Term Report on Nestle

Topic
Portfolio is an Effective Business Model
Course instructor: Sir Ahmad
Submitted by:

Ahsaan Sumbal
Muhammad Qammar
Rabia Ali Khan
Wajeeha Khalid
Izaz Sajaad
Hassan Mauvia

Acknowledgment
In the name of Allah who is the most Magnificent and the
Merciful. He is one who grant us with the knowledge and courage
doing things that we are not worthy of doing. The completion of
this report was a daunting task which was eventually made easy
with the grace of Allah.
We would like to express our profound gratitude and deep regards
to our Course instructor Ahmad Khan who gave us the golden
opportunity to do this wonderful report. The blessing, help,
constant encouragement and guidance given by him time to time
shall carry us a long way in the journey of life on which we are
about to embark.
We are grateful to our parents for their non dwindling support as
they stood by us in every need of hour by making this report.
Thank you for giving us strength to reach for the stars and chase
our dreams.
We dedicate this report to our parents for their endless love,
support and encrougment.

Contents:

Introduction
Historical glimpses
Nestle in Pakistan
Vision statement
Mission statement
Goals and objective
Values and Principles
Nestle Portfolio and its Competitors
Designing of business portfolio
SWOT Analysis
Cooperate Social Responsibility
Financial Analysis

Nestle introduction:
Nestl is the world's leading nutrition, health and wellness company based
in Switzerland. It was founded in 1866 by Henri Nestl. It has employed
around 3,28,000 people and has factories or operations in almost every
country in the world. Nestle was listed no.1 in fortune global 500 as the
Worlds most profitable organization. It has 522 factories in 86 countries.
Mainly deals in chocolates, milk products, maggi, soup, sauce, coffee, tea,
milkmaid, and mineral water. 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.

Historical Glimpses:
The history of Nestl began in Vevey, Switzerland, in 1867 when founder
Henri Nestl created one of the first infant foods in response to the need for
a healthy and affordable product to serve as an alternative for mothers who
could not breastfeed their babies.
He called his product Farine Lacte Henri Nestl. Henri used his sur name,
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 146 years ago, Nestls success with product innovations
and business acquisitions has turned it into the largest Food Company in
the world.

Nestle in Pakistan:
Nestle has been serving Pakistani consumers since 1988, when their parent
company ,the Switzerland-based Nestl SA, first acquired a share in
Milkman Ltd. It is listed on the Karachi and Lahore stock exchanges.
Headquartered in Lahore, the Company operates five production facilities.
Two of its factories in Sheihupura and Kabirwala are multi product
factories, while another one at Karachi is already for production. One
factory in Islamabad and two in Karachi produce bottled water. Nestle has
10 Regional Sales Offices in all over the Pakistan. Through its effective

marketing and a vast sales and distribution network throughout the

country, it ensures that its products are made available to consumers
whenever, wherever and however. Convenience is at the heart of the
Nestl philosophy, and their aim is to bring products to people's
doorsteps

Mission Statement:
Nestle is the world's leading nutrition, health and wellness company. Our
mission of "Good Food, Good Life" is to provide consumers with the best
tasting, most nutritious choices in a wide range of food and beverage
categories and eating occasions, from morning to night

Vision Statement:
To be a leading, competitive, Nutrition, Health and Wellness Company
delivering improved shareholder value by being a preferred corporate
citizen preferred employer preferred supplier selling preferred products
Nestl subscribes fully to this vision of being the number one Nutrition,
Health, and Wellness Company.

Objectives & Goals:

Marketing objectives are compatible with the overall corporate objectives of
nestle. Companys objective is to be the worlds largest and best branded
food manufacturer while insuring that nestle name is synonymous with the
products of the highest quality.
Its chief objectives are:

To achieve compatibility with international voluntary standards on

environmental management systems.
To build mutual trust with consumers, governmental authorities and
business partners.

To ensure continuous improvement of nestles environmental

performance.

Conservation of natural resources and minimization of waste.

To establish the benchmark for good business practice.

Employing new technologies and processing.

Measuring the cost and benefits to business of its activities.

Monitor progress.

