Saint Louis University Laboratory High School – Senior High

C. M Recto St. Saint Joseph Village, Navy Base, Baguio City

Financial Statement Analysis

The Financial Position and Performance of

Nestlé S.A

Submitted by:

Palor, Mark

Soriano, Romnie

Battuing, Kyra

Buduan, Kate

Dizon, Sophia

Leonen, Kristin

Sacramento, Shanne

Sagun, Micaella

Tadeja, Trish

Submitted to:

Mr. Gabriel De Guzman

Date:

May 11, 2018

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 Distribution of Tasks

Name Task/s

 Actor
 Composer
 Mark Palor  Director
 Video Editor
 Rapper

 Vertical Analysis w/ interpretation

 Romnie Soriano  Recommendation & Summary
 Encoder
 Actor

 Background of the Company

 Kyra Battuing  Actor
 Composer
 Rapper

 Encoder
 Kate Buduan  Trend Analysis w/ interpretation
 Recommendation & Summary
 Actor

 Encoder
 Sophia Dizon  Horizontal Analysis (Balance Sheet) w/ interpretation
 Recommendation & Summary
 Actor

 Trend Analysis w/ interpretation

 Kristin Leonen  Recommendation & Summary
 Actor

 Encoder
 Shanne  Vertical Analysis w/ interpretation
Sacramento  Recommendation & Summary
 Actor
 Rapper

 Encoder
 Micaella Sagun  Horizontal Analysis (Income Statement)
 Actor
 Rapper

 Encoder
 Interpretations
 Trish Tadeja  Print
 Compiler
 Actor

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Table of Contents
I. Background of Nestlé S.A ............................................................................................................................ 4
In Switzerland: .................................................................................................................................................... 4

In the Philippines:............................................................................................................................................... 5

I. Financial Statements .................................................................................................................................... 7

Statement of Financial Position....................................................................................................................... 7

Income Statement ............................................................................................................................................ 9

II. Horizontal Analysis ....................................................................................................................................... 10

Three - Year Comparative Statement of Financial Position ...................................................................... 10

Three - Year Comparative Statement of Financial Performance ............................................................ 12

Comparative Statement: Financial Position (Horizontal Analysis) ........................................................... 13

Comparative Statement: Financial Performance (Horizontal Analysis).................................................. 15

III. Vertical Analysis ........................................................................................................................................... 16

Three - Year Comparative Statement of Financial Position ...................................................................... 16

Three - Year Comparative Statement of Financial Performance ............................................................ 18

Comparative Statement: Financial Position (Vertical Analysis) ............................................................... 19

Comparative Statement: Financial Performance (Vertical Analysis) ..................................................... 21

IV. Trend Analysis ........................................................................................................................................... 22

Three - Year Comparative Statement of Financial Position ...................................................................... 22

Three - Year Comparative Statement of Financial Performance ............................................................ 24

Comparative Statement: Financial Position (Trend Analysis) ................................................................... 25

Comparative Statement: Financial Performance (Trend Analysis) ......................................................... 26

V. Recommendation and Summary ............................................................................................................. 27

References .......................................................................................................................................................... 28

Table of Figures
Figure 1: Comparative Financial Position (Horizontal Analysis) .................................................................... 13

Figure 2: Comparative Financial Performance (Horizontal Analysis) .......................................................... 15

Figure 3: Asset Composition (Vertical Analysis) .............................................................................................. 19

Figure 4: Percentile of Sales (Vertical Analysis) .............................................................................................. 21

Figure 5: Growth in Financial Position (Trend Analysis) .................................................................................. 25

Figure 6: Growth in Financial Performance (Trend Analysis) ........................................................................ 26

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 I. Background of Nestlé S.A
In Switzerland:
The pioneer years. Our history begins in 1866, with the foundation of the Anglo-Swiss Condensed Milk
Company. Henri Nestlé develops a breakthrough infant food in 1867, and in 1905 the company he
founded merges with Anglo-Swiss, to form what is now known as the Nestlé Group. During this period
cities grow and railways and steamships bring down commodity costs, spurring international trade in
consumer goods.

The Belle Époque. In 1905, Nestlé & Anglo Swiss has more than 20 factories, and starts using overseas
subsidiaries to establish a sales network that spans Africa, Asia, Latin America and Australia. As World
War One approaches, the firm benefits from the period of prosperity known as the Belle Époque or
‘Beautiful Age’, and becomes a global dairy company.

Survival during wartime. The outbreak of war in 1914 leads to increased demand for condensed milk
and chocolate, but a shortage of raw materials and limits on cross-border trade hamper production
for Nestlé & Anglo-Swiss. To solve this problem, the company acquires processing facilities in the US and
Australia, and by the end of the war it has 40 factories.

Crisis and opportunity. After the war military demand for canned milk declines, causing a major crisis
for Nestlé & Anglo-Swiss in 1921. The company recovers, but is rocked again by the Wall Street Crash in
1929, which reduces consumer purchasing power. However, the era carries many positives: the
company’s management corps is professionalized, research is centralized and pioneering products
such as Nescafé coffee are launched.

Riding out the storm. The outbreak of World War Two in 1939 affects virtually every market, but Nestlé &
Anglo-Swiss continues to operate in difficult circumstances, supplying both civilians and armed forces.
In 1947, the company adds Maggi soups and seasonings to its product range, and adopts the name
Nestlé Alimentana.

