towards future pension bene?ts in line with Nestlé’s Pension
Bene?ts Policy (CHF 1 031 504 in 2010).
Loans to members of the Executive Board
On 31 December 2011, there was an outstanding amount of CHF 91 192 for advances granted to two members of the
Executive Board in line with the Nestlé Corporate Expatriation policy (of which CHF 66 664 to Chris Johnson, Head of
Zone Americas).
Additional fees and remunerations of the Executive Board
There are no additional fees or remunerations paid by Nestlé S.A. or one of its Group companies, directly or indirectly,
to members of the Executive Board or closely related parties.
Compensations and loans for former members of the Executive Board
A total of CHF 300 000 was conferred during 2011 to a former member of the Executive Board in consideration of
ongoing services provided to the Company (CHF 400 000 was conferred during 2010 to a former member of the
Executive Board).
On 31 December 2011, there were no loans outstanding to former members of the Executive Board.
25. Additional information requested by the Swiss Code of Obligations on remuneration (continued)
145th Financial Statements of Nestlé S.A. 155
Shares and stock options ownership of the members of the Executive Board and closely related
parties as at 31 December 2011
Number of
shares
held
(a)
Number of
options
held
(b)
Paul Bulcke 325 853 1 396 800
Werner Bauer 210 288 362 200
José Lopez 53 001 347 500
John J. Harris 16 759 279 800
James Singh 47 357 306 700
Laurent Freixe 29 166 240 700
Chris Johnson
(c)
5 350 81 300
Patrice Bula
(d)
28 950 69 600
Doreswamy (Nandu) Nandkishore 47 080 68 600
Wan Ling Martello
(e)
— —
Marc Caira 39 100 245 350
Jean-Marc Duvoisin 43 862 115 200
Kurt Schmidt
(f)
— —
David P. Frick 25 707 —
Total as at 31 December 2011 872 473 3 513 750
Total as at 31 December 2010 1 033 203 3 257 500
(a) Including shares subject to a three-year blocking period.
(b) The ratio is one option for one Nestlé S.A. share.
(c) As from 1 January 2011
(d) As from 1 May 2011
(e) As from 1 November 2011
(f) As from 1 September 2011
25. Additional information requested by the Swiss Code of Obligations on remuneration (continued)
156 145th Financial Statements of Nestlé S.A.
Proposed appropriation of pro?t
In CHF 2011 2010
Retained earnings
Balance brought forward 1 763 699 388 398 264 298
Pro?t for the year 5 200 333 068 37 493 689 405
6 964 032 456 37 891 953 703
We propose the following appropriations:
Transfer to the special reserve — 30 000 000 000
Dividend for 2011, CHF 1.95 per share
on 3 219 823 070 shares
(a)
(2010: CHF 1.85 on 3 312 569 900 shares)
(b)
6 278 654 986 6 128 254 315
6 278 654 986 36 128 254 315
Balance to be carried forward 685 377 470 1 763 699 388
(a) Depending on the number of shares issued as of the dividend record date. Own shares held by the Nestlé Group are not entitled to dividend, consequently the
dividend on those shares still held on 20 April 2012 will be transferred to the special reserve.
(b) The amount of CHF 189 358 073, representing the dividend on 102 355 715 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 1.95 per share, representing a net amount of CHF 1.2675 per share after payment of the Swiss withholding
tax of 35%. The last trading day with entitlement to receive the dividend is 20 April 2012. The shares will be traded
ex-dividend as of 23 April 2012. The net dividend will be payable as from 26 April 2012.
The Board of Directors
Cham and Vevey, 15 February 2012
145th Financial Statements of Nestlé S.A. 157
Report of the Statutory auditor
to the General Meeting of Nestlé S.A.
As statutory auditor, we have audited the ?nancial statements (income statement, balance sheet and notes to the annual
accounts on pages 141 to 156) of Nestlé S.A. for the year ended 31 December 2011.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation of the ?nancial statements in accordance with the requirements
of Swiss law and the Company’s Articles of Incorporation. This responsibility includes designing, implementing and
maintaining an internal control system relevant to the preparation of ?nancial 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 responsibility
Our responsibility is to express an opinion on these ?nancial 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 ?nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the ?nancial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the ?nancial 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 ?nancial 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 ?nancial statements. We believe that the audit evidence we have obtained is suf?cient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the ?nancial statements for the year ended 31 December 2011 comply with Swiss law and the Company’s
Articles of Incorporation.
Report on other legal requirements
We con?rm 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 con?rm that an internal
control system exists, which has been designed for the preparation of ?nancial statements according to the instructions
of the Board of Directors.
We further con?rm that the proposed appropriation of available earnings complies with Swiss law and the Company’s
Articles of Incorporation. We recommend that the ?nancial statements submitted to you be approved.
KPMG SA
Mark Baillache Fabien Lussu
Licensed Audit Expert Licensed Audit Expert
Auditor in Charge
Geneva, 15 February 2012
158 145th Financial Statements of Nestlé S.A.
Notes
145th Financial Statements of Nestlé S.A. 159
Notes
160 145th Financial Statements of Nestlé S.A.
Notes
doc_966403788.pdf
The Consolidated Financial Statements have been prepared on an accrual basis and under the historical cost convention, unless stated otherwise.
Consolidated Financial Statements
of the Nestlé Group 2011
Principal exchange rates
Consolidated income statement for the year ended 31 December 2011
Consolidated statement of comprehensive income
for the year ended 31 December 2011
Consolidated balance sheet as at 31 December 2011
Consolidated cash ?ow statement for the year ended 31 December 2011
Consolidated statement of changes in equity
for the year ended 31 December 2011
Notes
1. Accounting policies
2. Acquisitions, disposals and discontinued operations
3. Analyses by segment
4. Net other trading and operating income/(expenses)
5. Inventories
6. Trade and other receivables
7. Property, plant and equipment
8. Goodwill
9. Intangible assets
10. Employee bene?ts
11. Equity compensation plans
12. Provisions and contingencies
13. Net ?nancing cost and ?nancial instruments
14. Taxes
15. Associates
16. Earnings per share
17. Cash ?ow statement
18. Equity
19. Lease commitments
20. Transactions with related parties
21. Joint ventures
22. Guarantees
23. Group risk management
24. Events after the balance sheet date
25. Group companies
Report of the Statutory Auditor
on the Consolidated Financial Statements
Financial information – 5 year review
Companies of the Nestlé Group
45
46
47
48
50
51
52
52
64
68
75
76
76
77
78
81
82
86
90
91
104
106
107
107
108
111
112
113
114
114
115
115
116
118
120
Consolidated Financial Statements of the Nestlé Group 2011 45
Principal exchange rates
CHF per 2011 2010 2011 2010
Year ending rates Weighted average annual rates
1 US Dollar USD 0.940 0.938 0.887 1.045
1 Euro EUR 1.217 1.253 1.233 1.380
1 Pound Sterling GBP 1.450 1.454 1.421 1.606
100 Brazilian Reais BRL 50.124 56.291 52.935 59.141
100 Japanese Yen JPY 1.212 1.153 1.121 1.188
100 Mexican Pesos MXN 6.712 7.568 7.122 8.241
1 Canadian Dollar CAD 0.921 0.938 0.890 1.012
1 Australian Dollar AUD 0.954 0.955 0.913 0.957
100 Philippine Pesos PHP 2.144 2.146 2.048 2.313
100 Chinese Yuan Renminbi CNY 14.926 14.227 13.796 15.362
46 Consolidated Financial Statements of the Nestlé Group 2011
Consolidated income statement
for the year ended 31 December 2011
In millions of CHF Notes 2011 2010
(a)
2010
(a)
2010
(a)
T
o
t
a
l
C
o
n
t
i
n
u
i
n
g
o
p
e
r
a
t
i
o
n
s
D
i
s
c
o
n
t
i
n
u
e
d
o
p
e
r
a
t
i
o
n
s
(
b
)
T
o
t
a
l
Sales 3 83 642 87 906 5 109 93 015
Other revenue 128 109 — 109
Cost of goods sold (44 127) (44 775) (1 074) (45 849)
Distribution expenses (7 602) (7 953) (125) (8 078)
Marketing and administration expenses (17 395) (19 846) (1 276) (21 122)
Research and development costs (1 423) (1 403) (478) (1 881)
Other trading income 4 51 168 — 168
Other trading expenses 4 (736) (1 530) — (1 530)
Trading operating pro?t 3 12 538 12 676 2 156 14 832
Other operating income 4 112 38 24 535 24 573
Other operating expenses 4 (179) (571) (14) (585)
Operating pro?t 12 471 12 143 26 677 38 820
Financial income 13 115 72 22 94
Financial expense 13 (536) (834) (13) (847)
Pro?t before taxes and associates 12 050 11 381 26 686 38 067
Taxes 14 (3 112) (3 343) (350) (3 693)
Share of results of associates 15 866 1 010 — 1 010
Pro?t for the year 9 804 9 048 26 336 35 384
of which attributable to non-controlling interests 317 271 880 1 151
of which attributable to shareholders of the parent (Net pro?t) 9 487 8 777 25 456 34 233
As percentages of sales
Trading operating pro?t 15.0% 14.4% 42.2% 15.9%
Pro?t for the year attributable to shareholders of the parent
(Net pro?t) 11.3% 36.8%
Earnings per share (in CHF)
Basic earnings per share 16 2.97 2.60 7.56 10.16
Diluted earnings per share 16 2.96 2.60 7.52 10.12
(a) 2010 restated following the changes in the Income Statement described in Note 1 – Accounting Policies.
(b) Detailed information related to Alcon discontinued operations is disclosed in Note 2.
Consolidated Financial Statements of the Nestlé Group 2011 47
Consolidated statement of comprehensive income
for the year ended 31 December 2011
In millions of CHF 2011 2010
Pro?t for the year recognised in the income statement 9 804 35 384
Currency retranslations (1 166) (4 801)
Fair value adjustments on available-for-sale ?nancial instruments
– Unrealised results (199) 227
– Recognition of realised results in the income statement 7 (10)
Fair value adjustments on cash ?ow hedges
– Recognised in hedging reserve (423) 704
– Removed from hedging reserve (42) (752)
Actuarial gains/(losses) on de?ned bene?t schemes (2 503) (153)
Share of other comprehensive income of associates 456 (89)
Taxes 859 268
Other comprehensive income for the year (3 011) (4 606)
Total comprehensive income for the year 6 793 30 778
of which attributable to non-controlling interests 284 941
of which attributable to shareholders of the parent 6 509 29 837
48 Consolidated Financial Statements of the Nestlé Group 2011
Consolidated balance sheet as at 31 December 2011
before appropriations
In millions of CHF Notes 2011 2010
Assets
Current assets
Cash and cash equivalents 13/17 4 938 8 057
Short-term investments 13 3 050 8 189
Inventories 5 9 255 7 925
Trade and other receivables 6/13 13 340 12 083
Prepayments and accrued income 900 748
Derivative assets 13 731 1 011
Current income tax assets 1 094 956
Assets held for sale 16 28
Total current assets 33 324 38 997
Non-current assets
Property, plant and equipment 7 23 971 21 438
Goodwill 8 29 008 27 031
Intangible assets 9 9 356 7 728
Investments in associates 15 8 629 7 914
Financial assets 13 7 161 6 366
Employee bene?ts assets 10 127 166
Current income tax assets 39 90
Deferred tax assets 14 2 476 1 911
Total non-current assets 80 767 72 644
Total assets 114 091 111 641
Consolidated Financial Statements of the Nestlé Group 2011 49
Consolidated balance sheet as at 31 December 2011 (continued)
In millions of CHF Notes 2011 2010
Liabilities and equity
Current liabilities
Financial debt 13 16 100 12 617
Trade and other payables 13 13 584 12 592
Accruals and deferred income 2 909 2 798
Provisions 12 576 601
Derivative liabilities 13 646 456
Current income tax liabilities 1 417 1 079
Liabilities directly associated with assets held for sale — 3
Total current liabilities 35 232 30 146
Non-current liabilities
Financial debt 13 6 207 7 483
Employee bene?ts liabilities 10 7 105 5 280
Provisions 12 3 094 3 510
Deferred tax liabilities 14 2 060 1 371
Other payables 13 2 119 1 253
Total non-current liabilities 20 585 18 897
Total liabilities 55 817 49 043
Equity 18
Share capital 330 347
Treasury shares (6 722) (11 108)
Translation reserve (16 927) (15 794)
Retained earnings and other reserves 80 116 88 422
Total equity attributable to shareholders of the parent 56 797 61 867
Non-controlling interests 1 477 731
Total equity 58 274 62 598
Total liabilities and equity 114 091 111 641
50 Consolidated Financial Statements of the Nestlé Group 2011
Consolidated cash ?ow statement
for the year ended 31 December 2011
In millions of CHF Notes 2011 2010
Operating activities
Pro?t for the year 9 804 35 384
Non-cash items of income and expense 17 3 039 (20 948)
Decrease/(increase) in working capital 17 (1 837) (632)
Variation of other operating assets and liabilities 17 (1 243) (196)
Operating cash ?ow
(a)
9 763 13 608
Investing activities
Capital expenditure 7 (4 779) (4 576)
Expenditure on intangible assets 9 (247) (408)
Sale of property, plant and equipment 111 113
Acquisition of businesses 2 (3 742) (5 582)
Disposal of businesses 2 7 27 715
Cash ?ows with associates 357 254
In?ows/(out?ows) from non-current ?nancial investments (1 802) (2 528)
Other investing cash ?ows (448) (439)
Cash ?ow from investing activities
(a)
(10 543) 14 549
Financing activities
Dividend paid to shareholders of the parent 18 (5 939) (5 443)
Purchase of treasury shares 17 (5 480) (12 135)
Sale of treasury shares 527 278
Cash ?ows with non-controlling interests (266) (791)
Bonds issued 595 1 219
Bonds repaid (1 751) (832)
In?ows from other non-current ?nancial liabilities 93 130
Out?ows from other non-current ?nancial liabilities (93) (225)
In?ows/(out?ows) from current ?nancial liabilities 3 504 (2 174)
In?ows/(out?ows) from short-term investments 6 452 (5 835)
Cash ?ow from ?nancing activities
(a)
(2 358) (25 808)
Currency retranslations 19 (117)
Increase/(decrease) in cash and cash equivalents (3 119) 2 232
Cash and cash equivalents at beginning of year 8 057 5 825
Cash and cash equivalents at end of year 17 4 938 8 057
(a) Detailed information related to Alcon discontinued operations is disclosed in Note 2. In 2010, even if Alcon's assets and liabilities were classi?ed as held for sale,
individual lines of the cash ?ow statement comprise Alcon's movements until disposal.
Consolidated Financial Statements of the Nestlé Group 2011 51
Consolidated statement of changes in equity
for the year ended 31 December 2011
In millions of CHF
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Equity as at 31 December 2009 365 (8 011) (11 175) 67 736 48 915 4 716 53 631
Pro?t for the year 34 233 34 233 1 151 35 384
Other comprehensive income for the year (4 619) 223 (4 396) (210) (4 606)
Total comprehensive income for the year (4 619) 34 456 29 837 941 30 778
Dividend paid to shareholders of the parent (5 443) (5 443) (5 443)
Dividends paid to non-controlling interests (729) (729)
Movement of treasury shares (net)
(a)
(11 859) 77 (11 782) (11 782)
Equity compensation plans 179 2 181 19 200
Changes in non-controlling interests (146) (146) (4 216) (4 362)
Adjustment for hyperin?ation
(b)
305 305 305
Reduction in share capital (18) 8 583 (8 565) — —
Total transactions with owners (18) (3 097) (13 770) (16 885) (4 926) (21 811)
Equity as at 31 December 2010 347 (11 108) (15 794) 88 422 61 867 731 62 598
Pro?t for the year 9 487 9 487 317 9 804
Other comprehensive income for the year (1 133) (1 845) (2 978) (33) (3 011)
Total comprehensive income for the year (1 133) 7 642 6 509 284 6 793
Dividend paid to shareholders of the parent (5 939) (5 939) (5 939)
Dividends paid to non-controlling interests (226) (226)
Movement of treasury shares (net)
(a)
(4 615) (355) (4 970) (4 970)
Equity compensation plans 175 5 180 180
Changes in non-controlling interests
(c)
(996) (996) 688 (308)
Adjustment for hyperin?ation
(b)
146 146 146
Reduction in share capital (17) 8 826 (8 809) — —
Total transactions with owners (17) 4 386 (15 948) (11 579) 462 (11 117)
Equity as at 31 December 2011 330 (6 722) (16 927) 80 116 56 797 1 477 58 274
(a) Movements reported under retained earnings and other reserves mainly relate to written put options on own shares.
(b) Relates to Venezuela, considered as a hyperin?ationary economy.
(c) Movements reported under retained earnings and other reserves include a put option for the acquisition of non-controlling interests.
52 Consolidated Financial Statements of the Nestlé Group 2011
Notes
1. Accounting policies
Accounting convention and accounting standards
The Consolidated Financial Statements comply with
International Financial Reporting Standards (IFRS) issued
by the International Accounting Standards Board (IASB)
and with the Interpretations issued by the International
Financial Reporting Interpretations Committee (IFRIC).
The Consolidated Financial Statements have been
prepared on an accrual basis and under the historical
cost convention, unless stated otherwise. All signi?cant
consolidated companies and associates have a 31 December
accounting year-end.
The preparation of the Consolidated Financial
Statements requires Group Management to exercise
judgement and to make estimates and assumptions that
affect the application of policies, reported amounts of
revenues, expenses, assets and liabilities and disclosures.
These estimates and associated assumptions are based
on historical experience and various other factors that are
believed to be reasonable under the circumstances. Actual
results may differ from these estimates.
The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the
period of the revision and future periods if the revision
affects both current and future periods. Those areas affect
mainly provisions, goodwill impairment tests, employee
bene?ts, allowance for doubtful receivables, share-based
payments and taxes, and key assumptions are detailed in
the related notes.
Scope of consolidation
The Consolidated Financial Statements comprise those
of Nestlé S.A. and of its af?liated companies, including
joint ventures and associates (the Group). The list of the
principal companies is provided in the section “Companies
of the Nestlé Group.”
Consolidated companies
Companies, in which the Group has the power to exercise
control, are fully consolidated. This applies irrespective of
the percentage of interest in the share capital. Control
refers to the power to govern the ?nancial and operating
policies of a company so as to obtain the bene?ts from
its activities. Non-controlling interests are shown as
a component of equity in the balance sheet and the share
of the pro?t attribu table to non-controlling interests is
shown as a component of pro?t for the year in the income
statement.
Proportionate consolidation is applied for companies
over which the Group exercises joint control with partners.
The individual assets, liabilities, income and expenses are
consolidated in proportion to the Nestlé participation in
their equity (usually 50%).
Newly acquired companies are consolidated from the
effective date of control, using the acquisition method.
Associates
Companies where the Group has the power to exercise
a signi?cant in?uence but does not exercise control are
accounted for using the equity method. The net assets
and results are adjusted to comply with the Group’s
accounting policies. The carrying amount of goodwill
arising from the acquisition of associates is included in
the carrying amount of investments in associates.
Venture funds
Investments in venture funds are recognised in accordance
with the consolidation methods described above, depending
on the level of control or signi?cant in?uence exercised.
Foreign currencies
The functional currency of the Group’s entities is the
currency of their primary economic environment.
In individual companies, transactions in foreign
currencies are recorded at the rate of exchange at the
date of the transaction. Monetary assets and liabilities in
foreign currencies are translated at year-end rates. Any
resulting exchange differences are taken to the income
statement.
On consolidation, assets and liabilities of Group entities
reported in their functional currencies are translated into
Swiss Francs, the Group’s presentation currency, at year-
end exchange rates. Income and expense items are
translated into Swiss Francs at the annual weighted
average rates of exchange or at the rate on the date of the
transaction for signi?cant items.
Differences arising from the retranslation of opening net
assets of Group entities, together with differences arising
from the restatement of the net results for the year of Group
entities, are recognised in other comprehensive income.
Consolidated Financial Statements of the Nestlé Group 2011 53
1. Accounting policies (continued)
The balance sheet and net results of Group entities
operating in hyperin?ationary economies are restated for
the changes in the general purchasing power of the local
currency, using of?cial indices at the balance sheet date,
before translation into Swiss Francs at year-end rates.
When there is a change of control in a foreign entity,
exchange differences that were recorded in equity are
recognised in the income statement as part of the gain
or loss on disposal.
Segment reporting
Operating segments re?ect the Group’s management
structure and the way ?nancial information is regularly
reviewed by the Group’s chief operating decision maker
(CODM), which is de?ned as the Executive Board.
The CODM considers the business from both
a geographic and product perspective, through three
geographic Zones and several Globally Managed
Businesses (GMB). Zones and GMB that meet the
quantitative threshold of 10% of sales, trading operating
pro?t or assets, are presented on a standalone basis as
reportable segments. Other GMB that do not meet the
threshold, like Nestlé Professional, Nespresso, Nestlé
Health Science and the Joint Ventures in the Food and
Beverages and Pharmaceutical activities are aggregated
and presented in Other. Therefore, the Group’s reportable
operating segments are:
– Zone Europe;
– Zone Americas;
– Zone Asia, Oceania and Africa;
– Nestlé Waters;
– Nestlé Nutrition;
– Other.
As some operating segments represent geographic zones,
information by product is also disclosed. The seven product
groups that are disclosed represent the highest categories
of products that are followed internally.
Finally, the Group provides information attributed to the
country of domicile of the Group’s parent company (Nestlé S.A.
– Switzerland) and to the ten most important countries in
terms of sales.
Segment results represent the contribution of the different
segments to central overheads, research and development
costs and the trading operating pro?t of the Group.
Speci?c corporate expenses as well as speci?c research
and development costs are allocated to the corresponding
segments.
Segment assets and liabilities are aligned with internal
repor ted information to the CODM. Segment assets comprise
property, plant and equipment, intangible assets, goodwill,
trade and other receivables, assets held for sale, inventories,
prepayments and accrued income as well as speci?c
?nancial assets associated to the reportable segments.
Segment liabilities comprise trade and other pay ables,
liabilities directly associated with assets held for sale,
some other payables as well as accruals and deferred
income. Eliminations represent inter-company balances
between the different segments.
Segment assets by operating segment represent the
situa tion at the end of the year. Assets and liabilities by
product represent the annual average, as this provides
a better indication of the level of invested capital for
management purposes.
Capital additions represent the total cost incurred to
acquire property, plant and equipment, intangible assets
and goodwill, including those arising from business
combinations. Capital expenditure represents the
investment in property, plant and equipment only.
Depreciation of segment assets includes depreciation
of property, plant and equipment and amortisation of
intangible assets. Impairment of assets includes impairment
related to property, plant and equipment, intangible assets
and goodwill.
Unallocated items represent non-speci?c items whose
allocation to a segment would be arbitrary. They mainly
comprise:
– corporate expenses and related assets/liabilities;
– research and development costs and related assets/
liabilities; and
– some goodwill and intangible assets.
Non-current assets by geography include property,
plant and equipment, intangible assets and goodwill that
are attributable to the ten most important countries and
the country of domicile of Nestlé S.A.
Valuation methods, presentation and de?nitions
Revenue
Revenue represents amounts received and receivable from
third parties for goods supplied to the customers and for
services rendered. Revenue from the sales of goods is
recognised in the income statement at the moment when
the signi?cant risks and rewards of ownership of the goods
have been transferred to the buyer, which is mainly upon
shipment. It is measured at the list price applicable to
54 Consolidated Financial Statements of the Nestlé Group 2011
a given distribution channel after deduction of returns,
sales taxes, pricing allowances, other trade discounts and
couponing and price promotions to consumers. Payments
made to the customers for commercial services received
are expensed.
Expenses
Cost of goods sold is determined on the basis of the cost
of production or of purchase, adjusted for the variation of
inventories. All other expenses, including those in respect
of advertising and promotions, are recognised when the
Group receives the risks and rewards of ownership of the
goods or when it receives the services.
Other trading income/(expenses)
These comprise mainly restructuring costs, impairment of
all assets except goodwill, litigations and onerous contracts,
result on disposal of property, plant and equipment, and
speci?c other income and expenses that fall within the
control of operating segments.
Restructuring costs are restricted to dismissal
indemnities and employee bene?ts paid to terminated
employees upon the reorganisation of a business.
Dismissal indemnities paid for normal attrition such as
poor performance, professional misconduct, etc. are part
of the expenses by functions.
Other operating income/(expenses)
These comprise impairment of goodwill, results on
disposals of businesses, acquisition-related costs and
other income and expenses that fall beyond the control of
operating segments and relate to events such as natural
disasters and expropriation of assets.
Net ?nancing cost
Net ?nancing cost includes the ?nancial expense on
borrowings from third parties as well as the ?nancial
income earned on funds invested outside the Group.
Net ?nancing cost also includes other ?nancial income
and expense, such as exchange differences on loans and
borrowings, results on foreign currency and interest rate
hedging instruments that are recognised in the income
statement. Certain borrowing costs are capitalised as
explained under the section on Property, plant and
equipment. Others are expensed.
Unwind of discount on provisions is presented in net
?nancing cost.
Taxes
The Group is subject to taxes in different countries all over
the world. Taxes and ?scal risks recognised in the
Consolidated Financial Statements re?ect Group
Management’s best estimate of the outcome based on the
facts known at the balance sheet date in each individual
country. These facts may include but are not limited to
change in tax laws and interpretation thereof in the
various jurisdictions where the Group operates. They may
have an impact on the income tax as well as the resulting
assets and liabilities. Any differences between tax
estimates and ?nal tax assessments are charged to the
income statement in the period in which they are in curred,
unless anticipated.
Taxes include current taxes on pro?t and other taxes
such as taxes on capital. Also included are actual or
potential withholding taxes on current and expected
transfers of income from Group companies and tax
adjustments relating to prior years. Income tax is
recognised in the income statement, except to the extent
that it relates to items directly taken to equity or other
comprehensive income, in which case it is recognised
against equity or other comprehensive income.
Deferred taxation is the tax attributable to the
temporary differences that arise when taxation authorities
recognise and measure assets and liabilities with rules that
differ from the principles of the Consolidated Financial
Statements. It also arises on temporary differences
stemming from tax losses carried forward.
Deferred taxes are calculated under the liability method
at the rates of tax expected to prevail when the temporary
differences reverse subject to such rates being substantially
enacted at the balance sheet date. Any changes of the tax
rates are recognised in the income statement unless related
to items directly recognised against equity or other
comprehensive income. Deferred tax liabilities are
recognised on all taxable temporary differences excluding
non-deductible goodwill. Deferred tax assets are
recognised on all deductible temporary differences
provided that it is probable that future taxable income will
be available.
For share-based payments, a deferred tax asset is
recognised in the income statement over the vesting
period, pro vided that a future reduction of the tax expense
is both probable and can be reliably estimated. The
deferred tax asset for the future tax deductible amount
exceeding the total share-based payment cost is
recognised in equity.
1. Accounting policies (continued)
Consolidated Financial Statements of the Nestlé Group 2011 55
Financial instruments
Classes of ?nancial instruments
The Group aggregates its ?nancial instruments into classes
based on their nature and characteristics. The details of
?nancial instruments by class are disclosed in the notes.
Financial assets
Financial assets are initially recognised at fair value plus
directly attributable transaction costs. However when
a ?nancial asset at fair value through pro?t or loss is
recognised, the transaction costs are expensed
immediately. Subsequent remeasurement of ?nancial
assets is determined by their classi?cation that is revisited
at each reporting date.
Derivatives embedded in other contracts are separated
and treated as stand-alone derivatives when their risks
and characteristics are not closely related to those of their
host contracts and the respective host contracts are not
carried at fair value.
In case of regular way purchase or sale (purchase or
sale under a contract whose terms require delivery within
the time frame established by regulation or convention in
the market place), the settlement date is used for both
initial recognition and subsequent derecognition.
At each balance sheet date, the Group assesses
whether its ?nancial assets are to be impaired. Impairment
losses are recognised in the income statement where
there is objective evidence of impairment, such as where
the issuer is in bankruptcy, default or other signi?cant
?nancial dif?culty. In addition, for an investment in an
equity security, a signi?cant or prolonged decline in its fair
value below its cost is objective evidence of impairment.
Impairment losses are reversed when the reversal can be
objectively related to an event occurring after the
recognition of the impairment loss. For debt instruments
measured at amortised cost or fair value, the reversal is
recognised in the income statement. For equity
instruments classi?ed as available for sale, the reversal is
recognised in other comprehensive income. Impairment
losses on ?nancial assets carried at cost because their fair
value cannot be reliably measured are never reversed.
Financial assets are derecognised (in full or partly)
when substantially all the Group’s rights to cash ?ows
from the respective assets have expired or have been
transferred and the Group has neither exposure to
substantially all the risks inherent in those assets nor
entitlement to rewards from them.
The Group classi?es its ?nancial assets into the following
categories: loans and receivables, held-for-trading assets
(?nan cial assets at fair value through pro?t and loss), held-
to-maturity investments and available-for-sale assets.
Loans and receivables
Loans and receivables are non-derivative ?nancial assets
with ?xed or determinable payments that are not quoted
in an active market. This category includes the following
classes of ?nancial assets: loans; trade and other
receivables and cash at bank and in hand.
Subsequent to initial measurement, loans and
receivables are carried at amortised cost using the
effective interest rate method less appropriate allowances
for doubtful receivables.
Allowances for doubtful receivables represent the
Group’s estimates of losses that could arise from the
failure or inability of customers to make payments when
due. These estimates are based on the ageing of
customers’ balances, speci?c credit circumstances and
the Group’s historical bad receivables experience.
Loans and receivables are further classi?ed as current
and non-current depending whether these will be realised
within twelve months after the balance sheet date or
beyond.
Held-for-trading assets
The Group does not apply the fair value option. Held-for-
trading assets are marketable securities and derivative
?nancial instruments.
Subsequent to initial measurement, held-for-trading
assets are carried at fair value and all their gains and
losses, realised and unrealised, are recognised in the
income statement.
Held-to-maturity investments
Held-to-maturity investments are non-derivative ?nancial
assets with ?xed or determinable payments and ?xed
maturities. Currently the Group does not have any
investments in this category.
Available-for-sale assets
Available-for-sale assets are those non-derivative ?nancial
assets that are either designated as such upon initial
recognition or are not classi?ed in any of the other
?nancial assets categories. This category includes the
following classes of ?nancial assets: bonds, equities,
commercial paper and bills, time deposits and other
1. Accounting policies (continued)
56 Consolidated Financial Statements of the Nestlé Group 2011
investments. They are included in non-current ?nancial
assets unless an investment matures or management
intends to dispose of it within 12 months of the end of the
reporting period. In that case it would be accounted for as
short-term investments, or cash and cash equivalents, as
appropriate.