Audit results.

Values & Principles:

Nestl is not like other companies. They have a unique set of values and
guiding principles that have been built up over time. Their motto is:
"Teamwork with responsible leadership"
Nestls Corporate Business, Management & Leadership Principles describe
the way that people throughout the Nestl Group interact with one another
day by day.
We believe in people rather than systems
They are committed to creating value for our shareholders but they
wont favour quick-wins at the expense of long-term business
development
They are committed to continuous improvement
They are pragmatic
Nestl mindset is based on these principles and is reflected constantly
through their business dealings and the commitment they attach in
developing our employees.

Designing of Business Portfolio Plan:

Business portfolio plan involves 2 steps
1. Analyze the current business portfolio
2. Shape the future portfolio by developing strategies for growth and
downsizing

Analyze the current business portfolio:

The process by which management evaluates the products and business
that makes up the company is called portfolio analysis The company
will want to put strong resources into its more profitable product line and
phase down or drop down its weaker one. The best known portfolio
planning methods was developed by the Boston Consulting Group. Using
BCG approach companies classify its SBUs according to growth-share
matrix.

Shape the future portfolio by developing

strategies for growth and downsizing:
Beyond evaluating current business portfolio, designing the business
portfolio involves finding business and product the company should
consider in the future. Companies need growth if they are to compete more
effectively, satisfy their stakeholder and attract top talent. Growth is pure
oxygen states one executive. A firm must careful not to make growth itself

an objective. The companys objective must be to manage portfolio

growth companies use product/market expansion grid for his purpose,
which identify company growth opportunities through market penetration,
market development, product development and diversification.

Analysis of current portfolio of Nestle

with the help of BCG Growth-Share
matrix:
Based on recent news sources and Nestls 2013 Annual Report, here is
Nestls current BCG Matrix for a selection of their brands:

Question Marks: Question marks are low share business unit with high
growth market. Magi 2-minute Noodles currently require lots of investment

in order to capitalize on the growing culinary segment, which may not offer
the highest return on investment in Nestles brand portfolio.
Stars: Stars are high growth and high share business unit. Nestls wide
range of mineral water has benefited from the combination of healthier
lifestyle trends and emerging markets. These products require large
amounts of investments in order to differentiate the bottled water brands
from competitors in mature markets and grow brand awareness in
emerging markets.
Dogs: Dogs are business unit which have low market share in a low growth
market. Sales of Jenny Craig and Lean Cuisine (weight loss management
brands) and Power Bar (nutrition brand) have failed to expand outside of
the USA these two brands are tipped to be divested in the future. SBUs in
this classification may generate enough profit to be self-sufficient, be are
considered to never be major sources of revenue.
Cash Cows: Cash Cows have a high share of a low growth market. Nestle
drinks and cereals (nesquik) are at cash cow with high market share and
low growth rate. They require very little investment to generate revenue.
They produced a lot of cash that the company uses to pay its bills and
support other SBUs that need investment.

Planning to develop the future portfolio

of Nestle for growth and downsizing:
One useful device for identifying growth opportunities is the
product/market expansion grid. This technique identifies the company
growth opportunities. It creates a vital, enthusiastic corporation where
people see genuine opportunities

Market penetration:
A strategy for company growth by increasing sale of current products to
current market segment without changing the products
Nestle do Market penetration by:
Promotion campaigns
Advertising strategies
New product innovation
Availability of in different pack sizes

Product development:
A strategy for company growth by offering modified or new products to
current market

Nestle do product development by acquiring the Kraft Foods'

frozen pizza business

Market development:
A strategy for company growth by identifying and developing new market
for its current products
Nestle do market developing by serving its products all around the world:
Europe, Americas and Asia zone, Oceania and Africa
Now, China is an emerging market for neslte

Article
China ------ The Emerging Market

Chief Executive Officer Paul Bulcke said:

The expansion of our manufacturing facilities in China is a clear demonstration of
our continued confidence in the Chinese market, and our commitment to the
country and its consumers,

Nestl leads dairy development in China with

new training institute:
This new training institute is a continuation of our long-term investment in the
future of Shuangcheng to ensure it remains one of Chinas leading dairy districts
said Roland Decorvet, Chairman and Chief Executive Officer of Nestl China.

