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Good food, Good life
NHI Group
Annual Financial Report
December 31, 2021
2 Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2021
3 Management Report
8 Responsibility Statement
9 Report of Independent Auditors
Consolidated Financial Statements
14 Consolidated income statement
15 Consolidated statement of comprehensive income
16 Consolidated balance sheet
18 Consolidated cash flow statement
19 Consolidated statement of changes in equity
Notes
20 1. Accounting policies
22 2. Scope of consolidation, acquisitions and disposals of businesses,
assets held for sale and acquisitions of non-controlling interests
27 3. Analyses by segment
31 4. Net other trading and operating income/(expenses)
33 5. Net financial income/(expense)
34 6. Inventories
7. Trade and other receivables/payables
36 8. Property, plant and equipment
40 9. Goodwill and intangible assets
44 10. Employee benefits
51 11. Provisions and contingencies
53 12. Financial instruments
65 13. Taxes
68 14. Associates
15. Cash flow statement
70 16. Transactions with related parties
71 17. Events after the balance sheet date
Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2021 3
Management Report
Nestlé Holdings, Inc. (“NHI”) (hereinafter, together with its subsidiaries, referred to as
the “NHI Group”) incorporated in the State of Delaware, United States, is a wholly owned
subsidiary of NIMCO US, Inc., which is an indirect wholly owned subsidiary of Nestlé S.A.,
incorporated in Switzerland, which is the holding company of the Nestlé group of companies
(hereinafter, referred to as the “Nestlé Group”). NHI is the holding company for Nestlé S.A.s
principal operating subsidiaries in the United States, which include, among others, Nestlé USA, Inc.,
Nestlé Purina Petcare Company, and Gerber Products Company. The NHI Group engages
primarily in the manufacture and sale of food products, pet care products, premium waters,
beverage products as well as nutrition and health science products. These businesses derive
revenue across the United States and in some international markets.
Key Figures
In millions of Dollars
2021 2020 Change
Sales 26 945 23 585 14.2%
Cost of goods sold (15 303) (13 267) 15.3%
as a percentage of sales (56.8%) (56.3%)
Underlying Trading operating profit 1 295 2 361 (45.2%)
as a percentage of sales 4.8% 10.0%
Trading operating profit 1 100 2 414 (54.4%)
as a percentage of sales 4.1% 10.2%
Net financial expenses (174) (168) 3.6%
Taxes 60 (833) (107.2%)
Profit for the period attributable to shareholders
of the parent (Net profit) 689 3 290 ( 79.1%)
as a percentage of sales 2.6% 13.9%
Operating cash flow 2 044 1 783 14.6%
as a percentage of sales 7.6 % 7.6%
Capital additions 2 788 3 063 (9.0%)
as a percentage of sales 10.3% 13.0%
The NHI Group has delivered year-over-year improvements in sales. We are committed to
continued execution of cost reduction initiatives and improved operational efficiencies. We
continue to invest in our core brands and made progress towards key initiatives related to
portfolio optimization including the acquisitions.
4 Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2021
Sales
For the years ended December 31, 2021 and 2020, consolidated sales totaled $26.9 billion and
$23.6 billion, respectively. The main factors per segment are as follows:
Nestlé USA Brands sales were $11.5 billion and $10.3 billion for the years ended
December 31, 2021 and 2020, respectively. The overall increase in sales was driven by
the integration of International Premium Waters (“IPW”) and Essentia Water businesses.
Sales for beverages, including Starbucks at-home products, Coffeemate and Nesquick
Ready-To-Drink, delivered single-digit growth. Frozen and chilled food saw mid single-digit
growth with favorable sales developments for Stouffers and Modern Health partially offset
by supply challenges in frozen pizza.
PetCare sales were $10.0 billion and $9.1 billion for the years ended December 31, 2021
and 2020, respectively. PetCare experienced strong demand for premium brands such as
Purina Pro Plan, Purina ONE and Fancy Feast.
Other businesses sales were $5.5 billion and $4.2 billion for the years ended December 31, 2021
and 2020, respectively. The overall recovery from COVID-19 and reopening of out-of-home food
businesses contributed to the strong performance of Nestlé Professional coupled with the
12-month performance of 2020 acquisitions relating to Zenpep, Vital Proteins, and
IM HealthScience compared to partial results included in the comparative period.
Profitability
Trading operating profit was $1.1 billion and $2.4 billion for the years ended December 31, 2021
and 2020, which equaled 4.1% and 10.2% of sales for each year, respectively. The decrease
was attributed to significantly higher distribution costs, partially offset by the lower marketing
and general administrative expenses.
