Nestle: Financial Management Nestle Company

Report
Financial Management
Nestle Company
Prepared by
Muhammad Noman Ali Chishti
NESTLE
Industry
Founded
Food processing
Anglo-Swiss Condensed Milk
Company
(1866)
Farine Lacte Henri Nestl

(1867)
Nestl and Anglo-Swiss Condensed
Milk Company
(1905)
Founder(s)
Henri Nestl, Charles Page, George

Page
Headquarters Vevey, Switzerland

Area served
Worldwide
Key people
Peter Brabeck-Letmathe (Chairman)

Paul Bulcke (CEO
Products
Baby food, coffee, dairy products,

breakfast cereals, confectionery,
bottled water, ice cream, pet foods
(list...)
CHF 83.64 billion (2011)[1]
Revenue
Operating
income
CHF 12.53 billion (2011)[1]
Profit
CHF 9.487 billion (2011)[1]
Total assets
CHF 114.09 billion (2011)[1]
Total equity
CHF 58.27 billion (2011)[1]
Employees
Website
328,000 (2012)[1][2]
www.nestle.com
INTRODUCTION:
Nestl was founded in 1866 by Henri Nestl and is today the worlds biggest food
and beverage company. Sales at the end of 2005 were CHF 91 bn, with a net profit
of CHF 8 bn. Nestle employ around 250,000 people from more than 70 countries
and have factories or operations in almost every country in the world.
The history of Nestl began in Switzerland in 1867 when Henri Nestl, the
pharmacist, launched his product Farine Lacte Nestl, a nutritious gruel for
children. Henri used his surname, which means little nest, in both the company
name and the logotype. The nest, which symbolizes security, family and
nourishment, still plays a central role in Nestls profile.
Since it began over 130 years ago, Nestls success with product innovations
and business acquisitions has turned it into the largest Food Company in the world.
As the years have passed, the Nestl family has grown to include chocolates,
soups, coffee, cereals, frozen products, yoghurts, mineral water and other food
products. Beginning in the 70s, Nestl has continued to expand its product
portfolio to include pet foods, pharmaceutical products and cosmetics too. Today,
Nestl markets a great number of products, all with one thing in common: the high
quality for which Nestl has become renowned throughout the world The
Company's strategy is guided by several fundamental principles. Nestl's
existing products grow through innovation and renovation while maintaining a
balance in geographic activities and product lines. Long-term potential is never
sacrificed for short-term performance. The Company's priority is to bring the best
and most relevant products to people, wherever they are, whatever their needs,
throughout their lives. Taste of Nestl in each of the countries where Nestl sell
products. Nestl is based on the principle of decentralization, which means each
country is responsible for the efficient running of its business - including the
recruitment of its staff.
Nestl is a company which is present in all over the world but it has difference and
unique motto to deal in all over the world. Nestl believes that they should think
about their organizations globally but they deal with people by interacting with
them locally.
Evolution of Nestl: 1867

Henri Nestl founded the company in Vevey, Switzerland.
1898
Nestl purchases its first factory outside of Switzerland - Viking Milk factory
in Norway.
1905
Nestl merges with Anglo-Swiss Condensed Milk Company.
1929
Nestl merges with Peter-Caller-Kohler Chocolates Suisses S.A.
1938
Nestl launches Nescafe - the worlds first instant coffee.
1947
Nestl merges with Alimenting S.A. with the brand Magi.
1962
Nestl purchases Findus.
1974
Nestl becomes a significant shareholder in the Cosmetics Company LOreal.
1977
Nestl purchases Alcon, manufacturer of eye care products and kits.
1985
Nestl purchases the Food Company Carnation.
1988
Nestl purchases the confectionary company Row tree Mackintosh and the pasta
company Buitoni-Perugina.
1992
Nestl purchases the mineral water Company Perrier.
1998
Nestl purchases Spillers pet foods business.
2000
Nestl sells the Findus brand in all countries except for Switzerland.
2001
Nestl merges with Ralston Purina, the premier pet food company in North
America, and with unique expertise in the dry dog food area.
Vision of Nestl
Nestl's vision of making good food central to enjoying a good healthy life for
consumers everywhere. This implies gaining a deeper understanding in many areas
of nutrition and food research and transforming the scientific advances into
applications for the company. Having a broad vision the company is doing its best
for their consumers to show the great sense of responsibility.
Nestls aim is to meet the various needs of the consumer every day by marketing
and selling food of a consistently high quality.
IMAGES OF NESTLES DIFFERENT BRANDS
MY PURPOSE OF TAKING NESTLE COMPANY AS A