Nestle is stepping up its efforts to expand in Chinas fast growing dairy market
with a construction of new dairy farming institute in the north eastern city of
Shuangcheng. This institute will include a series of training farms, which nestle
hopes, will became the country leading dairy training centers within next five
years. Dairy farm owners and workers from Shuangcheng and other Chinese
regions will be able to improve their farm management skills and learn how to use
the latest agricultural technology. Dairy farm owners and workers from
Shuangcheng and other Chinese regions will be able to improve their farm
management skills and learn how to use the latest agricultural technology. They
will gain practical experience in expanding their farm businesses, improving
productivity and sourcing high quality milk sustainably

Nestl is building Nescafe Coffee Centre in China

This new centre is a continuation of our long-term investment in the future of
coffee production and consumption in China, said Heiko Schipper, Managing
Director of Nestls Food and Beverage Division in China region.
Nestl is helping to accelerate the development of Chinas coffee industry with the
construction of new facilities that will provide farmers with training in improved
growing techniques, at the same time as promoting the beverage to more
consumers. The company has signed a memorandum of understanding with the
local government in Puer, Yunnan province, agreeing to invest in a Nescaf Coffee
Centre in the region that will include a coffee farming institute and a consumer
experience centre. The institute, which will be the largest of its kind in China, will
provide training to 5,000 farmers, agronomists, and coffee business professionals
every year. The experience centre will be used to raise the profile of coffee grown
in Yunnan province among consumers from China and the rest of the world. The
site will also provide much-needed infrastructure to support rapidly expanding
coffee production in the region. It will offer modern warehousing facilities and a
quality testing laboratory that will help to set local benchmarks against
international standards.

Diversification:
A strategy for company growth through starting up or acquiring business
outside the current products and markets

Nestle do diversification by investing in heath care

Article:

Nestle and Diversification Investing

in Healthcare
Nestle is rumored to have paid around 500m (the deal value was not formally
disclosed) to acquire Prometheus Laboratories Inc., a maker of treatments for
cancer and gastrointestinal illnesses. This is not Nestle first acquisition into
consumer healthcare. The Swiss company has said it aims to become the world
leader in health-science nutrition in 10 years, extending its dominance beyond
coffee, powdered milk and baby food.
Why the change in strategic direction? The answer, simply stated, is growth.
Healthcare markets are expected to grow significantly faster than mature food
product markets in the medium and long-term. Developing economies have to
handle ageing populations, with consumers increasingly prepared to spend on
healthcare and nutrition.
Another reason is profit margins. Net profit margins in pharmaceuticals are
generally much higher than those earned in food products, though there is often a
long lead time between new product development and product profitability.

Downsizing
Reducing the business portfolio by eliminating products of business units
that are not profitable or that no longer fit the companys overall strategy
Nestle do diversification by investing in heath care

Article

Nestle Draws Up Divestment Shortlist

Nestle SA, (NESN) the worlds biggest food company, has a shortlist of businesses
it is looking to sell after identifying laggards that it cannot fix, Chief Executive
Officer Paul Bulcke told investors today.
We are going to have some divestitures, Bulcke said, without disclosing any
further details or timing. We have allowed underperformers to underperform for
too long. That is not the case anymore. We will go after them. We want to be in
business, not agony.
Analysts have cited Jenny Craig diet centers, PowerBar energy snacks and Lean
Cuisine frozen meals as possible candidates to be jettisoned. In a presentation
yesterday in Vevey, Luis Cantarell, head of Nestles 10.7 billion-Swiss franc ($11.8
billion) nutrition and healthcare businesses, said that both Jenny Craig and
PowerBar were in suffering categories. Over the last three or four years we
have increased our capex quite extensively, Bulcke said, in order to expand in
emerging markets. We now want to sweat those assets.

SWOT Analysis:
Strengths:
The business offers one of the widest portfolios of food and brewery
products in its sector. It also operates 29 brands that earn more than $1
billion in annual revenues. With more than 8,000 products it is hard for
any other corporate to compete against Nestl.