Subsequent to initial measurement, available-for-sale
assets are stated at fair value with all unrealised gains or
losses recognised against other comprehensive income
until their disposal when such gains or losses are
recognised in the income statement.
Interest earned on available-for-sale assets is calculated
using the effective interest rate method and is recognised
in the income statement as part of interest income under
net ?nancing cost. Accrued interest on available-for-sale
?nancial assets is included in the balance sheet line
prepayments and accrued income.
Financial liabilities at amortised cost
Financial liabilities are initially recognised at the fair value of
consideration received less directly attributable transaction
costs.
Subsequent to initial measurement, ?nancial liabilities
are recognised at amortised cost unless they are part of
a fair value hedge relationship (refer to fair value hedges).
The difference between the initial carrying amount of the
?nancial liabilities and their redemption value is recognised
in the income statement over the contractual terms using
the effective interest rate method. This category includes
the following classes of ?nancial liabilities: trade and other
payables; commercial paper; bonds and other ?nancial
liabilities.
Financial liabilities at amortised cost are further classi?ed
as current and non-current depending whether these will
fall due within twelve months after the balance sheet date
or beyond.
Financial liabilities are derecognised (in full or partly)
when either the Group is discharged from its obligation,
they expire, are cancelled or replaced by a new liability
with substantially modi?ed terms.
Derivative ?nancial instruments
A derivative is a ?nancial instrument that changes its values
in response to changes in the underlying variable, requires
no or little net initial investment and is settled at a future
date. Derivatives are mainly used to manage exposures to
foreign exchange, interest rate and commodity price risk.
Whilst some derivatives are also acquired with the aim of
managing the return of marketable securities portfolios,
these derivatives are only acquired when there are
underlying ?nancial assets.
Derivatives are initially recognised at fair value. These
are subsequently remeasured at fair value on a regular
basis and at each reporting date as a minimum. The fair
values of exchange-traded derivatives are based on market
prices, while the fair value of the over-the-counter
derivatives are determined using accepted mathematical
models based on market data.
Derivatives are carried as assets when their fair value is
positive and as liabilities when their fair value is negative.
The Group’s derivatives mainly consist of currency
forwards, futures, options and swaps; commodity futures
and options; interest rate forwards, futures, options and
swaps.
The use of derivatives is governed by the Group’s
policies approved by the Board of Directors, which provide
written principles on the use of derivatives consistent with
the Group’s overall risk management strategy.
Hedge accounting
The Group designates and documents certain derivatives
as hedging instruments against changes in fair values of
recognised assets and liabilities (fair value hedges), highly
probable forecast transactions (cash ?ow hedges) and
hedges of net investments in foreign operations (net
investment hedges). The effectiveness of such hedges is
assessed at inception and veri?ed at regular intervals and
at least on a quarterly basis, using prospective and
retrospective testing.
Fair value hedges
The Group uses fair value hedges to mitigate foreign
currency and interest rate risks of its recognised assets
and liabilities.
The changes in fair values of hedging instruments are
recognised in the income statement. Hedged items are
also adjusted for the risk being hedged, with any gain or
loss being recognised in the income statement.
Cash ?ow hedges
The Group uses cash ?ow hedges to mitigate a particular
risk associated with a recognised asset or liability or highly
probable forecast transactions, such as anticipated future
export sales, purchases of equipment and raw materials,
as well as the variability of expected interest payments
and receipts.
1. Accounting policies (continued)
Consolidated Financial Statements of the Nestlé Group 2011 57
The effective part of the changes in fair value of hedging
instruments is recognised in other comprehensive income,
while any ineffective part is recognised immediately in the
income statement. When the hedged item results in the
recognition of a non-?nancial asset or liability, including
acquired businesses, the gains or losses previously
recognised in other comprehensive income are included in
the measurement of the cost of the asset or of the liability.
Otherwise the gains or losses previously recognised in
other comprehensive income are removed and recognised
in the income statement at the same time as the hedged
transaction.
Net investment hedges
The Group uses net investment hedges to mitigate
translation exposure on its net investments in af?liated
companies.
The changes in fair values of hedging instruments are
taken directly to other comprehensive income together
with gains or losses on the foreign currency translation of
the hedged investments. All of these fair value gains or
losses are deferred in equity until the investments are sold
or otherwise disposed of.
Undesignated derivatives
Undesignated derivatives are comprised of two categories.
The ?rst includes derivatives acquired in the frame of risk
management policies for which hedge accounting is not
applied. The second category relates to derivatives that
are acquired with the aim of delivering performance over
agreed benchmarks of marketable securities portfolios.
Subsequent to initial measurement, undesignated
derivatives are carried at fair value and all their gains and
losses, realised and unrealised, are recognised in the
income statement.
Fair value
The Group determines the fair value of its ?nancial
instruments on the basis of the following hierarchy.
i) The fair value of ?nancial instruments quoted in active
markets is based on their quoted closing price at the
balance sheet date. Examples include commodity
derivative assets and liabilities and other ?nancial assets
such as investments in equity and debt securities.
ii) The fair value of ?nancial instruments that are not
traded in an active market is determined by using
valuation techniques using observable market data.
Such valuation techniques include discounted cash
?ows, standard valuation models based on market
parameters, dealer quotes for similar instruments and
use of comparable arm’s length transactions. For
example, the fair value of forward exchange contracts,
currency swaps and interest rate swaps is determined
by discounting estimated future cash ?ows using a risk-
free interest rate.
iii) The fair value of ?nancial instruments that are
determined on the basis of entity speci?c valuations
using inputs that are not based on observable market
data (unobservable inputs). When the fair value of
unquoted instruments cannot be measured with
suf?cient reliability, the Group carries such instruments
at cost less impairment, if applicable.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in
hand and other short-term highly liquid investments with
maturities of three months or less from the initial
recognition.
Short-term investments
Short-term investments include investments from the
available-for-sale category if their maturity is more than
three months from the initial recognition and if they are due
within a period of 12 months or less; or there is no maturity
but the assets are expected to be realised within 12 months
after the reporting period.
Inventories
Raw materials and purchased ?nished goods are valued at
purchase cost. Work in progress and manufactured ?nished
goods are valued at production cost. Production cost
includes direct production costs and an appropriate
proportion of production overheads and factory depreciation.
Raw material inventories and purchased ?nished goods
are accounted for using the FIFO (?rst in, ?rst out) method.
The weighted average cost method is used for other
inventories.
An allowance is established when the net realisable
value of any inventory item is lower than the value
calculated above.
Prepayments and accrued income
Prepayments and accrued income comprise payments
made in advance relating to the following year, and
income relating to the current year, which will not be
invoiced until after the balance sheet date.
1. Accounting policies (continued)
58 Consolidated Financial Statements of the Nestlé Group 2011
Property, plant and equipment
Property, plant and equipment are shown in the balance
sheet at their historical cost. Depreciation is provided on
components that have homogenous useful lives by using
the straight-line method so as to depreciate the initial cost
down to the residual value over the estimated useful lives.
The residual values are 30% on head of?ces and nil for all
other asset types. The useful lives are as follows:
Buildings 20 – 40 years
Machinery and equipment 10 – 25 years
Tools, furniture, information technology
and sundry equipment 3 – 10 years
Vehicles 3 – 8 years
Land is not depreciated.
Useful lives, components and residual amounts are
reviewed annually. Such a review takes into consideration
the nature of the assets, their intended use including but
not limited to the closure of facilities and the evolution of
the techno logy and competitive pressures that may lead to
technical obsolescence.
Depreciation of property, plant and equipment is
allocated to the appropriate headings of expenses by
function in the income statement.
Borrowing costs incurred during the course of
construction are capitalised if the assets under
construction are signi?cant and if their construction
requires a substantial period to complete (typically more
than one year). The capitalisation rate is determined on the
basis of the short-term borrowing rate for the period of
construction. Premiums capitalised for leasehold land or
buildings are amortised over the length of the lease.
Government grants are recognised in accordance with the
deferral method, whereby the grant is set up as deferred
income which is released to the income statement over
the useful life of the related assets. Grants that are not
related to assets are credited to the income statement
when they are received.
Leased assets
Leasing agreements which transfer to the Group
substantially all the rewards and risks of ownership of an
asset are treated as ?nance leases. All other leases are
classi?ed as operating leases.
Assets acquired under ?nance leases are capitalised
and depreciated in accordance with the Group’s policy on
property, plant and equipment unless the lease term is
shorter. Land and building leases are recognised separately
provided an allocation of the lease payments between
these categories is reliable. The associated obligations are
included under ?nancial liabilities.
Rentals payable under operating leases are charged to
the income statement on a straight-line basis over the
period of the lease.
The costs of the agreements that do not take the legal
form of a lease but convey the right to use an asset are
separated into lease payments and other payments if the
entity has the control of the use or of the access to the
asset or takes essentially all the output of the asset. Then
the entity determines whether the lease component of the
agreement is a ?nance or an operating lease.
Business combinations and related goodwill
Business combinations are accounted for using the
acquisition method. Identi?able assets acquired and
liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at
the acquisition date. The consideration transferred is
measured at fair value and includes the fair value of any
contingent consideration. Subsequent changes in
contingent consideration, when not classi?ed as equity,
are recognised in pro?t or loss. The acquisition-related
costs are charged to the income statement in the period
in which they are incurred. Where not all of the equity of
a subsidiary is acquired the non-controlling interests are
recognised at the non-controlling interest’s share of the
acquiree’s net identi?able assets. Upon obtaining control
in a business combination achieved in stages, the Group
remeasures its previously held equity interest at fair value
and recognises a gain or a loss to the income statement.
Goodwill is recorded as the surplus of the consideration
transferred over the Group’s interest in the fair value of the
acquired net assets. Goodwill is not amortised but tested
for impairment at least annually and upon the occurrence
of an indication of impairment. The impairment testing
process is described in the appropriate section of these
policies. Goodwill is recorded in the functional currencies
of the acquired operations.
Acquisitions and disposals of non-controlling
interests
The Group treats transactions with non-controlling interests
that do not result in loss of control as transactions with
equity holders in their capacity as equity holders. For
purchases of shares from non-controlling interests, the
1. Accounting policies (continued)
Consolidated Financial Statements of the Nestlé Group 2011 59
difference between any consideration paid and the relevant
share acquired of the carrying amount of net assets of the
subsidiary is recorded in equity. The same principle is
applied to disposals of shares to non-controlling interests.
Intangible assets
This heading includes intangible assets that are internally
generated or acquired either separately or in a business
combination when they are identi?able and can be reliably
measured. Intangible assets are considered to be
identi?able if they arise from contractual or other rights, or
if they are separable (i.e. they can be disposed of either
individually or together with other assets). Intangible
assets comprise inde ?nite life intangible assets and ?nite
life intangible assets. Internally generated intangible assets
are capitalised, provided they generate future economic
bene?ts and their costs are clearly identi?able. Borrowing
costs incurred during the development of internally
generated intangible assets are capitalised if the assets are
signi?cant and if their develop ment requires a substantial
period to complete (typically more than one year).
Inde?nite life intangible assets are those for which there
is no foreseeable limit to their useful economic life as they
arise from contractual or other legal rights that can be
renewed without signi?cant cost and are the subject of
continuous marketing support. They are not amortised but
tested for impairment annually or more frequently if an
impairment indicator is triggered. They mainly comprise
certain brands, trademarks and intellectual property
rights. The assessment of the classi?cation of intangible
assets as inde?nite is reviewed annually.
Finite life intangible assets are those for which there is
an expectation of obsolescence that limits their useful
economic life or where the useful life is limited by
contractual or other terms. They are amortised over the
shorter of their contractual or useful economic lives. They
comprise mainly management information systems,
patents and rights to carry on an activity (e. g. exclusive
rights to sell products or to perform a supply activity).
Finite life intan gible assets are amortised on a straight-line
basis assuming a zero resi d ual value: management
information systems over a period ranging from 3 to
5 years; and other ?nite life intangible assets over 5 to
20 years. Useful lives and residual values are reviewed
annually. Amortisation of intangible assets is allocated to
the appropriate headings of expenses by function in the
income statement.
Research and development
Internal research costs are charged to the income
statement in the year in which they are incurred.
Development costs are also charged to the income
statement in the year in which they are incurred due to
uncertainties inherent in the development of new products
because the expected future economic bene?ts cannot be
reliably determined. As long as the products have not
reached the market place, there is no reliable evidence
that positive future cash ?ows would be obtained.
Payments made to third parties in order to in-license or
acquire intellectual property rights, compounds and
products are capitalised as they are separately identi?able
and are expected to generate future bene?ts.
Other development costs (essentially management
information system software) are capitalised provided that
there is an identi?able asset that will be useful in
generating future bene?ts in terms of savings, economies
of scale, etc.
Impairment of goodwill and inde?nite life intangible
assets
Goodwill and inde?nite life intangible assets are tested for
impairment at least annually and upon the occurrence of
an indication of impairment.
The impairment tests are performed annually at the
same time each year and at the cash generating unit
(CGU) level. The Group de?nes its CGU based on the way
that it monitors and derives economic bene?ts from the
acquired goodwill and intangibles. The impairment tests
are performed by comparing the carrying value of the
assets of these CGU with their recoverable amount, based
on their future projected cash ?ows discounted at an
appropriate pre-tax rate of return. Usually, the cash ?ows
correspond to estimates made by Group Management in
?nancial plans and business strategies covering a period
of ?ve years. They are then projected to 50 years using
a steady or declining growth rate given that the Group
businesses are of a long-term nature. The Group assesses
the uncertainty of these estimates by making sensitivity
analyses. The discount rate re?ects the current
assessment of the time value of money and the risks
speci?c to the CGU (essentially country risk). The business
risk is included in the determination of the cash ?ows.
Both the cash ?ows and the discount rates exclude
in?ation.
An impairment loss in respect of goodwill is never
subsequently reversed.
1. Accounting policies (continued)
60 Consolidated Financial Statements of the Nestlé Group 2011
Impairment of property, plant and equipment and
?nite life intangible assets
Consideration is given at each balance sheet date to
determine whether there is any indication of impairment
of the carrying amounts of the Group’s property, plant and
equipment and ?nite life intangible assets. Indication could
be unfavourable development of a business under
competitive pressures or severe economic slowdown in
a given market as well as reorganisation of the operations
to leverage their scale. If any indication exists, an asset’s
recoverable amount is estimated. An impairment loss is
recognised when ever the carrying amount of an asset
exceeds its recoverable amount. The recoverable amount
is the greater of the fair value less cost to sell and value in
use. In asses sing value in use, the estimated future cash
?ows are discounted to their present value, based on the
time value of money and the risks speci?c to the country
where the assets are located. The risks speci?c to the
asset are included in the determina tion of the cash ?ows.
Assets that suffered an impairment are tested for
possible reversal of the impairment at each reporting date
if indications exist that impairment losses recognised in
prior periods no longer exist or have decreased.
Assets held for sale and discontinued operations
Non-current assets held for sale (and disposal groups) are
presented separately in the current section of the balance
sheet. Immediately before the initial classi?cation of the
assets (and disposal groups) as held for sale, the carrying
amounts of the assets (or all the assets and liabilities in the
disposal groups) are measured in accordance with their
applicable accounting policy. Non-current assets held for
sale (and disposal groups) are subsequently measured at
the lower of their carrying amount and fair value less cost
to sell. Non-current assets held for sale (and disposal
groups) are no longer depreciated.
Upon occurrence of discontinued operations, the
income statement of the discontinued operations is
presented sepa ra tely in the consolidated income statement.
Comparative infor mation is restated accordingly. Balance
sheet and cash ?ow information related to discontinued
operations are disclosed separately in the notes.
Provisions
Provisions comprise liabilities of uncertain timing or
amount that arise from restructuring plans, environmental,
litigation and other risks. Provisions are recognised when
there exists a legal or constructive obligation stemming
from a past event and when the future cash out?ows can
be reliably estimated. Obligations arising from restructuring
plans are recognised when detailed formal plans have
been established and when there is a valid expectation
that such plans will be carried out by either starting to
implement them or announcing their main features.
Obligations under litigations re?ect Group Management’s
best estimate of the outcome based on the facts known at
the balance sheet date.
Contingent assets and liabilities
Contingent assets and liabilities are possible rights and
obligations that arise from past events and whose
existence will be con?rmed only by the occurrence or
non-occurrence of one or more uncertain future events
not fully within the control of the Group. They are
disclosed in the notes.
Post-employment bene?ts
The liabilities of the Group arising from de?ned bene?t
obligations, and the related current service cost, are
determined using the projected unit credit method.
Actuarial advice is provided both by external consultants
and by actuaries employed by the Group. The actuarial
assumptions used to calculate the de?ned bene?t
obligations vary according to the economic conditions of
the country in which the plan is located. Such plans are
either externally funded (in the form of independently
administered funds) or unfunded.
For the funded de?ned bene?t plans, the de?cit or
excess of the fair value of plan assets over the present
value of the de?ned bene?t obligation is recognised as
a liability or an asset in the balance sheet, taking into
account any unrecognised past service cost. However,
an excess of assets is recognised only to the extent that
it represents a future economic bene?t which is available
in the form of refunds from the plan or reductions in future
contributions to the plan. When these criteria are not met,
it is not recognised but is disclosed in the notes. Impacts
of minimum funding requirements in relation to past service
are considered when determining pension obligations.
Actuarial gains and losses arise mainly from changes in
actuarial assumptions and differences between actuarial
assumptions and what has actually occurred. They are
recognised in the period in which they occur in other
comprehensive income.
1. Accounting policies (continued)
Consolidated Financial Statements of the Nestlé Group 2011 61
For de?ned bene?t plans, the pension cost charged to
the income statement consists of current service cost,
interest cost, expected return on plan assets, effects of
early retirements, curtailments or settlements, and past
service cost. The past service cost for the enhancement of
pension bene?ts is accounted for when such bene?ts vest
or become a constructive obligation.
Some bene?ts are also provided by de?ned contribution
plans. Contributions to such plans are charged to the
income statement as incurred.
Equity compensation plans
The Group has equity-settled and cash-settled share-based
payment transactions.
Equity-settled share-based payment transactions are
recognised in the income statement with a corresponding
increase in equity over the vesting period. They are fair
valued at grant date and measured using generally
accepted pricing models. The cost of equity-settled
share-based payment transactions is adjusted annually
by the expec ta tions of vesting, for the forfeitures of the
participants’ rights that no longer satisfy the plan
conditions, as well as for early vesting.
Liabilities arising from cash-settled share-based payment
transactions are recognised in the income statement over
the vesting period. They are fair valued at each reporting
date and measured using generally accepted pricing
models. The cost of cash-settled share-based payment
transactions is adjusted for the forfeitures of the
participants’ rights that no longer satisfy the plan
conditions, as well as for early vesting.
Accruals and deferred income
Accruals and deferred income comprise expenses relating
to the current year, which will not be invoiced until after
the balance sheet date, and income received in advance
relating to the following year.
Dividend
In accordance with Swiss law and the Company’s Articles
of Association, dividend is treated as an appropriation of
pro?t in the year in which it is rati?ed at the Annual
General Meeting and subsequently paid.
Events occurring after the balance sheet date
The values of assets and liabilities at the balance sheet
date are adjusted if there is evidence that subsequent
adjusting events warrant a modi?cation of these values.
These adjustments are made up to the date of approval
of the Consolidated Financial Statements by the Board
of Directors. Other non-adjusting events are disclosed in
the notes.
Changes in presentation – Revenue
Certain allowances and discounts, granted to trade
chains, distributors, retailers and consumers for services
rendered to the Group concerning trade and consumer
promotions, selling, distribution, advertising etc. were
previously reported as expenses under marketing and
administration expenses as well as distribution expenses
on grounds that they are incurred to generate sales.
These allowances and discounts, as from 1 January 2011,
are disclosed as a deduction of sales in conformity with
the practice generally applied by consumer goods
companies. The impact of this change for the year ended
31 December 2010 is a reduction in distribution expenses
of CHF 432 million as well as marketing and administration
expenses of CHF 16 166 million. Moreover, a separate line
for other revenues such as license fees received from third
parties has been added to the Income Statement, for an
amount of CHF 109 million for this same period. The total
impact is a reduction in sales of CHF 16 707 million. 2010
comparatives have been restated accordingly.
Changes in presentation – Operating pro?t
Previously the Group Income Statement included EBIT
(Earnings before Interest, Taxes, Restructuring and
Impairments) and Pro?t before Interest and Taxes. As
from 2011, the Income Statement displays a Trading
Operating Pro?t that is after restructuring costs, impairment
of all assets except goodwill, litigations and onerous
contracts, result on disposal of property, plant and
equipment and speci?c other income and expenses that
fall within the control of operating segments. This
represents the new internal performance view that is also
utilised in the segment reporting. Finally the line Pro?t
before Interest and Taxes is renamed Operating Pro?t and
is after impairment of goodwill, results on disposals of
businesses, acquisition-related costs and other income
and expenses that fall beyond the control of operating
segments and relate to events such as natural disasters
and expropriation of assets. 2010 comparatives have been
restated accordingly.
1. Accounting policies (continued)
62 Consolidated Financial Statements of the Nestlé Group 2011
Changes in presentation – Analyses by segment
The scope of the operating segments has been modi?ed
following on the changes in management responsibilities:
HealthCare Nutrition, now managed by Nestlé Health
Science, is reported under “Other”. Moreover Pharma
is reported under “Other” as a result of the disposal of
Alcon. Information by product has been modi?ed
accordingly. 2010 comparatives have been restated.
Changes in accounting policies
The accounting policies are the same as those applied in
the Consolidated Financial Statements for the year ended
31 December 2010. The revised standards and the new or
revised interpretations that are effective for the 2011
reporting year are either not applicable to the Group, or do
not have a material impact on the Consolidated Financial
Statements.
Changes in IFRS that may affect the Group after
31 December 2011
The following standards and amendments to existing
standards have been published and are mandatory as well
as applicable for the Group’s accounting period beginning
on 1 January 2013, unless otherwise stated. The Group
will not early adopt them.
IFRS 9 – Financial Instruments
The standard addresses the classi?cation, measurement
and derecognition of ?nancial assets and ?nancial liabilities.
The standard will affect the Group’s accounting for its
available-for-sale ?nancial assets, as IFRS 9 only permits
the recognition of fair value gains and losses in other
comprehensive income if they relate to equity investments
that are not held for trading. Such gains and losses are
never reclassi?ed to the Income Statement at a later date.
There will be no impact on the Group’s accounting for
?nancial liabilities, as the new requirements only affect the
accounting for ?nancial liabilities that are designated at fair
value through pro?t or loss, and the Group does not have
any such liabilities. This standard is effective for the
Group’s accounting period beginning on 1 January 2015.
IFRS 10 – Consolidated Financial Statements
This standard introduces a new single control model as
the basis for consolidation applicable to all investees. It
also introduces a changed de?nition of control. It is not
expected to have a material impact on the Group Financial
Statements.
IFRS 11 – Joint Arrangements
This standard establishes principles for the ?nancial
reporting by parties to a joint arrangement. The standard
will affect the Group’s accounting for companies over
which the Group exercises joint control with partners.
The current proportionate consolidation method will be
replaced by the equity method and this change will affect
almost all Financial Statement line items resulting in
decreasing revenues and expenses, assets and liabilities.
Nevertheless, pro?t for the period and equity will remain
unchanged.
IFRS 12 – Disclosure of Interests in Other Entities
This standard combines, enhances and replaces disclosure
requirements for subsidiaries, joint arrangements,
associates and unconsolidated structured entities. The
Group will modify its disclosures accordingly.
IFRS 13 – Fair Value Measurement
This standard applies when other IFRS require or permit
fair value measurements. It de?nes fair value, sets out in
a single IFRS a framework for measuring fair value and
requires disclosures about fair value measurements. It is
not expected to have a material impact on the Group
Financial Statements.
IAS 19 Revised 2011 – Employee Bene?ts
The amendments that are expected to have the most
signi?cant impact include:
– replacement of the expected return on plan assets and
interests costs on the de?ned bene?t obligation with
a single net interest component which is calculated by
applying the discount rate to the net de?ned bene?ts
asset or liability;
– past-service costs that will be recognised in the period
of a plan amendment and unvested bene?ts that will no
longer be spread over a future period until the bene?ts
become vested.
1. Accounting policies (continued)
Consolidated Financial Statements of the Nestlé Group 2011 63
These changes will affect the pro?t for the period and the
earnings per share by increasing employee bene?t costs
of the Group. It will also impact the amounts presented in
other comprehensive income, and the net employee
bene?ts liabilities/(assets) in the Balance Sheet.
Improvements and other amendments to IFRS/IAS
A number of standards have been modi?ed on
miscellaneous points. Such changes include
IAS 1 – Presentation of Financial Statements, which
requires entities to separate items presented in Other
Comprehensive Income into two groups, based on
whether or not they may be recycled to the Income
Statement in the future. None of these amendments
are expected to have a material effect on the Group’s
Financial Statements.
1. Accounting policies (continued)
64 Consolidated Financial Statements of the Nestlé Group 2011
2. Acquisitions, disposals and discontinued operations
2.1 Modi?cation of the scope of consolidation
The scope of consolidation has been affected by acquisitions and disposals made in 2011.
Main acquisitions
Full consolidation
Hsu Fu Chi, China, confectionery products, 60% (December).
Yinlu Foods Group, China, ready-to-drink peanut milk and ready-to-eat canned rice porridge, 60% (November).
Prometheus, USA, HealthCare, 100% (July).
Proportionate consolidation
Q-Med, Sweden, HealthCare, 100% (March), acquired by our joint-venture Galderma.
Disposals
There were no major disposals in 2011.
2.2 Acquisitions of businesses
The major classes of assets acquired and liabilities assumed at the acquisition date are:
In millions of CHF 2011 2010
(a)
Hsu Fu Chi
Yinlu Foods
Group
Other
acquisitions
Property, plant and equipment 396 427 200 1 023 342
Intangible assets
(b)
479 694 724 1 897 2 134
Inventories and other assets 670 254 373 1 297 292
Assets held for sale
(c)
— — — — 845
Financial debt (81) (185) (16) (282) (18)
Employee bene?ts, deferred taxes and provisions (175) (171) (114) (460) (35)
Other liabilities (326) (250) (229) (805) (74)
Liabilities directly associated with assets held for sale
(c)
— — — — (177)
Fair value of identi?able net assets 963 769 938 2 670 3 309
(a) Mainly Kraft Foods' frozen pizza.
(b) Mainly Brands and intellectual property rights.
(c) Alcon's acquisitions.
Since the valuation of the assets and liabilities of recently acquired businesses is still in process, the values are determined
provisionally.
Consolidated Financial Statements of the Nestlé Group 2011 65
2. Acquisitions, disposals and discontinued operations (continued)
The goodwill arising on acquisitions and the cash out?ow are:
In millions of CHF 2011 2010
(a)
Hsu Fu Chi
Yinlu Foods
Group
Other
acquisitions
Fair value of consideration transferred 1 489 1 150 1 423 4 062 5 740
Non-controlling interests
(b)
385 308 11 704 6
Fair value of pre-existing interests
(c)
— — 48 48 —
Fair value of identi?able net assets (963) (769) (938) (2 670) (3 309)
Goodwill 911 689 544 2 144 2 437
(a) Mainly Kraft Foods' frozen pizza.
(b) Non-controlling interests have been measured in accordance with the accounting principle described in Note 1 – Business combinations and related goodwill.
(c) The remeasurement to fair value of pre-existing interests in one of the business acquisitions resulted in a gain of CHF 34 million and has been recognised under
other operating income in the income statement (Note 4.2).
In millions of CHF 2011 2010
(a)
Hsu Fu Chi
Yinlu Foods
Group
Other
acquisitions
Fair value of consideration transferred 1 489 1 150 1 423 4 062 5 740
Cash and cash equivalents acquired (132) (34) (134) (300) (41)
Consideration payable — (25) (16) (41) (135)
Payment of consideration payable on prior years acquisitions — — 21 21 18
Cash out?ow on acquisitions 1 357 1 091 1 294 3 742 5 582
(a) Mainly Kraft Foods' frozen pizza.
The consideration transferred consists of payments made in cash with some consideration remaining payable.
Hsu Fu Chi acquisition
On 22 December 2011, the Group acquired a 60% share in Hsu Fu Chi in China. Hsu Fu Chi is a leading manufacturer
and distributor of confectionery products in China. It will complement Nestlé’s existing product portfolio in China, which
includes culinary products, coffee, confectionery, bottled water, milk powder and products for the foodservice industry.
The goodwill arising on this acquisition includes elements that cannot be recognised as intangible assets such as
synergies, complementary market share and competitive position. The goodwill arising from this acquisition is expected
to be deductible for tax purposes. Because the impact of the activity of 10 days in December 2011 on sales and pro?t of
Hsu Fu Chi being insigni?cant for the Group, it has been consolidated for the ?rst time on 31 December 2011. The Group’s
total sales and pro?t for the year 2011 would have amounted respectively to CHF 84 457 million and CHF 9917 million if
the acquisition had been effective 1 January 2011. These amounts have been determined based on the assumption that
the fair value adjustments at the acquisition date, determined provisionally, would have been the same at 1 January.
Yinlu Foods Group acquisition
On 17 November 2011, the Group acquired a 60% share in the Yinlu Foods Group (Yinlu) in China. Yinlu is a signi?cant
marketer for ready-to-drink peanut milk and ready-to-eat canned rice porridge in China. It will complement Nestlé’s
existing product portfolio in China.
The goodwill arising on this acquisition includes elements that cannot be recognised as intangible assets such as
synergies, complementary market share and competitive position. The goodwill arising from this acquisition is expected
to be deductible for tax purposes. Sales and pro?t for the year 2011 of Yinlu Foods Group included in the Consolidated
Financial Statements amount respectively to CHF 123 million and CHF 13 million. The Group’s total sales and pro?t for
66 Consolidated Financial Statements of the Nestlé Group 2011
the year 2011 would have amounted respectively to CHF 84 782 million and CHF 9926 million if the acquisition had been
effective 1 January 2011. These amounts have been determined based on the assumption that the fair value adjustments
at the acquisition date, determined provisionally, would have been the same at 1 January.
Other acquisitions
There were other cash out?ows in 2011 related to several individually non signi?cant acquisitions, of which the main
ones are Q-Med by Galderma and Prometheus. The Group’s sales and pro?t for the year are not signi ?cantly impacted by
them. Cash out?ows of the comparative period were impacted by the Kraft Foods’ frozen pizza acquisition (cash out?ow
of CHF 3969 million) and other several non signi?cant acquisitions.
Acquisition-related costs
2011 acquisition-related costs have been recognised under Other operating expenses in the income statement (Note 4.2)
for an amount of CHF 34 million (2010: CHF 23 million).