TOPIC OF MY REPORT:
My purpose to take nestle company as a topic of my report is to find out its
financial condition by calculating its financial ratios.
Nestle company is a multinational company so it is not so hard to get their
financial records.
Following are the ratios that I will be calculating to find their financial condition
for the year 2010, 2011 and 2012 (as the current year);
Current ratio (C.R)

Quick ratio (Q.R)
Debt ratio (D.R)
Days Sales Outstanding (DSO)
Return on assets (R.O.A)
Return on equity (R.O.E)
Profit margin (P.M)
Equity multiplier (E.M)
Inventory turnover (I.T.O)
Total asset turnover (T.A.T.O)
Net operating working capital (NOWC)
Net cash flow (NCF)
FINANCIAL
STATEMENTS AND
THEIR CALCULATIONS:
CALCULATION OF THE ABOVE RATIOS TO FIND THE

FINANCIAL CONDITION OF NESTLE COMPANY:
CURRENT RATIO:
2010
C.R. = C.A / C.L
= 39 / 30.15
= 1.29
2011
C.R. = C.A / C.L
=33.32 / 35.23
= 0.95
2012 ( Current Year)

C.R. = C.A / C.L
=35.21 / 38.75
= 0.91
COMPARISION AND SUGGESTIONS:

C.R. of 2010 is in much better position as compare to the 2011 and current year
C.R., because the C.A of 2010 is more than liabilities. To get their position of C.R
back they need to reduce their liabilities as compare to their assets.
QUICK RATIO:
2010
Q.R. = C.A - Inventory
C.L.
= 39 7.93 / 30.15
= 1.03
2011
Q.R. = C.A - Inventory Q.R. = C.A - Inventory
C.L
C.L
=33.32 9.26 / 35.23
=35.21 9.13 / 38.75
= 0.70
= 0.67

Q.R. of 2010 is better than 2011 and current year Q.R., because their inventories
are low as compare to the inventories of 2011 and current year. They need to
reduce their inventories and liabilities to get themselves in better position again.
PROFIT MARGIN:
2010
P.M. = N.I / Sales
= 8.78 / 87.91
= 0.10
2011
P.M. = N.I / Sales
=9.49 / 83.64
= 0.11
2012 (Current Year)

P.M. = N.I / Sales
= 10.61 / 92.19
=0.12

P.M. of current year is in better position as compare to the 2010 and 2011 years
P.M because of their sales amount, their sales are much better as compare to their
sales of previous years. Therefore it is better to keep this amount of P.M going for
the betterment of product and companys future.
DAYS SALES OUTSTANDING:

2010
2011
2012 (Current Year)
DSO = Receivables /
DSO = Receivables /
DSO = Receivables /
Avg. sales per day
Avg. sales per day
Avg. sales per day
= 13.04 / 0.24
= 14.43 / 0.23
= 14.43 / 0.25
= 54.33
= 62.74
= 57.72
COMPARISIONS AND SUGGESTIONS:
The DSO is looking much better in 2011 as compare to 2010 but it again
loses its position in the current year because of their slow sales. To get
their position better they need to collect their sales amount fast.
INVENTORY TURNOVER:
2010
2011
2012 (Current Year)
I.T.O. = Sales / Inventory I.T.O. = Sales / Inventory I.T.O. = Sales / Inventory
= 87.91 / 7.93
= 83.64 / 9.26
= 92.19 / 9.13
= 11.10
= 9.03
= 10.10
COMPARISIONS AND SUGGESTIONS:
I.T.O is much better in 2010 because their sales rate is higher than their inventory
rate as compare to 2011 and current year. Their sales rate is better in current year;
they only need to control their inventory rate to get back.
RETURN ON ASSETS:
2010
R.O.A. = N.I / T.A
= 8.78 / 111.64
= 0.08
2011
R.O.A. = N.I / T.A
= 9.49 / 114.09
= 0.08

R.O.A. = N.I / T.A
= 10.61 / 126.23
= 0.08

ROA is and was same from 2010 to the current year because the amount
of total assets and net income changes with every year in pattern of
increasing in both amounts.
RETURN ON EQUITY:
2010
R.O.E. = N.I / T.C.E
=8.78 / 61.87
= 0.14
2011
= 9.49 / 56.8
= 0.17
2012 (Current Year)

= 10.61 / 60.95
= 0.17

ROE was less in 2010, but in 2011 it gains better position and maintain it in the
current year because of their net income which is better in 2011 and in current year
as compare to the net income of 2010.
EQUITY MULTIPLIER:
2010
E.M. = R.O.E / R.O.A
= 0.14 / 0.08
= 1.75
2011
= 0.17 / 0.08
= 2.13
2012 (Current Year)