Cost of goods sold was $15.3 billion and $13.3 billion for the years ended December 31, 2021
and 2020, which equaled 56.8% and 56.3% of sales for each year, respectively. The increase in
costs was driven by higher input costs, supply chain disturbances and full integration of water
business together with acquisition of the Essentia water. The NHI Group continued to take
selling price increases to mitigate the input cost inflation throughout the year.
Distribution expenses were $2.8 billion and $2.1 billion for the years ended December 31, 2021
and 2020, which equaled 10.4% and 8.7% of sales for each year, respectively. The increase was
mainly attributed to integration of the water business, freight and transportation costs, storage
costs, and supply timing.
Marketing, general and administrative expenses were $3.8 billion and $3.4 billion for the
years ended December 31, 2021 and 2020, which equaled 14.0% and 14.3% of sales for each
year, respectively. The decrease was enabled through the continued focus on elimination of
waste, optimizing the structures and operational efficiencies.
Royalties to affiliated company were $3.8 billion and $2.5 billion for the years ended
December 31, 2021 and 2020, respectively. The increase in royalties was due to a revision of
the General License agreement resulting in one-off payment related to earlier years.
Net other trading (expenses)/income were ($195) million and $53 million for the years
ended December 31, 2021 and 2020, respectively. The increase in expense was driven by
higher provisions for restructuring and impairments as compared to the release of restructuring
cost provisions as well as gains on real estate operations recognized in the prior comparative
period as an offset to expense.
Net Profit Margin – Other Items of Note
The net profit was $689 million as compared to $3290 million for the years ended December 31, 2021
and 2020 respectively. The results of 2020 were favorably impacted by one-off gains linked to
the disposal of the Ice Cream business and income from associates while the results of 2021
were impacted by the impairment of goodwill and the factors mentioned above under trading
operating profit analysis.
Management Report
Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2021 5
Taxes were $60 million and ($833) million for each of the years ended December 31, 2021
and 2020, respectively. The decrease was primarily due to the result of the tax effect of the
decrease in Profit before taxes and associates.
Cash Flow
Operating cash flow was $2.0 billion and $1.8 billion for the years ended December 31, 2021
and 2020, respectively. The increase was driven by improvements in the working capital.
Principal Risks and Uncertainties
Risk Management
At the Nestlé S.A. level, the Nestlé Group Enterprise Risk Management (ERM) framework is
designed to identify, assess and mitigate risks in order to minimize their potential impact on
the Nestlé Group, including the NHI Group.
A top-down assessment is performed at the Nestlé Group level once a year to create
a robust understanding of the Nestlé Group’s most significant risks, and to allocate ownership
to drive specific actions. A bottom-up assessment occurs in parallel resulting in the aggregation
of individual assessments by all Nestlé markets and globally managed businesses of the
Nestlé Group. These different risk mappings allow the NHI Group to make sound decisions
on its future operations.
Risk assessments are the responsibility of business line management; this applies equally
to a business or a function, and any mitigating actions identified in the assessments are the
responsibility of the individual line management. If Nestlé S.A. intervention is required,
responsibility for mitigating actions will generally be determined by the Nestlé Group Executive
Board.
The results of the ERM are presented annually to the Nestlé Group Executive Board, half-
yearly to the Audit Committee of Nestlé S.A., and reported annually to the Board of Directors
of Nestlé S.A.
The COVID-19 pandemic continues to have an impact on operating environments across
Nestlé markets. The continued impacts remain difficult to predict and will depend on the
evolution and duration of outbreaks, as well as the policy actions and restrictions taken to
mitigate the impacts. Nestlé S.A. assessed the potential impacts of the pandemic across
Nestlé Group’s risk universe and the risks listed below are considered the most relevant for
our business and performance.
Factors Affecting Results
Maintaining high levels of trust with consumers is essential for the NHI Group’s success. Any
major event triggered by a serious food safety or other compliance issue could have a negative
effect on the NHI Group’s reputation or brand image. The NHI Group has policies, processes,
controls and regular monitoring to ensure high-quality products and prevention of health risks
arising from handling, preparation and storage throughout the value chain.
The success of the NHI Group depends on its ability to anticipate consumer preferences and
to offer high quality, competitive, relevant, and innovative products. The NHI Group’s Nutrition,
Health and Wellness strategy aims to enhance people’s lives at all stages through access to
industry-leading research and development to drive innovation and the continuous
improvement of the NHI Group’s portfolio.
Prolonged negative perceptions concerning health implications of processed food and
beverage categories could lead to an increase in regulation of the industry and may also
influence consumer preferences. The NHI Group has long-term objectives in place to apply
scientific and nutritional know-how to enhance nutrition, health and wellness, contributing to
healthier eating, drinking and lifestyle habits, as well as improve accessibility of safe and
affordable food.