2.3 Disposals of businesses
In millions of CHF 2011 2010
(a)
Property, plant and equipment 1 4
Goodwill and intangible assets — 1
Other assets 10 8
Non-controlling interests — (4 352)
Other liabilities (3) (31)
Alcon net assets held for sale disposed of — 8 936
Net assets and non-controlling interests disposed of 8 4 566
Cumulative other comprehensive income items, net, reclassi?ed to income statement — 899
Pro?t/(loss) on current year disposals (3) 24 472
Total disposal consideration 5 29 937
Cash and cash equivalents disposed of (1) (2 242)
Consideration receivable (2) (2)
Receipt of consideration receivable on prior years disposals 5 22
Cash in?ow on disposals 7 27 715
(a) 2010 impacted by Alcon disposal (refer to Note 2.4).
2.4 Discontinued operations – Alcon
On 4 January 2010, Novartis exercised its call option to acquire the remaining 52% of Alcon outstanding capital from
Nestlé, at a price of USD 181.– per share. The transaction received regulatory approval and was completed on
25 August 2010.
The cash in?ow on Alcon disposal was as follows:
In millions of CHF 2010
Consideration received 29 926
Cash and cash equivalents disposed of (2 242)
Cash in?ow on Alcon disposal 27 684
2. Acquisitions, disposals and discontinued operations (continued)
Consolidated Financial Statements of the Nestlé Group 2011 67
The consideration received included the disposal price as per the selling agreement and interests due from the date
of the exercise of the call to the regulatory approval, as well as the results on hedges of the cash proceeds.
In accordance with IFRS 5, Alcon’s related assets and liabilities were classi?ed as a disposal group in Assets held for sale
and Liabilities directly associated with assets held for sale as at 31 December 2009 and until the disposal date.
Consequently, the depreciation and amortisation of non-current assets had been stopped as from 1 January 2010.
Additionally, Alcon operations were presented separately in the income statement as discontinued operations.
The assets held for sale and liabilities directly associated with assets held for sale related to the Alcon discontinued
operations were the following:
In millions of CHF 2010
(a)
Cash, cash equivalents and short-term investments 2 950
Inventories 664
Trade and other receivables 1 474
Property, plant and equipment 1 435
Goodwill and intangible assets 4 188
Other assets 1 127
Assets held for sale 11 838
Financial debt (395)
Trade and other payables (530)
Employee bene?ts and provisions (763)
Other liabilities (1 214)
Liabilities directly associated with assets held for sale (2 902)
Net assets held for sale from discontinued operations 8 936
(a) Represent the amounts at the date of the disposal. The non-controlling interests disposed of amounted to CHF 4.4 billion.
The cumulative income or expense recognised in other comprehensive income related to Alcon discontinued operations
were as follows:
In millions of CHF 2010
(a)
Currency retranslations, net of taxes (902)
Fair value adjustments on available-for-sale ?nancial instruments, net of taxes 3
Actuarial gains/(losses) on de?ned bene?t schemes, net of taxes (82)
Cumulative income or expense recognised in other comprehensive income (981)
(a) Represent the amounts at the date of the disposal.
The main elements of the cash ?ow of the Alcon discontinued operations were as follows:
In millions of CHF 2010
Cash ?ow from discontinued operations
Operating cash ?ow 1 884
Cash ?ow from investing activities (1 035)
Cash ?ow from ?nancing activities (1 650)
2. Acquisitions, disposals and discontinued operations (continued)
68 Consolidated Financial Statements of the Nestlé Group 2011
3.1 Operating segments
In millions of CHF
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Revenues and results
Sales
(e)
16 417 28 733 15 370 7 209 7 700 12 477 87 906 5 109 93 015
Trading operating pro?t 2 179 5 364 2 762 512 1 562 2 102 (1 805) 12 676 2 156 14 832
Impairment of goodwill (4) (4) (18) (204) (105) (2) — (337) — (337)
Net other operating income/(expenses) excluding impairment of goodwill (196) 24 521 24 325
Operating pro?t 12 143 26 677 38 820
Net ?nancing cost (762) 9 (753)
Pro?t before taxes and associates 11 381 26 686 38 067
Net other trading income/(expenses) included in Trading operating pro?t (544) (287) (179) (157) (80) (93) (22) (1 362) — (1 362)
of which impairment of assets other than goodwill (86) (17) (21) (31) (9) (30) — (194) — (194)
of which restructuring costs (245) (72) (14) (83) (16) (33) (6) (469) — (469)
Assets
Segment assets 10 935 22 312 8 765 6 596 12 006 8 887 10 924 (1 757) 78 668 — 78 668
Non-segment assets 32 973
Total assets 111 641
of which goodwill and intangible assets 2 453 9 862 1 862 1 665 6 395 3 461 9 061 34 759 — 34 759
Other information
Capital additions 1 075 5 678 877 529 470 685 232 9 546 1 168 10 714
of which capital expenditure 906 1 127 840 413 378 509 211 4 384 192 4 576
Depreciation and amortisation of segment assets 679 931 468 561 155 283 105 3 182 — 3 182
(a) 2010 comparatives have been restated following the changes in the Income Statement described in Note 1 – Accounting Policies. Moreover, the scope of the
operating segments has been reviewed to be aligned with the changes of management responsibility as of 1 January 2011. HealthCare Nutrition has been
reclassi?ed under "Other" as now managed as part of Nestlé Health Science. As a result of the disposal of Alcon, Pharma has been reclassi?ed under "Other" as
now managed together with the Food and Beverages Joint Ventures.
(b) Mainly Nespresso, Nestlé Professional, Nestlé Health Science, Food and Beverages Joint Ventures and Pharma Joint Ventures managed on a worldwide basis.
(c) Refer to the Segment reporting section of Note 1 – Accounting policies for the de?nition of unallocated items.
(d) Detailed information related to Alcon discontinued operations is disclosed in Note 2. In 2010, goodwill and intangible assets are included in Assets held for sale
in the Balance Sheet, before being disposed of.
(e) Inter-segment sales are not signi?cant.
3. Analyses by segment
2
0
1
0
(
a
)
Consolidated Financial Statements of the Nestlé Group 2011 69
3.1 Operating segments
In millions of CHF
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Revenues and results
Sales
(e)
16 417 28 733 15 370 7 209 7 700 12 477 87 906 5 109 93 015
Trading operating pro?t 2 179 5 364 2 762 512 1 562 2 102 (1 805) 12 676 2 156 14 832
Impairment of goodwill (4) (4) (18) (204) (105) (2) — (337) — (337)
Net other operating income/(expenses) excluding impairment of goodwill (196) 24 521 24 325
Operating pro?t 12 143 26 677 38 820
Net ?nancing cost (762) 9 (753)
Pro?t before taxes and associates 11 381 26 686 38 067
Net other trading income/(expenses) included in Trading operating pro?t (544) (287) (179) (157) (80) (93) (22) (1 362) — (1 362)
of which impairment of assets other than goodwill (86) (17) (21) (31) (9) (30) — (194) — (194)
of which restructuring costs (245) (72) (14) (83) (16) (33) (6) (469) — (469)
Assets
Segment assets 10 935 22 312 8 765 6 596 12 006 8 887 10 924 (1 757) 78 668 — 78 668
Non-segment assets 32 973
Total assets 111 641
of which goodwill and intangible assets 2 453 9 862 1 862 1 665 6 395 3 461 9 061 34 759 — 34 759
Other information
Capital additions 1 075 5 678 877 529 470 685 232 9 546 1 168 10 714
of which capital expenditure 906 1 127 840 413 378 509 211 4 384 192 4 576
Depreciation and amortisation of segment assets 679 931 468 561 155 283 105 3 182 — 3 182
(a) 2010 comparatives have been restated following the changes in the Income Statement described in Note 1 – Accounting Policies. Moreover, the scope of the
operating segments has been reviewed to be aligned with the changes of management responsibility as of 1 January 2011. HealthCare Nutrition has been
reclassi?ed under "Other" as now managed as part of Nestlé Health Science. As a result of the disposal of Alcon, Pharma has been reclassi?ed under "Other" as
now managed together with the Food and Beverages Joint Ventures.
(b) Mainly Nespresso, Nestlé Professional, Nestlé Health Science, Food and Beverages Joint Ventures and Pharma Joint Ventures managed on a worldwide basis.
(c) Refer to the Segment reporting section of Note 1 – Accounting policies for the de?nition of unallocated items.
(d) Detailed information related to Alcon discontinued operations is disclosed in Note 2. In 2010, goodwill and intangible assets are included in Assets held for sale
in the Balance Sheet, before being disposed of.
(e) Inter-segment sales are not signi?cant.
3. Analyses by segment (continued)
70 Consolidated Financial Statements of the Nestlé Group 2011
3.1 Operating segments (continued)
In millions of CHF
Z
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Revenues and results
Sales
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15 243 26 756 15 291 6 520 7 233 12 599 83 642
Trading operating pro?t 2 372 4 922 2 892 520 1 443 2 119 (1 730) 12 538
Impairment of goodwill — — (9) (5) — (2) — (16)
Net other operating income/(expenses) excluding impairment of goodwill (51)
Operating pro?t 12 471
Net ?nancing cost (421)
Pro?t before taxes and associates 12 050
Net other trading income/(expenses) included in Trading operating pro?t (169) (273) (74) (19) (36) (78) (36) (685)
of which impairment of assets other than goodwill (66) (18) (31) (8) (18) (9) — (150)
of which restructuring costs (43) (21) (12) (1) (9) (14) — (100)
Assets
Segment assets 11 561 23 081 13 806 6 602 12 848 10 936 11 117 (2 140) 87 811
Non-segment assets 26 280
Total assets 114 091
of which goodwill and intangible assets 2 304 9 831 4 561 1 720 6 486 4 438 9 024 38 364
Other information
Capital additions 971 1 267 4 819 594 590 1 595 254 10 090
of which capital expenditure 871 1 102 1 142 407 477 537 243 4 779
Depreciation and amortisation of segment assets (574) (783) (441) (474) (198) (338) (117) (2 925)
(a) Mainly Nespresso, Nestlé Professional, Nestlé Health Science, Food and Beverages Joint Ventures and Pharma Joint Ventures managed on a worldwide basis.
(b) Refer to the Segment reporting section of Note 1 – Accounting policies for the de?nition of unallocated items.
(c) Inter-segment sales are not signi?cant.
3. Analyses by segment (continued)
2
0
1
1
Consolidated Financial Statements of the Nestlé Group 2011 71
3.1 Operating segments (continued)
In millions of CHF
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Revenues and results
Sales
(c)
15 243 26 756 15 291 6 520 7 233 12 599 83 642
Trading operating pro?t 2 372 4 922 2 892 520 1 443 2 119 (1 730) 12 538
Impairment of goodwill — — (9) (5) — (2) — (16)
Net other operating income/(expenses) excluding impairment of goodwill (51)
Operating pro?t 12 471
Net ?nancing cost (421)
Pro?t before taxes and associates 12 050
Net other trading income/(expenses) included in Trading operating pro?t (169) (273) (74) (19) (36) (78) (36) (685)
of which impairment of assets other than goodwill (66) (18) (31) (8) (18) (9) — (150)
of which restructuring costs (43) (21) (12) (1) (9) (14) — (100)
Assets
Segment assets 11 561 23 081 13 806 6 602 12 848 10 936 11 117 (2 140) 87 811
Non-segment assets 26 280
Total assets 114 091
of which goodwill and intangible assets 2 304 9 831 4 561 1 720 6 486 4 438 9 024 38 364
Other information
Capital additions 971 1 267 4 819 594 590 1 595 254 10 090
of which capital expenditure 871 1 102 1 142 407 477 537 243 4 779
Depreciation and amortisation of segment assets (574) (783) (441) (474) (198) (338) (117) (2 925)
(a) Mainly Nespresso, Nestlé Professional, Nestlé Health Science, Food and Beverages Joint Ventures and Pharma Joint Ventures managed on a worldwide basis.
(b) Refer to the Segment reporting section of Note 1 – Accounting policies for the de?nition of unallocated items.
(c) Inter-segment sales are not signi?cant.
3. Analyses by segment (continued)
72 Consolidated Financial Statements of the Nestlé Group 2011
3.2 Products
In millions of CHF
P
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(
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Revenues and results
Sales 18 114 7 215 17 202 10 098 14 899 9 735 10 643 87 906 5 109 93 015
Trading operating pro?t 4 150 513 2 409 1 906 1 884 1 443 2 176 (1 805) 12 676 2 156 14 832
Impairment of goodwill (2) (204) (1) (105) (19) (4) (2) — (337) — (337)
Net other operating income/(expenses) excluding impairment of goodwill (196) 24 521 24 325
Operating pro?t 12 143 26 677 38 820
Net ?nancing cost (762) 9 (753)
Pro?t before taxes and associates 11 381 26 686 38 067
Net other trading income/(expenses) included in Trading operating pro?t (179) (157) (213) (135) (344) (224) (88) (22) (1 362) — (1 362)
of which impairment of assets other than goodwill (7) (31) (25) (38) (62) (31) — — (194) — (194)
of which restructuring costs (44) (83) (67) (35) (178) (42) (14) (6) (469) — (469)
Assets 9 219 7 477 13 333 16 669 12 995 6 112 14 510 974 81 289 4 370 85 659
of which goodwill and intangible assets 432 1 959 4 579 10 038 6 285 850 9 956 2 389 36 488 2 131 38 619
Liabilities 3 693 1 894 3 466 2 939 2 901 2 181 1 509 (2 388) 16 195 701 16 896
Revenues and results
Sales 18 204 6 526 16 406 9 744 13 933 9 065 9 764 83 642 83 642
Trading operating pro?t 4 129 520 2 251 1 820 2 016 1 524 2 008 (1 730) 12 538 12 538
Impairment of goodwill (2) (5) (5) — — (4) — — (16) (16)
Net other operating income/(expenses) excluding impairment of goodwill (51) (51)
Operating pro?t 12 471 12 471
Net ?nancing cost (421) (421)
Pro?t before taxes and associates 12 050 12 050
Net other trading income/(expenses) included in Trading operating pro?t (151) (19) (211) (55) (69) (136) (8) (36) (685) (685)
of which impairment of assets other than goodwill (35) (8) (37) (20) (18) (30) (2) — (150) (150)
of which restructuring costs (40) (1) (25) (16) (9) (11) 2 — (100) (100)
Assets 9 770 6 640 13 496 16 837 12 922 6 482 13 569 911 80 627 80 627
of which goodwill and intangible assets 393 1 678 4 397 9 762 6 308 1 023 9 141 2 184 34 886 34 886
Liabilities 3 872 1 747 3 456 2 959 2 703 2 034 1 514 (2 614) 15 671 15 671
(a) 2010 comparatives have been restated following the changes in the Income Statement described in Note 1 – Accounting Policies.
(b) Include Pharmaceutical products, previously disclosed separately.
(c) Refer to the Segment reporting section of Note 1 – Accounting policies for the de?nition of unallocated items.
(d) Detailed information related to Alcon discontinued operations is disclosed in Note 2. In 2010, goodwill and intangible assets are included in Assets held for sale
in the Balance Sheet, before being disposed of.
3. Analyses by segment (continued)
2
0
1
0
(
a
)
2
0
1
1
Consolidated Financial Statements of the Nestlé Group 2011 73
3.2 Products
In millions of CHF
P
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Revenues and results
Sales 18 114 7 215 17 202 10 098 14 899 9 735 10 643 87 906 5 109 93 015
Trading operating pro?t 4 150 513 2 409 1 906 1 884 1 443 2 176 (1 805) 12 676 2 156 14 832
Impairment of goodwill (2) (204) (1) (105) (19) (4) (2) — (337) — (337)
Net other operating income/(expenses) excluding impairment of goodwill (196) 24 521 24 325
Operating pro?t 12 143 26 677 38 820
Net ?nancing cost (762) 9 (753)
Pro?t before taxes and associates 11 381 26 686 38 067
Net other trading income/(expenses) included in Trading operating pro?t (179) (157) (213) (135) (344) (224) (88) (22) (1 362) — (1 362)
of which impairment of assets other than goodwill (7) (31) (25) (38) (62) (31) — — (194) — (194)
of which restructuring costs (44) (83) (67) (35) (178) (42) (14) (6) (469) — (469)
Assets 9 219 7 477 13 333 16 669 12 995 6 112 14 510 974 81 289 4 370 85 659
of which goodwill and intangible assets 432 1 959 4 579 10 038 6 285 850 9 956 2 389 36 488 2 131 38 619
Liabilities 3 693 1 894 3 466 2 939 2 901 2 181 1 509 (2 388) 16 195 701 16 896
Revenues and results
Sales 18 204 6 526 16 406 9 744 13 933 9 065 9 764 83 642 83 642
Trading operating pro?t 4 129 520 2 251 1 820 2 016 1 524 2 008 (1 730) 12 538 12 538
Impairment of goodwill (2) (5) (5) — — (4) — — (16) (16)
Net other operating income/(expenses) excluding impairment of goodwill (51) (51)
Operating pro?t 12 471 12 471
Net ?nancing cost (421) (421)
Pro?t before taxes and associates 12 050 12 050
Net other trading income/(expenses) included in Trading operating pro?t (151) (19) (211) (55) (69) (136) (8) (36) (685) (685)
of which impairment of assets other than goodwill (35) (8) (37) (20) (18) (30) (2) — (150) (150)
of which restructuring costs (40) (1) (25) (16) (9) (11) 2 — (100) (100)
Assets 9 770 6 640 13 496 16 837 12 922 6 482 13 569 911 80 627 80 627
of which goodwill and intangible assets 393 1 678 4 397 9 762 6 308 1 023 9 141 2 184 34 886 34 886
Liabilities 3 872 1 747 3 456 2 959 2 703 2 034 1 514 (2 614) 15 671 15 671
(a) 2010 comparatives have been restated following the changes in the Income Statement described in Note 1 – Accounting Policies.
(b) Include Pharmaceutical products, previously disclosed separately.
(c) Refer to the Segment reporting section of Note 1 – Accounting policies for the de?nition of unallocated items.
(d) Detailed information related to Alcon discontinued operations is disclosed in Note 2. In 2010, goodwill and intangible assets are included in Assets held for sale
in the Balance Sheet, before being disposed of.
3. Analyses by segment (continued)
74 Consolidated Financial Statements of the Nestlé Group 2011
3.3 Customers
There is no single customer amounting to 10% or more of Group’s revenues.
3.4 Geography (top ten countries and Switzerland)
In millions of CHF 2011 2010
Sales
Non-current
assets
(a)
Sales
(b)
Non-current
assets
(a)
USA 21 474 17 115 24 075 16 661
France 5 646 1 722 5 958 1 727
Brazil 5 418 1 242 5 602 1 228
Germany 3 444 1 356 3 656 1 406
Mexico 2 962 596 3 005 612
United Kingdom 2 678 877 2 900 900
Greater China Region 2 509 4 298 2 173 578
Italy 2 273 895 2 397 960
Australia 2 101 1 080 2 070 1 030
Canada 2 017 452 2 139 438
Switzerland
(c)
1 799 2 636 1 750 2 480
Rest of the world and unallocated items 31 321 30 066 32 181 28 177
Total continuing operations 83 642 62 335 87 906 56 197
Discontinued operations 5 109
Total 83 642 62 335 93 015 56 197
(a) Relate to property, plant and equipment, intangible assets and goodwill.
(b) 2010 comparatives have been restated following the changes in the Income Statement described in Note 1 – Accounting Policies.
(c) Country of domicile of Nestlé S.A.
The analysis of sales by geographic area is stated by customer location.
3. Analyses by segment (continued)
Consolidated Financial Statements of the Nestlé Group 2011 75
4. Net other trading and operating income/(expenses)
4.1 Net other trading income/(expenses)
In millions of CHF Notes 2011 2010
(a)
Pro?t on disposal of property, plant and equipment 18 41
Miscellaneous trading income 33 127
Other trading income 51 168
Loss on disposal of property, plant and equipment (15) (9)
Restructuring costs (100) (469)
Impairment of assets other than goodwill 7/9 (150) (194)
Litigations and onerous contracts
(b)
(341) (584)
Miscellaneous trading expenses (130) (274)
Other trading expenses (736) (1 530)
Net other trading income/(expenses) of continuing operations (685) (1 362)
Net other trading income/(expenses) of discontinued operations
(c)
—
Total net other trading income/(expenses) (685) (1 362)
(a) 2010 comparatives have been restated following the changes in the Income Statement described in Note 1 – Accounting Policies.
(b) It relates mainly to numerous separate legal cases (for example labour, civil and tax litigations) as well as several separate onerous contracts, predominantly in
Latin America.
(c) Detailed information related to Alcon discontinued operations is disclosed in Note 2.
4.2 Net other operating income/(expenses)
In millions of CHF Notes 2011 2010
(a)
Pro?t on disposal of businesses 2 4 10
Miscellaneous operating income 108 28
Other operating income 112 38
Loss on disposal of businesses 2 (7) (13)
Impairment of goodwill 8 (16) (337)
Miscellaneous operating expenses (156) (221)
Other operating expenses (179) (571)
Net other operating income/(expenses) of continuing operations (67) (533)
Net other operating income/(expenses) of discontinued operations
(b)
24 521
Total net other operating income/(expenses) (67) 23 988
(a) 2010 comparatives have been restated following the changes in the Income Statement described in Note 1 – Accounting Policies.
(b) Detailed information related to Alcon discontinued operations is disclosed in Note 2.
76 Consolidated Financial Statements of the Nestlé Group 2011
5. Inventories
In millions of CHF 2011 2010
Raw materials, work in progress and sundry supplies 3 904 3 243
Finished goods 5 488 4 812
Allowance for write-down at net realisable value (137) (130)
9 255 7 925
Inventories amounting to CHF 227 million (2010: CHF 169 million) are pledged as security for ?nancial liabilities.
6. Trade and other receivables
6.1 By type
In millions of CHF 2011 2010
Trade receivables 9 541 8 899
Other receivables 3 799 3 184
13 340 12 083
The ?ve major customers represent 9% (2010: 9%) of trade and other receivables, none of them exceeding 5% (2010: 4%).
6.2 Past due and impaired receivables
In millions of CHF 2011 2010
Not past due 11 326 10 522
Past due 1–30 days 1 119 742
Past due 31–60 days 353 273
Past due 61–90 days 100 121
Past due 91–120 days 90 107
Past due more than 120 days 724 727
Allowance for doubtful receivables (372) (409)
13 340 12 083
6.3 Allowance for doubtful receivables
In millions of CHF 2011 2010
At 1 January 409 451
Currency retranslations (15) (52)
Allowance made during the year 59 94
Amounts used and reversal of unused amounts (81) (84)
At 31 December 372 409
Based on the historic trend and expected performance of the customers, the Group believes that the above allowance for
doubtful receivables suf?ciently covers the risk of default.
Consolidated Financial Statements of the Nestlé Group 2011 77
7. Property, plant and equipment
In millions of CHF
Land and
buildings
Machinery
and
equipment
Tools,
furniture
and other
equipment
Vehicles
Total
Gross value
At 1 January 2010 12 931 25 562 7 717 876 47 086
Currency retranslations (961) (2 722) (670) (95) (4 448)
Capital expenditure
(a)
872 2 468 893 151 4 384
Disposals (137) (688) (541) (65) (1 431)
Reclassi?ed as held for sale (48) (31) (5) — (84)
Modi?cation of the scope of consolidation 148 186 (9) 2 327
At 31 December 2010 12 805 24 775 7 385 869 45 834
Currency retranslations (104) (719) (187) (21) (1 031)
Capital expenditure
(a)
1 022 2 643 950 164 4 779
Disposals (140) (624) (507) (65) (1 336)
Reclassi?ed as held for sale — 5 1 — 6
Modi?cation of the scope of consolidation 526 392 86 14 1 018
At 31 December 2011 14 109 26 472 7 728 961 49 270
Accumulated depreciation and impairments
At 1 January 2010 (5 014) (14 596) (5 384) (493) (25 487)
Currency retranslations 434 1 461 512 52 2 459
Depreciation (370) (1 319) (765) (98) (2 552)
Impairments (38) (131) (17) — (186)
Disposals 107 641 492 56 1 296
Reclassi?ed as held for sale 30 29 4 — 63
Modi?cation of the scope of consolidation — 1 10 — 11
At 31 December 2010 (4 851) (13 914) (5 148) (483) (24 396)
Currency retranslations 76 286 125 14 501
Depreciation (341) (1 263) (728) (90) (2 422)
Impairments (51) (81) (17) (1) (150)
Disposals 99 525 490 56 1 170
Reclassi?ed as held for sale — (5) (1) — (6)
Modi?cation of the scope of consolidation — 3 1 — 4
At 31 December 2011 (5 068) (14 449) (5 278) (504) (25 299)
Net at 31 December 2010 7 954 10 861 2 237 386 21 438
Net at 31 December 2011 9 041 12 023 2 450 457 23 971
(a) Including borrowing costs.
At 31 December 2011, property, plant and equipment include CHF 1267 million of assets under construction
(2010: CHF 802 million). Net property, plant and equipment held under ?nance leases amount to CHF 194 million
(2010: CHF 240 million). Net property, plant and equipment of CHF 323 million are pledged as security for ?nancial
liabilities (2010: CHF 112 million). Fire risks, reasonably estimated, are insured in accordance with domestic
requirements.
78 Consolidated Financial Statements of the Nestlé Group 2011
Impairment
Impairment of property, plant and equipment arises mainly from the plans to optimise industrial manufacturing
capacities by closing or selling inef?cient production facilities.
Commitments for expenditure
At 31 December 2011, the Group was committed to expenditure amounting to CHF 734 million (2010: CHF 624 million).
8. Goodwill
In millions of CHF Notes 2011 2010
Gross value
At 1 January 29 003 29 282
Currency retranslations (196) (2 716)
Goodwill from acquisitions 2 2 144 2 437
At 31 December 30 951 29 003
Accumulated impairments
At 1 January (1 972) (1 780)
Currency retranslations 45 145
Impairments (16) (337)
At 31 December (1 943) (1 972)
Net at 31 December 29 008 27 031
Goodwill impairment reviews have been conducted for more than 200 goodwill items allocated to some 50 Cash
Generating Units (CGU).
Detailed results of the impairment tests are presented below for the three largest goodwill items, representing more
than 50% of the net book value at 31 December 2011. For the purpose of the tests, they have been allocated to the
following CGU: PetCare by geographical zone, Infant Nutrition, Frozen Pizza and Ice Cream USA. For each of the CGU,
the recoverable amount is higher than its carrying amount. The recoverable amount has been determined based upon
a value-in-use calculation. De?ated cash ?ow projections covering the next 50 years, discounted at a de?ated pre-tax
weighted average rate, were used in this calculation. The cash ?ows for the ?rst ?ve years were based upon ?nancial
plans approved by Group Management; years six to ten were based upon Group Management’s best expectations,
which are consistent with the Group’s approved strategy for this period. Cash ?ows were assumed to be ?at for years
eleven to 50, although Group Management expects continuing growth. Cash ?ows have been adjusted to re?ect the
speci?c business risks.
7. Property, plant and equipment (continued)
Consolidated Financial Statements of the Nestlé Group 2011 79
8.1 PetCare
The goodwill related to the acquisition of Ralston Purina in 2001 is allocated for impairment tests purpose to three
distinct CGU corresponding to the three operating segments that are covering geogra phically the PetCare business:
Zone Europe, Zone Americas and Zone Asia, Oceania and Africa.
As at 31 December, the carrying amounts of the PetCare goodwill and intangible assets with inde?nite useful life,
expressed in various currencies, represent an equivalent of:
In millions of CHF 2011 2010
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Goodwill 8 982 1 762 7 148 9 006 1 802 7 131
Intangible assets with inde?nite useful life 197 — 158 197 — 158
9 179 1 762 7 306 9 203 1 802 7 289
Assumptions
The main assumptions for the two most important CGU, PetCare Zone Europe and PetCare Zone Americas, were the
following:
Zone
Europe
Zone
Americas
De?ated pre-tax weighted average discount rate 6.5% 7.4%
Annual sales growth over the ?rst ten-year period between 3.0 and 6.4% between 4.0 and 4.4%
Trading operating pro?t margin
(a)
evolution over the ?rst ten-year period
steady improvement
in a range of 20–40
basis points per year
stable
Assumptions used in the calculations are consistent with the expected long-term average growth rate of the PetCare
businesses in the Zones concerned. The margin evolu tion is consistent with sales growth and portfolio rationalisation.
Sensitivity analyses
The key sensitivity for the impairment tests is the growth in sales and trading operating pro?t margin
(a)
. For Zone Americas
and Zone Europe, assuming no sales growth and no improvement in trading operating pro?t margin
(a)
over the entire
period would not result in the carrying amount exceeding the recoverable amount. An increase of 100 basis points in the
discount rate assump tion would not change the conclusions of the impairment tests.
(a) Before net other trading income/(expenses).
8. Goodwill (continued)
80 Consolidated Financial Statements of the Nestlé Group 2011
8.2 Infant Nutrition
Goodwill and intangible assets with inde?nite useful life related to the 2007 acquisition of Gerber have been allocated for
the impairment test to the CGU of the Infant Nutrition businesses on a worldwide basis. As at 31 December 2011, the
carrying amounts, expressed in various currencies, represent an equivalent of CHF 3580 million (2010: CHF 3557 million)
for the goodwill and CHF 1250 million (2010: CHF 1248 million) for the intangible assets with inde?nite useful life.
Assumptions
A de?ated pre-tax weighted average discount rate of 7.8% was used in this calculation.
Main assumptions, based on past experiences and current initiatives, were the following:
– sales: annual growth between 4.7 and 7.0% for North America over the ?rst ten-year period, and between 4.5 and 6.0%
for the rest of the world over the ?rst six-year period and ?at thereafter;
– trading operating pro?t margin
(a)
evolution: steadily improving trading operating pro?t margin
(a)
over the ?rst six-year
period, in a range of 20 to 60 basis points per year and then declining or stable from a range of –10 to 0 basis points
per year from year seven to ten.
Sensitivity analyses
The key sensitivity for the impairment test is the growth in sales and trading operating pro?t margin
(a)
. Assuming no
sales growth and no improvement in trading operating pro?t margin
(a)
over the entire period would not result in the
carrying amount exceeding the recoverable amount. An increase of 100 basis points in the discount rate assumption
would not change the conclusions of the impairment test.
8.3 Frozen Pizza and Ice Cream USA
Goodwill and intangible assets with inde?nite useful life related to the Group’s Ice cream businesses in the USA (Nestlé
Ice Cream Company and Dreyer’s) and related to the acquisition in March 2010 of the Kraft Food’s frozen pizza business
in the USA have been allocated to the CGU Frozen Pizza and Ice Cream USA. As at 31 December 2011, the carrying
amounts, expressed in USD, represent an equivalent of CHF 4274 million (2010: CHF 4263 million) for the goodwill and
CHF 1683 million (2010: CHF 1679 million) for the intangible assets with inde?nite useful life.