= 0.17 / 0.08
= 2.13

E.M is and was in great position in 2011 and current year as compare to
2010 because of their equity return rate which was and is less as
compare to the 2010 equity return rate.
DEBT RATIO:
2010
D.R. = 1 1 / E.M
= 1 1 / 1.75
= 0.43
2011
D.R. = 1 1 / E.M
= 1 1 / 2.13
= 0.53
2012 (Current Year)

D.R. = 1 1 / E.M
= 1 1 / 2.13
= 0.53

D.R was in good position in 2010 as shown in the calculation, but it gets much
better in 2011 and current year because of the change in equity multiplier. Its
better to keep it that way for the future.
TOTAL ASSET TURNOVER:

2010
2011
2012 (Current Year)
T.A.T.O. = Sales / T.A
= 87.91 / 111.64
= 83.64 / 114.09
= 92.19 / 126.23
= 0.79
= 0.73
= 0.73
COMPARISION AND SUGGESTION:
T.A.T.O of 2010 was in great position as compare to 2011 and current year. In
2010 their sales are high as compare to their sales of 2011. In current year their
sales are much better than 2010 and 2011, the only thing creating problem is the
amount of assets of all three years, on which 2010 assets are reasonable as compare
to the others. To get themselves in better position again they need to control their
assets or must increase their selling power.
NET OPERATING WORKING CAPITAL:

2010
2011
2012 (Current Year)
NOWC = C.A Acc.P/A NOWC = C.A Acc.P/A NOWC = C.A Acc.P/A
= 39 12.59
= 33.32 13.58
= 35.21 14.46
= 26.41
= 19.74
= 20.75
NOWC of 2010 is much better than the two years, because in 2010 the amount of
C.A is greater and payable amount is less of the next two years (2011 and 2012).
To control it they need to reduce their payable amounts.
NET CASH FLOW:

2010
NCF = N.I + Dep.
= 8.78 + 2.55
= 11.33
2011
NCF = N.I + Dep.
= 9.49 + 2.42
= 11.91
2012 (Current Year)

NCF = N.I + Dep.
= 10.61 + 2.71
= 13.32

NCF of 2010 and 2011 was fine and in good position, but it becomes more good
and increased in current year because of the increase in their net income. There
position of NCF is stable and good so its better to keep it that way for the near
future.
CONCLUSION:
The above calculation of ratios shows the stability position of nestle company in all
the important aspects including their products quantity, quality, pricing, their
development, their advancement in company and in their products, controlling,
manage workers and employees salaries, taking good care of their customers, and
controlling budget of company.
The most important thing is the satisfaction of their customers which make a long
lasting relation between them and their customers. Every time they introduce a new
product they get the good response from the customers because their customers
knew that it does not matter if the product is new as long as it is the product of
nestle so it will definitely great in taste, quality, and quantity.
I myself is also a proud customer of nestle products like, milk, chocolate, magi,
water, Nescafe, and polo. I am very comfortable of buying these products because
I have been using them for a long time and still they all are best in all three main
aspects quantity, quality, and tastes.
Nowadays with the products that nestle is providing, nestle company is on top of
all the companies who are providing the same products.

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Report

Muhammad Noman Ali Chishti

Farine Lacte Henri Nestl

Henri Nestl, Charles Page, George

Headquarters Vevey, Switzerland

Peter Brabeck-Letmathe (Chairman)

Baby food, coffee, dairy products,

CHF 12.53 billion (2011)[1]

CHF 9.487 billion (2011)[1]

CHF 114.09 billion (2011)[1]

CHF 58.27 billion (2011)[1]

Evolution of Nestl: 1867

IMAGES OF NESTLES DIFFERENT BRANDS

MY PURPOSE OF TAKING NESTLE COMPANY AS A

Current ratio (C.R)

CALCULATION OF THE ABOVE RATIOS TO FIND THE

2012 ( Current Year)

COMPARISION AND SUGGESTIONS:

COMPARISION AND SUGGESTIONS:

2012 (Current Year)

COMPARISION AND SUGGESTIONS:

DAYS SALES OUTSTANDING:

2012 ( Current Year)

COMPARISION AND SUGGESTIONS:

2012 (Current Year)

COMPARISION AND SUGGESTIONS:

2012 (Current Year)

COMPARISION AND SUGGESTIONS:

2012 (Current Year)

COMPARISION AND SUGGESTIONS:

TOTAL ASSET TURNOVER:

NET OPERATING WORKING CAPITAL:

NET CASH FLOW:

2012 (Current Year)

COMPARISION AND SUGGESTIONS:

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