 Nestl has been forming successful partnerships and acquiring other

companies in order to grow and maintain its leadership in the market.
Nestle focus on collectivism and performance orientation attitude, which
encourages employees to work harder.
Another thing is high level of market share and that people all over the
world trust and recognizes Nestle as a big brand name.
Nestl is known almost everywhere and has a reputable brand for its
products that are used by millions every day.
Nestl invested more than $2 billion in R&D in 2011. Its introducing
new and redesigned products every year, strengthening firms
competitive advantage
Nestl runs in more than 100 countries and has extensive distribution
channel all over the world, which supports its operations globally.
They are low cost operators which allow them to not only beat
competition but also edging ahead operating excellence, innovation,
renovation, product availability and communication are major strengths.

Weaknesses:
One major weakness of Nestle is that it is entering into markets that are
already mature and can give a tough competition to new entrants, e.g. In
the late 1980s, Dannon entered the market with a health-based yogurt,
and become the top selling brand of yogurt; Nestls 1994 launch was
behind the product life cycle curve in an already mature market and
could not compete against a strong, established brand.
Nestle Plain Yogurt has proved to be a Nestle weakness because it has
been unable to make its market place in USA
The company has complex supply chain management

 The company has announced and is involved in many programs that aim
to make company more eco-friendly and improving the working
conditions of its suppliers. Nestle receives a lot of criticism Because of
weak implementation of its program.
They were affected by pet food recall in 2007, in which 95 different
brands of dog and cat food was recalled due to contamination with rat
poison.

Breakfast cereal industry has been under fire from the FDA and the
American Medical Association, both of which say that false claims of
heart healthy and lower cholesterol need to be removed from
packing and advertising. They have also been forced to reduce the
amount of sugar in their products, as parents advocates groups claimed
they were contributing to the diabetes epidemic among American
children

Opportunities:
Nestle is already involved in many successful Ventures with major world
companies like The coca-cola Company, Colgate-Palmolive, and recently
Chi-Med. Joint ventures are a great opportunity for businesses to
accelerate growth, to gain skill, capabilities, market access etc.
(Bloomberg, 2012)
In todays health conscious societies, they can introduce more healthbased products, and because they are a market leader, they would likely
be more successful. Provide allergen free food items, such as gluten free
and peanut free.
There is a large amount of startups that are forming and introducing
new products for well-being or revolutionizing the ways those products

are made. Startups are cheap and easy to acquire. This is a great
opportunity to expand their portfolio since Nestle is focusing on
providing more well-being products. (The Wall Street Journal, 2011)
Nestle in Pakistan has a great opportunity for expanding its markets
because in Pakistan there is a large ready market of food and beverages
due to trends of eating and the increasing .I t also has opportunities
largely in China and India as well. Through proper marketing research
Nestle can cash on to these opportunities.

Threats:
Even though Nestls recent focus is towards healthier products, the
company is a major supplier of chocolate and chocolate drinks that
have high level of calories and due to changing customer habits this
could cause a decline in consumer demand.
Although it is Nestls responsibility to run thorough quality checks of
its products, the company had been reportedly providing
contaminated food or other products to the market. Such actions hurt
the companys reputation and result in losses.
Supermarkets and other retailers are introducing their own label
products that cost less and can easily compete with Nestls product
portfolio.

With an overall growth of world economy and population, the

demand for raw food will rise. This increase will result in high
material costs and lower margin for Nestle.
They have major competitors, like Hersheys, Cadbury-Schweppes
(owned by Pepsi), Starbucks, Beech-Nut, Quaker, Kraft Foods, DelMonte, Frito-Lay. Another threat is due to the increasing popularity
of its competitor OLPERS in local and international markets.

 Nestle is facing the threats by worldwide community due to its

violation of international marketing standards. Many conferences and
campaigns have been held against Nestle in this regard which can
damage the name and trust of its customers.