Assumptions
A de?ated pre-tax weighted average discount rate of 7.2% was used in this calculation.
Main assumptions, based on past experiences and current initiatives, were the following:
– sales: annual growth between 3.9 and 5.1% over the ?rst ten-year period;
– trading operating pro?t margin
(a)
evolution: steadily improving trading operating pro?t margin
(a)
over the ?rst four-year
period, in a range of 110 to 210 basis points per year and then from a range of 30 to 70 basis points per year from year
?ve to ten.
Sensitivity analyses
The key sensitivity for the impairment test is the growth in sales and trading operating pro?t margin
(a)
. Assuming no
sales growth and no trading operating pro?t margin
(a)
improvement after the ?rst ?ve-year period would not result in the
carrying amount exceeding the recoverable amount. An increase of 90 basis points in the discount rate assumption would
not change the conclusions of the impairment test.
(a) Before net other trading income/(expenses).
8. Goodwill (continued)
Consolidated Financial Statements of the Nestlé Group 2011 81
9. Intangible assets
In millions of CHF
Brands and
intellectual
property rights
Operating
rights
and others
Management
information
systems Total
of which
internally
generated
Gross value
At 1 January 2010 4 662 959 4 034 9 655 3 696
of which inde?nite useful life 4 100 — — 4 100 —
Currency retranslations (494) (97) (341) (932) (300)
Expenditure 6 124 119 249 94
Disposals — (14) (20) (34) —
Modi?cation of the scope of consolidation 2 057 78 (5) 2 130 (4)
At 31 December 2010 6 231 1 050 3 787 11 068 3 486
of which inde?nite useful life
(a)
5 689 — — 5 689 —
Currency retranslations 23 (14) (87) (78) (85)
Expenditure 13 113 121 247 97
Disposals — (104) (2) (106) (2)
Modi?cation of the scope of consolidation 1 846 51 (2) 1 895 (2)
At 31 December 2011 8 113 1 096 3 817 13 026 3 494
of which inde?nite useful life
(a)
7 272 — — 7 272 —
Accumulated amortisation and impairments
At 1 January 2010 (256) (288) (2 453) (2 997) (2 190)
Currency retranslations 11 35 216 262 183
Amortisation (30) (79) (521) (630) (506)
Impairments (8) — — (8) —
Disposals — 11 19 30 —
Modi?cation of the scope of consolidation — — 3 3 3
At 31 December 2010 (283) (321) (2 736) (3 340) (2 510)
Currency retranslations 1 (1) 65 65 63
Amortisation (44) (67) (392) (503) (371)
Disposals — 104 2 106 2
Modi?cation of the scope of consolidation — — 2 2 2
At 31 December 2011 (326) (285) (3 059) (3 670) (2 814)
Net at 31 December 2010 5 948 729 1 051 7 728 976
Net at 31 December 2011 7 787 811 758 9 356 680
(a) Yearly impairment tests are performed together with goodwill items (refer to Note 8).
Internally generated intangible assets consist mainly of management information systems.
Commitments for expenditure
At 31 December 2011, the Group was committed to expen diture amounting to CHF 35 million (2010: CHF 36 mil lion).
82 Consolidated Financial Statements of the Nestlé Group 2011
10. Employee bene?ts
Salaries and welfare expenses
The Group’s total salaries and welfare expenses (continuing operations) amount to CHF 13 643 million
(2010: CHF 14 738 million). They are allocated to the appropriate headings of expenses by function.
Pensions and retirement bene?ts
The majority of Group employees are eligible for retirement bene?ts under de?ned bene?t schemes based on
pensionable remuneration and length of service.
Post-employment medical bene?ts and other employee bene?ts
Group companies, principally in the Americas, maintain medical bene?ts plans, which cover eligible retired employees.
The obligations for other employee bene?ts consist mainly of end of service indemnities, which do not have the character
of pensions.
10.1 Reconciliation of assets and liabilities recognised in the balance sheet
In millions of CHF 2011 2010 2009 2008 2007
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Present value of funded obligations 22 733 69 22 802 21 394 22 006 19 139 23 098
Fair value of plan assets (19 526) (42) (19 568) (19 852) (19 545) (17 228) (24 849)
Excess of liabilities/(assets) over funded obligations 3 207 27 3 234 1 542 2 461 1 911 (1 751)
Present value of unfunded obligations 650 2 007 2 657 2 499 2 334 2 337 2 693
Unrecognised past service cost of non-vested bene?ts (12) 21 9 9 (18) 7 5
Unrecognised assets and minimum funding requirements 81 — 81 35 62 91 1 171
De?ned bene?ts net liabilities/(assets) 3 926 2 055 5 981 4 085 4 839 4 346 2 118
Liabilities from de?ned contribution plans
and non-current deferred compensation 937 943 1 081 960 1 369
Liabilities from cash-settled share-based transactions
(a)
60 86 99 98 165
Net liabilities 6 978 5 114 6 019 5 404 3 652
Re?ected in the balance sheet as follows:
Employee bene?ts assets (127) (166) (230) (60) (1 513)
Employee bene?ts liabilities 7 105 5 280 6 249 5 464 5 165
Net liabilities 6 978 5 114 6 019 5 404 3 652
(a) The intrinsic value of liabilities from cash-settled share-based transactions that are vested amounts to CHF 31 million (2010: CHF 42 million;
2009: CHF 29 million; 2008: CHF 34 million; 2007: CHF 72 million).
Consolidated Financial Statements of the Nestlé Group 2011 83
10. Employee bene?ts (continued)
10.2 Movement in fair value of de?ned bene?t plan assets
In millions of CHF 2011 2010
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At 1 January (19 805) (47) (19 852) (19 443) (102) (19 545)
Currency retranslations 217 2 219 1 521 14 1 535
Expected return on plan assets (1 328) (2) (1 330) (1 348) (3) (1 351)
Employees' contributions (117) — (117) (120) — (120)
Employer contributions (524) (4) (528) (819) (6) (825)
Actuarial (gains)/losses 1 025 1 1 026 (609) (1) (610)
Bene?ts paid on funded de?ned bene?t schemes 1 005 7 1 012 1 080 8 1 088
Reclassi?ed as held for sale — — — 109 — 109
Transfer (from)/to de?ned contribution plans 1 1 2 (176) 43 (133)
At 31 December (19 526) (42) (19 568) (19 805) (47) (19 852)
The plan assets include property occupied by af?liated companies with a fair value of CHF 13 million (2010: CHF 13 million)
and assets loaned to af?liated companies with a fair value of CHF 34 million (2010: CHF 24 million). The actual return on
plan assets is positive in 2011 by CHF 304 million (2010: positive by CHF 1961 million). The Group expects to contribute
CHF 622 million to its funded de?ned bene?t schemes in 2012.
The major categories of plan assets as a percentage of total plan assets are as follows:
At 31 December 2011 2010
Equities 36% 39%
Bonds 32% 32%
Real estate 7% 6%
Alternative investments 21% 20%
Cash/Deposits 4% 3%
The overall investment policy and strategy for the Group’s funded de?ned bene?t schemes is guided by the objective of
achieving an investment return which, together with the contributions paid, is suf?cient to maintain reasonable control
over the various funding risks of the plans. The investment advisors appointed by plan trustees are responsible for
determining the mix of asset types and target allocations which are reviewed by the plan trustees on an ongoing basis.
Actual asset allocation is determined by a variety of current economic and market conditions and in consideration of
speci?c asset class risk.
The expected long-term rates of return on plan assets are based on long-term expected in?ation, interest rates, risk
premiums and targeted asset class allocations. These estimates take into consideration historical asset class returns and
are determined together with the plans’ investment and actuarial advisors.
84 Consolidated Financial Statements of the Nestlé Group 2011
10.3 Movement in the present value of de?ned bene?t obligations
In millions of CHF 2011 2010
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At 1 January 21 936 1 957 23 893 22 471 1 869 24 340
of which funded de?ned bene?t schemes 21 320 74 21 394 21 863 143 22 006
of which unfunded de?ned bene?t schemes 616 1 883 2 499 608 1 726 2 334
Currency retranslations (231) (65) (296) (1 672) (186) (1 858)
Current service cost 632 73 705 640 74 714
Interest cost 972 114 1 086 1 097 116 1 213
Early retirements, curtailments and settlements (11) (2) (13) (66) (7) (73)
Past service cost of vested bene?ts (103) (110) (213) 4 (2) 2
Past service cost of non-vested bene?ts 1 (3) (2) (1) (24) (25)
Actuarial (gains)/losses 1 200 230 1 430 543 197 740
Bene?ts paid on funded de?ned bene?t schemes (1 005) (7) (1 012) (1 080) (8) (1 088)
Bene?ts paid on unfunded de?ned bene?t schemes (35) (115) (150) (46) (131) (177)
Reclassi?ed as held for sale — — — (152) — (152)
Modi?cation of the scope of consolidation 30 1 31 — 16 16
Transfer from/(to) de?ned contribution plans (3) 3 — 198 43 241
At 31 December 23 383 2 076 25 459 21 936 1 957 23 893
of which funded de?ned bene?t schemes 22 733 69 22 802 21 320 74 21 394
of which unfunded de?ned bene?t schemes 650 2 007 2 657 616 1 883 2 499
10.4 Actuarial gains/(losses) of de?ned bene?t schemes recognised in other comprehensive income
In millions of CHF 2011 2010 2009 2008 2007
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Experience adjustments on plan assets (1 025) (1) (1 026) 610 744 (5 719) 421
Experience adjustments on plan liabilities (154) (99) (253) 71 (303) 95 (297)
Change of assumptions on plan liabilities (1 046) (131) (1 177) (811) (2 146) 1 471 955
Transfer from/(to) unrecognised assets and other (47) — (47) 23 33 1 014 (806)
Actuarial gains/(losses) on de?ned bene?t schemes (2 272) (231) (2 503) (107) (1 672) (3 139) 273
At 31 December 2011, the net cumulative actuarial losses on de?ned bene?t schemes recognised in equity amount to
CHF 7859 million (2010: CHF 5419 million).
10. Employee bene?ts (continued)
Consolidated Financial Statements of the Nestlé Group 2011 85
10. Employee bene?ts (continued)
10.5 Expenses recognised in the income statement
In millions of CHF 2011 2010
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Current service cost 632 73 705 640 74 714
Employee contributions (117) — (117) (120) — (120)
Interest cost 972 114 1 086 1 097 116 1 213
Expected return on plan assets (1 328) (2) (1 330) (1 348) (3) (1 351)
Early retirements, curtailments and settlements (11) (2) (13) (66) (7) (73)
Past service cost of vested bene?ts (103) (110) (213) 4 (2) 2
Past service cost of non-vested bene?ts 1 (1) — 2 2 4
Total de?ned bene?t expenses 46 72 118 209 180 389
Total de?ned contribution expenses 240 259
Expenses from discontinued operations 117
Total 358 765
The expenses for de?ned bene?t and de?ned contribution plans are allocated to the appropriate headings of expenses
by function.
10.6 Principal ?nancial actuarial assumptions
The principal ?nancial actuarial assumptions are presented by geographic area. Each item is a weighted average in
relation to the relevant underlying component.
At 31 December 2011 2010
Discount rates
Europe 3.5% 4.0%
Americas 5.7% 6.3%
Asia, Oceania and Africa 4.7% 5.2%
Expected long-term rates of return on plan assets
Europe 6.0% 6.3%
Americas 8.8% 8.8%
Asia, Oceania and Africa 7.1% 7.4%
Expected rates of salary increases
Europe 2.9% 3.1%
Americas 3.0% 3.0%
Asia, Oceania and Africa 3.6% 3.7%
Expected rates of pension adjustments
Europe 1.8% 1.9%
Americas 0.9% 0.9%
Asia, Oceania and Africa 1.7% 2.0%
Medical cost trend rates
Americas 7.0% 7.1%
86 Consolidated Financial Statements of the Nestlé Group 2011
10. Employee bene?ts (continued)
10.7 Mortality tables and life expectancies for the major schemes
Country Mortality table
Life expectancy at age 65
for a male member
currently aged 65 (in years)
Life expectancy at age 65
for a female member
currently aged 65 (in years)
At 31 December 2011 2010 2011 2010
Switzerland LPP 2010 19.0 18.9 21.5 21.4
United Kingdom S1NA 2008, CMI 2009 20.8 20.8 21.7 21.6
United States RP–2000 19.1 19.0 21.0 20.9
Germany Heubeck Richttafeln 1998 21.3 21.3 22.8 22.8
Netherlands AG Prognosetafel 2010–2060 21.3 21.6 23.9 23.5
Life expectancy is re?ected in the de?ned bene?t obligations by using mortality tables of the country in which the plan is
located. When those tables no longer re?ect recent experience, they are adjusted by appropriate loadings.
10.8 Sensitivity analysis on medical cost trend rates
A one percentage point increase in assumed medical cost trend rates would increase the de?ned bene?t obligations by
CHF 143 million and increase the aggregate of current service cost and interest cost by CHF 14 million.
A one percentage point decrease in assumed medical cost trend rates would decrease the de?ned bene?t obligations by
CHF 115 million and decrease the aggregate of current service cost and interest cost by CHF 11 million.
11. Equity compensation plans
Select Group employees are eligible to receive long-term incentives in the form of equity compensation plans. Members
of the Executive Board are entitled to Management Stock Option Plan (MSOP) and Performance Share Unit Plan (PSUP),
whereas members of Group Management are entitled to Restricted Stock Unit Plans (RSUP) or Share Appreciation
Rights (SAR).
Equity compensation plans are settled either by remittance of Nestlé S.A. shares (accounted for as equity-settled share-
based payment transactions) or by the payment of an equivalent amount in cash (accounted for as cash-settled share-
based payment transactions).
The following share-based payment costs are allocated to the appropriate headings of expenses by function in the
income statement:
In millions of CHF 2011 2010
Equity-settled share-based payment costs 158 158
Cash-settled share-based payment costs 21 46
Total share-based payment costs from continuing operations 179 204
Total share-based payment costs from discontinued operations 39
Total share-based payment costs 179 243
Consolidated Financial Statements of the Nestlé Group 2011 87
The share-based payment costs from continuing operations are composed of the following plans:
In millions of CHF 2011 2010
RSUP 166 180
MSOP 9 9
PSUP 8 5
SAR (4) 10
Total share-based payment costs from continuing operations 179 204
11.1 Restricted Stock Unit Plan (RSUP)
Members of Group Management are awarded Restricted Stock Units (RSU) that entitle participants to receive freely
disposable Nestlé S.A. shares (accounted for as equity-settled share-based payment transactions) or an equivalent amount
in cash (accounted for as cash-settled share-based payment transactions) at the end of a three-year restriction period.
Number of RSU in millions of units 2011 2010
Outstanding at 1 January 10.7 11.1
Granted 3.5 3.5
Settled (3.4) (3.8)
Forfeited (0.2) (0.1)
Outstanding at 31 December 10.6 10.7
of which vested at 31 December 0.5 0.5
of which cash-settled at 31 December 1.4 1.4
The fair value of equity-settled RSU is determined on the basis of the market price of Nestlé S.A. shares at grant date,
discounted at a risk-free interest rate and adjusted for the dividends that participants are not entitled to receive during
the restricted period of three years. The weighted average fair value of the equity-settled RSU granted in 2011 is
CHF 48.75 (2010: CHF 50.74).
For cash-settled outstanding RSU, the liability is re-measured at each reporting date based on subsequent changes in
the market price of Nestlé S.A. shares. The average fair value of the cash-settled RSU outstanding at 31 December 2011
is CHF 52.23 (2010: CHF 53.43).
11.2 Management Stock Option Plan (MSOP)
Members of Executive Board are awarded Management Stock Option Plan (MSOP) that provides non-tradable options
on Nestlé S.A. shares (accounted for as equity-settled share-based payment transactions). Each option gives the right
to purchase at the exercise price one Nestlé S.A. share. The stock options vest three years after the grant. Upon vesting,
the options have an exercise period of four years before they expire.
11. Equity compensation plans (continued)
88 Consolidated Financial Statements of the Nestlé Group 2011
11. Equity compensation plans (continued)
The weighted average exercise price (in CHF) and the number of options (in millions of units) are the following:
2011 2010 2011 2010
Weighted average
exercise price
Weighted average
exercise price
Number
of options
Number
of options
Outstanding at 1 January 42.16 35.37 8.3 15.4
Granted 52.58 53.29 1.4 1.6
Exercised 32.85 32.12 (1.8) (8.7)
Forfeited — — — —
Outstanding at 31 December 46.25 42.16 7.9 8.3
of which exercisable at 31 December 43.38 37.10 2.7 3.7
At 31 December 2011, the exercise prices of the outstanding options range from CHF 30.92 to CHF 53.29 and their
weighted average remaining contractual life is 4 years. Those options can be divided as follows: 0.8 million options are
exercisable at prices ranging from CHF 30.92 to CHF 40.– with a weighted average remaining contractual life of 1 year,
4.1 million at prices ranging from CHF 40.– to CHF 50.– with a weighted average remaining contractual life of 3.4 years
and 3 million at prices ranging from CHF 50.– to CHF 53.29 with a remaining contractual life of 5.6 years.
The fair value of the options granted in 2011 is CHF 5.54 (2010: CHF 6.70) and was estimated using a Black and Scholes
model. The inputs to the model at grant date were as follows:
2011 2010
Market price of Nestlé S.A. shares (in CHF) 52.60 53.85
Exercise price (in CHF) 52.58 53.29
Expected volatility 18.42% 19.05%
Expected dividend yield 3.52% 2.97%
Risk-free interest rate 1.59% 1.54%
Grant date 03/03/2011 05/03/2010
Expiry date 02/03/2018 04/03/2017
The exercise price corresponds to the average market price of Nestlé S.A. shares of the last ten trading days preceding
the grant date. The expected volatility is based upon historical volatility of the market price of Nestlé S.A. shares and
adjusted for any expected changes to future volatility due to publicly available information.
In 2011, the weighted average market price of Nestlé S.A. shares at the date of exercise was CHF 52.86 (2010: CHF 53.43).
Consolidated Financial Statements of the Nestlé Group 2011 89
11.3 Performance Share Unit Plan (PSUP)
Members of the Executive Board are also awar d ed Performance Share Unit Plan (PSUP) that provides units (PSU) which
entitle participants to receive freely disposable Nestlé S.A. shares (accoun ted for as equity-settled share-based payment
transactions) at the end of a three-year restriction period. Upon vesting, the number of shares delivered ranges from
0% to 200% of the initial grant and is determined by the degree by which the performance measure of the PSUP has
been met. The performance measure is the relative Total Shareholder Return of the Nestlé S.A. share compared to the
STOXX Europe 600 Food & Beverage Index.
Number of PSU in millions of units 2011 2010
Outstanding at 1 January 0.3 0.2
Granted 0.1 0.1
Settled — —
Forfeited (0.1) —
Outstanding at 31 December 0.3 0.3
The fair value of the PSU granted in 2011 is CHF 53.63 (2010: CHF 55.81) and was estimated at the grant date using
a Monte Carlo simulation approach. The inputs incorporated into the valuation model comprise the market price of
Nestlé S.A. shares at grant date, a risk-free interest rate and the expected dividends that participants are not entitled to
receive during the restricted period of three years.
11.4 Share Appreciation Rights (SAR)
Key members of Management of some US af?liates are awarded Share Appreciation Rights (SAR). Those plans give the
right, upon exercise, to the payment in cash of the difference between the market price of a Nestlé S.A. share and the
exercise price (accounted for as cash-settled share-based payment transactions).
The weighted average exercise price (in CHF) and the number of SAR (in millions of units) are the following:
2011 2010 2011 2010
Weighted average
exercise price
Weighted average
exercise price
Number
of SAR
Number
of SAR
Outstanding at 1 January 29.70 29.27 0.6 1.9
Granted — — — —
Exercised 28.39 29.99 (0.5) (1.3)
Forfeited — — — —
Outstanding at 31 December 29.69 29.70 0.1 0.6
of which exercisable at 31 December 29.69 29.70 0.1 0.6
The rights outstanding at 31 December 2011 expire at the beginning of 2012. In 2011, the weighted average market price
of Nestlé S.A. shares at the date of exercise was CHF 51.70 (2010: CHF 52.88).
11. Equity compensation plans (continued)
90 Consolidated Financial Statements of the Nestlé Group 2011
12. Provisions and contingencies
12.1 Provisions
In millions of CHF
Restructuring Environmental Litigation Other Total
At 1 January 2010 730 30 2 694 411 3 865
Currency retranslations (115) 1 (183) (35) (332)
Provisions made during the year
(a)
433 6 633 280 1 352
Amounts used (224) (3) (242) (126) (595)
Unused amounts reversed (26) (5) (131) (25) (187)
Modi?cation of the scope of consolidation — — 2 6 8
At 31 December 2010 798 29 2 773 511 4 111
of which expected to be settled within 12 months 601
Currency retranslations (33) — (39) (16) (88)
Provisions made during the year
(a)
115 5 194 162 476
Amounts used (187) (5) (85) (146) (423)
Unused amounts reversed (61) (2) (327) (34) (424)
Modi?cation of the scope of consolidation — — 18 — 18
At 31 December 2011 632 27 2 534 477 3 670
of which expected to be settled within 12 months 576
(a) Including discounting of provisions (refer Note 13).
Restructuring
Restructuring provisions arise from a number of projects across the Group. These include plans to optimise production,
sales and administration structures, mainly in Europe. Restructuring provisions are expected to result in future cash
out?ows when implementing the plans (usually over the following two to three years).
Litigation
Litigation provisions have been set up to cover tax, legal and administrative proceedings that arise in the ordinary course
of the business. These provisions cover numerous separate cases whose detailed disclosure could be detrimental to the
Group interests. The Group does not believe that any of these litigation proceedings will have a material adverse impact
on its ?nancial position. The timing of out?ows is uncertain as it depends upon the outcome of the proceedings. In that
instance, these provisions are not discounted because their present value would not represent meaningful information.
Group Manage ment does not believe it is possible to make assumptions on the evolution of the cases beyond the balance
sheet date.
Other
Other provisions are mainly constituted by onerous contracts and various damage claims having occurred during the year
but not covered by insurance companies. Onerous contracts result from unfavourable leases, breach of contracts or supply
agreements above market prices in which the unavoidable costs of meeting the obligations under the contracts exceed
the economic bene?ts expected to be received or for which no bene?ts are expected to be received.
Consolidated Financial Statements of the Nestlé Group 2011 91
12. Provisions and contingencies (continued)
12.2 Contingencies
The Group is exposed to contingent liabilities amounting to a maximum potential payment of CHF 1363 million
(2010: CHF 1121 million) representing potential litigations of CHF 1344 million (2010: CHF 1110 million) and other items of
CHF 19 million (2010: CHF 11 million). Potential litigations relate mainly to labour, civil and tax litigations in Latin America.
Contingent assets for litigation claims in favour of the Group amount to a maximum potential recoverable of
CHF 281 million (2010: CHF 247 million).
13. Net ?nancing cost and ?nancial instruments
13.1 Net ?nancing cost
In millions of CHF 2011 2010
Interest income 87 58
Gains on investments at fair value to income statement 28 14
Financial income 115 72
Interest expense (527) (828)
Unwind of the discount on provisions (9) (6)
Financial expense (536) (834)
Net ?nancing cost of continuing operations (421) (762)
Net ?nancing cost of discontinued operations 9
Total net ?nancing cost (421) (753)
92 Consolidated Financial Statements of the Nestlé Group 2011
13.2 Financial assets and liabilities
13.2a By class and by category
2011 2010
Classes L
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Cash at bank and in hand 3 591 3 591 2 460 2 460
Commercial paper and bills 474 474 11 259 11 259
Time deposits 2 085 2 085 1 958 1 958
Trading portfolios 553 553 542 542
Bonds 1 274 1 274 —
Other ?nancial assets – current 11 11 27 27
Liquid assets
(b)
3 591 553 3 844 7 988 2 460 542 13 244 16 246
Trade and other receivables 13 340 13 340 12 083 12 083
Bonds 3 026 3 026 3 522 3 522
Equity instruments 1 737 1 737 1 138 1 138
Other ?nancial assets – non-current 438 1 960 2 398 289 1 417 1 706
Financial assets – non-current 438 6 723 7 161 289 6 077 6 366
Derivative assets
(c)
731 731 1 011 1 011
Total ?nancial assets 17 369 1 284 10 567 29 220 14 832 1 553 19 321 35 706
Trade and other payables (15 703) (15 703) (13 845) (13 845)
Financial debt (22 307) (22 307) (20 100) (20 100)
Derivative liabilities
(c)
(646) (646) (456) (456)
Total ?nancial liabilities (38 010) (646) — (38 656) (33 945) (456) — (34 401)
Net ?nancial position (20 641) 638 10 567 (9 436) (19 113) 1 097 19 321 1 305
of which at fair value 638 10 567 11 205 1 097 19 321 20 418
(a) Carrying amount of these instruments is a reasonable approximation of their fair value. For bonds included in ?nancial debt, see section 13.2c.
(b) Liquid assets are composed of cash and cash equivalents (CHF 4938 million) and short-term investments (CHF 3050 million).
(c) Include derivatives that are undesignated and under hedge accounting.
13. Net ?nancing cost and ?nancial instruments (continued)
Consolidated Financial Statements of the Nestlé Group 2011 93
13. Net ?nancing cost and ?nancial instruments (continued)
13.2b Fair value hierarchy of ?nancial instruments
In millions of CHF 2011 2010
Trading portfolios 551 445
Derivative assets 18 102
Bonds 2 366 1 940
Equity instruments 1 433 1 102
Other ?nancial assets 405 342
Derivative liabilities (244) (70)
Prices quoted in active markets (Level 1) 4 529 3 861
Commercial paper and bills 474 11 259
Time deposits 2 085 1 958
Derivative assets 713 909
Bonds 1 908 1 557
Other ?nancial assets 1 313 694
Derivative liabilities (402) (386)
Valuation techniques based on observable market data (Level 2) 6 091 15 991
Other ?nancial assets 585 566
Valuation techniques based on unobservable input (Level 3) 585 566
Total ?nancial instruments at fair value 11 205 20 418
There have been no signi?cant transfers between the different hierarchy levels in 2011.
94 Consolidated Financial Statements of the Nestlé Group 2011
13. Net ?nancing cost and ?nancial instruments (continued)
13.2c Bonds
In millions of CHF 2011 2010
Issuer
Face value
in millions Coupon
Effective
interest
rate
Year of
issue/
maturity Comments Carrying amount
Nestlé Holdings, Inc., USA USD 500 4.75% 4.90% 2007–2011 470
AUD 600 7.25% 7.63% 2008–2011 576
CHF 300 2.25% 2.30% 2008–2011 301
NOK 1000 5.00% 5.55% 2008–2011 161
USD 750 4.00% 3.87% 2008–2011 711
CHF 675 3.00% 2.86% 2007–2012
(a)
687 699
AUD 350 6.00% 6.24% 2009–2013
(b)
333 334
CHF 450 2.50% 2.57% 2006–2013
(c)
468 472
USD 275 2.00% 2.26% 2009–2013
(d)
259 259
USD 550 2.13% 2.13% 2010–2014 517 516
CHF 250 2.63% 2.66% 2007–2018
(c)
276 264
AUD 275 5.50% 5.69% 2011–2016
(c)
270
USD 200 2.00% 2.06% 2011–2016 188
NOK 1000 3.38% 3.59% 2011–2016
(c)
156
Nestlé Purina PetCare Company, USA USD 48 7.75% 6.25% 1995–2015 47 47
USD 63 9.30% 6.46% 1991–2021 71 72
USD 79 8.63% 6.46% 1992–2022 86 87
USD 44 8.13% 6.47% 1993–2023 47 47
USD 51 7.88% 6.45% 1995–2025 54 54
Nestlé Finance International Ltd, Luxembourg CHF 1075 1.25% 1.40% 2009–2012
(e)
1 076 1 078
CHF 1200 2.00% 2.04% 2009–2013
(f)
1 199 1 199
CHF 425 2.00% 2.03% 2009–2014
(f)
425 425
CHF 275 2.13% 2.13% 2009–2014
(f)
275 275
AUD 450 5.75% 5.81% 2010–2014
(c)
444 431
NOK 1250 2.50% 2.73% 2010–2014
(c)
192 200
CHF 350 2.13% 2.20% 2009–2015
(f)
349 349
Other bonds 90 7
Total 7 509 9 034
of which due within one year 1 788 2 218
of which due after one year 5 721 6 816
Consolidated Financial Statements of the Nestlé Group 2011 95
13. Net ?nancing cost and ?nancial instruments (continued)
The fair value of bonds amounts to CHF 7866 million (2010: CHF 9358 million). This value includes accrued interest of
CHF 88 million (2010: CHF 153 million).
Most of the bonds are hedged by currency and/or interest derivatives. The fair value of these derivatives is shown under
derivative assets for CHF 544 million (2010: CHF 832 million) and under derivative liabilities for CHF 7 million
(2010: CHF 11 million).
(a) This bond is composed of:
– CHF 200 million issued in 2007 subject to an interest rate and currency swap that creates a liability at ?oating rates in the currency of the issuer;
– CHF 150 million issued in 2008 subject to an interest rate and currency swap that creates a liability at ?xed rates in the currency of the issuer; and
– CHF 325 million issued in 2008 subject to an interest rate and currency swap that creates a liability at ?oating rates in the currency of the issuer.
(b) Subject to an interest rate and currency swap that creates a liability at ?xed rates in the currency of the issuer.
(c) Subject to an interest rate and/or currency swap that creates a liability at ?oating rates in the currency of the issuer.
(d) This bond is composed of:
– USD 150 million issued in 2009; and
– USD 125 million issued in 2009 subject to an interest rate swap that creates a liability at ?oating rates in the currency of the issuer.
(e) This bond is composed of:
– CHF 525 million issued in 2009 subject to interest rate and currency swaps that create a liability at ?oating rates in the currency of the issuer; and
– CHF 550 million issued in 2009 subject to currency swaps that hedge the CHF face value exposure.
(f) Subject to currency swaps that hedge the CHF face value exposure.