Greater consumer convenience. The post-war period is marked by growing prosperity, and people in
the US and Europe spend money on machines that make life easier, such as refrigerators and freezers.
They also favour convenience foods, and Nestlé Alimentana meets this need with new products
including Nesquik and Maggi ready meals.

Frozen foods to pharmaceuticals. Acquisitions enable Nestlé to enter fast-growing new areas such as
frozen foods, and to expand its traditional businesses in milk, coffee and canned foods. In the 1970s
the company diversifies into pharmaceuticals and cosmetics. It starts to attract criticism from activist
groups that allege its marketing of infant food is unethical. Nestlé later becomes one the first
companies to apply the WHO code on breast-milk substitutes across its business.

Towards Nutrition, Health and Wellness. Following years of growth, Nestlé disposes of unprofitable
brands and promotes those that satisfy increasingly health conscious consumers, in line with its new
‘Nutrition, Health and Wellness’ ambition. The company expands in the US, Eastern Europe and Asia,
and targets for global leadership in water, ice cream and animal food.
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Creating Shared Value. Nestlé articulates its Creating Shared Value approach to business for the first
time, and launches its Nestlé Cocoa Plan and Nescafé Plan to further develop sustainable supply
chains in cocoa and coffee. While strengthening its position in traditional segments, infant formula and
frozen foods, Nestlé strengthens its focus on medical nutrition.

In the Philippines:

The Early Years. Although Nestlé products were already available in the Philippines as far back as 1895,
it was not until 1911 when The Nestlé and Anglo Swiss Condensed Milk Company was established in the
country, with its first sales office in Calle Renta, Binondo. The Company was forced to suspend its
operations during World War II, but soon made a comeback after Liberation, under a new name:
Filipro, Inc. It continued to import products such as MILO, NIDO powder milk, MILKMAID and NESCAFÉ
from other countries. In the early 1950’s, Filipro encountered difficulties when the Philippine
government imposed import control. Due to lack of imported products to sell, it was forced to become
a distributor of peanut butter, napkins, fruit preserves, and patis (fish sauce) just to keep its operations
going.

Local Production. In 1960, Nestlé S.A. and San Miguel Corporation entered into a partnership resulting
in the formation of Nutritional Products, Inc. (Nutripro). In 1962, Nutripro’s first factory started operations
in Alabang, Muntinlupa to manufacture NESCAFÉ. In 1977, Filipro, Inc. and Nutripro Inc. merged under
the name Filipro, Inc. In 1986, Filipro, Inc. changed to its present name as Nestlé Philippines, Inc. Nestlé
now has manufacturing facilities in Cabuyao (Laguna), Cagayan de Oro, Lipa (Batangas), Pulilan
(Bulacan) and Tanauan (Batangas) to meet the growing demand for Nestlé products in the country.

Growth and Diversification. In 1991, Nestlé pioneered the AIJV (ASEAN Industrial Joint Venture), a
regional complementation program. The Company participated in this program with the production
of breakfast cereals at the Nestlé Lipa Factory, for export to ASEAN markets. Today, three of the Nestlé
factories in the Philippines – Lipa, Cabuyao, and Cagayan de Oro -- serve as ASEAN Supply Centers to
meet the requirements of Nestlé markets in the region. In late 1998, Nestlé Philippines became a wholly
owned subsidiary of Nestlé S.A., following the latter’s purchase of all of San Miguel Corporation’s equity
shareholding in the Company. Driven by its mission to nurture generations of Filipino families, Nestlé
today produces and markets products under some of the country’s well-known brands such as
NESCAFÉ, NIDO, MILO, NESTEA, MAGGI, BEAR BRAND, NESTLÉ, and PURINA, among others.

About Us. Over a hundred years after it first started operations in the country, Nestlé Philippines, Inc.
(NPI) today is a robust and stable organization, proud of its role in bringing the best food and beverage
throughout the stages of the Filipino consumers’ lives.

Our Purpose. Inspired by the scientific breakthrough of our founder, Henri Nestlé, guided by our values
and with nutrition at our core, we work alongside partners to enhance quality of life and contribute to
a healthier future.

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Our Ambitions. We have defined three overarching ambitions which will guide our work towards
achieving our 2020 commitments and supporting the achievement of the UN Sustainable
Development Goals.

Our History. We want to shape a better and healthier world. This was how we started more than 150
years ago when Henri Nestlé created an infant cereal that saved the life of a child.

Our Values. Our values are reflected in the way we do business, always acting legally and honestly
with respect both for our own people and those we do business with.

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I. Financial Statements

Nestlé S.A
Statement of Financial Position
2015 - 2017
In millions of CHF Amounts (CHF)
2017 2016 2015
Assets

Current assets
Cash and cash equivalents 7,938 7,990 4,884
Short-term investments 655 1,306 921
Inventories 9,061 8,401 8,153
Trade and other receivables 12,422 12,411 12,252
Prepayments and accrued income 607 573 583
Derivative assets 231 550 337
Current income tax assets 919 786 874
Assets held for sale 357 25 1,430
Total current assets 32,190 32,042 29,434

Non-current assets
Property, plant and equipment 27,775 27,554 26,576
Goodwill 29,748 33,007 32,772
Intangible assets 20,615 20,397 19,236
Investments in associates and joint ventures 11,628 10,709 8,675
Financial assets 6,003 5,719 5,419
Employee benefits assets 392 310 109
Current income tax assets 62 114 128
Deferred tax assets 1,967 2,049 1,643
Total non-current assets 98,190 99,859 94,558

