NESTLE

INTERNAL AUDIT REPORT

Nestl S.A. is the largest food and nutrition company in the world. Founded and headquartered in Vevey, Switzerland, Nestl originated in a 1905 merger of the Anglo-Swiss Milk Company, established in 1867 by brothers George Page and Charles Page, and Farine Lacte Henri Nestl, founded in 1866 by Henri Nestl. The company grew significantly during the First World War and again following the Second World War, eventually expanding its offerings beyond its early condensed milk and infant formula products. Today, the company operates in 86 countries around the world, and employs over 280,000 people.

FINANCIAL REPORT
Margins % of Sales Revenue COGS Gross Margin SG&A R&D Other Operating Margin Net Int Inc & Other EBT Margin 2009-12 100.00 42.01 57.99 41.53 1.88 1.15 13.91 -0.57 13.34 2010-12 100.00 41.79 58.21 41.74 1.71 14.76 19.93 34.69

Profitability Net Margin % Asset Turnover (Average)

Return on Assets %
Financial Leverage (Average) Return on Equity % Return on Invested Capital % Current Ratio Quick Ratio Operating Profit

2009-12 9.69 0.99 9.61 2.27 20.92 14.40 1.29 0.49 15%

2010-12 31.20 0.99 30.76 1.80 61.80 44.38 1.10 0.78 14.80%

Efficiency Days Sales Outstanding

2009-12 43.67

2010-12 40.57

Days Inventory Payables Period

Cash Conversion Cycle Receivables Turnover Inventory Turnover Fixed Assets Turnover Asset Turnover

68.93 103.51
9.09 8.36 5.29 5.04 0.99

62.33 102.00
0.90 9.00 5.86 5.10 0.99

MARKET SHARE SAMPLE

STOCK PRICE PERFORMANCE

Stock Price 08/08/2011 08/12/2011

EMPLOYEE TURNOVER
1. Programmes shares and best practices for manufacturing, leadership and people development. 2. Major global effort in implementing safety and health approach in the workplace. 3. SAP Development and Performance Evaluation and Personal Development Processes. 4. Mentoring Scheme Programs. 5. International career Development. 6. Employee engagement

LABOUR PRIORITIES
Respect the right of our employees to establish and join organizations of their own choosing and engage in constructive negotiations. Offer competitive wages and benefits that allow our employees to cover their needs according to local standards of living. Respect Corporate guidelines regarding temporary employees based on which temporary staff shall only be used in circumstances where it is justified by the temporary nature of the job and will not result in unjustifiable differences in employment conditions. Respect Corporate guidelines regarding outsourced activities which indicate that only those activities which are non-core to the business may be outsourced and that the people performing them will be treated fairly at all times. Implement the Corporate guidelines regarding working time for our employees to assure a safe and healthy workplace and a working environment respectful of their family lives. Treat every employee with dignity and without any tolerance for discrimination, harassment or abuse.

VALUE CHAIN
Products and consumers

Agriculture and Sourcing

Manufacturing and Distribution

SUPPLY CHAIN MANAGEMENT

Nestle defines SCM as the two-way management of the flow of goods, services and information from suppliers to manufacturers, wholesalers, distributors, stores to the end user. SCM is especially critical for the food industry because of the ease of spoilage. Nestle feels a consumer products company remains profitable only if it has the right product at the right price in the right place at the right time. However, getting these stars to line up only happens when the entire supply chain works as one. Seen that way, SCM becomes a branding issue. When Nestle places its logo on a product, the logo represents a seal of quality. Protecting that quality makes Nestle responsible for its entire supply chain. Teiling says consumers dont care if a supplier or distributor had a problem. If something goes wrong in the supply chain, it ruins things for the consumer, says the Nestle executive.

COMPETITIVE ADVANTAGE
Our unmatched product and brand portfolio, with strong market positions. Over 20 Nestl brands have annual sales of over CHF 1 billion. Whether global or regional, our brands are always relevant to consumers locally. Our unmatched R&D is the unseen impetus behind the growth of our brands. It is science-based, consumer centric and focused on differentiation from our competitors. It goes beyond food to cover new products, packaging, technology and manufacturing, quality and safety.

Our unmatched geographic Our people, culture, values, presence has been established and over attitude enable us to be many years and is a reflection decentralised of both and entrepreneurial. It the breadth of our presence, combines with our devolved responsibilities with a brands available more or less cohesive strategic direction. everywhere, and the duration We are for which patient and not averse to taking we have been present in reasonable risks. Our speed countries the and focus world over. enable us to remain competitive in spite of any challenges in the marketplace.

CORE COMPETENCE
Nutrition, Health and Wellness. Each of our product categories, from Chocolate to Baby Food, has a specific strategy to ensure that it can be the nutrition leader in its space. branded food to lower income consumers around the world.

Out-of-home consumption is growing faster than in-home. We are the largest branded manufacturer, with Emerging markets and Popularly a business built on branded Positioned Products. We have ingredients tailored but increasingly achieving new not just our products, but also our standards in customer solutions, business models and marketing mix systems and service. to ensure that we are best able to realise the growing opportunity to provide nutritious, affordable,

Innovation & renovation. Innovation both over 70 years old is about big steps and changing the rules of the game, or even changing Operational efficiency seeks to the game. It is hard to copy. Its ensure that we have the highest rewards quality, can be measured by profitable the lowest cost and best growth customer service. The aim is to for years to come and sustainable improve our competitive advantages. Renovat sustainability by being better, is more incremental, and lies behindfaster, more efficient, less the still-growing success of brands wasteful and, such as Nescaf and KitKat, as a result, higher performing

STRENGTHS
1.Ability to leverage strong brand name to generate sales. 2.Ability to customize products to the local market conditions. 3.Strong global operations with diversified revenue base. 4.Research and development capabilities.

WEAKNESSESS
1.Increasing instance of product recall hampering brand equity. 2.Limited presence in organic foods market. 3. Lack in retail presence

Choose Wellness Choose Nestle

Good food, good life