96 Consolidated Financial Statements of the Nestlé Group 2011
13. Net ?nancing cost and ?nancial instruments (continued)
13.2d Derivative assets and liabilities
By type
In millions of CHF 2011 2010
Contractual
or notional
amounts
Fair
value
assets
Fair
value
liabilities
Contractual
or notional
amounts
Fair
value
assets
Fair
value
liabilities
Fair value hedges
Currency forwards, futures and swaps 7 730 108 3 9 144 198 194
Interest rate forwards, futures and swaps 901 12 3 1 814 60 —
Interest rate and currency swaps 3 257 502 26 3 642 598 15
Cash ?ow hedges
Currency forwards, futures, swaps and options 4 920 87 95 3 756 44 68
Interest rate forwards, futures and swaps 2 730 — 250 2 100 6 109
Commodity futures and options 1 935 17 237 910 82 26
Undesignated derivatives
Currency forwards, futures, swaps and options 1 256 4 8 888 17 7
Interest rate and currency swaps — — — 378 5 5
Interest rate forwards, futures, swaps and options 187 — 17 626 — 31
Commodity futures and options 8 1 7 8 1 1
22 924 731 646 23 266 1 011 456
Some derivatives, while complying with the Group’s ?nancial risk management policies of managing the risks of the
volatility of the ?nancial markets, do not qualify for hedge accounting and are therefore classi?ed as undesignated
derivatives.
Impact on the income statement of fair value hedges
In millions of CHF 2011 2010
on hedged items (82) (1 005)
on hedging instruments 74 1 004
Ineffective portion of gains/(losses) of cash ?ow hedges and net investment hedges is not signi?cant.
Consolidated Financial Statements of the Nestlé Group 2011 97
13. Net ?nancing cost and ?nancial instruments (continued)
13.3 Financial risks
In the course of its business, the Group is exposed to a number of ?nancial risks: credit risk, liquidity risk, market risk
(including foreign currency risk and interest rate risk), commodity price risk and other risks (including equity price risk
and settlement risk). This note presents the Group’s objectives, policies and processes for managing its ?nancial risk
and capital.
Financial risk management is an integral part of the way the Group is managed. The Board of Directors establishes the
Group’s ?nancial policies and the Chief Executive Of?cer establishes objectives in line with these policies. An Asset and
Liability Management Committee (ALMC), under the supervision of the Chief Financial Of?cer, is then responsible for
setting ?nancial strategies, which are executed by the Centre Treasury, the Regional Treasury Centres and, in speci ?c
local circumstances, by the af?liated companies. The activities of the Centre Treasury and of the various Regio nal
Treasury Centres are supervised by an independent Middle Of?ce, which veri?es the compliance of the strategies
proposed and/or operations executed within the approved guidelines and limits set by the ALMC. Approved Treasury
Management Guidelines de?ne and classify risks as well as determine, by category of transaction, speci?c approval,
limit and monitoring procedures. In accordance with the aforementioned policies, the Group only enters into derivative
transactions relating to assets, liabilities or anticipated future transactions.
13.3a Credit risk
Credit risk management
Credit risk arises because a counterparty may fail to perform its obligations. The Group is exposed to credit risk on
?nancial instruments such as liquid assets, non-current ?nancial assets, derivative assets and trade receivable portfolios.
The Group sets credit limits based on a counterparty value computed with a probability of default. The methodology
used to set the list of counterparty limits includes Enterprise Value (EV), counterparty Credit Ratings (CR) and Credit
Default Swaps (CDS). Evolution of counterparties is monitored daily, taking into consideration EV, CR and CDS evolution.
As a result of this daily review, changes on investment limits and risk allocation are carried out. The Group avoids the
concentration of credit risk on its liquid assets by spreading them over several institutions and sectors.
Trade receivables are subject to credit limits, control and approval procedures in all the af?liated companies. Due to its
large geographic base and number of customers, the Group is not exposed to material concentrations of credit risk on
its trade receivables (refer to Note 6). Never theless global commercial counterparties are constantly monitored following
the same methodology used for ?nancial counterparties.
The maximum exposure to credit risk resulting from ?nancial activities, without considering netting agreements and
without taking into account any collateral held or other credit enhancements, is equal to the carrying amount of the
Group’s ?nancial assets.
98 Consolidated Financial Statements of the Nestlé Group 2011
13. Net ?nancing cost and ?nancial instruments (continued)
Credit rating of ?nancial assets
This includes cash at bank and in hand, held for trading and available for sale ?nancial assets.
In millions of CHF 2011 2010
Investment grade A– and above
(a)
11 356 20 846
Investment grade BBB+, BBB and BBB– 1 881 1 728
Non-investment grade (BB+ and below) 171 80
Not rated
(b)
2 034 680
15 442 23 334
(a) 2010 includes Swiss National Bank bills which implicitly bene?t from the AAA-rating of Switzerland.
(b) Mainly equity securities and other investments for which no credit rating is available.
The source of the credit ratings is Standard & Poor’s; if not available, the Group uses other credit rating equivalents. The
Group deals essentially with ?nancial institutions located in Switzerland, the European Union and North America.
13.3b Liquidity risk
Liquidity risk management
Liquidity risk arises when a company encounters dif?culties to meet commitments associated with liabilities and other
payment obligations. Such risk may result from inadequate market depth or disruption or re?nancing problems. The
Group’s objective is to manage this risk by limiting exposures in instruments that may be affected by liquidity problems
and by maintaining suf?cient back-up facilities. The Group does not expect any re?nancing issues and has successfully
completed a EUR 4.5 billion one year revolving credit facility replacing an older facility of EUR 2 billion. The facility currently
serves primarily as a backstop to its global commercial paper programme. In total, the Group’s revolving credit facilities
amount to EUR 9.5 billion.
Consolidated Financial Statements of the Nestlé Group 2011 99
13. Net ?nancing cost and ?nancial instruments (continued)
Maturity of ?nancial instruments
In millions of CHF 2010
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Cash at bank and in hand 2 460 2 460 2 460
Commercial paper and bills 11 259 11 259 11 259
Time deposits 1 958 1 958 1 958
Trade and other receivables 12 083 12 083 12 083
Trading portfolios 542 542 542
Other ?nancial assets 27 1 227 1 099 2 617 4 970 4 970
28 329 1 227 1 099 2 617 33 272 33 272
Financial investments without contractual maturities 1 423
Financial assets 28 329 1 227 1 099 2 617 33 272 34 695
Trade and other payables (12 592) (273) (39) (992) (13 896) (13 845)
Commercial paper
(a)
(7 520) (7 520) (7 516)
Bonds
(a)
(2 413) (1 938) (4 770) (646) (9 767) (9 034)
Other ?nancial debt (3 292) (283) (256) (265) (4 096) (3 550)
Total ?nancial debt (13 225) (2 221) (5 026) (911) (21 383) (20 100)
Financial liabilities (25 817) (2 494) (5 065) (1 903) (35 279) (33 945)
Non-currency derivative assets 118 (1) 1 30 148 149
Non-currency derivative liabilities (89) (45) (37) 25 (146) (167)
Gross amount receivable from currency derivatives 15 765 1 182 1 528 270 18 745 18 596
Gross amount payable from currency derivatives (15 671) (988) (1 254) (290) (18 203) (18 023)
Net derivatives 123 148 238 35 544 555
Net ?nancial position 2 635 (1 119) (3 728) 749 (1 463) 1 305
of which derivatives under cash ?ow hedges
(b)
(33) (47) (24) 55 (49) (71)
(a) Commercial paper (liabilities) of CHF 6393 million and bonds of CHF 1305 million have maturities of less than three months.
(b) The periods when the cash ?ow hedges affect the income statement do not differ signi?cantly from the maturities disclosed above.
100 Consolidated Financial Statements of the Nestlé Group 2011
13. Net ?nancing cost and ?nancial instruments (continued)
Maturity of ?nancial instruments
In millions of CHF 2011
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Cash at bank and in hand 3 591 3 591 3 591
Commercial paper and bills 474 474 474
Time deposits 2 085 2 085 2 085
Trade and other receivables 13 340 13 340 13 340
Trading portfolios 553 553 553
Other ?nancial assets 1 285 1 228 366 2 468 5 347 5 348
21 328 1 228 366 2 468 25 390 25 391
Financial investments without contractual maturities 3 098
Financial assets 21 328 1 228 366 2 468 25 390 28 489
Trade and other payables (13 584) (48) (1 095) (1 123) (15 850) (15 703)
Commercial paper
(a)
(10 540) (10 540) (10 535)
Bonds
(a)
(1 985) (2 419) (3 119) (626) (8 149) (7 509)
Other ?nancial debt (3 931) (195) (170) (228) (4 524) (4 263)
Total ?nancial debt (16 456) (2 614) (3 289) (854) (23 213) (22 307)
Financial liabilities (30 040) (2 662) (4 384) (1 977) (39 063) (38 010)
Non-currency derivative assets 29 2 — — 31 30
Non-currency derivative liabilities (326) (72) (91) (36) (525) (514)
Gross amount receivable from currency derivatives 14 869 960 1 152 263 17 244 17 058
Gross amount payable from currency derivatives (14 644) (758) (1 004) (196) (16 602) (16 489)
Net derivatives (72) 132 57 31 148 85
Net ?nancial position (8 784) (1 302) (3 961) 522 (13 525) (9 436)
of which derivatives under cash ?ow hedges
(b)
(307) (69) (77) (36) (489) (478)
(a) Commercial paper (liabilities) of CHF 7576 million and bonds of CHF 54 million have maturities of less than three months.
(b) The periods when the cash ?ow hedges affect the income statement do not differ signi?cantly from the maturities disclosed above.
Consolidated Financial Statements of the Nestlé Group 2011 101
13. Net ?nancing cost and ?nancial instruments (continued)
13.3c Market risk
The Group is exposed to risk from movements in foreign currency exchange rates, interest rates and market prices that
affect its assets, liabilities and anticipated future transactions.
Foreign currency risk
Foreign currency risk management
The Group is exposed to foreign currency risk from transactions and translation. Transac tional exposures are managed
within a prudent and systematic hedging policy in accordance with the Group’s speci?c business needs. Translation
exposure arises from the consolidation of the ?nancial statements of foreign operations in Swiss francs, which is, in
principle, not hedged. The Group’s objective is to manage its foreign currency exposure through the use of currency
forwards, futures, swaps and options.
Exchange differences recorded in the income statement represented a loss of CHF 113 million in 2011 (2010: loss of
CHF 380 million). They are allocated to the appropriate headings of expenses by function.
Financial instruments by currency
Transaction exposure arises because af?liated companies undertake transactions in foreign currencies.
In millions of CHF 2010
Currency of ?nancial instruments
CHF USD EUR GBP CAD Other Total
CHF 602 323 50 263 2 1 240
USD (23) (10) (5) 9 134 105
EUR 58 (20) 84 (2) 19 139
GBP (10) 9 (67) — (1) (69)
Other exposed (119) (375) (306) (25) — (82) (907)
Total exposed (94) 216 (60) 104 270 72 508
Not exposed 5 041 3 002 (4 939) (284) (417) (1 606) 797
Total 4 947 3 218 (4 999) (180) (147) (1 534) 1 305
In millions of CHF 2011
Currency of ?nancial instruments
CHF USD EUR GBP CAD Other Total
CHF 378 104 (78) 131 101 636
USD 2 (28) (5) (50) 575 494
EUR (50) 24 (1) (5) 7 (25)
GBP (12) 5 21 — — 14
Other exposed (140) (828) (217) (34) (3) (51) (1 273)
Total exposed (200) (421) (120) (118) 73 632 (154)
Not exposed 1 447 (2 082) (5 196) (455) (371) (2 625) (9 282)
Total 1 247 (2 503) (5 316) (573) (298) (1 993) (9 436)
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102 Consolidated Financial Statements of the Nestlé Group 2011
13. Net ?nancing cost and ?nancial instruments (continued)
Interest rate risk
Interest risk management
Interest rate risk comprises the interest price risk that results from borrowings at ?xed rates and the interest cash ?ow
risk that results from borrowings at variable rates. The ALMC is responsible for setting the overall duration and interest
management targets. The Group’s objective is to manage its interest rate exposure through the use of interest rate
forwards, futures and swaps.
Interest structure of non-current ?nancial debt (including interest effects of derivatives)
In millions of CHF 2011 2010
Financial debt at ?xed rates 2 042 2 712
Financial debt at variable rates 4 165 4 771
6 207 7 483
Price risk
Commodity price risk
Commodity price risk arises from transactions on the world commodity markets for securing the supplies of green coffee,
cocoa beans and other commodities necessary for the manufacture of some of the Group‘s products.
The Group’s objective is to minimise the impact of commo d ity price ?uctuations and this exposure is hedged in
accordance with the commodity risk management policies set by the Board of Directors. The regional Commodity
Purchasing Competence Centres are responsible for managing commodity price risk on the basis of internal directives
and centrally determined limits. They ensure that the Group bene?ts from guaranteed ?nan cial hedges through the use
of exchange traded commodity derivatives. The commodity price risk exposure of anticipated future purchases is
managed using a combination of derivatives (futures and options) and executory contracts (differentials and ratios).
The vast majority of these contracts are for phy sical delivery, while cash-settled contracts are treated as undesignated
derivatives. As a result of the short product business cycle of the Group, the majority of the anticipated future raw material
transactions outstanding at the balance sheet date are expected to occur in the next period.
Equity price risk
The Group is exposed to equity price risk on investments held as trading and available-for-sale assets. To manage the
price risk arising from investments in secur ities, the Group diversi?es its portfolios in accordance with the Guidelines set
by the Board of Directors. The Group’s external investments are in principle only with publicly traded counterparties that
have an investment grade rating by one of the recognised rating agencies.
13.3d Settlement risk
Settlement risk results from the fact that the Group may not receive ?nancial instruments from its counterparties at the
expected time. This risk is managed by monitoring counterparty activity and settlement limits.
Consolidated Financial Statements of the Nestlé Group 2011 103
13. Net ?nancing cost and ?nancial instruments (continued)
13.3e Value at Risk (VaR)
Description of the method
The VaR is a single measure to assess market risk. The VaR estimates the size of losses given current positions and
possible changes in ?nancial markets. The Group uses simulation to calculate VaR based on the historic data for
a 250 days period. The VaR calculation is based on 95% con?dence level and, accordingly, does not take into account
losses that might occur beyond this level of con?dence. The VaR is calculated on the basis of unhedged exposures
outstanding at the close of business and does not necessarily re?ect intra-day exposures.
Objective of the method
The Group uses the described VaR analysis to estimate the potential one-day loss in the fair value of its ?nancial and
commodity instruments. The Group cannot predict the actual future movements in market rates and prices, therefore
the below VaR numbers neither represent actual losses nor consider the effects of favourable movements in underlying
variables. Accordingly, these VaR numbers may only be considered indicative of future movements to the extent the
historic market patterns repeat in the future.
VaR ?gures
The VaR computation includes the Group’s ?nancial assets and liabilities that are subject to foreign currency, interest
rate and price risk.
The estimated potential one-day loss from the Group’s foreign currency, interest rate and security price risk sensitive
instruments, as calculated using the above described historic VaR model, is as follows:
In millions of CHF 2011 2010
Foreign currency 3 10
Interest rate 4 17
Security price 144 204
Foreign currency, interest rate and security price combined 122 207
The estimated potential one-day loss from the Group’s commodity price risk sensitive instruments, as calculated using
the above described historic VaR model, is not signi?cant.
13.3f Capital risk management
The Group’s capital management is driven by the impact on shareholders of the level of total capital employed. It is the
Group’s policy to maintain a sound capital base to support the continued development of its business.
The Board of Directors seeks to maintain a prudent balance between different components of the Group’s capital. The
ALMC monitors capital on the basis of operating cash ?ow as a percentage of net ?nancial debt. Net ?nancial debt is
de?ned as current and non-current ?nancial liabilities less liquid assets (refer to section 13.2a).
The operating cash ?ow-to-net ?nancial debt ratio highlights the ability of a business to repay its debts. As at
31 December 2011, the ratio was 68.2% (2010: 353.2%
(a)
). The Group’s subsidiaries have complied with local statu tory
capital requirements as appropriate.
(a) Impacted by the pro?t on disposal of 52% of Alcon outstanding capital.
104 Consolidated Financial Statements of the Nestlé Group 2011
14. Taxes
14.1 Taxes recognised in the income statement
In millions of CHF 2011 2010
Components of taxes
Current taxes
(a)
2 554 2 917
Deferred taxes (301) 181
Taxes reclassi?ed to other comprehensive income 859 248
Taxes reclassi?ed to equity — (3)
Taxes from continuing operations 3 112 3 343
Taxes from discontinued operations 350
Total taxes 3 112 3 693
Reconciliation of taxes
Expected tax expense at weighted average applicable tax rate 3 054 2 882
Tax effect of non-deductible or non-taxable items (202) (10)
Prior years’ taxes (215) (129)
Transfers to unrecognised deferred tax assets 83 53
Transfers from unrecognised deferred tax assets (123) (20)
Changes in tax rates 23 9
Withholding taxes levied on transfers of income 313 353
Other, incl. taxes on capital 179 205
Taxes from continuing operations 3 112 3 343
(a) Current taxes related to prior years represent a tax expense of CHF 35 million (2010: tax expense of CHF 25 million).
The expected tax expense at weighted average applicable tax rate is the result from applying the domestic statutory tax
rates to pro?ts before taxes of each entity in the country it operates. For the Group, the weighted average applicable tax
rate varies from one year to the other depending on the relative weight of the pro?t of each individual entity in the
Group’s pro?t as well as the changes in the statutory tax rates.
14.2 Taxes recognised in other comprehensive income
In millions of CHF 2011 2010
Tax effects relating to
Currency retranslations 64 195
Fair value adjustments on available-for-sale ?nancial instruments (29) (11)
Fair value adjustments on cash ?ow hedges 159 21
Actuarial gains/(losses) on de?ned bene?t schemes 665 63
859 268
Consolidated Financial Statements of the Nestlé Group 2011 105
14. Taxes (continued)
14.3 Reconciliation of deferred taxes by type of temporary differences recognised in the balance sheet
In millions of CHF
Property,
plant and
equipment
Goodwill
and
intangible
assets
Employee
bene?ts
Inventories,
receivables,
payables
and
provisions
Unused tax
losses and
unused tax
credits
Other
Total
At 1 January 2010 (1 068) (1 089) 1 965 822 307 (139) 798
Currency retranslations 116 87 (149) (88) (28) (18) (80)
Deferred tax (expense)/income (134) (157) (98) 101 39 68 (181)
Modi?cation of the scope of consolidation (7) (7) 8 2 — 7 3
At 31 December 2010 (1 093) (1 166) 1 726 837 318 (82) 540
Currency retranslations 5 (12) (24) (24) (15) 4 (66)
Deferred tax (expense)/income (223) (46) 408 10 62 90 301
Modi?cation of the scope of consolidation (36) (360) 10 14 1 12 (359)
At 31 December 2011 (1 347) (1 584) 2 120 837 366 24 416
In millions of CHF 2011 2010
Re?ected in the balance sheet as follows:
Deferred tax assets 2 476 1 911
Deferred tax liabilities (2 060) (1 371)
Net assets 416 540
14.4 Unrecognised deferred taxes
The deductible temporary differences as well as the unused tax losses and tax credits for which no deferred tax assets
are recognised expire as follows:
In millions of CHF 2011 2010
Within one year 20 56
Between one and ?ve years 314 276
More than ?ve years 1 479 1 648
1 813 1 980
At 31 December 2011, the unrecognised deferred tax assets amount to CHF 464 million (2010: CHF 544 million).
In addition, the Group has not recognised deferred tax liabilities in respect of unremitted earnings that are consi dered
inde?nitely reinvested in foreign subsidiaries. At 31 December 2011, these earnings amount to CHF 12.9 bil lion
(2010: CHF 13.3 billion). They could be subject to withholding and other taxes on remittance.
106 Consolidated Financial Statements of the Nestlé Group 2011
15. Associates
In millions of CHF 2011 2010
At 1 January 7 914 8 693
Currency retranslations (240) (1 446)
Investments 60 106
Share of results 866 1 010
Dividends received (417) (360)
Share of other comprehensive income 456 (89)
Other (10) —
At 31 December 8 629 7 914
of which L'Oréal 7 708 6 954
15.1 L’Oréal
The Group holds 178 381 021 shares in L’Oréal, representing a 30.0% participation in its equity after consideration of its
own shares (2010: 178 381 021 shares representing a 30.3% participation). At 31 December 2011, the market value of the
shares held amounts to CHF 17 514 million (2010: CHF 18 569 million).
15.2 Key ?nancial data of the main associates
The following items are an aggregate of the Financial Statements of the main associates:
In millions of CHF 2011 2010
Total current assets 10 023 9 375
Total non-current assets 24 081 22 222
Total assets 34 104 31 597
Total current liabilities 9 263 8 842
Total non-current liabilities 2 621 3 334
Total liabilities 11 884 12 176
Total equity 22 220 19 421
Total sales 26 469 28 554
Total results 2 969 3 165
Consolidated Financial Statements of the Nestlé Group 2011 107
16. Earnings per share
2011 2010
Basic earnings per share (in CHF) 2.97 10.16
Net pro?t (in millions of CHF) 9 487 34 233
Weighted average number of shares outstanding (in millions of units) 3 196 3 371
Diluted earnings per share (in CHF) 2.96 10.12
Net pro?t, net of effects of dilutive potential ordinary shares (in millions of CHF) 9 487 34 233
Weighted average number of shares outstanding, net of effects of dilutive potential ordinary shares
(in millions of units) 3 205 3 382
Reconciliation of weighted average number of shares outstanding (in millions of units)
Weighted average number of shares outstanding used to calculate basic earnings per share 3 196 3 371
Adjustment for share-based payment schemes, where dilutive 9 11
Weighted average number of shares outstanding used to calculate diluted earnings per share 3 205 3 382
17. Cash ?ow statement
17.1 Non-cash items of income and expense
In millions of CHF 2011 2010
Share of results of associates (866) (1 010)
Depreciation of property, plant and equipment 2 422 2 552
Impairment of property, plant and equipment 150 186
Impairment of goodwill 16 337
Amortisation of intangible assets 503 630
Impairment of intangible assets — 8
Net result on disposal of businesses 3 (24 472)
Net result on disposal of assets 25 (29)
Non-cash items in ?nancial assets and liabilities 39 157
Deferred taxes (301) 236
Taxes in other comprehensive income and equity 859 266
Equity compensation plans 158 187
Other 31 4
3 039 (20 948)
17.2 Decrease/(increase) in working capital
In millions of CHF 2011 2010
Inventories (1 280) (899)
Trade receivables (628) (463)
Trade payables 497 718
Other current assets (1 113) (1 015)
Other current liabilities 687 1 027
(1 837) (632)
108 Consolidated Financial Statements of the Nestlé Group 2011
17. Cash ?ow statement (continued)
17.3 Variation of other operating assets and liabilities
In millions of CHF 2011 2010
Variation of employee bene?ts assets and liabilities (602) (543)
Variation of provisions (371) 566
Other (270) (219)
(1 243) (196)
17.4 Purchase of treasury shares
In 2011, out of the CHF 5.5 billion (2010: CHF 12.1 billion) of purchase of treasury shares, the Group invested CHF 4.8 billion
on its Share Buy-Back Programme (2010: CHF 10.1 billion).
17.5 Cash and cash equivalents at end of year
In millions of CHF 2011 2010
Cash at bank and in hand 3 591 2 460
Time deposits
(a)
1 334 1 209
Commercial paper
(a)
13 4 388
4 938 8 057
(a) With maturity of three months or less as from the initial recognition.
17.6 Interest, taxes and dividends
The following items are allocated to the appropriate headings in the cash ?ow statement:
In millions of CHF 2011 2010
Interest paid (491) (510)
Interest received 49 59
Taxes paid (2 555) (2 958)
Dividends paid (6 165) (6 172)
Dividends received 437 380
18. Equity
18.1 Share capital issued
The ordinary share capital of Nestlé S.A. authorised, issued and fully paid is composed of 3 300 000 000 registered
shares with a nominal value of CHF 0.10 each (2010: 3 465 000 000 registered shares). Each share confers the right
to one vote. No shareholder may be registered with the right to vote for shares which it holds, directly or indirectly,
in excess of 5% of the share capital. Shareholders have the right to receive dividends.
The share capital changed twice in the last two ?nancial years as a consequence of the Share Buy-Back Programmes.
The cancellation of shares was approved at the Annual General Meetings of 15 April 2010 and 14 April 2011. In 2010,
the share capital was reduced by 185 000 000 shares from CHF 365 million to CHF 347 mil lion. In 2011, the share capital
was further reduced by 165 000 000 shares from CHF 347 million to CHF 330 million.
Consolidated Financial Statements of the Nestlé Group 2011 109
18.2 Conditional share capital
The conditional capital of Nestlé S.A. amounts to CHF 10 mil lion as in the preceding year. It confers the right to increase
the ordinary share capital, through the exercise of conversion or option rights in connection with debentures and other
?nancial market instruments, by a maximum of CHF 10 mil lion by the issue of a maximum of 100 000 000 registered shares
with a nominal value of CHF 0.10 each. Thus the Board of Directors has at its disposal a ?exible instrument enabling it, if
necessary, to ?nance the activities of the Company through convertible debentures.
18.3 Treasury shares
Number of shares in millions of units Notes 2011 2010
Purpose of holding
Trading 34 40
Share Buy-Back Programme 75 149
Long-Term Incentive Plans 11 19 19
128 208
At 31 December 2011, the treasury shares held by the Group represent 3.9% of the share capital (2010: 6.0%). Their market
value amounts to CHF 6913 million (2010: CHF 11 393 million).
18.4 Number of shares outstanding
Number of shares in millions of units
Shares
issued
Treasury
shares
Outstanding
shares
At 1 January 2010 3 650 (178) 3 472
Purchase of treasury shares (227) (227)
Treasury shares delivered in respect of options exercised 9 9
Treasury shares delivered in respect of equity compensation plans 3 3
Treasury shares cancelled (185) 185 —
At 31 December 2010 3 465 (208) 3 257
Purchase of treasury shares (99) (99)
Sale of treasury shares 9 9
Treasury shares delivered in respect of options exercised 2 2
Treasury shares delivered in respect of equity compensation plans 3 3
Treasury shares cancelled (165) 165 —
At 31 December 2011 3 300 (128) 3 172
18.5 Translation reserve
The translation reserve comprises the cumulative gains and losses arising from translating the ?nancial statements of
foreign operations that use functional currencies other than Swiss francs. It also includes the changes in the fair value
of hedging instruments used for net investments in foreign operations.
18. Equity (continued)
110 Consolidated Financial Statements of the Nestlé Group 2011
18. Equity (continued)
18.6 Retained earnings and other reserves
Retained earnings represent the cumulative pro?ts, share premium, as well as actuarial gains and losses on de?ned
bene?t plans attributable to shareholders of the parent. Other reserves comprise the fair value reserve and the hedging
reserve attributable to shareholders of the parent.
The fair value reserve includes the gains and losses on remeasuring available-for-sale ?nancial instruments.
At 31 December 2011, the reserve is positive of CHF 254 million (2010: positive of CHF 450 million).
The hedging reserve consists of the effective portion of the gains and losses on hedging instruments related to hedged
transactions that have not yet occurred. At 31 December 2011, the reserve is negative of CHF 447 million (2010: positive
of CHF 30 million).
18.7 Non-controlling interests
The non-controlling interests comprise the portion of equity of subsidiaries that are not owned, directly or indirectly,
by Nestlé S.A.
18.8 Other comprehensive income
In millions of CHF
T
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a
t
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Currency retranslations (4 619) (4 619) (182) (4 801)
Fair value adjustments on available-for-sale
?nancial instruments 230 230 (13) 217
Fair value adjustments on cash ?ow hedges (48) (48) — (48)
Actuarial gains/(losses) on de?ned bene?t schemes (128) (128) (25) (153)
Share of other comprehensive income of associates (89) (89) (89)
Taxes 258 258 10 268
Other comprehensive income for the year (4 619) 223 (4 396) (210) (4 606)
Currency retranslations (1 133) (1 133) (33) (1 166)
Fair value adjustments on available-for-sale
?nancial instruments (192) (192) — (192)
Fair value adjustments on cash ?ow hedges (465) (465) — (465)
Actuarial gains/(losses) on de?ned bene?t schemes (2 503) (2 503) — (2 503)
Share of other comprehensive income of associates 456 456 456
Taxes 859 859 — 859
Other comprehensive income for the year (1 133) (1 845) (2 978) (33) (3 011)
2
0
1
0
2
0
1
1
Consolidated Financial Statements of the Nestlé Group 2011 111
18. Equity (continued)
18.9 Dividend
The dividend related to 2010 was paid on 21 April 2011 in conformity with the decision taken at the Annual General
Meeting on 14 April 2011. Shareholders approved the proposed dividend of CHF 1.85 per share, resulting in a total
dividend of CHF 5939 million.
Dividend payable is not accounted for until it has been rati?ed at the Annual General Meeting. At the meeting
on 19 April 2012, a dividend of CHF 1.95 per share will be proposed, resulting in a total dividend of CHF 6279 million.
For further details, refer to the Financial Statements of Nestlé S.A.
The Financial Statements for the year ended 31 Decem ber 2011 do not re?ect this proposed distribution, which will be
treated as an appropriation of pro?t in the year ending 31 December 2012.
19. Lease commitments
19.1 Operating leases
In millions of CHF 2011 2010
Minimum lease payments
Future value
Within one year 595 600
In the second year 442 467
In the third to the ?fth year 866 939
After the ?fth year 516 569
2 419 2 575
Lease commitments refer mainly to buildings, industrial equipment, vehicles and IT equipment. Operating lease charge
for the year 2011 amounts to CHF 657 million (2010: CHF 701 mil lion).
19.2 Finance leases
In millions of CHF 2011 2010
Minimum lease payments
Present
value
Future
value
Present
value
Future
value
Within one year 57 63 68 74
In the second year 50 61 57 68
In the third to the ?fth year 90 136 106 155
After the ?fth year 51 101 69 145
248 361 300 442
The difference between the future value of the minimum lease payments and their present value represents the discount
on the lease obligations.
112 Consolidated Financial Statements of the Nestlé Group 2011
20. Transactions with related parties
20.1 Compensation of the Board of Directors and the Executive Board
Board of Directors
With the exception of the Chairman and the CEO, members of the Board of Directors receive an annual compensation
that varies with the Board and the Committee responsibilities as follows:
– Board members: CHF 280 000;
– members of the Chairman’s and Corporate Governance Committee: additional CHF 200 000;
– members of the Compensation Committee: additional CHF 40 000 (Chair CHF 100 000);
– members of the Nomination Committee: additional CHF 40 000 (Chair CHF 100 000); and
– members of the Audit Committee: additional CHF 100 000 (Chair CHF 150 000).
Half of the compensation is paid through the granting of Nestlé S.A. shares at the ex-dividend closing price. These
shares are subject to a three-year blocking period.
With the exception of the Chairman and the CEO, members of the Board of Directors also receive an annual expense
allowance of CHF 15 000 each. This allowance covers travel and hotel accommodation in Switzerland, as well as sundry
out-of-pocket expenses. For Board members from outside Europe, the Company reimburses additionally the airline
tickets. When the Board meets outside of Switzerland, all expenses are borne and paid directly by the Company.