Total assets 130,380 131,901 123,992

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Liabilities and equity

Current liabilities
Financial debt 10,536 12,118 9,629
Trade and other payables 18,872 18,629 17,038
Accruals and deferred income 4,094 3,855 3,673
Provisions 863 620 564
Derivative liabilities 507 1,068 1,021
Current income tax liabilities 1,170 1,221 1,124
Liabilities directly associated with assets held for sale 12 6 272
Total current liabilities 36,054 37,517 33,321

Non-current liabilities
Financial debt 15,932 11,091 11,601
Employee benefits liabilities 7,111 8,420 7,691
Provisions 2,445 2,640 2,601
Deferred tax liabilities 3,559 3,865 3,063
Other payables 2,502 2,387 1,729
Total non-current liabilities 31,549 28,403 26,685

Total liabilities 67,603 65,920 60,006

Equity
Share capital 311 311 319
Treasury shares (4,537) (990) (7,489)
Translation reserve (19,433) (18,799) (19,851)
Other reserves 989 1,198 1,345
Retained earnings 84,174 82,870 88,014
Total equity attributable to shareholders of the parent 61,504 64,590 62,338
Non-controlling interests 1,273 1,391 1,648
Total equity 62,777 65,981 63,986

Total liabilities and equity 130,380 131,901 123,992

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 Nestlé S.A
Income Statement
From 2015 - 2017
In millions of CHF Amounts (CHF)
2017 2016 2015

Sales 89,791 89,469 88,785

Other revenue 330 317 298

Cost of goods sold (44,923) (44,199) (44,730)
Distribution expenses (8,205) (8,059) (7,899)
Marketing and administration expenses (20,540) (21,485) (20,744)
Research and development costs (1,724) (1,736) (1,678)
Other trading income 111 99 78
Other trading expenses (1,607) (713) (728)
Trading operating profit 13,233 13,693 13,382

Other operating income 379 354 126

Other operating expenses (3,500) (884) (1,100)
Operating profit 10,112 13,163 12,408

Financial income 152 121 101

Financial expense (771) (758) (725)
Profit before taxes, associates and joint ventures 9,493 12,526 11,784

Taxes (2,779) (4,413) (3,305)

Income from associates and joint ventures 824 770 988
Profit for the year 7,538 8,883 9,467
of which attributable to non-controlling interests 355 352 401
of which attributable to shareholders of the parent (Net profit) 7,183 8,531 9,066

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II. Horizontal Analysis

Nestlé S.A
Three - Year Comparative Statement of Financial Position
2016 - 2017
In millions of CHF 2017 2016 Amount (CHF) Percentage (%)
Assets

Current assets
Cash and cash equivalents 7,938 7,990 -52 -0.65 %
Short-term investments 655 1,306 -651 -49.85 %
Inventories 9,061 8,401 660 7.86 %
Trade and other receivables 12,422 12,411 11 0.09 %
Prepayments and accrued income 607 573 34 5.93 %
Derivative assets 231 550 -319 -58 %
Current income tax assets 919 786 133 16.92 %
Assets held for sale 357 25 332 1328 %
Total current assets 32,190 32,042 148 0.46 %

Non-current assets
Property, plant and equipment 27,775 27,554 221 0.80 %
Goodwill 29,748 33,007 -3,259 -9.87 %
Intangible assets 20,615 20,397 218 1.07 %
Investments in associates and joint ventures 11,628 10,709 919 8.58 %
Financial assets 6,003 5,719 284 4.97 %
Employee benefits assets 392 310 82 26.45 %
Current income tax assets 62 114 -52 -45.61 %
Deferred tax assets 1,967 2,049 -82 -4 %
Total non-current assets 98,190 99,859 -1,669 -1.67 %

Total assets 130,380 131,901 -1521 -1.15%

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Liabilities and equity

Current liabilities
Financial debt 10,536 12,118 -1,882 -13.05 %
Trade and other payables 18,872 18,629 243 1.30 %
Accruals and deferred income 4,094 3,855 239 6.20 %
Provisions 863 620 243 39.19 %
Derivative liabilities 507 1,068 -561 -52.53 %
Current income tax liabilities 1,170 1,221 -51 -4.18 %
Liabilities directly associated with assets held for sale 12 6 6 100%
Total current liabilities 36,054 37,517 -1,463 -3.90 %

Non-current liabilities
Financial debt 15,932 11,091 4,841 43.65 %
Employee benefits liabilities 7,111 8,420 -1309 -15.55 %
Provisions 2,445 2,640 -195 -7.39 %
Deferred tax liabilities 3,559 3,865 -306 -7.92 %
Other payables 2,502 2,387 115 4.82 %
Total non-current liabilities 31,549 28,403 3,146 11.08 %

Total liabilities 67,603 65,920 1,683 2.55 %

Equity
Share capital 311 311 0% 0%
Treasury shares (4,537) (990) -3,547 358.28 %
Translation reserve (19,433) (18,799) -634 3.37 %
Other reserves 989 1,198 -209 -17.45 %
Retained earnings 84,174 82,870 1,304 1.57 %
Total equity attributable to shareholders of the parent 61,504 64,590 -3,086 -4.78 %
Non-controlling interests 1,273 1,391 -118 -8.48 %
Total equity 62,777 65,981 -3204 -4.86 %