Corporate Social Responsibility:

In 2012 Nestle Provide 89% nutritionally sounds products.
In 2012 Nestle achieve Nutritional Foundation on its 75.7% of the entire
portfolio
The Nestl Nutritional Profling System (NNPS) is a rigorous system used to
bench-mark their products against set criteria based on recommended
values from the World Health Organization and other independent
authorities. It assesses a products nutritional contribution, considering its
role in a balanced diet, its ingredients (including fat, added sugar, calcium
and whole grain) and the serving size usually consumed, either by adults or
children
Nestl continues to further expand its portfolio of health and wellness
products into areas such as chronic diseases - traditionally addressed by
pharmaceutical products.
Nestle renovate its portfolio by adding the relevant nutrients, focusing on
popular foods.
Nestle monitor all developments that may have applications in the food
and beverage industry, and this includes nano-technology Nestle is able to
deliver all our innovations in our foods and beverage portfolio without
using nanotechnology or nano materials.
Nestl promoting vegetable consumption via teaching home cooking and
healthy meal structure, Help increase consumption of whole grains and

vegetables, including via healthier home cooking, Maggi Cooking Lesson

Programme on-going in 8 countries in 2012 and in 2015 Maggi Cooking
Lesso Programme on-going in 30 countries. In 2012, 65% of Maggi product
portfolio worldwide promoting home cooking and meals with vegetables
and in 2015 90% of Maggi product portfolio worldwide promoting home
cooking and meals with vegetables
Nestl Policy on Salt (2005, updated 2012) Reduce salt in our products
90% of childrens products (sales value) meet the Nestl Nutritional
Foundation sodium criterion. Nestl Policy on Sugars (2007 Reduce sugars
in our products 90% of childrens products (sales value) meeting the Nestl
Nutritional Foundation sodium criterion.
Nestle also Improves resource efficiency. Nestle 39 factories generating
zero waste for disposal.

Financial Performance:2013, proved to be a challenging year for the Company. Deteriorating law &
order situation and the political scenario of the country played a major role
in causing regular disruptions in business throughout the year, resulting in
slowing down of business growth. The constantly higher inflation and
significant depreciation of the Pakistani rupee has further aggravated the
weak economic conditions of the country and has also adversely impacted
the purchasing power of the consumer. Despite all these challenges, the
Company reported a top line growth of 9% way ahead of the countrys GDP.
The Company also improved its Gross Margins by 80 bps. The growth was
fuelled by effective product mix management, optimization of our value
chain through Nestl Continuous Excellence initiatives and processes
enabling us to invest increased marketing support behind our brands.
Nestl Pakistan remains committed to enhancing its product base by
diversifying into new functionalities. Innovation & renovation remain an
integral part of the Companys vision to positively enhance the quality of

life. The major new product launches during 2013 included: NESTL
CRUNCH, NESTL FRUITA VITALS Valencia Orange, MILKPAK Yogurt
Pouch, MAGGI Noodles Chatpata, NAN3, and CERELAC - Stage 4 and
NESTL MOM & me.
Total sales grew by 9% to PKR 86.2 billion, with growth coming from both
the increased volumes and selling prices. The Gross Profit (GP) margin has
improved by 80 bps as compared to last year due to lower increase in
commodity prices, optimal product mix and strict control on total delivered
cost through the NCE mindset. However, this was partially offset by
increasing fuel prices, depreciation of Pakistani rupee and increased
depreciation.
During the current year the Company has invested heavily behind its
brands. Furthermore, due to the increased average borrowing as well as
depreciation of the Pakistani rupee, the Companys Net Profit margin has
decreased by 60 bps.

Dividends:-

Keeping in view the good financial performance of the Company, the Board
of Directors has recommended to pay final cash dividend of PKR 75 per
share.

Sales of nestle are continuously increasing, and earnings per share jump in
6 years from 34.24 rupess to 129.37 rupees.

