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Introduction

Nestle has been serving this world for over one hundred and fourteen years. It has
differentiated itself through its high quality product mix and positioned itself
as health and Nutrition Company while targeting the health conscious people
throughout the world. Nestle started its operations in Pakistan back in1988,
by acquiring a diary company MILK PAK LTD, when people of Pakistan actually
needed it.
Since Pakistan is the fifth worlds largest milk producing country therefore Nestle
deals mainly in dairy products. Moreover it also sells juices, chocolates, prepared
food like noodles, baby food, infant formula milk and breakfast cereals in Pakistan.
Nestle is a low cost leader with its efficient operations hence it provides its
customers with high quality products and sells them at a premium price. Therefore
it is earning good profits.
Nestle has set its manufacturing plants at in Karachi, Lahore, Islamabad and
Kabirwala. The milk processing plant at Kabirwala district is the Nestls world
largest milk processing plant.
When nestle introduced its products in Pakistan people were neither aware nor
accustomed to them. Therefore nestle ran an extensive marketing campaign to
educate people and create a need for its products.
Pakistan is a land where fresh eatables are readily available. Nestle should sell
the same quality of products in Pakistan as it sells abroad. It should also introduce
more brands in Pakistani market which it offers in other markets of the world since
consumers in Pakistan are becoming more demanding day by day

Growth
Nestle, the world's largest packaged foods maker, forecast sales growth around 5
percent this year, at the low end of its long-term goal, as it grapples with deflation
in Europe and a slowdown in China.
Nestls long-term model calls for growth of 5 to 6 percent, but it fell below that in
2014, coming in at 4.5 percent.
Chief Executive Paul Bulcke called the results "solid" in a tough environment. He
said 2015 would be similar, but that Nestle still aimed for growth "around 5
percent", language analysts perceived as giving some wiggle room to again miss its
long-term target.

Product line in Pakistan


Milked dairy and chilled dairy:
MILK PAK
NES VITA
NIDO
NESLAC
EVERYDAY
NESTLE Dahi
NESTLE Fruit Yogurt
NESTLE Raita
MILK PAK Cream

Beverages:
NESCAFE
NEQUICK
MILO
NESTLE Fruita Vitals
Bottled Water:
NESTLE Pure Life
Baby Food:
CERELAC
Food:
MAGGI-2 Minute Noodles
Break Fast Cereals:
Corn Flakes
Honey Gold Flakes
KOKO Crunch
Chocolate & Confectionary:
KIT KAT
KIT KAT Chunky
Polo

Competitors

Engro Foods Pakistan

Major product lines: Olpers milk, Olwell, Olper Cream, Tarang Tea
whitener, Tarkka Ghee
Haleeb Foods
Major product lines: Bread, snacks, desserts and meals.
Shezan Foods Pakistan
Major product lines: Food Products, Jams Jellies & Marmalades,
Tomato Ketchup, Sauces & Pickles, Fruit Juices Syrups &
Squashes

UNILEVER Pakistan

Target market of Nestle:


Milk, dairy and Chilled dairy: wide variety of dairy products is available to
cater almost every segment of customer. Liquid Milk especially Nesvita is
produced especially for the females as it contains high content of iron,
beneficial for them.
Beverages: it includes Nescafe, Milo, Nesquik, and Nestle Friuta Vitals.
Their main target market includes people of all ages.
Bottled water: businesses, students, for the people who do not have access to
clean drinking water.
Baby food: target market of baby food is all the parents
Food: it includes Maggie noodles which mostly caters children and
teenagers.
Breakfast cereals: children, teens and adults benefits from it
Chocolates and confectionary: people of all ages.

Sports nutrition: it specifically targets sports persons for a nutritive protein


diet.

Sales force Structure


Zonal Sales Manager
Responsible for geographic territory of Sindh & Baluchistan
with an annual turnover of USD 260 million in Food,
Beverages, Nutrition & Chilled Dairy. Leading team of nine
(09) regional managers and responsible for a head count of
71 direct and indirect reports and 1700 strong distribution
sales force of cities & towns. Responsible for key accounts,
route to market planning, shopper marketing strategy,
logistics and distributor financial management. Member of
the strategic sales management committee in the
organization.