The Chairman is entitled to a cash compensation, as well as Nestlé S.A. shares which are blocked for three years.
Executive Board
The total annual remuneration of the members of the Executive Board comprises a salary, a bonus (based on the
individual’s performance and the achievement of the Group’s objectives), equity compensation and other bene?ts.
Members of the Executive Board can choose to receive part or all of their bonus in Nestlé S.A. shares at the average
closing price of the last ten trading days of January of the year of the payment of the bonus. These shares are subject
to a three-year blocking period.
In millions of CHF 2011 2010
Board of Directors
(a)
Chairman's compensation 10 9
Other Board members
Remuneration – cash 3 3
Shares 2 2
Executive Board
(a)
Remuneration – cash 15 16
Bonus – cash 8 10
Bonus – shares 7 9
Equity compensation plans
(b)
15 14
Pension 5 4
(a) Refer to Note 25 of the Financial Statements of Nestlé S.A. for the detailed disclosures, regarding the remunerations of the Board of Directors and the Executive
Board, that are required by Swiss law.
(b) Equity compensation plans are equity-settled share-based payment transactions whose cost is recognised over the vesting period as required by IFRS 2.
Consolidated Financial Statements of the Nestlé Group 2011 113
20. Transactions with related parties (continued)
20.2 Intra-Group transactions and transactions with associated companies
Intra-Group transactions are eliminated on consolidation:
– when it is between the parent and the fully consolidated af?liates or between fully consolidated af?liates; or
– in proportion to the Nestlé participation in the equity of the joint ventures (usually 50%) when it is between the parent
and the joint ventures, or between fully consolidated af?liates and joint ventures. There were no signi?cant transactions
between the Group companies and associated companies.
20.3 Other transactions
Nestlé Capital Advisers SA (NCA), one of the Group’s subsidiaries, is an unregulated investment and actuarial adviser,
based in Switzerland. Further to actuarial advice, NCA renders investment consulting services to some of the Group’s
pension funds, either directly or indirectly via the Robusta mutual fund umbrella, but NCA never executes trading and
investment transactions. The fees received by NCA in 2011 for those activities amounted to CHF 11.0 million
(2010: CHF 7.1 million).
Nestlé Capital Management Ltd (NCM), a 100% subsidiary of NCA, is an asset manager authorised and regulated by
the Financial Services Authority, in the United Kingdom. NCM manages some of the assets of the Group’s pension
funds. In this function, NCM executes trading and investment transactions on behalf of these pension funds directly
or for the Robusta mutual funds pension investment vehicles. The fees received by NCM in 2011 for those activities
amounted to CHF 15.6 million (2010: CHF 14.6 million). The assets under direct management represented an amount
of CHF 13.2 billion at 31 December 2011 (2010: CHF 9.6 billion).
In addition, Robusta Asset Management Ltd (RAML), a 100% subsidiary of NCA, is in charge of selecting and monitoring
investment managers for the Robusta mutual funds pension investment vehicles. RAML has delegated most its activities
to third-parties, including NCA and hence no fee income is generated by RAML. Any remaining expenses are covered by
means of fees deducted from its assets under management. The assets under supervision of RAML amounted to
CHF 8.6 billion at 31 December 2011 (2010: CHF 9.3 billion). Of this amount CHF 5.4 billion (2010: CHF 4.9 billion) of assets
are under direct management of NCM.
Furthermore, throughout 2011, no director had a personal interest in any transaction of signi?cance for the business of
the Group.
21. Joint ventures
In millions of CHF 2011 2010
Share of assets and liabilities consolidated in the balance sheet
Total current assets 924 775
Total non-current assets 1 612 1 134
Total current liabilities 1 752 1 270
Total non-current liabilities 285 208
Share of income and expenses consolidated in the income statement
Total sales 2 426 2 437
Total expenses (2 154) (2 141)
114 Consolidated Financial Statements of the Nestlé Group 2011
22. Guarantees
At 31 December 2011, the Group has given guarantees to third parties for an amount of CHF 852 million
(2010: CHF 698 million). The most signi?cant balance relates to the Nestlé UK pension fund.
23. Group risk management
The Nestlé Group Enterprise Risk Management (ERM) is a process applied across the enterprise, designed to identify
potential events that may affect the Company, to manage risk to be within its risk appetite, and to provide reasonable
assurance regarding the achievement of objectives. Risk management is an integral element of the Governance, Risk
management and Compliance (GRC) model.
GRC is an integrated, holistic approach ensuring that the organisation acts in accordance with its risk appetite, internal
policies and guidelines, and external regulations. GRC is thereby promoting a proactive risk management and the
effectiveness of internal controls.
ERM enables Nestlé’s management to raise risk awareness, to anticipate risks early and to make sound business decisions
throughout the Group by understanding relative business impact of different types of risks, root causes and correlations
among interdependent risks or major impact of the Company on its social and physical environment.
A global risk appetite is de?ned by the Executive Board and reviewed and validated on an annual basis by the Board of
Directors.
The complexity of the Nestlé Group requires a two-tiered (centralised and decentralised) approach to the evaluation of
risk. To allow for this complexity, the ERM has been developed using both “Top-Down” and “Bottom-Up” assessments.
Implementation of this Framework has allowed the Group to achieve the following objectives:
– identi?cation and quanti?cation of tangible (?nancial, operational, physical, human assets, etc.) and intangible
(reputation, brand image, intellectual property, etc.) risks in a transparent manner;
– development of a common language for communicating and consolidating risk; and
– prioritisation and identi?cation of where to focus management resources and activity.
The “Top-Down” assessment occurs annually and focuses on the Group’s global risk portfolio. It involves the aggregation
of individual “Top-Down” assessments of Zones, Globally Managed Businesses, and all markets. It is intended to provide
a high-level mapping of Group risk and allow Group Management to make sound decisions on the future operations of
the Company. Risk assessments are the responsibility of line management; this applies equally to a business, a market
or a function, and any mitigating actions identi?ed in the assessments are the responsibility of the individual line
management. If a Group-level intervention is required, responsibility for mitigating actions will generally be determined
by the Executive Board.
The “Bottom-Up” process includes assessments performed at an individual component level (business unit, function,
department or project). The reason for performing these component level risk assessments is to highlight localised
issues where risks can be mitigated quickly and ef?ciently. The timing of these assessments varies, and any mitigating
actions required are the responsibility of the line management of the individual component unit.
Consolidated Financial Statements of the Nestlé Group 2011 115
Overall Group ERM reporting combines the total results of the “Top-Down” assessment and the compilations of the
individual “Bottom-Up” assessments. The results of the Group ERM are presented to the Executive Board, Audit
Committee and Board of Directors annually. In the case of an individual risk assessment identifying a risk which requires
action at Group level, an ad hoc presentation is made to the Executive Board.
Financial risks management is described in more details in Note 13.
24. Events after the balance sheet date
At 15 February 2012, date of approval of the Financial Statements by the Board of Directors, the Group had no
subsequent events that warrant a modi?cation of the value of the assets and liabilities or an additional disclosure.
25. Group companies
The list of companies appears in the section Companies of the Nestlé Group.
23. Group risk management (continued)
116 Consolidated Financial Statements of the Nestlé Group 2011
Report of the Statutory Auditor
on the Consolidated Financial Statements
to the General Meeting of Nestlé S.A.
As statutory auditor, we have audited the consolidated ?nancial statements (income statement, statement of
comprehensive income, balance sheet, cash ?ow statement, statement of changes in equity and notes on pages 46
to 115) of the Nestlé Group for the year ended 31 December 2011.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation and fair presentation of the consolidated ?nancial 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
and fair presentation of consolidated ?nancial 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 responsibility
Our responsibility is to express an opinion on these consoli dated ?nancial 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
?nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
?nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks
of material misstatement of the consolidated ?nancial 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 and fair presentation
of the consolidated ?nancial 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 ?nancial statements. We believe that
the audit evidence we have obtained is suf?cient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated ?nancial statements for the year ended 31 December 2011 give a true and fair view of
the ?nancial position, the results of operations and the cash ?ows in accordance with International Financial Reporting
Standards (IFRS) and comply with Swiss law.
Consolidated Financial Statements of the Nestlé Group 2011 117
Report of the Statutory auditor on the Consolidated Financial Statements (continued)
Report on other legal requirements
We con?rm 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 con?rm that an internal
control system exists, which has been designed for the preparation of consolidated ?nancial statements according to the
instructions of the Board of Directors.
We recommend that the consolidated ?nancial statements submitted to you be approved.
KPMG SA
Mark Baillache Fabien Lussu
Licensed Audit Expert Licensed Audit Expert
Auditor in charge
Geneva, 15 February 2012
118 Consolidated Financial Statements of the Nestlé Group 2011
Financial information – 5 year review
In millions of CHF (except for per share data and personnel) 2011 2010 2009 2008 2007
Results Results
Sales
(a)
83 642 93 015 Sales
(a)
Trading operating pro?t
(a)
12 538 14 832 Trading operating pro?t
(a)
as % of sales
(a)
15.0% 15.9% as % of sales
(a)
Sales 109 722 107 618 109 908 107 552 Sales
EBIT * 16 194 15 699 15 676 15 024 EBIT *
as % of sales 14.8% 14.6% 14.3% 14.0% as % of sales
Taxes 3 112 3 693 3 362 3 787 3 416 Taxes
Pro?t for the year attributable to shareholders of the parent (Net pro?t) 9 487 34 233
(f)
10 428 18 039
(g)
10 649 Pro?t for the year attributable to shareholders of the parent (Net pro?t)
as % of sales
(a)
11.3% 36.8%
(f)
9.7% 16.4%
(g)
9.9% as % of sales
(a)
Total amount of dividend 6 279
(e)
5 939 5 443 5 047 4 573 Total amount of dividend
Depreciation of property, plant and equipment 2 422 2 552 2 713 2 625 2 620 Depreciation of property, plant and equipment
Balance sheet and Cash ?ow statement Balance sheet and Cash ?ow statement
Current assets 33 324 38 997 39 870 33 048 35 770 Current assets
of which liquid assets 7 988 16 246 5 319 7 131 9 496 of which liquid assets
Non-current assets 80 767 72 644 71 046 73 167 79 591
(h)
Non-current assets
Total assets 114 091 111 641 110 916 106 215 115 361
(h)
Total assets
Current liabilities 35 232 30 146 36 083 33 640 43 326 Current liabilities
Non-current liabilities 20 585 18 897 21 202 17 659 17 259
(h)
Non-current liabilities
Equity attributable to shareholders of the parent 56 797 61 867 48 915 50 774 52 627
(h)
Equity attributable to shareholders of the parent
Non-controlling interests 1 477 731 4 716 4 142 2 149 Non-controlling interests
Net ?nancial debt 14 319 3 854 18 085 14 596 21 174 Net ?nancial debt
Operating cash ?ow 9 763 13 608 17 934 10 763 13 439 Operating cash ?ow
as % of net ?nancial debt 68.2% 353.2%
(f)
99.2% 73.7% 63.5% as % of net ?nancial debt
Free cash ?ow
(b)
4 491 7 761 12 369 5 033 8 231 Free cash ?ow
(b)
Capital expenditure 4 779 4 576 4 641 4 869 4 971 Capital expenditure
as % of sales
(a)
5.7% 4.9% 4.3% 4.4% 4.6% as % of sales
(a)
Data per share
(c)
Data per share
(c)
Weighted average number of shares outstanding (in millions of units) 3 196 3 371 3 572 3 705 3 829 Weighted average number of shares outstanding (in millions of units)
Total basic earnings per share 2.97 10.16
(f)
2.92 4.87
(g)
2.78 Total basic earnings per share
Equity attributable to shareholders of the parent 17.77 18.35 13.69 13.71 13.75
(h)
Equity attributable to shareholders of the parent
Dividend 1.95
(e)
1.85 1.60 1.40 1.22 Dividend
Pay-out ratio based on Total basic earnings per share 65.7%
(e)
18.2% 54.8% 28.8% 43.9% Pay-out ratio based on Total basic earnings per share
Stock prices (high) 55.45 56.90 51.25 52.95 55.35 Stock prices (high)
Stock prices (low) 43.50 48.18 35.04 38.02 42.65 Stock prices (low)
Yield
(d)
3.5/4.5
(e)
3.3/3.8 3.1/4.6 2.6/3.7 2.2/2.9 Yield
(d)
Market capitalisation 171 287 178 316 174 294 150 409 195 661 Market capitalisation
Number of personnel (in thousands) 328 281 278 283 276 Number of personnel (in thousands)
* Earnings Before Interest, Taxes, restructuring and impairments.
(a) 2010 restated following the changes in the Income Statement described in Note 1 – Accounting Policies.
(b) Operating cash ?ow less capital expenditure, disposal of tangible assets, purchase and disposal of intangible assets, movements with associates as well as with
non-controlling interests, and other investing cash ?ows.
(c) 2007 has been restated following 1-for-10 share split effective on 30 June 2008.
Consolidated Financial Statements of the Nestlé Group 2011 119
Financial information – 5 year review
In millions of CHF (except for per share data and personnel) 2011 2010 2009 2008 2007
Results Results
Sales
(a)
83 642 93 015 Sales
(a)
Trading operating pro?t
(a)
12 538 14 832 Trading operating pro?t
(a)
as % of sales
(a)
15.0% 15.9% as % of sales
(a)
Sales 109 722 107 618 109 908 107 552 Sales
EBIT * 16 194 15 699 15 676 15 024 EBIT *
as % of sales 14.8% 14.6% 14.3% 14.0% as % of sales
Taxes 3 112 3 693 3 362 3 787 3 416 Taxes
Pro?t for the year attributable to shareholders of the parent (Net pro?t) 9 487 34 233
(f)
10 428 18 039
(g)
10 649 Pro?t for the year attributable to shareholders of the parent (Net pro?t)
as % of sales
(a)
11.3% 36.8%
(f)
9.7% 16.4%
(g)
9.9% as % of sales
(a)
Total amount of dividend 6 279
(e)
5 939 5 443 5 047 4 573 Total amount of dividend
Depreciation of property, plant and equipment 2 422 2 552 2 713 2 625 2 620 Depreciation of property, plant and equipment
Balance sheet and Cash ?ow statement Balance sheet and Cash ?ow statement
Current assets 33 324 38 997 39 870 33 048 35 770 Current assets
of which liquid assets 7 988 16 246 5 319 7 131 9 496 of which liquid assets
Non-current assets 80 767 72 644 71 046 73 167 79 591
(h)
Non-current assets
Total assets 114 091 111 641 110 916 106 215 115 361
(h)
Total assets
Current liabilities 35 232 30 146 36 083 33 640 43 326 Current liabilities
Non-current liabilities 20 585 18 897 21 202 17 659 17 259
(h)
Non-current liabilities
Equity attributable to shareholders of the parent 56 797 61 867 48 915 50 774 52 627
(h)
Equity attributable to shareholders of the parent
Non-controlling interests 1 477 731 4 716 4 142 2 149 Non-controlling interests
Net ?nancial debt 14 319 3 854 18 085 14 596 21 174 Net ?nancial debt
Operating cash ?ow 9 763 13 608 17 934 10 763 13 439 Operating cash ?ow
as % of net ?nancial debt 68.2% 353.2%
(f)
99.2% 73.7% 63.5% as % of net ?nancial debt
Free cash ?ow
(b)
4 491 7 761 12 369 5 033 8 231 Free cash ?ow
(b)
Capital expenditure 4 779 4 576 4 641 4 869 4 971 Capital expenditure
as % of sales
(a)
5.7% 4.9% 4.3% 4.4% 4.6% as % of sales
(a)
Data per share
(c)
Data per share
(c)
Weighted average number of shares outstanding (in millions of units) 3 196 3 371 3 572 3 705 3 829 Weighted average number of shares outstanding (in millions of units)
Total basic earnings per share 2.97 10.16
(f)
2.92 4.87
(g)
2.78 Total basic earnings per share
Equity attributable to shareholders of the parent 17.77 18.35 13.69 13.71 13.75
(h)
Equity attributable to shareholders of the parent
Dividend 1.95
(e)
1.85 1.60 1.40 1.22 Dividend
Pay-out ratio based on Total basic earnings per share 65.7%
(e)
18.2% 54.8% 28.8% 43.9% Pay-out ratio based on Total basic earnings per share
Stock prices (high) 55.45 56.90 51.25 52.95 55.35 Stock prices (high)
Stock prices (low) 43.50 48.18 35.04 38.02 42.65 Stock prices (low)
Yield
(d)
3.5/4.5
(e)
3.3/3.8 3.1/4.6 2.6/3.7 2.2/2.9 Yield
(d)
Market capitalisation 171 287 178 316 174 294 150 409 195 661 Market capitalisation
Number of personnel (in thousands) 328 281 278 283 276 Number of personnel (in thousands)
* Earnings Before Interest, Taxes, restructuring and impairments.
(a) 2010 restated following the changes in the Income Statement described in Note 1 – Accounting Policies.
(b) Operating cash ?ow less capital expenditure, disposal of tangible assets, purchase and disposal of intangible assets, movements with associates as well as with
non-controlling interests, and other investing cash ?ows.
(c) 2007 has been restated following 1-for-10 share split effective on 30 June 2008.
Financial information – 5 year review (continued)
(d) Calculated on the basis of the dividend for the year concerned, which is paid in the following year, and on high/low stock prices.
(e) As proposed by the Board of Directors of Nestlé S.A.
(f) Impacted by the pro?t on disposal of 52% of Alcon outstanding capital.
(g) Impacted by the pro?t on disposal of 24.8% of Alcon outstanding capital.
(h) 2007 comparatives have been restated following ?rst application of IFRIC 14.
120 Consolidated Financial Statements of the Nestlé Group 2011
Companies
% capital
City shareholdings Currency Capital
Companies of the Nestlé Group
Principal af?liated and associated companies
(a)
which operate in the Food and Beverages business, with the exception
of those marked with an ° which are engaged in health and beauty activities.
(a)
In the context of the SIX Swiss Exchange Directive on Information relating to Corporate Governance, the disclosure criteria are as follows:
– operating companies are disclosed if their sales exceed CHF 10 million or equivalent;
– ?nancial companies are disclosed if either their equity exceed CHF 10 million or equivalent and/or the total
balance sheet is higher than CHF 50 million or equivalent.
Countries within the continents are listed according to the alphabetical order of the country names.
Percentage of capital shareholding corresponds to voting powers unless stated otherwise.
All companies listed below are fully consolidated unless stated otherwise.
1)
Af?liated companies for which the method of proportionate consolidation is used.
2)
Associated companies for which the equity method is used.
?
Companies listed on the stock exchange
?
Sub-holding, ?nancial and property companies
Europe
Austria
C.P.A. Cereal Partners Handelsgesellschaft
M.B.H. & Co. OHG
1)
Wien 50% EUR 145 346
Nespresso Österreich GmbH & Co. OHG Wien 100% EUR 35 000
Nestlé Austria Holding GmbH
?
Wien 100% EUR 7 270 000
Nestlé Österreich GmbH Wien 100% EUR 3 000 000
Schöller Lebensmittel GmbH Wien 100% EUR 7 231 000
Belgium
Centre de Coordination Nestlé S.A.
?
Bruxelles 100% EUR 3 298 971 818
Davigel Belgilux S.A. Bruxelles 100% EUR 1 487 361
Nespresso Belgique S.A. Bruxelles 100% EUR 550 000
Nestlé Belgilux S.A. Bruxelles 100% EUR 8 924 200
Nestlé Catering Services N.V. Bruxelles 100% EUR 14 035 500
Nestlé Waters Benelux S.A. Etalle 100% EUR 19 924 000
Bosnia and Herzegovina
Nestlé Adriatic B&H d.o.o. Sarajevo 100% BAM 2 000
Bulgaria
Nestlé Bulgaria A.D. So?a 100% BGN 10 234 933
Croatia
Nestlé Adriatic d.o.o. Zagreb 100% HRK 14 685 500
Czech Republic
Cereal Partners Czech Republic
1)
Praha 50% CZK 23 100 000
Nestlé Cesko s.r.o. Praha 100% CZK 1 154 000 000
Consolidated Financial Statements of the Nestlé Group 2011 121
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Denmark
Nestlé Danmark A/S Copenhagen 100% DKK 44 000 000
Nestlé Waters Powwow (Denmark) Holdings A/S
?
Copenhagen 100% DKK 15 000 000
Oscar A/S Rønnede 100% DKK 10 990 000
Finland
Puljonki Oy Juuka 100% EUR 16 000
Suomen Nestlé Oy Helsinki 100% EUR 10 000 000
France
Centres de Recherche et Développement Nestlé S.A.S. Beauvais 100% EUR 3 138 230
Cereal Partners France SNC
1)
Noisiel 50% EUR 3 000 000
Davigel S.A.S. Martin Eglise 100% EUR 7 681 250
Eau Minérale Naturelle de Plancoët
«Source Sassay» S.A.S. Plancoët 100% EUR 430 028
Galderma International S.A.S.°
1)
Courbevoie 50% EUR 931 905
Galderma Research and Development SNC°
1)
Biot 50% EUR 70 518 259
Herta S.A.S. Noisiel 100% EUR 12 908 610
Houdebine S.A.S. Noyal Pontivy 50% EUR 726 000
Jenny Craig France S.A.S. La Baule-Escoublac 100% EUR 1 000 000
? L’Oréal S.A.°
2)
Paris 30% EUR 120 596 816
Listed on the Paris stock exchange, market capitalisation EUR 48.7 billion, quotation code (ISIN) FR0000120321
Laboratoires Galderma S.A.S.°
1)
Alby-sur-Chéran 50% EUR 14 015 454
Laboratoires Innéov SNC°
1)
Nanterre 50% EUR 650 000
Lactalis Nestlé Produits Frais S.A.S.
2)
Laval 40% EUR 69 208 832
Nespresso France S.A.S. Paris 100% EUR 1 360 000
Nestlé Clinical Nutrition France S.A.S. Noisiel 100% EUR 57 943 072
Nestlé Entreprises S.A.S.
?
Noisiel 100% EUR 739 559 392
Nestlé France S.A.S. Noisiel 100% EUR 130 925 520
Nestlé Grand Froid S.A. Noisiel 100% EUR 3 120 000
Nestlé HomeCare S.A.S. Noisiel 100% EUR 5 550 979
Nestlé Purina PetCare France S.A.S. Rueil-Malmaison 100% EUR 21 091 872
Nestlé Waters S.A.S.
?
Issy-les-Moulineaux 100% EUR 154 893 080
Nestlé Waters France S.A.S.
?
Issy-les-Moulineaux 100% EUR 44 856 149
Nestlé Waters Management & Technology S.A.S. Issy-les-Moulineaux 100% EUR 38 113
Nestlé Waters Marketing & Distribution S.A.S. Issy-les-Moulineaux 100% EUR 26 740 940
Nestlé Waters Supply Centre S.A.S. Issy-les-Moulineaux 100% EUR 2 577 000
Nestlé Waters Supply Est S.A.S. Issy-les-Moulineaux 100% EUR 17 539 660
Nestlé Waters Supply Sud S.A.S. Issy-les-Moulineaux 100% EUR 8 130 105
S.A. des Eaux Minérales de Ribeauvillé Ribeauvillé 99.6% EUR 846 595
Schöller Glaces et Desserts S.A.S. Vitry-sur-Seine 100% EUR 104 400
Société de Bouchages Emballages
Conditionnement Moderne S.A.S.
2)
Lavardac 50% EUR 10 200 000
Société des Produits Alimentaires de Caudry S.A.S. Noisiel 100% EUR 1 440 000
Société Française des Eaux Régionales S.A.S.
?
Issy-les-Moulineaux 100% EUR 1 490 098
Société Immobilière de Noisiel S.A.
?
Noisiel 100% EUR 22 753 550
Société Industrielle de Transformation
de Produits Agricoles S.A.S. Noisiel 100% EUR 9 718 000
122 Consolidated Financial Statements of the Nestlé Group 2011
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Germany
Alois Dallmayr Kaffee OHG
2)
München 25% EUR 10 250 000
C.P.D. Cereal Partners Deutschland GmbH & Co. OHG
1)
Frankfurt am Main 50% EUR 511 292
Distributa Gesellschaft für Lebensmittel-Logistik mbH Postdam 94% EUR 515 000
Erlenbacher Backwaren GmbH Darmstadt 100% EUR 2 582 024
Galderma Laboratorium GmbH°
1)
Düsseldorf 50% EUR 800 000
Herta GmbH Recklinghausen 100% EUR 51 129
Innéov Deutschland GmbH°
1)
Karlsruhe 50% EUR 25 000
Nespresso Deutschland GmbH Düsseldorf 100% EUR 25 000
Nestlé Deutschland AG Frankfurt am Main 100% EUR 214 266 628
Nestlé Product Technology Centre
Lebensmittelforschung GmbH Singen 100% EUR 52 000
Nestlé Purina PetCare Deutschland GmbH Euskirchen 100% EUR 30 000
Nestlé Schöller GmbH Nürnberg 100% EUR 100 000
Nestlé Schöller Produktions GmbH Nürnberg 100% EUR 30 000
Nestlé Unternehmungen Deutschland GmbH
?
Frankfurt am Main 100% EUR 60 000 000
Nestlé Versorgungskasse GmbH
?
Frankfurt am Main 100% EUR 60 000
Nestlé Waters Deutschland GmbH Mainz 100% EUR 10 566 000
Nestlé Waters Direct Deutschland GmbH Neuss 100% EUR 31 000
PowerBar Europe GmbH München 100% EUR 25 000
Q-Med GmbH°
1)
Bensheim 50% EUR 26 000
Trinks GmbH
2)
Goslar 25% EUR 2 360 000
Trinks Süd GmbH
2)
München 25% EUR 260 000
Wagner Tiefkühlprodukte GmbH Saarbrücken 74% EUR 511 292
WCO Kinderkost GmbH Conow Schwerin 100% EUR 26 000
Greece
C.P.W. Hellas Breakfast Cereals S.A.
1)
Maroussi 50% EUR 201 070
Nespresso Hellas S.A. Maroussi 100% EUR 500 000
Nestlé Hellas S.A. Maroussi 100% EUR 18 656 726
Hungary
Cereal Partners Hungária Kft.
1)
Budapest 50% HUF 22 000 000
Kékkúti Ásvànyvíz Zrt. Budapest 100% HUF 238 326 000
Nestlé Hungária Kft. Budapest 100% HUF 6 000 000 000
Italy
Fastlog S.p.A. Milano 100% EUR 154 935
Galderma Italia S.p.A.°
1)
Milano 50% EUR 112 000
Koiné S.p.A. Madone (Bergamo) 51% EUR 258 230
Nespresso Italiana S.p.A. Milano 100% EUR 250 000
Nestlé ltaliana S.p.A. Milano 100% EUR 25 582 492
Q-Med ICT S.r.l.°
1)
Codogno 50% EUR 10 000
Sanpellegrino S.p.A. Milano 100% EUR 58 742 145
Kazakhstan
Nestlé Food Kazakhstan LLP Almaty 100% KZT 91 900
Consolidated Financial Statements of the Nestlé Group 2011 123
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Lithuania
UAB “Nestlé Baltics” Vilnius 100% LTL 110 000
Luxemburg
Compagnie Financière du Haut-Rhin S.A.
?
Luxembourg 100% EUR 105 200 000
Nespresso Luxembourg Sàrl Luxembourg 100% EUR 12 525
Nestlé Finance International Ltd
?
Luxembourg 100% EUR 440 000
NTC-Europe S.A.
?
Luxembourg 100% EUR 3 565 000
Macedonia
Nestlé Adriatik Makedonija d.o.o.e.l. Skopje-Karpos 100% MKD 31 065 780
Malta
Nestlé Malta Ltd Lija 100% EUR 116 469
Netherlands
East Springs International N.V.
?
Amsterdam 100% EUR 25 370 000
Nespresso Nederland B.V. Amsterdam 100% EUR 680 670
Nestlé Nederland B.V. Amsterdam 100% EUR 11 346 000
Norway
A/S Nestlé Norge Oslo 100% NOK 81 250 000
Kaffeknappen Norge AS Oslo 75% NOK 100 000
Poland
Cereal Partners Poland Torun-Paci?c Sp. Z o.o.
1)
Torun 50% PLN 14 572 838
Galderma Polska Z o.o.°
1)
Warszawa 50% PLN 50 000
Nestlé Polska S.A. Warszawa 100% PLN 50 000 000
Nestlé Waters Polska S.A. Warszawa 100% PLN 46 100 000
Portugal
Cereal Associados Portugal A.E.I.E.
1)
Oeiras 50% EUR 99 760
Nestlé Portugal S.A. Linda-a-Velha 100% EUR 30 000 000
Nestlé Waters direct Portugal, comércio e
distribuição de produtos alimentares, S.A. Loures 100% EUR 1 000 000
Prolacto-Lacticinios de São Miguel S.A. Ponta Delgada 100% EUR 700 000
Republic of Ireland
Nestlé (lreland) Ltd Dublin 100% EUR 3 530 600
Republic of Serbia
Centro-Spice d.o.o. Surcin, Beograd 100% EUR 15 039 495
Nestlé Adriatic Foods d.o.o. Beograd 100% EUR 13 844 950
Nestlé Ice Cream Srbija d.o.o. Stara Pazova Stara Pazova 100% EUR 41 792 988
Romania
Nestlé Romania S.R.L. Bucharest 100% RON 77 906 800
124 Consolidated Financial Statements of the Nestlé Group 2011
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Russia
Cereal Partners Russia LLC
1)
Moscow 50% RUB 20 420 000
LLC Nestlé Watercoolers Service Moscow 100% RUB 20 372 926
Nestlé Kuban LLC Timashevsk 100% RUB 48 675
Nestlé Rossiya LLC Moscow 100% RUB 717 730 776
Slovak Republic
Cereal Partners Slovak Republic s.r.o.
1)
Prievidza 50% EUR 165 970
Nestlé Slovensko s.r.o. Prievidza 100% EUR 13 277 568
Spain
Aquarel Iberica S.A. Barcelona 100% EUR 300 505
Cereal Partners España A.E.I.E.
1)
Esplugues de Llobregat (Barcelona) 50% EUR 120 202
Davigel España S.A. Sant Just Desvern (Barcelona) 100% EUR 984 000
Helados y Postres S.A. Vitoria (Alava) 100% EUR 140 563 200
Innéov España S.A.°
1)
Madrid 50% EUR 120 000
Laboratorios Galderma, S.A.°
1)
Madrid 50% EUR 432 480
Nestlé España S.A. Esplugues de Llobregat (Barcelona) 100% EUR 100 000 000
Nestlé Healthcare Nutrition, S.A. Esplugues de Llobregat (Barcelona) 100% EUR 300 000
Nestlé Purina PetCare España S.A. Castellbisbal (Barcelona) 100% EUR 12 000 000
Nestlé Waters España, S.A. Barcelona 100% EUR 14 700 000
Productos del Café S.A. Reus (Tarragona) 100% EUR 6 600 000
Sweden
Galderma Holding AB°
1) ?