Changing customer relationships and channel landscape may inhibit the NHI Group’s
growth if the NHI Group fails to maintain strong engagements or adapt to changing customer
Management Report
6 Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2021
needs. The NHI Group’s strategy is to maintain and develop strong relationships with
customers across the United States to help them win in their respective prioritized categories
where the NHI Group operates.
The NHI Group is dependent on the sustainable supply of a number of raw and packaging
materials. Issues relating to longer-term changes in weather patterns, water shortages, shifts
in production patterns, economic and social inequality in supply chains, etc. could result in
capacity constraints, as well as reputational damage. The NHI Group has policies, processes,
controls and regular monitoring in place which are intended to allow the NHI Group to
anticipate such events and adequately take actions to mitigate the adverse impacts.
The NHI Group manages risks related to climate change and water resources.
The NHI Group is subject to environmental regulation regimes and has controls in place to
comply with legislation concerning the protection of the environment, including the use of
natural resources, release of air emissions and waste water, and the generation, storage,
handling, transportation, treatment, and disposal of waste materials.
The NHI Group is reliant on the procurement of materials, manufacturing and supply of
finished goods for all product categories. A major event impacting input prices, or in one of the
NHI Group’s key plants, at a key supplier, contract manufacturer, co packer, and/or warehouse
facility could potentially lead to a supply disruption. Active price risk management on key
commodities and business continuity plans are established and regularly maintained in order
to mitigate against such events.
The investment choices of the NHI Group evolve over time and may include investments in
emerging technologies, new business models, and the creation of, or entry into, new
categories. This may result in broader exposures for the NHI Group, e.g. a more highly regulated
environment for the healthcare segment, etc. The NHI Group’s investment choices are aligned
with its strategy and prioritized based on the potential to create value over the long-term.
The NHI Group, as part of its strategy, undertakes business transformations such as large
scale change management projects, mergers, acquisitions, and divestitures. To ensure the
realization of the anticipated benefits of these business transformations, they receive executive
sponsorship with aligned targets as well as appropriate levels of resources to support
successful execution of them.
The ability to attract and retain skilled, talented employees is critical to the success of the
NHI Group’s strategy. The NHI Group’s initiatives and processes aim to sustain a high-
performance culture, supported by a total awards approach and people development that
emphasizes diversity, innovation and growth.
The NHI Group is subject to health and safety regimes and has procedures in place to comply
with legislation concerning the protection of the health and welfare of employees and
contractors, as well as long-term initiatives to promote safe and healthy employee behaviors.
The NHI Group depends on accurate, timely data along with increasing integration of digital
solutions, services and models, both internal and external. Disruption impacting the reliability,
security and privacy of the data, as well as the information technology infrastructure, is a threat
to the NHI Group’s business. Contingency plans along with policies and controls are in place
aiming to protect and ensure compliance on both infrastructure and data.
The NHI Group’s liquidity/liabilities (currency, interest rate, hedging, cost of capital, pension
obligations/retirement benefits, banking/commercial credit, etc.) could be impacted by any
major event in the financial markets. The NHI Group, along with its ultimate parent company,
Nestlé S.A., has the appropriate risk mitigation measures in place with strong governance to
actively manage exposures and long-term asset and liability outlook.
Security, political instability, legal and regulatory, fiscal, macroeconomic, foreign trade,
labor, conflict and/or infrastructure risks could potentially impact the NHI Group’s ability to do
business. Major events caused by natural hazards (such as flood, drought, infectious disease
pandemics, etc.) could also impact the NHI Group’s ability to operate. Any of these events
could lead to a supply disruption and impact the NHI Group’s financial results. Regular
monitoring and ad hoc business continuity plans are established in order to mitigate against
such events.
Management Report
Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2021 7
Outlook
The NHI Group is committed to supporting the Nestlé Group in achieving its financial
objectives including continued increase in organic sales growth towards a mid single-digit
rate, underlying Trading operating margin with continued moderate improvement, an increase
in Underlying earnings per share in constant currency and capital efficiency.
Management Report
8 Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2021
Giulio Gerardo, Chief Financial Officer, confirms that to the best of his knowledge:
(a) the financial statements of NHI Group for the annual period ended December 31, 2021,
which have been prepared in accordance with IFRS as issued by the International
Accounting Standards Board (IASB), give a true and fair view of the assets, liabilities,
financial position and profit or loss of NHI, and the undertakings included in the
consolidation taken as a whole; and
(b) the management report includes a fair review of the development and performance of the
business and the position of NHI and the undertakings included in the consolidation taken
as a whole, together with a description of the principal risks and uncertainties that they face.