Total liabilities and equity 130,380 131,901 -1521 -1.15 %

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 Nestlé S.A
Three - Year Comparative Statement of Financial Performance
2016 - 2017
In millions of CHF 2017 2016 Amount (CHF) Percentage (%)
Sales 89,791 89,469 322 0.36%

Other revenue 330 317 13 4.10%

Cost of goods sold (44,923) (44,199) -724 1.64%
Distribution expenses (8,205) (8,059) -146 1.81%
Marketing and administration expenses (20,540) (21,485) 945 -4.40%
Research and development costs (1,724) (1,736) 12 -0.69%
Other trading income 111 99 12 12.12%
Other trading expenses (1,607) (713) -894 125.39%
Trading operating profit 13,233 13,693 -460 -3.36%

Other operating income 379 354 25 7.06%

Other operating expenses (3,500) (884) -2 616 295.93%
Operating profit 10,112 13,163 -3 051 -23.18%

Financial income 152 121 31 25.62%

Financial expense (771) (758) -13 1.72%
Profit before taxes, associates and joint ventures 9,493 12,526 -3 033 -24.21%

Taxes (2,779) (4,413) 1 634 -37.03%

Income from associates and joint ventures 824 770 54 7.01%
Profit for the year 7,538 8,883 -1 345 -15.14%
of which attributable to non-controlling interests 355 352 3 0.85%
of which attributable to shareholders of the parent (Net profit) 7,183 8,531 -1 348 -15.80%

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 SUMMARY OF FINDINGS

Comparative Statement: Financial Position (Horizontal Analysis)

From the horizontal analysis prepared, the Statement of Financial Position of Nestle S.A over the
year 2016 to 2017 shows the following changes:

COMPARATIVE FINANCIAL POSITION

2016-2017
(IN MILLIONS CHF)

99,859 2016 2017

98,190

67,603

65,981
65,920

62,777
32,190
32,042

CURRENT ASSETS NON-CURRENT ASSETS LIABILITIES OWNER'S EQUITY

Figure 1: Comparative Financial Position (Horizontal Analysis)

ASSETS

Nestlé’s Total Current Assets favorably increased by 0.46% in 2017. This was caused by the 1,328%
increase in Assets Held for Sale from CHF 25 million to CHF 357 million. This was also supported by the
small increases of other accounts like: Inventories increased by 7.86%, Trade and Other Receivables by
a slight increase of 0.09%, Prepayments and Accrued Income by 5.93% and lastly, the Current Income
Tax Assets by 16.92%. However, there was a dramatic decrease of 49.85% in Short-Term Investments
from CHF 1306 million to CHF 655 million. Likewise, the Derivative Assets decreased by 58% from CHF
550 million to CHF 231 million.

Nestlé’s Total Noncurrent Assets unfavorably decreased by 1.67 % from CHF 99,859 million to
98,109 million. Their Current Income Tax Assets had a massive decrease of 45.61% from CHF 114 million
to CHF 62 million which completely affected the fall on the Noncurrent Assets. Included are the 9.87 %
decrease on Goodwill, 4 % decrease on their Deferred Tax Assets, 8.58% and on Inventories and Joint
Ventures. Yet, Employee Benefits Assets essentially increased by 26.45% from CHF 310 million to CHF 392
million. The increase in Property, Plant, and Equipment by 0.8%, Intangible Assets by 1.07% and the
Financial Assets by 4.97% also resulted a small increase of 1.15% in the Total Assets.

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LIABILITIES

Nestlé’s total Liabilities increased by 2.55% from CHF 65,920 million to CHF 67,603 million which is
considered unfavorable. Even though the Current Liabilities favorably decreased by 3.9%, the increase
on Non-Current Liabilities by 11.08% influenced the total Liabilities as a whole.

The Current Liabilities in Liabilities Directly Associated with Assets Held for Sale largely increased
by a 100% from CHF 6 million to CHF 12 million along with the increase of Provisions by 39.19%, 6.2%
increase in Accruals and Deferred Income and a small increase of 1.30% in Trade and Other Payables.
Still, there was a favorable decrease on Derivative Liabilities by 52.53%, 13.05% on Financial Debt and
4.18% on Current Income Tax Liabilities.

Unlike the Current Liabilities, The total Noncurrent Liabilities’ accounts had an unfavorable
increase. Employee Benefits Liabilities decreased by 15.55%, Provisions by 7.39%, and Deferred Tax
Liabilities by 7.92% and Other Payables by 1.03%. It was observed that Nestle did pay for their other
obligations but not fully paid, moreover, they bought more equipment which caused the great
increase on Liabilities. However, the 43.65% increase on Financial Debt had a huge impact on the total
Liabilities which became unfavorable.

OWNER’S EQUITY

The Total Equity of Nestlé decreased by 4.86% with a CHF 2304 million difference despite having
a 358.28% increase in treasury shares from CHF (990) million to CHF (4,537) million. This is because most
of the accounts marginally decreased by a small percentage like the other reserve’s decrease of
17.45%. All in all, Nestlé’s total liabilities and equity unfavorably decreased by 1.15%.