Bromma 50% SEK 50 000
Galderma Nordic AB°
1)
Bromma 50% SEK 31 502 698
Hemglass AB Stockholm 100% SEK 14 000 000
Jede AB Mariestad 100% SEK 7 000 000
Kaffeknappen AB
?
Stockholm 100% SEK 100 000
Kaffeknappen Sverige AB Stockholm 100% SEK 100 000
Nestlé Sverige AB Helsingborg 100% SEK 20 000 000
Q-Med AB°
1)
Uppsala 50% SEK 24 845 500
Q-Med Production AB°
1)
Uppsala 50% SEK 100 000
Switzerland
Beverage Partners Worldwide (Europe) AG
1)
Zürich 50% CHF 2 000 000
Beverage Partners Worldwide S.A.
1) ?
Zürich 50% CHF 14 000 000
CPW Operations Sàrl
1)
Prilly 50% CHF 20 000
CPW S.A.
1)
Prilly 50% CHF 10 000 000
Eckes-Granini (Suisse) S.A.
1)
Henniez 49% CHF 2 000 000
Emaro S.A.
?
Romanel-sur-Lausanne 100% CHF 300 000
Entreprises Maggi S.A.
?
Cham 100% CHF 100 000
Galderma Pharma S.A.°
1) ?
Lausanne 50% CHF 48 900 000
Galderma S.A.°
1)
Cham 50% CHF 100 000
Intercona Re AG
?
Châtel-St-Denis 100% CHF 35 000 000
Life Ventures S.A.
?
La Tour-de-Peilz 100% CHF 30 000 000
Nestec S.A. Vevey 100% CHF 5 000 000
Nestlé Finance S.A.
?
Cham 100% CHF 30 000 000
Nestlé International Travel Retail S.A. Vevey 100% CHF 3 514 000
Consolidated Financial Statements of the Nestlé Group 2011 125
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Switzerland (continued)
Nestlé Nespresso S.A. Lausanne 100% CHF 2 000 000
Nestlé Operational Services Worldwide S.A. Bussigny-près-Lausanne 100% CHF 100 000
Nestlé Suisse S.A. Vevey 100% CHF 250 000
Nestlé Waters (Suisse) S.A. Henniez 100% CHF 5 000 000
Nestrade S.A. La Tour-de-Peilz 100% CHF 6 500 000
Nutrition-Wellness Venture AG
?
Vevey 100% CHF 100 000
Rive-Reine S.A.
?
La Tour-de-Peilz 100% CHF 2 000 000
S.I. En Bergère Vevey S.A.
?
Vevey 100% CHF 19 500 000
Société des Produits Nestlé S.A. Vevey 100% CHF 54 750 000
So?nol S.A. Manno 100% CHF 3 000 000
Turkey
Balaban Gida Sanayi ve Ticaret Anonim Sirketi Sakarya 50.9% TRY 21 424 364
Cereal Partners Gida Ticaret Limited Sirketi
1)
Istanbul 50% TRY 20 000
Erikli Dagitim ve Pazarlama A.S. Bursa 80% TRY 3 849 975
Erikli Su ve Mesrubat Sanayi ve Ticaret A.S. Bursa 80% TRY 12 700 000
NDB Gida Sanayi ve Ticaret Anonim Sirketi
?
Istanbul 50.9% TRY 66 611 123
Nestlé Turkiye Gida Sanayi A.S. Istanbul 99.9% TRY 35 000 000
Nestlé Waters Gida ve Mesrubat Sanayi Ticaret A.S. Bursa 75% TRY 8 000 000
Ukraine
LLC Nestlé Ukraine Kyiv 100% USD 150 000
LLC Technocom Kharkiv 100% UAH 119 658 066
PJSC "Lviv Confectionery Factory Svitoch” Lviv 97% UAH 88 111 060
PRJSC Volynholding Torchyn 100% UAH 100 000
United Kingdom
Cereal Partners UK
1)
Welwyn Garden 50% GBP —
Galderma (UK) Ltd°
1)
Watford 50% GBP 1 500 000
Nespresso UK Ltd Croydon 100% GBP 275 000
Nestec York Ltd York 100% GBP 500 000
Nestlé Holdings (UK) PLC
?
Croydon 100% GBP 77 940 000
Nestlé Purina PetCare (UK) Ltd Croydon 100% GBP 44 000 000
Nestlé UK Ltd Croydon 100% GBP 129 972 342
Nestlé Waters (UK) Holdings Ltd
?
Croydon 100% GBP 6 500 002
Nestlé Waters UK Ltd Croydon 100% GBP 640
Raw Products Ltd Croydon 100% GBP 200 000
Schöller Ice-Cream Ltd Guildford 100% GBP 1 584 626
Vita?o (International) Ltd Liverpool 100% GBP 625 379
126 Consolidated Financial Statements of the Nestlé Group 2011
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Africa
Algeria
Nestlé Algérie SpA Alger 70% DZD 7 000 000
Nestlé Waters Algérie SpA Blida 100% DZD 1 622 551 965
Angola
Nestlé Angola Lda Luanda 100% AOA 24 000 000
Burkina Faso
Nestlé Burkina S.A. Ouagadougou 100% XOF 50 000 000
Cameroon
Nestlé Cameroun Douala 100% XAF 650 000 000
Côte d'Ivoire
? Nestlé Côte d’Ivoire Abidjan 86.5% XOF 5 517 600 000
Listed on the Abidjan stock exchange, market capitalisation XOF 53.0 billion, quotation code (ISIN) CI0009240728
Democratic Republic of Congo
Nestlé Congo s.p.r.l. Kinshasa 100% USD 3 200 000
Egypt
Nestlé Egypt S.A.E. Giza 100% EGP 80 722 000
Nestlé Waters Distribution Company Cairo 64% EGP 15 200 000
Nestlé Waters Egypt S.A.E. Cairo 63.7% EGP 81 500 000
Gabon
Nestlé Gabon Libreville 90% XAF 344 000 000
Ghana
Nestlé Central and West Africa Ltd Accra 100% GHS 46 000
Nestlé Ghana Ltd Accra 76% GHS 100 000
Guinea
Nestlé Guinée S.A. Conakry 99% GNF 3 424 000 000
Kenya
Nestlé Equatorial African Region Limited Nairobi 100% KES 132 000 000
Nestlé Kenya Ltd Nairobi 100% KES 89 625 000
Mali
Nestlé Mali S.A.U. Bamako 100% XOF 10 000 000
Mauritius
Nestlé SEA Trading Ltd Port Louis 100% USD 2
Nestlé’s Products (Mauritius) Ltd Port Louis 100% BSD 71 500
Consolidated Financial Statements of the Nestlé Group 2011 127
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Morocco
Nestlé Maghreb S.A. Casablanca 100% MAD 300 000
Nestlé Maroc S.A. El Jadida 94.5% MAD 156 933 000
Mozambique
Nestlé Mocambique Lda Maputo 100% MZN 400 004 000
Niger
Nestlé Niger Niamey 75% XOF 50 000 000
Nigeria
? Nestlé Nigeria Plc Ilupeju 63.2% NGN 396 328 125
Listed on the Lagos stock exchange, market capitalisation NGN 353.3 billion, quotation code (ISIN) NGNESTLE0006
Senegal
Nestlé Sénégal Dakar 100% XOF 1 620 000 000
South Africa
Cereal Partners South Africa
1)
Randburg 50% ZAR 4 999 000
Galderma Laboratories South Africa (Pty) Ltd°
1)
Randburg 50% ZAR 375 000
Nestlé (South Africa) (Pty) Ltd Johannesburg 100% ZAR 53 400 000
Specialised Protein Products (Pty) Ltd Bryanston 100% ZAR 4 000
Togo
Nestlé Togo S.A.U. Lome 100% XOF 50 000 000
Tunisia
Nestlé Tunisie Distribution S.A. Tunis 99.5% TND 100 000
Nestlé Tunisie S.A. Tunis 99.5% TND 8 438 280
Zimbabwe
Nestlé Zimbabwe (Private) Ltd Harare 100% USD 2 000 000
128 Consolidated Financial Statements of the Nestlé Group 2011
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Americas
Argentina
Dairy Partners Americas Argentina S.A.
1)
Buenos Aires 50% ARS 98 808
Dairy Partners Americas Manufacturing Argentina S.A.
1)
Buenos Aires 50% ARS 272 500
Eco de Los Andes S.A. Buenos Aires 50.9% ARS 92 524 285
Nestlé Argentina S.A. Buenos Aires 100% ARS 10 809 000
Nestlé Waters Argentina S.A. Buenos Aires 100% ARS 6 420 838
Barbados
Lacven Corporation
1) ?
Barbados 50% USD 65 159 192
Bermuda
Centram Holdings Ltd
?
Hamilton 100% USD 12 000
DPA Manufacturing Holdings Ltd
1) ?
Hamilton 50% USD 23 639 630
Bolivia
Nestlé Bolivia S.A. Santa Cruz 100% BOB 191 900
Fagal Srl Santa Cruz 100% BOB 126 100 000
Brazil
ASB-Bebidas e Alimentos Ltda São Paulo 100% BRL 1 000
Chocolates Garoto S.A. Vila Velha 100% BRL 161 450 000
CPW Brasil Ltda
1)
São Paulo 50% BRL 7 885 520
Dairy Partners Americas Brasil Ltda
1)
São Paulo 50% BRL 27 606 368
Dairy Partners Americas Manufacturing Brasil Ltda
1)
São Paulo 50% BRL 39 468 974
Dairy Partners Americas Nordeste – Produtos
Alimentícios Ltda
1)
Garanhuns 50% BRL 100 000
Galderma Brasil Ltda°
1)
São Paulo 50% BRL 19 741 602
Innéov Brasil Nutricosmeticos Ltda°
1)
Duque de Caxias 50% BRL 201 160
Nestlé Brasil Ltda São Paulo 100% BRL 450 092 396
Nestlé Nordeste Alimentos e Bebidas Ltda Feira de Santana 100% BRL 12 713 641
Nestlé Sul Alimentos e Bebidas Ltda Carazinho 100% BRL 100 000
Nestlé Waters Brasil – Bebidas e Alimentos Ltda São Paulo 100% BRL 87 248 341
Canada
G. Production Canada Inc.°
1)
Baie D'Urfé (Québec) 50% CAD 100
Galderma Canada Inc.°
1)
New Brunswick 50% CAD 100
Jenny Craig Weight Loss Centres (Canada) Company Halifax (Nova Scotia) 100% CAD 10 000
Nestlé Canada Inc. Toronto (Ontario) 100% CAD 47 165 540
Nestlé Capital Canada Ltd
?
Toronto (Ontario) 100% CAD 1 010
Nestlé Globe Inc. Toronto (Ontario) 100% CAD 106 000 100
Cayman Islands
Hsu Fu Chi International Limited Grand Cayman 60% SGD 7 950 000
Chile
Aguas CCU – Nestlé Chile S.A.
2)
Santiago de Chile 49.7% CLP 49 799 375 321
Cereales CPW Chile Ltda
1)
Santiago de Chile 50% CLP 3 026 156 114
Comercializadora de Productos Nestlé S.A. Santiago de Chile 99.7% CLP 1 000 000
Consolidated Financial Statements of the Nestlé Group 2011 129
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Chile (continued)
Gerber Chile S.A. Santiago de Chile 100% CLP 4 009 604 142
Nestlé Chile S.A. Santiago de Chile 99.7% CLP 11 832 926 000
Colombia
Comestibles La Rosa S.A. Bogotá 100% COP 126 397 400
Dairy Partners Americas Manufacturing Colombia Ltda
1)
Bogotá 50% COP 200 000 000
Nestlé de Colombia S.A. Bogotá 100% COP 1 291 305 400
Nestlé Purina PetCare de Colombia S.A. Bogotá 100% COP 17 030 000 000
Costa Rica
Compañía Nestlé Costa Rica S.A. Barreal de Heredia 100% CRC 18 000 000
Gerber Ingredients, S.A. San José 100% CRC 10 000
Cuba
Coralac S.A. La Habana 60% USD 6 350 000
Los Portales S.A. La Habana 50% USD 24 110 000
Dominican Republic
Nestlé Dominicana S.A. Santo Domingo 97.2% DOP 48 500 000
Silsa Dominicana S.A. Santo Domingo 97.2% DOP 10 000
Ecuador
Ecuajugos S.A.
1)
Quito 50% USD 232 000
Industrial Surindu S.A. Quito 100% USD 3 000 000
Nestlé Ecuador S.A. Quito 100% USD 1 776 760
El Salvador
Nestlé El Salvador, S.A. de C.V. San Salvador 100% USD 4 457 200
Guatemala
Malher S.A. Guatemala 92% GTQ 100 000 000
Nestlé Guatemala S.A. Mixco 100% GTQ 23 460 600
Honduras
Nestlé Hondureña S.A. Tegucigalpa 100% PAB 200 000
Jamaica
Nestlé Jamaica Ltd Kingston 100% JMD 49 200 000
Mexico
Cereal Partners México, S.A. de C.V.
1)
México, D.F. 50% MXN 500 000
CPW México, S. de R.L. de C.V.
1)
México, D.F. 50% MXN 43 138 000
Galderma México, S.A. de C.V.°
1)
México, D.F. 50% MXN 2 385 000
Manantiales La Asunción, S.A.P.I. de C.V. México, D.F. 40% MXN 1 205 827 492
Marcas Nestlé, S.A. de C.V. México, D.F. 100% MXN 500 050 000
Nescalín, S.A. de C.V.
?
México, D.F. 100% MXN 445 826 740
Nespresso México, S.A. de C.V. México, D.F. 100% MXN 10 050 000
Nestlé México, S.A. de C.V. México, D.F. 100% MXN 607 532 730
130 Consolidated Financial Statements of the Nestlé Group 2011
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Mexico (continued)
Nestlé Servicios Corporativos, S.A. de C.V. México, D.F. 100% MXN 170 100 000
Nestlé Servicios Industriales, S.A. de C.V. México, D.F. 100% MXN 1 050 000
Productos Gerber, S.A. de C.V. México, D.F. 100% MXN 5 252 440
Ralston Purina México, S.A. de C.V. México, D.F. 100% MXN 9 257 112
Waters Partners Services México, S.A.P.I. de C.V. México, D.F. 40% MXN 620 000
Nicaragua
Compañía Centroaméricana de Productos Lácteos, S.A. Managua 92.6% NIO 10 294 900
Nestlé Nicaragua, S.A. Managua 100% USD 150 000
Panama
Food Products (Holdings), S.A.
?
Panamá City 100% PAB 286 000
Garma Enterprises, S.A.
?
Panamá City 92% PAB 0
Lacteos de Centroamérica, S.A. Panamá City 100% USD 1 500 000
Nestlé Panamá, S.A. Panamá City 100% PAB 17 500 000
Unilac, Inc.
?
Panamá City 100% USD 750 000
Paraguay
Nestlé Paraguay S.A. Asunción 100% PYG 100 000 000
Peru
Nestlé Marcas Perú, S.A.C. Lima 100% PEN 1 000
Nestlé Perú, S.A. Lima 99.6% PEN 120 683 387
Puerto Rico
Nestlé Puerto Rico, Inc. Cataño 100% USD 500 000
Payco Foods Corporation Bayamon 100% USD 890 000
SWIRL Corporation Guaynabo 100% USD 1 000 000
Trinidad and Tobago
Nestlé Caribbean, Inc. Valsayn 100% USD 100 000
Nestlé Trinidad and Tobago Ltd Valsayn 100% TTD 35 540 000
CPW Trinidad & Tobago Limited
1)
Valsayn 50% USD 50 000
United States
Beverage Partners Worldwide (North America)
1)
Wilmington (Delaware) 50% USD —
Checkerboard Holding Company, Inc.
?
Wilmington (Delaware) 100% USD 1 001
Dreyer’s Grand Ice Cream Holdings, Inc.
?
Wilmington (Delaware) 100% USD 10
Galderma Laboratories, Inc.°
1)
Fort Worth (Texas) 50% USD 981
Galderma Research and Development, Inc.°
1)
Dover (New Hampshire) 50% USD 2 050 000
Gerber Finance Company
?
Wilmington (Delaware) 100% USD 1
Gerber Life Insurance Company New York 100% USD 148 500 000
Gerber Products Company Fremont (Michigan) 100% USD 1 000
Jenny Craig Holdings, Inc.
?
Wilmington (Delaware) 100% USD 0
Jenny Craig Operations, Inc. Los Angeles (California) 100% USD 0
Jenny Craig Weight Loss Centres, Inc.
?
Wilmington (Delaware) 100% USD 2
Jenny Craig, Inc.
?
Wilmington (Delaware) 100% USD 0
Nespresso USA, Inc. Wilmington (Delaware) 100% USD 1 000
Consolidated Financial Statements of the Nestlé Group 2011 131
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
United States (continued)
Nestlé Capital Corporation
?
Wilmington (Delaware) 100% USD 1 000 000
Nestlé Dreyer's Ice Cream Company Wilmington (Delaware) 100% USD 1
Nestlé Holdings, Inc.
?
Wilmington (Delaware) 100% USD 100 000
Nestlé Nutrition R&D Centers, Inc. Wilmington (Delaware) 100% USD 10 000
Nestlé Prepared Foods Company Philadelphia (Pennsylvania) 100% USD 476 760
Nestlé Purina PetCare Company St. Louis (Missouri) 100% USD 1 000
Nestlé Purina PetCare Global Resources, Inc. Wilmington (Delaware) 100% USD 1 000
Nestlé R&D Center, Inc. Wilmington (Delaware) 100% USD 10 000
Nestlé Transportation Company Wilmington (Delaware) 100% USD 100
Nestlé USA, Inc. Wilmington (Delaware) 100% USD 1 000
Nestlé Waters North America Holdings, Inc.
?
Wilmington (Delaware) 100% USD 10 000 000
Nestlé Waters North America, Inc. Wilmington (Delaware) 100% USD 10 700 000
Prometheus Laboratories Inc. Los Angeles (California) 100% USD 100
Sweet Leaf Tea Company Austin (Texas) 100% USD 10
The Stouffer Corporation
?
Cleveland (Ohio) 100% USD 0
Tradewinds Beverage Company Cinccinati (Ohio) 100% USD 0
TSC Holdings, Inc.
?
Wilmington (Delaware) 100% USD 100 000
Vitality Foodservice Holding Corporation
?
Dover (Delaware) 100% USD 58 865
Vitality Foodservice, Inc. Dover (Delaware) 100% USD 1 240
Waggin' Train LLC Greenville (South Carolina) 100% USD —
Uruguay
Nestlé del Uruguay S.A. Montevideo 100% UYU 9 495 189
Venezuela
Corporación Inlaca, C.A.
1)
Caracas 50% VEF 6 585
Laboratorios Galderma Venezuela, S.A.°
1)
Caracas 50% VEF 5
Nestlé Cadipro, S.A. Caracas 100% VEF 50 634
Nestlé Venezuela, S.A. Caracas 100% VEF 517
Novartis Nutrition de Venezuela, S.A. Caracas 100% VEF 1 125
132 Consolidated Financial Statements of the Nestlé Group 2011
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Asia
Bahrain
Nestlé Bahrain Trading WLL Manama 49% BHD 200 000
Bangladesh
Nestlé Bangladesh Ltd Dhaka 100% BDT 100 000 000
Greater China Region
Beverage Partners Worldwide (Paci?c) Limited
1)
Hong Kong 50% HKD 1 000 000
CPW Hong Kong Limited
1)
Hong Kong 50% HKD 402 773 606
CPW Tianjin Limited
1)
Tianjin 50% CNY 305 000 000
Dongguan Andegu Plastic Packaging Material Limited Dongguan 60% HKD 10 000 000
Dongguan Hsu Chi Food Co., Limited Dongguan 60% HKD 700 000 000
Galderma Hong Kong Limited°
1)
Hong Kong 50% HKD 10 000
Guangzhou Refrigerated Foods Limited Guangzhou 95.5% CNY 390 000 000
Henan Hsu Fu Chi Foods Co., Limited Zhumadian 60% CNY 210 000 000
Hsu Fu Chi International Holdings Limited
?
Hong Kong 60% HKD 1 500 000 000
Hubei Yinlu Foods Co., Limited Hanchuan 60% CNY 278 000 000
Nestlé (China) Limited Beijing 100% CNY 250 000 000
Nestlé Dongguan Limited Dongguan 100% CNY 472 000 000
Nestlé Hong Kong Limited Hong Kong 100% HKD 250 000 000
Nestlé Hulunbeir Limited Erguna 100% CNY 55 000 000
Nestlé Purina PetCare Tianjin Limited Tianjin 100% CNY 40 000 000
Nestlé Qingdao Limited Laixi 100% CNY 930 000 000
Nestlé R&D Centre Beijing Limited Beijing 100% CNY 40 000 000
Nestlé Shanghai Limited Shanghai 95% CNY 200 000 000
Nestlé Shuangcheng Limited Shuangcheng 97% CNY 435 000 000
Nestlé Sources Shanghai Limited Shanghai 100% CNY 211 000 000
Nestlé Sources Tianjin Limited Tianjin 95% CNY 204 000 000
Nestlé Taiwan Limited Taipei 100% TWD 100 000 000
Nestlé Tianjin Limited Tianjin 100% CNY 785 000 000
Shandong Yinlu Foods Co. Limited Zhangqiu 60% CNY 71 880 000
Shanghai Fuller Foods Co. Limited Shanghai 100% CNY 384 000 000
Shanghai Nestlé Product Services Limited Shanghai 97% CNY 83 000 000
Shanghai Totole First Food Limited Shanghai 80% CNY 72 000 000
Shanghai Totole Food Limited Shanghai 80% USD 7 800 000
Sichuan Haoji Food Co. Limited Chengdu 80% CNY 80 000 000
Xiamen Yinlu Foods Group Co., Limited Xiamen 60% CNY 311 590 000
Yunnan Dashan Drinks Co., Limited Kunming 70% CNY 35 000 000
India
Galderma India Private Ltd°
1)
Mumbai 50% INR 24 156 000
? Nestlé India Ltd New Delhi 62.8% INR 964 157 160
Listed on the Mumbai stock exchange, market capitalisation INR 402.3 billion, quotation code (ISIN) INE239A01016
Indonesia
P. T. Beverage Partners Worldwide Indonesia
1)
Jakarta 50% IDR 2 210 500
P. T. Cereal Partners Indonesia
1)
Jakarta 50% IDR 956 500 000
Consolidated Financial Statements of the Nestlé Group 2011 133
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Indonesia (continued)
P. T. Nestlé Indofood Citarasa Indonesia
1)
Jakarta 50% IDR 200 000 000 000
P. T. Nestlé Indonesia Jakarta 90.2% IDR 152 753 440 000
Iran
Anahita Polour Industrial Mineral Water Company Tehran 100% IRR 35 300 000
Nestlé Iran (Private Joint Stock Company) Tehran 89.7% IRR 358 538 000 000
Israel
Nespresso Israel Ltd Tel-Aviv 100% ILS 1 000
? OSEM Investments Ltd Shoham 53.8% ILS 110 644 444
Listed on the Tel-Aviv stock exchange, market capitalisation ILS 6.2 billion, quotation code (ISIN) IL0003040149
Japan
Galderma K.K.°
1)
Tokyo 50% JPY 10 000 000
Nestlé Japan Ltd Kobe 100% JPY 20 000 000 000
Nestlé Nespresso K.K. Kobe 100% JPY 10 000 000
Jordan
Ghadeer Mineral Water Co. WLL Amman 75% JOD 1 785 000
Nestlé Jordan Trading Co. Ltd Amman 77.8% JOD 410 000
Kuwait
Nestlé Kuwait General Trading Co. WLL Safat 49% KWD 300 000
Lebanon
Société des Eaux Minérales Libanaises S.A.L. Hazmieh 100% LBP 1 610 000 000
Société pour l’Exportation des Produits Nestlé S.A. Baabda 100% CHF 1 750 000
SOHAT Distribution S.A.L. Hazmieh 100% LBP 160 000 000
Malaysia
Cereal Partners (Malaysia) Sdn. Bhd.
1)
Petaling Jaya 50% MYR 1 025 000
? Nestlé (Malaysia) Bhd. Petaling Jaya 72.6% MYR 234 500 000
Listed on the Kuala Lumpur stock exchange, market capitalisation MYR 13.2 billion, quotation code (ISIN) MYL4707OO005
Nestlé Asean (Malaysia) Sdn. Bhd. Petaling Jaya 72.6% MYR 42 000 000
Nestlé Manufacturing (Malaysia) Sdn. Bhd. Petaling Jaya 72.6% MYR 132 500 000
Nestlé Products Sdn. Bhd. Petaling Jaya 72.6% MYR 25 000 000
Purina PetCare (Malaysia) Sdn. Bhd. Petaling Jaya 100% MYR 1 100 000
Oman
Nestlé Oman Trading LLC Muscat 49% OMR 300 000
Pakistan
? Nestlé Pakistan Ltd Lahore 59% PKR 453 495 840
Listed on the Karachi and the Lahore stock exchanges, market capitalisation PKR 163.1 billion, quotation code (ISIN) PK0025101012
Palestinian Territories
Nestlé Trading Private Limited Company Bethlehem 97.5% JOD 200 000
134 Consolidated Financial Statements of the Nestlé Group 2011
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Philippines
Beverage Partners Worldwide (Philippines) Inc.
1)
Makati City 50% PHP 10 224 600
CPW Philippines, Inc.
1)
Makati City 50% PHP 7 500 000
Nestlé Business Services AOA, Inc. Bulacan 100% PHP 70 000 000
Nestlé Philippines, Inc. Cabuyao 100% PHP 2 300 927 400
Penpro, Inc. Makati City 88.5% PHP 630 000 000
Qatar
Al Manhal Water Factory Co. Ltd WLL Doha 51% QAR 5 500 000
Nestlé Qatar Trading LLC Doha 49% QAR 1 680 000
Republic of Korea
Beverage Partners Worldwide Korea Limited Seoul 50% KRW 50 000 000
Galderma Korea Ltd°
1)
Seoul 50% KRW 500 000 000
Nestlé Korea Ltd Seoul 100% KRW 21 141 560 000
Pulmuone Waters Co., Ltd Goesan-Gun, Chunbuk 51% KRW 6 778 760 000
Saudi Arabia
Al Anhar Water Factory Co. Ltd Jeddah 64% SAR 7 500 000
Al Manhal Water Factory Co. Ltd Riyadh 64% SAR 7 000 000
Nestlé Saudi Arabia LLC Jeddah 75% SAR 27 000 000
Nestlé Water Factory Co. Ltd Riyadh 64% SAR 15 000 000
Saudi Food Industries Co. Ltd Jeddah 51% SAR 51 000 000
SHAS Company for Water Services Ltd Riyadh 64% SAR 13 500 000
Springs Water Factory Co. Ltd Dammam 64% SAR 5 000 000
Singapore
Galderma Singapore Private Ltd°
1)
Singapore 50% SGD 1 387 000
Nestlé R&D Center (Pte) Ltd Singapore 100% SGD 20 000 000
Nestlé Singapore (Pte) Ltd Singapore 100% SGD 1 000 000
Nestlé TC Asia Paci?c Pte Ltd
?
Singapore 100% JPY
SGD
10 000 000 000
2
Sri Lanka
? Nestlé Lanka PLC Colombo 90.8% LKR 537 254 630
Listed on the Colombo stock exchange, market capitalisation LKR 47.1 billion, quotation code (ISIN) LK0128N00005
Syria
Nestlé Syria S.A. Damascus 100% SYP 800 000 000
Thailand
Nestlé (Thai) Ltd Bangkok 100% THB 880 000 000
Perrier Vittel (Thailand) Ltd Bangkok 100% THB 235 000 000
Quality Coffee Products Ltd Bangkok 50% THB 500 000 000
United Arab Emirates
CP Middle East FZCO
1)
Dubai 50% AED 600 000
Nestlé Dubai Manufacturing LLC Dubai 49% AED 300 000
Nestlé Middle East FZE Dubai 100% AED 3 000 000
Consolidated Financial Statements of the Nestlé Group 2011 135
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
United Arab Emirates (continued)
Nestlé Treasury Centre-Middle East & Africa Ltd
?
Dubai 100% USD 6 650 500 000
Nestlé UAE LLC Dubai 49% AED 2 000 000
Nestlé Waters Factory H&O LLC Dubai 48% AED 22 300 000
Nestlé Waters Middle East Investments FZCO
?
Dubai 100% AED 600 000
Uzbekistan
Nestlé Uzbekistan MChJ Namangan 95.9% USD 32 565 463
Vietnam
La Vie Limited Liability Company Long An 65% USD 2 663 400
Nestlé Vietnam Ltd Dongnai 100% USD 75 266 000
136 Consolidated Financial Statements of the Nestlé Group 2011
Companies of the Nestlé Group (continued)
Companies
% capital
City shareholdings Currency Capital
Oceania
Australia
Cereal Partners Australia Pty Ltd
1)
Sydney 50% AUD 107 800 000
Galderma Australia Pty Ltd°
1)
Sydney 50% AUD 2 500 300
Jenny Craig Weight Loss Centres Pty Ltd
?
Melbourne 100% AUD 210 562
Nestlé Australia Ltd Sydney 100% AUD 274 000 000
Fiji
Nestlé (Fiji) Ltd Lami 100% FJD 3 000 000
French Polynesia
Nestlé Polynésie S.A.S. Papeete 100% XPF 5 000 000
New Caledonia
Nestlé Nouvelle-Calédonie S.A.S. Nouméa 100% XPF 250 000 000
New Zealand
CPW New Zealand
1)
Auckland 50% NZD —
Jenny Craig Weight Loss Centres (NZ) Ltd
?
Auckland 100% NZD 10 000
Nestlé New Zealand Limited Auckland 100% NZD 300 000
Papua New Guinea
Nestlé (PNG) Ltd Lae 100% PGK 11 850 000
Consolidated Financial Statements of the Nestlé Group 2011 137
City of operations
Switzerland
Nestec S.A. Vevey TA
Technical, scienti?c, commercial and business assistance company whose units, specialised in all areas of the
business, supply permanent know-how and assistance to operating companies in the Group within the framework of
licence and equivalent contracts. It is also responsible for all scienti?c research and technological development,
which it undertakes itself or through af?liated companies.