Ratio Analysis:LIQUID 200

ITY
3
RATIOS

200
4

200
5

200
6

2
7

Quick
Ratio

0.18 0.18 0.41 0.46 0.47 0.45 0.26 0.28

Current
Ratio

0.89 1.03 0.81 0.89 0.94 1.07 0.85 0.85

Quick Ratio for Nestle Pakistan from 0.26 in FY09 to 0.28 in FY10. This is
because although current assets of the company showed an increase in
FY10 (22.02% YoY), the increase was mostly attributed to stores and spares
and stock in trade, which reduced liquidity of the current assets. The trade
debts of the company decreased significantly by 48%. Furthermore, current
liabilities rose from Rs 8.083 billion in FY09 to Rs 9.806 billion (YoY
increase of 21.32%). The current ratio remained the same 0.85 in FY10 as in
FY09 as the increase in current assets was more than offset by the increase
in current liabilities.

PROFITABILIT 2003 2004 2005 2006 2007 2008 2009 201

0
Y RATIOS
Profit Margin

7.25
%,

7.73
%

6.73
%

6.19
%

6.39
%

4.54
%

7.30
%

7.99
%

G/P margin

28.82
%
19.76
%
63.02
%

27.80
%
17.64
%
63.45
%

27.93
%
12.97
%
61.87
%

28.38
%
10.55
%
53.86
%

28.14
%
11.39
%
43.90
%

26.19
%
9.31
%
35.38
%

28.91
%
16.17
%
67.88
%

26.9
6%
17.9
2%
73.6
8%

Return on Assets
Return on Equity

Gross Profit for Nestle Pakistan rose 16.64% (YoY) in FY10 from Rs 11.898
billion to Rs 13.9 billion owing to the significant increase of almost 25% in
net sales. Net operating expenses came from Rs 7.270 billion to Rs 7.89
billion increasing the EBIT to Rs 6.2 billion from Rs 4.628 billion, an
increase of 34.16% YoY. This significant rise can be contributed to tightlycontrolled operations of the company and a rise in other operating income
generated by Nestle Pakistan.Nestle Pakistans PAT in FY10 was Rs 4.11
billion as compared to FY09 when it was Rs 3.005 billion, an increase of
almost 37% (YoY) as a result of the higher EBIT.An assessment of Nestle
Pakistans profitability, as demonstrated by the diagram below, shows an
upward trend in all profitability ratios:
The profit margin rose from 7.30% in FY09 to almost 8% in FY10. This was
higher than the industry average of 7.67%. The gross profit margin
decreased from 28.91% in FY09 to 27% in FY10 but again this was less than
the industrys GPM, which stood at 30%. An overview of the Return on
Assets (ROA) and Return on Equity (ROE) forged a similar upward trend
thereby sustaining the profitability of Nestle Pakistan. ROA increased to
17% in FY10 from 16.17% in FY09 attributed to a 37% increase in PAT
accompanied by 23.5% rise in total assets between FY09 and FY10. The
industry average ROA stood at 21%. ROE statistics indicate an increase
from 67.88% in FY09 to 73.68 in FY10 as the total equity increased by
26.1% in FY10. ROE for the industry was 82.65%. Overall, Nestle Pakistans
profitability ratios, gross profit and net profit margin remained almost

equal to the industry average whereas the ROA and ROE remained below
the industry average showing high competition from the competitors

ASSET
MANAGEMEN
T RATIOS

2003

20
04

20
05

20
06

20
07

20
08

20
09

2010

Inventory
Turnover(Days)
Day Sales
Outstanding

36.77

55.0
0
0.87

36.6
0
0.99

36.5
5
3.89

36.0
8
4.39

34.6
8
4.81

41.6
7
2.11

36.52

Operating cycle
(Days)

37.77

55.8
6

37.6
0

40.4
4

40.4
7

39.4
9

43.7
9

40.41

Total Asset
Turnover
Sales/Equity

2.24

2.72

2.28

1.93

1.70

1.78

2.05

2.21

8.69

8.20

9.20

8.70

6.87

7.79

9.30

9.22

0.99

0.88

The inventory turnover decreased from 42 days in FY09 to 39 days in FY10,

which means it took Nestle Pakistan an average of 39 days to convert its
inventories into cash ie 2 less days than in the previous year. However, this
was below the industry average of 43 days. Day Sales Outstanding more
than halved from 2.11 days in FY09 to 0.88 days in FY10, indicating a
tighter collection policy from the debtors. This was also lower than the
industry average of 2.44 days.
Moving further, the Total Asset Turnover for Nestle Pakistan rose from 2.21
in FY09 to 2.24 in FY10 indicating slightly higher profitability of the asset

base employed by Nestle Pakistan. Total Asset Turnover for the industry
was 2.62, which is slightly better. Assets of the company Sales to Equity
Ratio decreased from 9.30 in FY09 to 9.22 in FY10.