Regional Sales Managers

Regional
Regional
Regional
Regional
Regional
Regional
Regional
Regional
Regional

Sales
Sales
Sales
Sales
Sales
Sales
Sales
Sales
Sales

Manager,
Manager,
Manager,
Manager,
Manager,
Manager,
Manager,
Manager,
Manager,

Faisalabad Region
Multan
Quetta
Lahore
Hyderabad
Gujranwala
Islamabad
Jhelum
Peshawar

Human Resource Management


HR activities at Nestle:
HR is dedicated to their employees, and
ensures that they have all the right people with the right skills, in
the right places at the right time. Understanding that their people

are the bedrock of all their business strategies, it is their mandate


to enhance their skills with cutting edge training and provide
them with world-standard facilities. They select flexible,
innovative people who are ready to confront new challenges and
make a difference. Their groundbreaking Management Trainee
Programmed aims to develop talented young men and women
and help them achieve their potential in a dynamic and enabling
environment.
Over a hundred people travel out of the country every year to
take advantage of their international training and development
events.
Objective of the Organization HRM:
The protection of its employees is
Nestle first priority because employees are the asset of this
company. To maintain the global corporate standard Nestle
focuses on the need for safe working environments. Nestle has
resolved to provide a safe working environment for all their
employees, contractors and visitors and they are trying to
implement Health and safety practices and programs at all
working places objectives of the organization are
Nestle provide a safe work place to owe employees.
Nestle meet all requirements like health, safety, legislative
etc.
Nestle establish and monitor new purposes to decrease work
related injury or illness.
Nestle develop an efficient injury management system which
helps the affected employees return to work.
Nestle supply information, provide training to employees and
contractors to make them aware of their roles and
responsibilities in decreasing the risk of work place injury or
illness.

HR Skills
Strong analytical and conceptual thinking skills; ability to
analyze data.

Strong critical thinking skills


Strong grasp of Federal & State Employment Laws.
Must have strong problem-solving and decision-making skills.
Excellent communication and interpersonal skills.
Must be detail-oriented.
Must be able to work with and lead all levels of employees
and management within the organization.
Must possess good training skills.
Understanding of continuous improvement programs and
team environments.
High initiative.
A proven ability to achieve results.

Administrative Structure

Nestles Chain Of Command


Managing Director (M.D)

Marketing
And Sale
Manager

Technical
Manager

Plant
Manager

Supply Chain
Manager

Corporate
Manager

Finance
Control
Manager

Finance
Controller

Corporate
HR
Manager

Corporate
Quality Assurance
Manager

HR
Manager
Quality Assurance
Manager

National
Sale
Manager

Group
Brand
Manager

Distribution
Operations

Distributions
Services

Demand And
Supply Chain

There is a chain that extends from upper organization level to the


lowest levels and clarifies who reports to whom. The orders move
from upward to downward and suggestions move downward to
upward direction. The continuous improvement section is made
for this purpose. It encourages employees to give their
suggestions and share the new ideas. The jobs are formalized:
there are explicit job descriptions, numerous organizational rules,
and dearly defined procedures covering work procedures. But in
spite of formal rules and regulations, Nestle keeps on changing to
keep a pace with the changing environment. So, it is strict but not
rigid organization. In effort to be more flexible and responsive,
there has been distinct trend in this organization toward
decentralizing decision-making.

Financial Statements
Consolidated income statement
For the year ended 31 December 2014
In millions of CHF
Sales
Other revenue
Cost of goods sold

Notes

2014
91 612
253
(47 553)

2013
92 158
215
(48 111)

(8 217)

(8 156)

(19 651)

(19 711)

(1 628)

(1 503)

Other trading income


Other trading expenses
Trading operating profit

110
(907)
14 019

120
(965)
14 047

Other operating income


Other operating expenses
Operating profit

154
(3 268)
10 905

616
(1 595)
13 068

Financial income
Financial expense
Profit before taxes, associates and joint ventures
Taxes
Income from associates and joint ventures

135
(772)
10 268
(3 367)
8 003

219
(850)
12 437
(3 256)
1 264

Profit for the year

14 904

10 445

48

430

of which attributable to shareholders of the parent (Net profit)

14 456

10015

As percentages of sales
Trading operating profit

15.3%

15.2%

Profit for the year attributable to shareholders of the parent (Net Profit)

15.8%

10.9%

Distribution expenses
Marketing and administration expenses
Research and development costs

of which attributable to non-controlling interests

Earnings per share (in CHF)


Basic earnings per share

16

4.54

3.14

Diluted earnings per share

16

4.52

3.13

Consolidated
balance sheet
before appropriations
In millions of CHF

Notes

Assets
Current assets
Cash and cash equivalents

13/17

7 448

6 415

13
6

1 433
9 172

638
8 382

7/13

13 459
565

12 206
762

Short-term investments
Inventories
Trade and other receivables
Prepayments and accrued income

2014

2013

Derivative assets
Current income tax assets

13

400
908

230
1 151

Assets held for sale


Total current assets
Non-current assets
Property, plant and equipment
Goodwill

576
33 961

282
30 066

8
9

28 421
34 557

26 895
31 039

Intangible assets
Investments in associates and joint ventures

9
15

19 800
8 649

12 673
12 315

Financial assets
Employee benefits assets
Current income tax assets
Deferred tax assets