The units involved are:
CPW R&D Centre
1)
Orbe R&D
Nestle Institute of Health Sciences Ecublens R
Nestlé Product Technology Centre Konol?ngen PTC
Nestlé Product Technology Centre Orbe PTC
Nestlé R&D Centre Broc R&D
Nestlé R&D Centre Orbe R&D
Nestlé Research Centre Lausanne R
Nestlé System Technology Centre Orbe PTC
Australia
CPW R&D Centre
1)
Rutherglen R&D
Chile
Nestlé R&D Centre Santiago de Chile R&D
Côte d'Ivoire
Nestlé R&D Centre Abidjan R&D
France
Galderma R&D Centre°
1)
Biot R&D
Nestlé Product Technology Centre Beauvais PTC
Nestlé Product Technology Centre Lisieux PTC
Nestlé Product Technology Centre Vittel PTC
Nestlé R&D Centre Aubigny R&D
Nestlé R&D Centre Tours R&D
Germany
Nestlé Product Technology Centre Singen PTC
Technical assistance, research and development units
Technical Assistance TA
Research centres R
Research & Development centres R&D
Product Technology centres PTC
138 Consolidated Financial Statements of the Nestlé Group 2011
City of operations
Technical assistance, research and development units (continued)
Greater China Region
Nestlé R&D Centre Beijing R&D
Nestlé R&D Centre Shanghai R&D
Israel
Nestlé R&D Centre Sderot R&D
Italy
Nestlé R&D Centre Sansepolcro R&D
Mexico
Nestlé R&D Centre Queretaro R&D
Singapore
Nestlé R&D Centre Singapore R&D
Sweden
Galderma R&D Centre° Uppsala R&D
United Kingdom
Nestlé Product Technology Centre York PTC
United States
Galderma R&D Centre°
1)
Cranbury (New Jersey) R&D
Nestlé Product Technology Centre Fremont (Michigan) PTC
Nestlé Product Technology Centre Marysville (Ohio) PTC
Nestlé Product Technology Centre St. Louis (Missouri) PTC
Nestlé R&D Centre Bakers?eld (California) R&D
Nestlé R&D Centre Minneapolis (Minnesota) R&D
Nestlé R&D Centre San Diego (California) R&D
Nestlé R&D Centre Solon (Ohio) R&D
Nestlé R&D Centre St. Joseph (Missouri) R&D
145th Financial Statements of Nestlé S.A.
140 145th Financial Statements of Nestlé S.A.
Income statement for the year ended 31 December 2011
Balance sheet as at 31 December 2011
Notes to the annual accounts
1. Accounting policies
2. Income from Group companies
3. Financial income
4. Pro?t on disposal of ?xed assets
5. Investment write downs
6. Administration and other expenses
7. Financial expense
8. Taxes
9. Liquid assets
10. Receivables
11. Financial assets
12. Participations in Group companies
13. Loans to Group companies
14. Own shares
15. Intangible assets
16. Tangible ?xed assets
17. Short-term payables
18. Long-term payables
19. Provisions
20. Share capital
21. Changes in equity
22. Reserve for own shares
23. Contingencies
24. Risk assessment
25. Additional information
Proposed appropriation of pro?t
Report of the statutory auditors
141
142
143
143
145
145
145
145
145
146
146
146
146
147
147
147
148
148
148
149
149
149
150
150
151
151
151
152
156
157
145th Financial Statements of Nestlé S.A. 141
Income statement for the year ended 31 December 2011
In millions of CHF Notes 2011 2010
Income
Income from Group companies 2 6 460 10 119
Financial income 3 148 —
Pro?t on disposal of ?xed assets 4 2 29 923
Other income 118 104
Total income 6 728 40 146
Expenses
Investment write downs 5 (843) (1 511)
Administration and other expenses 6 (242) (212)
Financial expense 7 (65) (540)
Total expenses before taxes (1 150) (2 263)
Pro?t before taxes 5 578 37 883
Taxes 8 (378) (389)
Pro?t for the year 21 5 200 37 494
142 145th Financial Statements of Nestlé S.A.
Balance sheet as at 31 December 2011
before appropriations
In millions of CHF Notes 2011 2010
Assets
Current assets
Liquid assets 9 2 396 9 189
Receivables 10 1 242 947
Prepayments and accrued income 11 9
Total current assets 3 649 10 145
Fixed assets
Financial assets 11 46 214 51 532
Intangible assets 15 1 102 1 469
Tangible ?xed assets 16 — —
Total ?xed assets 47 316 53 001
Total assets 50 965 63 146
Liabilities and equity
Liabilities
Short-term payables 17 5 589 8 300
Accruals and deferred income 35 67
Long-term payables 18 153 153
Provisions 19 878 751
Total liabilities 6 655 9 271
Equity
Share capital 20/21 330 347
Legal reserves 21 8 470 12 777
Special reserve 21 28 546 2 859
Pro?t brought forward 21 1 764 398
Pro?t for the year 21 5 200 37 494
Total equity 44 310 53 875
Total liabilities and equity 50 965 63 146
145th Financial Statements of Nestlé S.A. 143
Notes to the annual accounts
1. Accounting policies
General
Nestlé S.A. (the Company) is the ultimate holding company
of the Nestlé Group which comprises subsidiaries,
associated companies and joint ventures throughout the
world. The accounts are prepared in accordance with
accounting principles required by Swiss law. They are
prepared under the historical cost convention and on the
accruals basis.
Foreign currency translation
Transactions in foreign currencies are recorded at the rate
of exchange at the date of the transaction or, if hedged
forward, at the rate of exchange under the related forward
contract. Non-monetary assets and liabilities are carried at
historical rates. Monetary assets and liabilities in foreign
currencies are translated at year-end rates. Any resulting
exchange differences are included in the respective income
statement captions depending upon the nature of the
underlying transactions. The aggregate unrealised exchange
difference is calculated by reference to original transaction
date exchange rates and includes hedging transactions.
Where this gives rise to a net loss, it is charged to the
income statement whilst a net gain is deferred.
Hedging
The Company uses forward foreign exchange contracts,
options, ?nancial futures and currency swaps to hedge
foreign currency ?ows and positions. Unrealised foreign
exchange differences on hedging instruments are matched
and accounted for with those on the underlying asset or
liability. Long-term loans, in foreign currencies, used to
?nance investments in participations are generally not
hedged.
The Company also uses interest rate swaps to manage
interest rate risk. The swaps are accounted for at fair value
at each balance sheet date and changes in the market
value are recorded in the income statement.
Income statement
Not currently transferable income is recognised only upon
receipt. Dividends paid out of pre-acquisition pro?ts are
not included under income from Group companies; instead
they are credited against the carrying value of the
participation.
In accordance with Swiss law and the Company’s
Articles of Association, dividends are treated as
an appropriation of pro?t in the year in which they are
rati?ed at the Annual General Meeting rather than as
an appropriation of pro?t in the year to which they relate.
Taxes
This caption includes taxes on pro?t, capital and
withholding taxes on transfers from Group companies.
Financial assets
The carrying value of participations and loans comprises
the cost of investment, excluding the incidental costs of
acquisition, less any write downs.
Participations located in countries where the political,
economic or monetary situation might be considered to
carry a greater than normal level of risk are carried at
a nominal value of one franc.
Participations and loans are written down on
a conservative basis, taking into account the pro?tability
of the company concerned.
Marketable securities are valued at the lower of cost
and market value.
Own shares held to cover option rights in favour of
members of the Group’s Management are carried at
exercise price if lower than cost. Own shares held for
trading purposes are carried at cost as are own shares
earmarked to cover other Long-Term Incentive Plans. Own
shares repurchased for the Share Buy-Back Programme
are carried at cost. All gains and losses on own shares are
recorded in the income statement.
144 145th Financial Statements of Nestlé S.A.
1. Accounting policies (continued)
Intangible assets
Trademarks and other industrial property rights are written
off on acquisition or exceptionally over a longer period. In
the Consolidated Financial Statements of the Nestlé Group
this item has a different treatment.
Tangible ?xed assets
The Company owns land and buildings which have been
depreciated in the past to one franc. Of?ce furniture and
equipment are fully depreciated on acquisition.
Provisions
Provisions recognise contingencies which may arise and
which have been prudently provided. A provision for
uninsured risks is constituted to cover general risks not
insured with third parties, such as consequential loss.
Provisions for Swiss taxes are made on the basis of the
Company’s taxable capital, reserves and pro?t for the year.
A general provision is maintained to cover possible foreign
taxes liabilities.
Employee bene?ts
Employees are eligible for retirement bene?ts under
a de?ned bene?t plan with a retirement pension objective
expressed as a percentage of the base salary. Those
bene?ts are mainly provided through separate pension
funds.
Prepayments and accrued income
Prepayments and accrued income comprise payments
made in advance relating to the following year, and income
relating to the current year which will not be received until
after the balance sheet date (such as interest receivable
on loans or deposits). Revaluation gains on open forward
exchange contracts at year-end rates, as well as the result
of the valuation of interest rate swaps, are also included in
this caption.
Accruals and deferred income
Accruals and deferred income comprise expenses relating
to the current year which will not be paid until after the
balance sheet date and income received in advance,
relating to the following year. Net revaluation losses on
open forward exchange contracts at year-end rates, as
well as the result of the valuation of interest rate swaps,
are also included in this caption.
145th Financial Statements of Nestlé S.A. 145
2. Income from Group companies
This represents dividends of the current and prior years and other net income from Group companies.
3. Financial income
In millions of CHF 2011 2010
Net result on loans to Group companies 90 —
Other ?nancial income 58 —
148 —
In 2010 substantial exchange losses on long-term loans to Group companies and investments were recorded as a result
of the strengthening of the Swiss Franc against most foreign currencies. The interest income arising on these loans and
investments partially compensated the exchange losses. The net charge was included under “Financial expense” in
Note 7.
4. Pro?t on disposal of ?xed assets
This represents mainly the net gains realised on the sale of trademarks and other industrial property rights previously
written down. In 2010, this included the net gains realised on the sale of the remaining 52% of Alcon Inc. to Novartis
(CHF 29 903 million).
5. Investment write downs
In millions of CHF 2011 2010
Participations and loans 351 639
Trademarks and other industrial property rights 492 872
843 1 511
The write down of trademarks and other industrial property rights in 2011 includes a ?fth of the amount paid for the
acquisition of Kraft Foods frozen pizza (CHF 367 million).
In 2010, trademarks linked to the acquisition of Kraft Foods frozen pizza were amortised by one ?fth of the amount paid
(CHF 367 million), as well as the balance of the amount paid in 2008 in respect of Gerber North America’s Intellectual
Property Rights (CHF 286 million).
6. Administration and other expenses
In millions of CHF 2011 2010
Salaries and welfare expenses 105 104
Other expenses 137 108
242 212
146 145th Financial Statements of Nestlé S.A.
7. Financial expense
In millions of CHF 2011 2010
Net result on loans from Group companies (see Note 3) 65 501
Other ?nancial expenses (see Note 3) — 39
65 540
8. Taxes
This includes withholding taxes on income from foreign sources, as well as Swiss taxes for which adequate provisions
have been established.
9. Liquid assets
In millions of CHF 2011 2010
Cash and cash equivalents 1 997 5 346
Marketable securities 399 3 843
2 396 9 189
Cash and cash equivalents include deposits of CHF 650 million with maturities of less than three months.
Marketable securities of CHF 399 million consist of commercial papers with maturities from three to six months.
10. Receivables
In millions of CHF 2011 2010
Amounts owed by Group companies (current accounts) 1 064 763
Other receivables 178 184
1 242 947
145th Financial Statements of Nestlé S.A. 147
11. Financial assets
In millions of CHF Notes 2011 2010
Participations in Group companies 12 28 131 28 865
Loans to Group companies 13 13 233 13 845
Own shares 14 4 798 8 764
Other investments 52 58
46 214 51 532
12. Participations in Group companies
In millions of CHF 2011 2010
At 1 January 28 865 15 441
Net increase/(decrease) (491) 14 010
Write downs (243) (586)
At 31 December 28 131 28 865
The increase in participations is mainly due to the acquisitions made in China. It was overcompensated by the capital
decrease in one af?liate resulting in a net decrease for 2011.
The carrying value of participations continues to represent a conservative valuation having regard to both the income
received by the Company and the net assets of the Group companies concerned.
A list of the most important companies held, either directly by Nestlé S.A. or indirectly through other Group companies,
with the percentage of the capital controlled, is given in the Consolidated Financial Statements of the Nestlé Group.
13. Loans to Group companies
In millions of CHF 2011 2010
At 1 January 13 845 11 588
New loans 5 438 5 340
Repayments and write downs (6 112) (1 515)
Realised exchange differences (1 602) (779)
Unrealised exchange differences 1 664 (789)
At 31 December 13 233 13 845
Loans granted to Group companies are usually long-term to ?nance investments in participations.
148 145th Financial Statements of Nestlé S.A.
14. Own shares
In millions of CHF 2011 2010
Number Amount Number Amount
Share Buy-Back Programme 75 200 000 3 930 148 730 000 7 962
Management Stock Option Plan 7 862 930 353 8 257 590 338
Restricted Stock Unit Plan 9 449 256 439 9 510 199 412
Performance Share Unit Plan 363 170 17 301 530 13
Future Long-Term Incentive Plans 1 275 135 59 891 771 39
94 150 491 4 798 167 691 090 8 764
The share capital of the Company changed twice in the last two ?nancial years as a consequence of the cancellation of
registered shares purchased as part of the various Share Buy-Back Programmes. In 2010, the share capital was reduced
by 185 000 000 shares from CHF 365 million to CHF 347 million. In 2011, the share capital was further reduced by
165 000 000 shares from CHF 347 million to CHF 330 million. The purchase value of those cancelled shares amount to
CHF 8826 million. During the year, 91 470 000 shares were purchased as part of the Share Buy-Back Programme for
CHF 4794 million.
The Company held 7 862 930 shares to cover management option rights and 11 087 561 shares to cover the other
incentives plans. The Management Stock Option Plan is valued at strike price if lower than acquisition cost, while the
shares held for the other plans are valued at acquisition cost. During the year 5 250 599 shares were delivered as part of
the Nestlé Group remuneration plans for a total value of CHF 235 million.
15. Intangible assets
This amount represents the balance of the trademarks and other industrial property rights capitalised value linked with
the acquisition of Kraft Foods’ frozen pizza. A ?fth of the initial value has been amortised during the period.
In 2010, this amount represented the balance of the trademarks and other industrial property rights capitalised value
linked with the acquisition of Kraft Foods frozen pizza, amortised over a ?ve year period (refer to Note 5).
16. Tangible ?xed assets
These are principally the land and buildings at Cham and at La Tour-de-Peilz. Nestlé Suisse S.A., the principal operating
company in the Swiss market, is the tenant of the building at La Tour-de-Peilz. The “En Bergère” head of?ce building in
Vevey is held by a property company, which is wholly owned by Nestlé S.A.
The ?re insurance value of buildings, furniture and of?ce equipment at 31 December 2011 amounted to CHF 24 million
(2010: CHF 24 million).
145th Financial Statements of Nestlé S.A. 149
17. Short-term payables
In millions of CHF 2011 2010
Amounts owed to Group companies 5 478 7 898
Other payables 111 402
5 589 8 300
18. Long-term payables
Amounts owed to Group companies represent a long-term loan issued in 1989.
19. Provisions
In millions of CHF 2011 2010
Uninsured
risks
Exchange
risks
Swiss &
foreign
taxes Other Total Total
At 1 January 475 — 172 104 751 1 035
Provisions made in the period — 172 101 48 321 155
Amounts used — — (149) (44) (193) (416)
Unused amounts reversed — — — (1) (1) (23)
At 31 December 475 172 124 107 878 751
150 145th Financial Statements of Nestlé S.A.
20. Share capital
The share capital of the Company has been reduced by CHF 16 500 000 through the cancellation of 165 000 000
registered shares purchased as part of the Share Buy-Back Programme. As a result, the share capital of Nestlé S.A. is
now structured as follows:
2011 2010
Number of registered shares of nominal value CHF 0.10 each 3 300 000 000 3 465 000 000
In millions of CHF 330 347
According to article 5 of the Company’s Articles of Association, no person or entity shall be registered with voting rights
for more than 5% of the share capital as recorded in the commercial register. This limitation on registration also applies
to persons who hold some or all of their shares through nominees pursuant to this article. In addition, article 11 provides
that no person may exercise, directly or indirectly, voting rights, with respect to own shares or shares represented by
proxy, in excess of 5% of the share capital as recorded in the commercial register.
At 31 December 2011, the share register showed 142 059 registered shareholders. If unprocessed applications for
registration, the indirect holders of shares under American Depositary Receipts and the bene?cial owners of
shareholders registered as nominees are also taken into account, the total number of shareholders probably exceeds
250 000. The Company was not aware of any shareholder holding, directly or indirectly, 5% or more of the share capital.
Group companies were holding together 3.9% of the Nestlé S.A. share capital as at 31 December 2011.
Conditional share capital
According to the Articles of Association, the share capital may be increased in an amount not to exceed CHF 10 000 000
(ten million Swiss francs) by issuing up to 100 000 000 registered shares with a nominal value of CHF 0.10 each, which
shall be fully paid up, through the exercise of conversion rights and/or option rights granted in connection with the
issuance by Nestlé S.A. or one of its subsidiaries of newly or already issued convertible debentures, debentures with
option rights or other ?nancial market instruments.
Concerning the share capital in general, refer also to the Corporate Governance Report.
21. Changes in equity
In millions of CHF
Share
capital
General
reserve
(a)
Reserve
for own
shares
(a)(b)
Special
reserve
Retained
earnings Total
At 1 January 2011 347 1 888 10 889 2 859 37 892 53 875
Cancellation of 165 000 000 shares
(ex Share Buy-Back Programme) (17) 17 (8 826) (8 826)
Transfer to the special reserve — — — 30 000 (30 000) —
Pro?t for the year — — — — 5 200 5 200
Dividend for 2010 — — — — (5 939) (5 939)
Movement of own shares — — 4 502 (4 502) — —
Dividend on own shares held
on the payment date of 2010 dividend — — — 189 (189) —
At 31 December 2011 330 1 905 6 565 28 546 6 964 44 310
(a) The general reserve and the reserve for own shares constitute the legal reserves.
(b) Refer to Note 22.
145th Financial Statements of Nestlé S.A. 151
22. Reserve for own shares
At 31 December 2010, the reserve for own shares amounting to CHF 10 889 million represented the cost of 18 961 090
shares earmarked to cover the Nestlé Group remuneration plans and 40 403 169 shares held for trading purposes.
Another 148 730 000 shares were held as part of the Share Buy-Back Programme.
During the year, an additional 91 470 000 shares have been acquired at a cost of CHF 4 794 million under the Share
Buy-Back Programmes while 165 000 000 shares were cancelled. A total of 5 250 599 shares have been delivered to
the bene?ciaries of the Nestlé Group remuneration plans. In addition, 2 077 200 shares have been acquired at a cost
of CHF 111 million for trading purposes and 5 240 000 shares at a cost of CHF 274 million to cover Nestlé Group
remuneration plans and 8 610 781 shares have been sold for a total amount of CHF 466 million.
Another Group company holds 33 869 588 Nestlé S.A. shares. The total of own shares of 128 020 079 held by Group
companies at 31 December 2011 represents 3.9% of the Nestlé S.A. share capital (208 094 259 own shares held
at 31 December 2010, representing 6.0% of the Nestlé S.A. share capital).
23. Contingencies
At 31 December 2011, the total of the guarantees mainly for credit facilities granted to Group companies and commercial
paper programmes, together with the buy-back agreements relating to notes issued, amounted to CHF 19 610 million
(2010: CHF 17 877 million).
24. Risk assessment
Nestlé Management considers that the risks for Nestlé S.A. are the same as the ones identi?ed at Group level, as the
holding is an ultimate aggregation of all the entities of the Group.
Therefore, we refer to the Nestlé Group Enterprise Risk Management Framework (ERM) described in the Note 23 of the
Consolidated Financial Statements.
152 145th Financial Statements of Nestlé S.A.
25. Additional information requested by the Swiss Code of Obligations on remuneration
Annual remuneration of members of the Board of Directors
2011
Cash
in CHF
(a)
Number
of shares
Discounted
value of shares
in CHF
(b)
Total
remuneration
Peter Brabeck-Letmathe, Chairman
(c)
1 600 000 122 606 5 373 821 6 973 821
Paul Bulcke, Chief Executive Of?cer
(c)
— — — —
Andreas Koopmann, 1st Vice Chairman 325 000 5 939 260 306 585 306
Rolf Hänggi, 2nd Vice Chairman 330 000 6 035 264 514 594 514
Jean-René Fourtou 275 000 4 981 218 317 493 317
Daniel Borel 205 000 3 640 159 541 364 541
Jean-Pierre Meyers 175 000 3 066 134 383 309 383
André Kudelski 205 000 3 640 159 541 364 541
Carolina Müller-Möhl 175 000 3 066 134 383 309 383
Steven G. Hoch 175 000 3 066 134 383 309 383
Naïna Lal Kidwai 205 000 3 640 159 541 364 541
Beat Hess 205 000 3 640 159 541 364 541
Titia de Lange 155 000 2 682 117 552 272 552
Jean-Pierre Roth 155 000 2 682 117 552 272 552
Ann M. Veneman 155 000 2 682 117 552 272 552
Total for 2011 4 340 000 171 365 7 510 927 11 850 927
Total for 2010 4 185 000 127 407 8 867 028
(d)
13 052 028
(a) The cash amount includes the expense allowance of CHF 15 000. The Chairman receives no expense allowance.
(b) Nestlé S.A. shares received as part of the Board membership and the Committee fees are valued at the closing price of the share on the SIX Swiss Exchange on
the ex-dividend date, discounted by 16.038% to account for the blocking period of three years.
(c) The Chairman and the Chief Executive Of?cer receive neither Board membership or Committee fees nor expense allowance.
(d) Including the fair value of stock options granted to the Chairman in 2010.
During 2011, one new Board member (Ms. Ann M. Veneman) joined the Board.
Peter Brabeck-Letmathe, in his capacity as active Chairman, received a cash compensation as well as Nestlé S.A.
shares, which are blocked for three years. This in particular re?ects certain responsibilities for the direction and control
of the Group including the Nestlé Health Science Company and the direct leadership of Nestlé’s interests in L’Oréal,
Galderma and Laboratoires inneov. He also represents Nestlé at the European Round Table of Industrialists and at the
Foundation Board of the World Economic Forum (WEF). All corresponding compensation is included in the disclosed
amount. His total compensation was:
2011 2010
Number
Value
in CHF
Number
Value
in CHF
Cash Compensation 1 600 000 1 600 000
Blocked Shares (discounted value) 122 606 5 373 821 80 475 3 526 424
Stock options (fair value at grant) — — 477 600 3 199 920
Total 6 973 821 8 326 344
145th Financial Statements of Nestlé S.A. 153
Loans to members of the Board of Directors
There are no loans outstanding to executive and non-executive members of the Board of Directors or closely related
parties.
Additional fees and remunerations of the Board of Directors
There are no additional fees or remunerations paid by Nestlé S.A. or one of its Group companies, directly or indirectly,
to members of the governing body or closely related parties, except for CHF 35 000 paid to Mrs. T. de Lange who serves
as a member of the Nestlé Nutritional Council (NNC).
Compensations and loans for former members of the Board of Directors
There is no compensation conferred during 2011 on former members of the Board of Directors who gave up their
function during the year preceding the year under review or earlier. Similarly, there are no loans outstanding to former
members of the Board of Directors.
Shares and stock options ownership of the non-executive members of the Board of Directors and
closely related parties as at 31 December 2011
Number of
shares held
(a)
Number of
options held
(b)
Peter Brabeck-Letmathe, Chairman 2 237 853 2 733 600
Andreas Koopmann, 1st Vice Chairman 72 973 —
Rolf Hänggi, 2nd Vice Chairman 72 440 —
Jean-René Fourtou 27 754 —
Daniel Borel 225 426 —
Jean-Pierre Meyers 1 425 574 —
André Kudelski 50 036 —
Carolina Müller-Möhl 168 008 —
Steven G. Hoch 213 844 —
Naïna Lal Kidwai 16 216 —
Beat Hess 15 816 —
Titia de Lange 5 414 —
Jean-Pierre Roth 5 414 —
Ann M. Veneman 2 682 —
Total as at 31 December 2011 4 539 450 2 733 600
Total as at 31 December 2010 4 048 300 3 093 600
(a) Including blocked shares.
(b) The ratio is one option for one Nestlé S.A. share.
25. Additional information requested by the Swiss Code of Obligations on remuneration (continued)
154 145th Financial Statements of Nestlé S.A.
Annual remuneration of members of the Executive Board
The total remuneration of members of the Executive Board amounts to CHF 43 513 350 for the year 2011
(CHF 48 809 452 for the year 2010). Remuneration principles are described in Appendix 1 of the Corporate Governance
Report.
The valuation of equity compensation plans mentioned in this Note differs in some respect from compensation
disclosures in Note 20.1 of the Consolidated Financial Statements of the Nestlé Group, which have been prepared in
accordance with International Financial Reporting Standards (IFRS).
The Company also made contributions of CHF 3 883 588 toward future pension bene?ts of the Executive Board
members in line with Nestlé’s Pension Bene?t Policy (CHF 3 689 774 in 2010).
Highest total compensation for a member of the Executive Board
In 2011, the highest total compensation for a member of the Executive Board was conferred to Paul Bulcke, CEO.
2011 2010
Number
Value
in CHF
Number
Value
in CHF
Annual Base Salary 2 000 000 2 000 000
Short-term Bonus (cash) 856 045 520 019
Short-term Bonus (discounted value of the share) 64 095 2 874 661 89 672 3 929 427
Stock Options (fair value at grant) 361 000 1 999 940 298 500 1 999 950
Performance Share Units (fair value at grant) 38 040 2 040 085 37 530 2 094 549
Other bene?ts 28 884 28 548
Total 9 799 615 10 572 493
The Company also made a contribution of CHF 949 676 towards future pension bene?ts in line with Nestlé’s Pension
Bene?ts Policy (CHF 1 031 504 in 2010).
Loans to members of the Executive Board
On 31 December 2011, there was an outstanding amount of CHF 91 192 for advances granted to two members of the
Executive Board in line with the Nestlé Corporate Expatriation policy (of which CHF 66 664 to Chris Johnson, Head of
Zone Americas).
Additional fees and remunerations of the Executive Board
There are no additional fees or remunerations paid by Nestlé S.A. or one of its Group companies, directly or indirectly,
to members of the Executive Board or closely related parties.
Compensations and loans for former members of the Executive Board
A total of CHF 300 000 was conferred during 2011 to a former member of the Executive Board in consideration of
ongoing services provided to the Company (CHF 400 000 was conferred during 2010 to a former member of the
Executive Board).
On 31 December 2011, there were no loans outstanding to former members of the Executive Board.
25. Additional information requested by the Swiss Code of Obligations on remuneration (continued)
145th Financial Statements of Nestlé S.A. 155
Shares and stock options ownership of the members of the Executive Board and closely related
parties as at 31 December 2011
Number of
shares
held
(a)
Number of
options
held
(b)
Paul Bulcke 325 853 1 396 800
Werner Bauer 210 288 362 200
José Lopez 53 001 347 500
John J. Harris 16 759 279 800
James Singh 47 357 306 700
Laurent Freixe 29 166 240 700
Chris Johnson
(c)
5 350 81 300
Patrice Bula
(d)
28 950 69 600
Doreswamy (Nandu) Nandkishore 47 080 68 600
Wan Ling Martello
(e)
— —
Marc Caira 39 100 245 350
Jean-Marc Duvoisin 43 862 115 200
Kurt Schmidt
(f)
— —
David P. Frick 25 707 —
Total as at 31 December 2011 872 473 3 513 750
Total as at 31 December 2010 1 033 203 3 257 500
(a) Including shares subject to a three-year blocking period.
(b) The ratio is one option for one Nestlé S.A. share.
(c) As from 1 January 2011
(d) As from 1 May 2011
(e) As from 1 November 2011
(f) As from 1 September 2011
25. Additional information requested by the Swiss Code of Obligations on remuneration (continued)
156 145th Financial Statements of Nestlé S.A.
Proposed appropriation of pro?t
In CHF 2011 2010
Retained earnings
Balance brought forward 1 763 699 388 398 264 298
Pro?t for the year 5 200 333 068 37 493 689 405
6 964 032 456 37 891 953 703
We propose the following appropriations:
Transfer to the special reserve — 30 000 000 000
Dividend for 2011, CHF 1.95 per share
on 3 219 823 070 shares
(a)
(2010: CHF 1.85 on 3 312 569 900 shares)
(b)
6 278 654 986 6 128 254 315
6 278 654 986 36 128 254 315
Balance to be carried forward 685 377 470 1 763 699 388
(a) Depending on the number of shares issued as of the dividend record date. Own shares held by the Nestlé Group are not entitled to dividend, consequently the
dividend on those shares still held on 20 April 2012 will be transferred to the special reserve.
(b) The amount of CHF 189 358 073, representing the dividend on 102 355 715 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 1.95 per share, representing a net amount of CHF 1.2675 per share after payment of the Swiss withholding
tax of 35%. The last trading day with entitlement to receive the dividend is 20 April 2012. The shares will be traded
ex-dividend as of 23 April 2012. The net dividend will be payable as from 26 April 2012.
The Board of Directors
Cham and Vevey, 15 February 2012
145th Financial Statements of Nestlé S.A. 157
Report of the Statutory auditor
to the General Meeting of Nestlé S.A.
As statutory auditor, we have audited the ?nancial statements (income statement, balance sheet and notes to the annual
accounts on pages 141 to 156) of Nestlé S.A. for the year ended 31 December 2011.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation of the ?nancial statements in accordance with the requirements
of Swiss law and the Company’s Articles of Incorporation. This responsibility includes designing, implementing and
maintaining an internal control system relevant to the preparation of ?nancial 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 responsibility
Our responsibility is to express an opinion on these ?nancial 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 ?nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the ?nancial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the ?nancial 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 ?nancial 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 ?nancial statements. We believe that the audit evidence we have obtained is suf?cient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the ?nancial statements for the year ended 31 December 2011 comply with Swiss law and the Company’s
Articles of Incorporation.
Report on other legal requirements
We con?rm 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 con?rm that an internal
control system exists, which has been designed for the preparation of ?nancial statements according to the instructions
of the Board of Directors.
We further con?rm that the proposed appropriation of available earnings complies with Swiss law and the Company’s
Articles of Incorporation. We recommend that the ?nancial statements submitted to you be approved.
KPMG SA
Mark Baillache Fabien Lussu
Licensed Audit Expert Licensed Audit Expert
Auditor in Charge
Geneva, 15 February 2012
158 145th Financial Statements of Nestlé S.A.
Notes
145th Financial Statements of Nestlé S.A. 159
Notes
160 145th Financial Statements of Nestlé S.A.
Notes
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