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 SUMMARY OF FINDINGS

Comparative Statement: Financial Performance (Horizontal Analysis)

As regards the company’s financial performance in its operations for the years 2016 and 2017,
the graph shown below give an off-hand picture:

COMPARATIVE FINANCIAL PERFORMANCE

2016-2017
(IN MILLIONS CHF)

2016 2017
89,791
89,469

13,693

13,233

13,163

12,526
10,112

9,493

8,531

7,183
SALES TRADING OPERATING OPERATING PROFIT PROFIT BEFORE TAXES, NET PROFIT
PROFIT ASSOCIATES AND JOINT
VENTURES

Figure 2: Comparative Financial Performance (Horizontal Analysis)

Nestlé made a 0.36% increase on sales from 2016 to 2017 which is considered favorable. This
shows that their strategy on selling goods is better than the last year. However, the unfavorable
decrease of the profit accounts must not be overlooked. The Trading Operating Profit decreased by
3.36%. The factors that affected this account are distribution expenses which had a 1.81% increase and
the other trading expenses which had a large increase of 125.39%. The Operating Profit decreased by
23.18%. This was caused by the 295.93% increase in other operating expense. The Profit before Taxes,
Associates and Joint Ventures decreased by 24.21% because of the 1.72% increase in financial
expense. All in all, the Net Profit was affected by these accounts which led to the decrease by 15.80%
from CHF 8,531 million to CHF 7,183 million.

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III. Vertical Analysis

Nestlé S.A
Three - Year Comparative Statement of Financial Position
2015 - 2017
In millions of CHF 2017 Percentage (%) 2016 Percentage (%) 2015 Percentage (%)
Assets

Current assets
Cash and cash equivalents 7,938 6.09% 7,990 6.06% 4,884 3.94%
Short-term investments 655 0.5% 1,306 0.99% 921 0.74%
Inventories 9,061 6.95% 8,401 6.37% 8,153 6.58%
Trade and other receivables 12,422 9.53% 12,411 9.41% 12,252 9.88%
Prepayments and accrued income 607 0.47% 573 0.43% 583 0.47%
Derivative assets 231 0.18% 550 0.42% 337 0.27%
Current income tax assets 919 0.7% 786 0.6% 874 0.7%
Assets held for sale 357 0.27% 25 0.2% 1,430 1.15%
Total current assets 32,190 24.69% 32,042 24.29% 29,434 23.74%

Non-current assets
Property, plant and equipment 27,775 21.3% 27,554 20.89% 26,576 21.43%
Goodwill 29,748 22.82% 33,007 25.02% 32,772 26.43%
Intangible assets 20,615 15.81% 20,397 15.46% 19,236 15.51%
Investments in associates and joint ventures 11,628 8.92% 10,709 8.12% 8,675 6.1%
Financial assets 6,003 4.6% 5,719 4.34% 5,419 4.37%
Employee benefits assets 392 0.3% 310 0.24% 109 0.09%
Current income tax assets 62 0.05% 114 0.09% 128 0.1%
Deferred tax assets 1,967 1.51% 2,049 1.55% 1,643 1.33%
Total non-current assets 98,190 75.31% 99,859 75.71% 94,558 76.26%

Total assets 130,380 100% 131,901 100% 123,992 100%

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Liabilities and equity

Current liabilities
Financial debt 10,536 8.08% 12,118 9.19% 9,629 7.77%
Trade and other payables 18,872 14.47% 18,629 14.12% 17,038 13.74%
Accruals and deferred income 4,094 3.14% 3,855 2.92% 3,673 2.96%
Provisions 863 0.66% 620 0.47% 564 0.45%
Derivative liabilities 507 0.39% 1,068 0.81% 1,021 0.82%
Current income tax liabilities 1,170 0.9% 1,221 0.93% 1,124 0.91%
Liabilities directly associated with assets held for sale 12 9.2% 6 4.55% 272 0.22%
Total current liabilities 36,054 27.65% 37,517 28.44% 33,321 26.87%

Non-current liabilities
Financial debt 15,932 12.22% 11,091 8.41% 11,601 9.36%
Employee benefits liabilities 7,111 5.45% 8,420 6.38% 7,691 6.2%
Provisions 2,445 1.88% 2,640 2% 2,601 2.1%
Deferred tax liabilities 3,559 2.73% 3,865 2.93% 3,063 2.47%
Other payables 2,502 1.92% 2,387 1.81% 1,729 1.39%
Total non-current liabilities 31,549 24.2% 28,403 21.53% 26,685 21.52%
Total liabilities 67,603 51.85% 65,920 49.98% 60,006 48.4%
Equity
Share capital 311 0.24% 311 0.24% 319 0.26%
Treasury shares (4,537) 3.48% (990) 0.75% (7,489) 6.04%
Translation reserve (19,433) 14.9% (18,799) 14.25% (19,851) 16.01%
Other reserves 989 0.76% 1,198 0.91% 1,345 1.08%
Retained earnings 84,174 64.56% 82,870 62.83% 88,014 70.98%
Total equity attributable to shareholders of the parent 61,504 47.17% 64,590 48.97% 62,338 50.28%
Non-controlling interests 1,273 0.98% 1,391 1.05% 1,648 1.33%
Total equity 62,777 48.15% 65,981 50.02% 63,986 51.6%

Total liabilities and equity 130,380 100% 131,901 100% 123,992 100%

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 Nestlé S.A
Three - Year Comparative Statement of Financial Performance
2015 – 2017
In millions of CHF 2017 Percentage (%) 2016 Percentage (%) 2015 Percentage (%)
Sales 89,791 100% 89,469 100% 88,785 100%

