Nestlé maintains strong momentum over first half of 2007 - 7.4% organic growth, EBIT margin up 60 basis points - CHF 25 billion three-year share buyback programme
Vevey, August 15, 2007

Sales of CHF 51.1bn, up CHF 4bn (+8.4%)
7.4% organic growth, 5.3% real internal growth
EBIT of CHF 6.9bn (+14.2%), margin of 13.5%, +60 basis points
Food and Beverages: 7.1% organic growth, EBIT margin +60 basis points
Net profit of CHF 4.9bn (+18.4%), earnings per share CHF 12.79 (+19.0%)
Operating cash flow CHF 4.3bn, up 29.4%
CHF 25bn three-year share buyback programme announced
Full-year outlook: above-target organic growth with sustainable margin improvement
Peter Brabeck-Letmathe, Chairman and CEO of Nestlé: "The Group again achieved both strong growth and improved margins, the hallmark of the Nestlé model. These results are due to the strong performance of the Food and Beverages business and Nestlé's ongoing transformation into the world's leading nutrition, health and wellness company. In spite of increasing input cost pressures, I am confident of Nestlé achieving above-target organic growth for 2007, as well as a sustainable margin improvement. Finally, the Board has approved a new, three-year CHF 25 billion share buyback programme. This reflects our commitment to an efficient capital structure and our continued confidence in the business."

EBIT Margins
Jan.-June
2007 Change vs.
Jan.-June 2006 (a) Jan.-June
2007 vs. Jan.-June 2006 (a)
Sales CHF 51 114m + 8.4% + CHF 3 956m
EBIT CHF 6 919m + 14.2% + CHF 859m 13.5% +60 bps
Net profit CHF 4 916m + 18.4% + CHF 765m 9.6% +80 bps
Total EPS CHF 12.79 + 19.0%
Real internal growth
Organic growth 5.3% 7.4%
(a) see note at end of release
All calculations based on non-rounded figures

Group sales, profitability and financial positionIn the first six months of 2007 consolidated sales of the Nestlé Group amounted to CHF 51.1 billion, an increase of 8.4% over the same period last year. This was mainly driven by organic growth of 7.4%, consisting of real internal growth of 5.3% and price increases of 2.1%. Foreign exchange pushed sales up by 0.5%, while acquisitions, net of divestitures, added another 0.5%. The Group's Food and Beverages business achieved organic growth of 7.1%, consisting of real internal growth of 4.9% and price increases of 2.2%.

Food and Beverages' strong organic growth of 7.1% yielded scale benefits both in cost of goods sold and marketing. Combined with a continued drive for efficiencies, these benefits of scale more than compensated for higher input costs. As a result, Food and Beverages’ EBIT margin (Earnings Before Interest and Taxes) was up 60 basis points and was the main contributor to the Group's overall EBIT margin improvement of 60 basis points to 13.5%. The Group’s EBIT rose 14.2% to CHF 6.9 billion. The cost of goods sold decreased by 20 basis points. Distribution expenses increased by 40 basis points, mainly as a result of the Jenny Craig acquisition in August 2006 and the strong growth of other distribution intensive businesses such as Nestlé Waters. In spite of increased investment in Nestlé's brands, marketing and administrative costs dropped by 80 basis points due to the good management of trade spend and economies of scale.

Net profit grew 18.4% to CHF 4.9 billion, resulting in a net margin of 9.6%, up 80 basis points. Earnings per share grew 19.0% to CHF 12.79.

The Group’s operating cash flow increased by 29.4% or CHF 1 billion over the same period last year, to CHF 4.3 billion. The continued focus on working capital resulted in a further improvement in this area as compared to the first half of 2006. The Group’s net debt was CHF 13.4 billion, a level similar to the corresponding period last year.

New, three-year CHF 25 billion share buyback programmeNestlé's Board of Directors approved a new CHF 25 billion share buyback programme to be completed over the next three years, subject to market conditions and strategic opportunities. This decision takes into account the strong momentum, improving capital efficiency and future prospects of the Food and Beverages business, which is increasingly benefiting from the move towards nutrition, health and wellness. Furthermore, the recent acquisitions of Novartis Medical Nutrition and Gerber create critical mass in Nutrition, with annualised sales of over CHF 10 billion. Therefore, while the Board continues to believe that driving the performance of the Food and Beverages business offers the greatest opportunity for value creation within Nestlé, it takes the view that a significant share buyback programme should further enhance shareholder value. The scale of the buyback programme is in line with Nestlé’s financial management objectives, which aim to retain flexibility.

Sales and EBIT margins by management responsibilities and geographic areas Jan.-June 2007
Sales in CHF millions Jan.-June 2007
Organic Growth(%) EBIT Margins
Jan.-June 2007 Change vs.
Jan.-June 2006 (a)
Food
- Zone Europe 13 561 + 1.4 11.4% +50 bps
- Zone Americas 15 289 + 7.4 14.5% +80 bps
- Zone Asia, Oceania and Africa 8 030 + 9.7 16.3% +30 bps
Nestlé Waters 5 411 + 10.3 9.3% +10 bps
Nestlé Nutrition 3 441 + 10.5 18.7% -20 bps
Other Food & Beverages (b) 1 673 + 22.7 18.9% +190 bps
Total Food & Beverages 47 405 + 7.1 12.0% +60 bps
Pharma 3 709 + 11.0 32.9% +130 bps
Group Total 51 114 + 7.4 13.5% +60 bps

(a) see note at end of release
(b) Mainly Joint ventures managed on a worldwide basis and Nespresso
All calculations based on non-rounded figures

Outlook
Nestlé’s first half performance was helped by the scale benefits of strong volume growth as well as the positive impact of price increases ahead of higher input costs. In the second half of the year, these higher prices are likely to slow volume growth slightly, while the increasing impact of higher raw material costs, particularly milk, will heighten pressure on EBIT margins. Nonetheless, the strong start to the year allows Nestlé to expect above-target organic growth as well as a further sustainable improvement in margins for the full year.