13
10

5 493
383
128
2 058

4 550
537
124
2 243

99 489

90 376

8 810

11 380

17 437

16 072

3 759

3 185

Provisions

695

523

Derivative liabilities

757

381

1 264
173

1 276
100

32 895

32 917

Total non-current assets

14

Liabilities and equity


Current liabilities
Financial debt
Trade and other payables
Accruals and deferred income

Current income tax liabilities


Liabilities directly associated with assets held for sale
Total current liabilities

Non-current liabilities
Financial debt

12 396

10 363

Employee benefits liabilities

8 081

6 279

Provisions

3 161

2 714

Deferred tax liabilities

3 191

2 643

Other payables

1 842

1 387

Total non-current liabilities

28 671

23 386

Total liabilities

61 566

56 303

322

322

(3 918)

(2 196)

(17 255)

(20 811)

Retained earnings and other reserves

90 981

85 260

Total equity attributable to shareholders of the parent

70 130

62 575

1 754

1 564

71 884

64 139

Equity
Share capital
Treasury shares
Translation reserve

Non-controlling interests
Total equity

18

Consolidated cash flow statement for the year ended 31 December


2014
In millions of CHF
Operating activities

2014

2013

10 905
6 323
17 228
(114)
85
17199
(356)
(2 859)
716

13 068
4 352
17 420
1 360
(574)
18 206
(351)
(3 520)
657

Operating cash flow


Investing activities

14 700

14 992

Capital expenditure
Expenditure on intangible assets

(3 914)
(509)

(4 928)
(402)

Acquisition of businesses
Disposal of businesses
Investments (net of divestments) in associates and joint
(a) non-current treasury investments
ventures from
Outflows

(1 986)
321
3 958
(137)

(321)
421
(28)
(244)

255
(962)
294
(392)

2 644
400
1 273
(421)

(3 072)

(1 606)

(6 863)
(356)

(6 552)
(328)

(49)

(337)

(1 721)

(481)

104
2 202
(1 969)
(1 985)
(10 637)
42
1 033
6 415

60
3 814
(2 271)
(6 063)
(12 158)
(526)
702
713

Operating profit
Non-cash items of income and expense
Cash flow before changes in operating assets and
liabilities
Decrease/(increase)
in working capital
Variation of other operating assets and liabilities
Cash generated from operations
Net cash flows from treasury activities
Taxes paid
Dividends and interest from associates and joint ventures

Inflows from non-current treasury investments


Inflows/(outflows) from short-term treasury investments
Inflows from other investing activities (b)
Outflows from other investing activities
Cash flow from investing activities
Financing activities
Dividend paid to shareholders of the parent
Dividends paid to non-controlling interests
Acquisition (net of disposal) of non-controlling interests
Purchase of treasury shares
Sale of treasury shares
Inflows from bonds and other non-current financial debt
Outflows from bonds and other non-current financial debt
Inflows/(outflows) from current financial debt
Cash flow from financing activities
Currency retranslations
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year

Notes

17

17

Total equity attributable to shareholders of the parent

Translation
shares
Retained earningsReserve
andTreasury
other
reserves
Share
capital

Cash and cash equivalents at end of year

7 448

6 415

In millions
of CHF
Equity as at 31 December 2012
Profit for the year

322

(2078) (17924) 80687 61007 1657 62664

10 015 10015 430 10445

Other comprehensive income for the year

(2887)

884

(2003)

(59)

(2062)

Total comprehensive income for the year

(2887)

10899

8012

371

8383

Dividend paid to shareholders of the parent

(6552)

Dividends paid to non-controlling interests

(328)

(328)

Movement of treasury shares

(612)

190

(422)

(422)

Equity compensation plans


Other transactions settled with treasury shares
(a)
Changes in non-controlling interests

214

(39)

175

175

280

280

280

(297)

(297)

(136)

(433)

Total transactions with owners


Other movements (b)

(118)

Equity as at 31 December 2013

322

(6552) (6552)

(6 698) (6816) (464) (7280)


372

372

372

(2196) (20811) 85260 62575 1564 64139

Profit for the year

14456

14456

448

14904

Other comprehensive income for the year

3556

(1764)

1792

108

1900

Total comprehensive income for the year


Dividend paid to shareholders of the parent
Dividends paid to non-controlling interests

3556

12692 16248 556 16804


(6863) (6863) (6863)

(356) (356)

Movement of treasury shares

(1943)

204

(1739)

(1739)

Equity compensation plans

221

(48)

173

173

Changes in non-controlling interests

(297)

(297)

(10)

(307)

Total transactions with owners

(1722)

(7004) (8726) (366) (9092)

Other movements

Consolidated statement of changes in equity for


the year ended 31 December 2014

33

33

33

Analysis Of Financial
Statements
Ratio analyses:
A tool used by individuals to conduct a quantitative analysis of information in a company's
financial statements. Ratios are calculated from current year numbers and are then compared
to previous years, other companies, the industry, or even the economy to judge the
performance of the company. Ratio analysis is predominately used by proponents of
fundamental analysis.