Other revenue 330 0.37% 317 0.35% 298 0.34%

Cost of goods sold (44,923) 50.03% (44,199) 49.4% (44,730) 50.38%
Distribution expenses (8,205) 9.14% (8,059) 9.01% (7,899) 8.9%
Marketing and administration expenses (20,540) 22.88% (21,485) 24.01% (20,744) 23.36%
Research and development costs (1,724) 1.92% (1,736) 1.94% (1,678) 1.89%
Other trading income 111 0.12% 99 0.11% 78 0.09%
Other trading expenses (1,607) 1.79% (713) 0.8% (728) 0.82%
Trading operating profit 13,233 14.74% 13,693 15.3% 13,382 15.07%

Other operating income 379 0.42% 354 0.4% 126 0.14%

Other operating expenses (3,500) 3.9% (884) 0.99% (1,100) 1.24%
Operating profit 10,112 11.26% 13,163 14.71% 12,408 13.98%

Financial income 152 0.17% 121 0.14% 101 0.11%

Financial expense (771) 0.86% (758) 0.85% (725) 0.82%
Profit before taxes, associates and joint ventures 9,493 10.57% 12,526 14% 11,784 13.27%

Taxes (2,779) 3.09% (4,413) 4.93% (3,305) 3.72%

Income from associates and joint ventures 824 0.92% 770 0.86% 988 1.11%
8.4 9.93% 10.66%
Profit for the year 7,538 8,883 9,467
%
of which attributable to non-controlling interests 355 0.4% 352 0.39% 401 0.45%
of which attributable to shareholders of the parent (Net
7,183 7.1% 8,531 9.54% 9,066 10.21%
profit)

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 SUMMARY OF FINDINGS

Comparative Statement: Financial Position (Vertical Analysis)

Using the common-size statements for the financial position of Nestle S.A for the years 2015 to
2017, the following were noted:

ASSET COMPOSITION
2017 2016 2015

Investments in Associates and Joint Ventures

Intangible Assets

Goodwill

Property, Plant and Equipment

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00%

Figure 3: Asset Composition (Vertical Analysis)

 Most of the accounts under Noncurrent Assets make up more than half of the Total Assets
for the span of three years. These accounts like Investments in Associates and Joint Ventures
(7.71% average), Intangible Assets (15.59%), Goodwill (24.76%), and Property, Plant and
Equipment (21.21%) are the highest components in all of the assets of Nestlé S.A.
 The company’s Noncurrent Assets makes up 75.71% of the Assets in 2016 but then
decreased to 75.31% in 2017. Mostly, because of the rapid decrease of Goodwill from 25.02% to
22.82% in 2017.
 The Current Assets gradually increased from 23.74% in 2015 to 24.29% in 2016 and then to
24.69% in 2017. The Cash and Cash Equivalents gradually increased from 3.94% in 2015 to 6.06%
in 2016 and then to 6.09% in 2017.
 Current Income Tax Assets and Prepaid and Accrued Income decreased on the year
2016, yet during 2017, these accounts shared the similar amounts they had last 2015. Current
Income Tax Assets being 0.7% to 0.6% then back to 0.7%. Similar with Prepaid and Accrued
Income being 0.47% to 0.43% then back to 0.47%.

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 Unfortunately, the Liabilities steadily increased from 48.40% in 2015 to 49.98% in 2016 and
then to 51.85% in 2017. The Trade and Other Payables rapidly increased from 13.74% in 2015,
14.12% in 2016 and then to 14.47% in 2017. Provisions slowly increased from 0.45% in 2015 to 0.47%
in 2016 and then to 0.66% in 2017. Other payables also increased from 1.39% in 2015, 1.81% in
2016 and then to 1.92% in 2017.

 The Owner’s Equity deliberately decreased from 51.6% in 2015 to 50.02% in 2016 and then
to 48.15% in 2017. Other reserves decreased from 1.08% in 2015 to 0.91% in 2016 and then to
0.76% in 2017. Total equity attributable to shareholders of the parent decreased from 50.28% in
2015 to 48.97% in 2016 and then to 47.17% in 2017. Non-controlling interest also decreased from
1.33% in 2015 to 1.05% in 2016 and then to 0.98% in 2017.

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 SUMMARY OF FINDINGS

Comparative Statement: Financial Performance (Vertical Analysis)

The graph below shows the company’s common-sized income statements for the year
2015 to 2017:

PERCENTILE OF SALES
2017 2016 2015

Net Profit

Profit before taxes…

Operating profit

Trading operating profit

0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00%

Figure 4: Percentile of Sales (Vertical Analysis)

 Trading Operating Profit increased from 15.07% in 2015 to 15.30% in 2016 and then decreased
14.74% in 2017. Mostly because of the continuous increase on other trading income from 2015 to
2017, for 0.09% to 0.11% to 0.12% respectively.
 Operating Profit increased from 13.98% in 2015 to 14.71% in 2016 and then decreased to 11.26%
in 2017 with other operating income as a major factor for it increased from 0.14% in 2015 to .4% in
2016 and then to 0.42% in 2017.
 Profit before Taxes, Associates and Joint Ventures increased from 13.27% in 2015 to 14% in 2016
and then decreased to 10.57% in 2017 because of the continuous increase of financial expense
from 0.82% to 0.85% and then to 0.86%.
 The Net Profit was affected by these changes which resulted to constantly decreased from
13.27% in 2015 to 9.54% in 2016 and then to 7.1% in 2017.