DEBT
MANAGEM
ENT
RATIOS

20
03

20
04

200 200 200 200 200 201

5
6
7
8
9
0

Debt to Asset

0.69

0.72

0.79

0.80

0.74

0.74

0.76

0.76

Debt to Equity
Ratio

2.19

2.60

3.77

4.11

2.85

2.80

3.20

3.11

Long Term
Debt to Equity

0.95

1.12

1.40

2.04

1.40

1.59

1.37

1.36

Times Interest
Earned

19.7
1

24.9
8

10.0
9

5.48

5.36

5.00

10.4
7

12.1
0

The debt to asset ratio stood at 0.76 in FY10 showing little change since
FY07. The debt to equity ratio declined from 3.20 in FY09 to 3.11 in FY10
implying a slight shift from debt financing for assets of the company
supported by increased interest rates in the economy and instability of the
equity market. On the other hand, the long-term debt to equity ratio also
fell slightly from 1.37 in FY09 to 1.36 in FY10, indicating companys
preference for equity over long-term borrowing. The company preferred
short-term running finance as it witnessed a significant increase of 267%.
The Times Interest Earned (TIE) ratio increased from 10.47 in FY09 to
12.10 owing to the high EBIT in FY10.

MARKE
T
RATIOS

200 200 200 200 200 200 200 201

3
4
5
6
7
8
9
0

Earnings
per share

16.76 21.87 25.42 30.06 39.81 34.24 66.27 90.96

Price/Earni
ngs Ratio

22.43 23.78 30.29 34.76 45.22 38.96 18.80 26.19

Dividend
per share

4.00

Book value
per share

26.60 34.46 41.09 55.81 90.67 96.78 97.62 123.0

9

5.00

15.00 5.00

10.00 25.00 20.00 30.00

Market ratios for Nestle Pakistan indicate a 37% increase in Earnings per
Share from Rs 66.27 in FY09 to Rs 90.69. The industrys EPS was much
higher, standing at an average of Rs 168.35.Dividend per Share also
increased by 50% rising from Rs 20 in FY09 to Rs 30 in FY10. The reason
for this is the high increase in profits of the company. The Book Value per
Share for Nestle Pakistan registered an increase from its value of Rs 97.62
in FY09 to Rs 123.09 in FY10. This rise can largely be accounted for by the
23.5% increase in total assets without any change in the number of issued
ordinary shares, which stood at 45,349,600 shares at the end of 2010.

Year

200
3

No. of
Share
issued
( in
thousand

4527 4527 4534 4534 4534 4534 4534 45349

3
3
9
9
9
9
9

200
4

200
5

200
6

200
7

200
8

200
9

2010

Year

200
3

2006

2007

2008

2009

2010

Market
prices(Yea
r End)

376.0 520.0 770.0 1045.

0
0
0
00

1800.
00

1334.
00

1246.
00

2375.00

200
4

200
5

The price of Nestle Pakistans shares on 31st December 2010 rose from Rs
1246 to Rs 2375, which is a significant increase of 90.61%.

Future outlook
Nestle Pakistan has maintained a firm position in the Pakistani foods
market with the leading position in several categories and is expected to
continue its strong operations on the basis of its current and past
performance.
Nestle Pakistans future operations seem promising with several projects
and investments already in line. The company plans to approximately Rs 8
billion in 2011 for milk collection field development, upgrading of existing
production facilities and increase in production capacity. The company also
plans to continue with its Corporate Social Responsibility efforts in the
coming year.

Nestle Pakistan has also decided to contribute significantly to the Port

Grand Project being initiated in Karachi with a Coffee Shop and Beverages
Bar offering at the complex.