Liquidity ratios:
Current ratio=

Current Assets/ Current Liabilities


2013
0.91:1

2014
1.03 :1

Interpretation:
In 2013 the current ratio has increasing trend, and the nestle has the ability to pay 0.91 against 1
rupees. In 2014 the current ratio increase due to increase in current assets as compare to current
liabilities and the company have the ability to pay 1.03 against 1 rupees liability.

Quick ratio:
Quick ratio =

Current Assets Inventory / Current Liabilities


2013
0.66 :1

2014
0.75 :1

Interpretation:
The quick ratio in 2013 is 0.66:1 because nestle increase in current liabilities as compare to
the current assets , and the company have the ability to pay current assets without relying on
inventory . In 2014 the current ratio increases due to increase in current asset.

Net working capital:

Current Asset current


liabilities.

In
2013 2014
milli
ons
of
CH
F
10
2851 66

Net working capital is also another measure of the liquidity of the company. Net working capital
is the difference between the current assets and current liabilities. It is just like the current ratio
indicating either the company has enough current assets to pay its current liabilities. If the
current assets are more than the current liabilities then company has strong liquidity position
indicating it has the ability to discharge it current liabilities. Net working capital is also going
increase every year which means APL have enough cash after payment of current liabilities. So
the liquidity position is strong.

Cash ratio based on current liabilities

Cash & Cash Equivalents


Current Liabilities

In million of
CHf

2013

2014

0.265

0.327

Interpretation
Cash and cash equivalents are current assets excluding inventory, prepayments and trade debts.
The above ratio shows variation due to inflow or outflow of cash in business. In 2014 the ratio is
very high but in 2013 ratio is very low as compared to other years which means in 2014 Nestle
has more cash and cash equivalents but in 2013 Nestle have low cash and cash equivalents to pay
current liabilities.

Activity Analysis
Inventory Turnover
Inventory Turnover Ratio =
2013
10.99 times

Sales/Inventory

2014
9.99 times

Interpretation:
In 2014 the inventory turnover ratio reduce due to increase in inventory and inventory
converted in to sale less as compare to 2013. Inventory turnover ratio increase means inventory
is more converted into sale.

Fixed Asset Turnover

2013
10.57

Fixed Assets Turnover=


2013
2.07 time

2014
8.51 times

times

Sales/Net Fixed Assets

2014
2.12 time

Interpretation:
In 2013 the fixed assets turnover ratio is high as compare to 2014 means the
company use more fixed assets as compare to 2013.But in 2014 the ratio is reduce which show
that the company use less fixed assets to generate sales.

Current asset turnover


=
_Sale________
current Asset

Cash and cash equivalents are current assets excluding inventory, prepayments and trade debts.
The above ratio shows variation due to inflow or outflow of cash in business. In 2013 the ratio is
very high but in 2014 ratio is very low as compared to other years which means in 2013 Nestle
has more cash and cash equivalents but in 2014 they have low cash and cash equivalents to pay
current liabilities.

Total Asset Turnover


Total Assets Turnover=

Sales/Total Assets
2013
0.765 time

2014
0,68 time

Interpretation:
The ratio show how much total assets use to generate the sale. In 2013 the Total assets
turnover ratio is high compare to 2014 which show that the company use more fixed to generate
the sale. In 2014 the ratio reduce which show that the company generate more sale by using less
total assets and in 2013.

Solvency Ratios:

Total Debt to Total Assets


Total Debt to Total Assets= (Total Debt/Total Assets)*100
2013
32.54%

2014
30.33%

Interpretation:
In 2013 the Total debt to total assets ratio is high as compare to 2014 which show
that the 30.33% company assets are generated from the total debt. In 2014 the ratio reduce which
show that the generate more assets from less total debt compare to 2013.

Conclusion:
The company performance not bad, and still nestle is the market leader in
Pakistan but the company have more chance to increase its growth and
market share because uniliver is the big competitor and he give more
challenge in the market.
So we can say company performance is satisfactory.

Recommendations
Employees should be trained according to the changing standards of the
organization.
Company should conduct survey from time to time, according to which
changes can be introduced in the organization to stay updated in the market.
They should introduce creativity into the work, so that the employees Cando
their work active mindedly.
Employee should be given compensation in order to keep them loyal.
Employee should be more involved in decision making to become more
differentiated.

Company should provide incentives to shop keepers

As far as the Liquidity ratios are concerned then liquidity position of nestle
is not good so the company should improve current ratio and should be able
to pay off its current liabilities in this regard the company should increase
cash and cash equivalents.