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IV. Trend Analysis

Nestlé S.A
Three - Year Comparative Statement of Financial Position
2015 - 2017
Percentage (%) Percentage (%) 2015 Percentage (%)
In millions of CHF 2017 2016
(Base Year)
Assets

Current assets
Cash and cash equivalents 7,938 162.53% 7,990 163.6% 4,884 100%
Short-term investments 655 71.12% 1,306 141.8% 921 100%
Inventories 9,061 111.14% 8,401 103.04% 8,153 100%
Trade and other receivables 12,422 101.39% 12,411 101.3% 12,252 100%
Prepayments and accrued income 607 104.12% 573 98.28% 583 100%
Derivative assets 231 68.55% 550 163.2% 337 100%
Current income tax assets 919 105.15% 786 89.93% 874 100%
Assets held for sale 357 24.97% 25 1.75% 1,430 100%
Total current assets 32,190 109.36% 32,042 108.86% 29,434 100%

Non-current assets
Property, plant and equipment 27,775 104.51% 27,554 103.68% 26,576 100%
Goodwill 29,748 90.77% 33,007 100.72% 32,772 100%
Intangible assets 20,615 107.17% 20,397 106.04% 19,236 100%
Investments in associates and joint ventures 11,628 134.04% 10,709 123.45% 8,675 100%
Financial assets 6,003 110.78% 5,719 105.54% 5,419 100%
Employee benefits assets 392 359.63% 310 284.4% 109 100%
Current income tax assets 62 48.44% 114 89.06% 128 100%
Deferred tax assets 1,967 119.72% 2,049 124.71% 1,643 100%
Total non-current assets 98,190 103.84% 99,859 105.6% 94,558 100%

Total assets 130,380 105.15% 131,901 106.38% 123,992 100%

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Liabilities and equity

Current liabilities
Financial debt 10,536 109.42% 12,118 125.85% 9,629 100%
Trade and other payables 18,872 110.76% 18,629 109.34% 17,038 100%
Accruals and deferred income 4,094 111.46% 3,855 104.96% 3,673 100%
Provisions 863 153.01% 620 109.93% 564 100%
Derivative liabilities 507 49.66% 1,068 104.6% 1,021 100%
Current income tax liabilities 1,170 104.09% 1,221 108.63% 1,124 100%
Liabilities directly associated with assets held for sale 12 4.41% 6 2.21% 272 100%
Total current liabilities 36,054 108.2% 37,517 112.59% 33,321 100%

Non-current liabilities
Financial debt 15,932 137.33% 11,091 95.6%% 11,601 100%
Employee benefits liabilities 7,111 92.46% 8,420 109.48% 7,691 100%
Provisions 2,445 94% 2,640 101.5% 2,601 100%
Deferred tax liabilities 3,559 116.19% 3,865 126.18% 3,063 100%
Other payables 2,502 144.71% 2,387 138.06% 1,729 100%
Total non-current liabilities 31,549 118.23% 28,403 106.44% 26,685 100%
Total liabilities 67,603 112.66% 65,920 109.86% 60,006 100%
Equity
Share capital 311 97.49% 311 97.49% 319 100%
Treasury shares (4,537) 60.58% (990) 13.22% (7,489) 100%
Translation reserve (19,433) 97.89% (18,799) 94.7% (19,851) 100%
Other reserves 989 73.53% 1,198 89.07% 1,345 100%
Retained earnings 84,174 95.64% 82,870 94.16% 88,014 100%
Total equity attributable to shareholders of the parent 61,504 98.66% 64,590 103.61% 62,338 100%
Non-controlling interests 1,273 77.25% 1,391 84.41% 1,648 100%
Total equity 62,777 98.11% 65,981 103.12% 63,986 100%

Total liabilities and equity 130,380 105.15% 131,901 106.38% 123,992 100%

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 Nestlé S.A
Three - Year Comparative Statement of Financial Performance
2015 - 2017
Percentage (%) Percentage (%) 2015 Percentage (%)
In millions of CHF
2017 2016 (Base Year)
Sales 89,791 101.13% 89,469 100.77% 88,785 100%

Other revenue 330 110.74% 317 106.38% 298 100%

Cost of goods sold (44,923) 100.43% (44,199) 98.81% (44,730) 100%
Distribution expenses (8,205) 103.87% (8,059) 102.03% (7,899) 100%
Marketing and administration expenses (20,540) 99.02% (21,485) 103.57% (20,744) 100%
Research and development costs (1,724) 102.74% (1,736) 103.46% (1,678) 100%
Other trading income 111 142.31% 99 126.92% 78 100%
Other trading expenses (1,607) 220.74% (713) 97.94% (728) 100%
Trading operating profit 13,233 98.89% 13,693 102.32% 13,382 100%

Other operating income 379 300.79% 354 280.95% 126 100%

Other operating expenses (3,500) 318.18% (884) 80.36% (1,100) 100%
Operating profit 10,112 81.50% 13,163 106.08% 12,408 100%

Financial income 152 150.5% 121 119.8% 101 100%

Financial expense (771) 106.34% (758) 104.55% (725) 100%
Profit before taxes, associates and joint ventures 9,493 80.56% 12,526 106.3% 11,784 100%

Taxes (2,779) 84.08% (4,413) 133.52% (3,305) 100%

Income from associates and joint ventures 824 83.4% 770 77.94% 988 100%
Profit for the year 7,538 79.62% 8,883 93.83% 9,467 100%
355 88.53% 352 87.78% 401 100%
of which attributable to non-controlling interests
of which attributable to shareholders of the
7,183 79.23% 8,531 94.1% 9,066 100%
parent (Net profit)

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 SUMMARY OF FINDINGS

Comparative Statement: Financial Position (Trend Analysis)

The trends in some important accounts like current assets, non-current assets, liabilities, and
owner’s equity shall be shown:

GROWTH IN FINANCIAL POSITION

2015-2017
115%

110%

105%

100%

95%

90%
2015 2016 2017

Current Assets Non-Current Assets Liabilities Owner's Equity

Figure 5: Growth in Financial Position (Trend Analysis)

In terms of the Current Assets, it showed an upward trend in those three years. Possibly because
of the nonstop increase of cash and cash equivalents, inventories, and the current income tax assets.

The Non-Current Assets skyrocketed from 2015 to 2016 yet barely kept up the positive trend from
2016 to 2017. This was caused by the decrease of almost all of the accounts under it except for the
financial debt and the other payables.

The Liabilities however increased by 2016, trade and other payables in Current Liabilities and
other payables in Non-Current Liabilities being the main elements yet, it had a declining rate in the
year 2017 which is considered favorable. This was possible since there was a decrease on provisions
under the Non-Current Liabilities and in derivative liabilities under Current Liabilities.

Regrettably, the share capital having no change and the massive decrease on total equity
attributes to share of the parent had a great impact resulting Owner’s Equity to intensely go down
between the years 2016 to 2017.

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 SUMMARY OF FINDINGS

Comparative Statement: Financial Performance (Trend Analysis)

The trends in some important accounts like sales, trading operating profit, operating profit, profit
before taxes, associates and joint ventures and net profit shall be shown:

GROWTH IN FINANCIAL PERFORMANCE

2015-2017
120%

100%

80%

60%

40%

20%

0%
2015 2016 2017

Sales Trading Operating Profit

Operating Profit Profit before Taxes, Associates and Joint Ventures
Net Profit

Figure 6: Growth in Financial Performance (Trend Analysis)

The Sales remained a steady increase throughout those three years but only by a small fraction
however still significant.
The Trading Operating Profit increased amid 2015 to 2016 because of the positive increase on
other trading income however faintly decreased as it reached 2017 because other trading expense’s
immense growth.
The Operating Profit and Profit before Taxes, Associates and Joint Ventures coincidentally had
the same pattern of going up in 2016 because of their corresponding incomes then slowly decreasing
in 2017 being pulled down by their expenses.
All of these changes resulted to a considerably low Net profit in the span of those three years.

Page | 26
V. Recommendation and Summary
Our recommendation for Nestle is as follows; the company needs to increase their short-term
investments since it decreased drastically in the past year. Keep short-term investments that are easy
to liquidate in case of emergencies, same with their current income tax assets which also decreased.
As for their liabilities, they need to decrease their provisions and their financial debt which increased
drastically since 2016. For the company's owners’ equity, most of the accounts decreased minimally.
Although the difference is small, there was still a big impact on the equity as a whole. They should still
monitor their equity like what they did last 2015 in order to prevent this from happening in the future.

As for the financial performance of Nestlé S.A, the sales and the incomes are not that bad, in
fact these accounts did well. However, the expenses were also high that it certainly affected those
positive incomes. One recommendation that must be kept in mind is to learn to control their expenses.
Always look for the cheapest yet still good quality resources for it is the wisest choice.

As what we have identified in the company’s balance sheet and income statement it is
unfavorable due to some reasons. We recommend that they must lessen their liabilities and they must
increase their assets. They can do this through finding a lot of investors and if they sell their remaining
products in lower cost in order to lessen their inventories. They must also be aware of their Property,
Plant, and Equipment because this three has a very big impact in the asset of the business. The
company’s liabilities increased much because of their payables, deferred income, financial debt and
others. The equity also decreases that leads to a negative total equity.

In the income statement of the company that is also unfavorable they must lessen their
expenses, decrease overheads and must sell their products with this discounts or either they must
increase their prices in order to gain more profit. They must identify their most profitable items because
they will gain much more profit with this.

The fact that there is an obvious increase on liabilities and decrease on owner’s equity which
are both unfavorable, it is very alarming and it shows that the company depends on their equity to
pay for their obligations. If they cannot lessen the liabilities and end the owner’s equity’s decrease,
there is a big probability that some of their investors will be going to pull out their investment. This year
they must increase their assets same through with the owner’s equity and decrease in liabilities.

When it comes to the income statement, it was unfavorable for it shows the decrease of the
profit of the company this past few years. The collected data shows that as the income increases so
do the expenses which over all resulted to a negative effect. The company needs to sell their
inventories so that their profit may increase. They may use sale, discounts, or coupons to attract the
customers to buy their products and gifted that they may now introduce or create a new product or
improve an existing one that can go to the trend.

Page | 27
References
Nestlé EAR. (2014). Nestlé. Retrieved April 1, 2018, from https://www.nestle-
ea.com/en/aboutus/history/history_detailed
Nestlé Philippines. (2014). Nestlé. Retrieved April 1, 2018, from
https://www.nestle.com.ph/aboutus/history
Nestlé Philippines. (2014). Nestlé. Retrieved April 1, 2018, from https://www.nestle.com.ph/aboutus
Nestlé S.A. (2018, April 1). Publications. Retrieved from Nestlé:
https://www.nestle.com/investors/publications

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