March 17, 2022
Responsibility Statement
Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2021 9
Report of Independent Auditors
To the Board of Directors of Nestlé Holdings, Inc.:
Opinion
We have audited the consolidated financial statements of Nestlé Holdings, Inc. and its subsidiaries (the
NHI Group”), which comprise the consolidated balance sheets as of December 31, 2021 and 2020,
and the related consolidated income statements, statements of comprehensive income, statements of
changes in equity and cash flow statements for the years then ended, and the related notes (collectively
referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the
financial position of the NHI Group at December 31, 2021 and 2020, and the results of their operations
and their cash flows for the years then ended in accordance with International Financial Reporting
Standards promulgated by the International Accounting Standards Board.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States
of America (GAAS) and in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report. We are required to be independent of the NHI
Group, and have fulfilled our other ethical responsibilities, in accordance with the relevant ethical
requirements relating to our audits, which include relevant ethical requirements in the United States of
America and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional
Accountants. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.
Key Audit Matters
Key audit matters are those matters that were communicated with those charged with governance and,
in our professional judgment, were of most significance in our audit of the financial statements for the
year ended December 31, 2021. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Key audit matter How our audit addressed the key audit matter
Measurement of sales as it relates to trade spend
As described in Note 3 of the financial statements,
sales are recognized when control of the goods
has transferred to the customer, which is mainly
upon arrival at the customer. Revenue is
measured as the amount of consideration that the
NHI Group expects to receive after deduction of
returns, sales taxes, pricing allowances, other
trade discounts, and couponing and price
promotions to consumers. The level of discounts,
allowances, and promotional rebates (collectively
‘trade spend’) are estimated and recognized as a
deduction from revenue.
We assessed the NHI Group’s revenue recognition
accounting policies, including the recognition and
classification criteria for trade spend.
We evaluated monthly trends of trade spend. We
performed a predictive analysis focused on trade
spend as a percentage of sales by month, and by
customer. For a sample of trade spend, we
considered if those items were properly classified
with reference to the NHI Group’s accounting
policies.
Ernst & Young LLP
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Tel: +1 703 747 0000
ey.com
10 Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2021
The risk of sales being misstated, through error,
misinterpretation or misapplication of accounting
standards and policies or intentional manipulation,
may result from the pressure that management
may feel to achieve performance targets. The
nature of the misstatements may include bias in
estimates, unrecorded accruals, or the
misclassification of trade spend in the consolidated
income statement.
We deemed the measurement of trade spend to
be a key audit matter due to the materiality and
complexity in estimating the amount of trade
spend that is ultimately claimed. Management
estimates the level of trade spend using judgments
based on historical experience and the specific
terms of the agreements with the customers. The
estimates require the use of assumptions that are
complex, given the diversity of trade spend
arrangements and the uncertainty related to
future outcomes. There is a risk that discounts,
allowances, and promotional rebates to
consumers are not properly measured or
classified at the reporting date, resulting in a
misstatement of sales.
For a sample of trade spend arrangements, we
reconciled key inputs and assumptions used in the
estimates with internal and external sources of
information, such as the contracts with the relevant
customers or other third-party support. We
recalculated the accrual and consolidated income
statement amounts to test mathematical accuracy.
We considered the aging of trade spend accruals
based on our understanding of the average lead
time for settlement. We reviewed the NHI Group’s
lookback analysis over the prior year end accrual
balance and assessed the accuracy at which the
NHI Group determined their accruals. We tested
payments made to customers after the reporting
date to assess the completeness of accruals and
assessed whether recorded in the correct period.
We assessed the adequacy of the disclosures
provided in Note 3 of the financial statements in
relation to the relevant accounting standards.
Carrying value of goodwill and indefinite life intangible assets
As described in Note 9 of the financial statements,
the NHI Group has $15.1 billion of goodwill
and$4.2 billion of indefinite life intangibles assets.
For all cash generating units (CGUs), goodwill
and indefinite life intangibles are tested for
impairment at least annually and when there is an
indication of impairment. The impairment test is
performed by comparing the carrying value of the
assets of these CGUs with their recoverable
amount.
The NHI Group recognized an impairment charge
of $494 million in the year ended December 31,
2021 related to the goodwill of the Freshly CGU.
There were no other goodwill or indefinite life
intangible impairment charges recognized in the
year ended December 31, 2021 based on the NHI
Group’s recoverability assessment.
The recoverability of goodwill and indefinite life
intangible assets is assessed using forecasted
financial information within a discounted cash
flow model. The assumptions used in the
impairment tests, including projected cash flows,
discount rates, and terminal growth rates, as well
as allocation of assets to CGUs, are subject to
management judgment.
We assessed whether the determination of CGUs,
and whether the allocation of assets to CGUs, was
appropriate. We obtained an understanding of the
current macro-economic environment, the impact
of COVID-19 on forecasted financial information
and the outlook for a sample of CGUs through
external market data and discussions with selected
stakeholders within the NHI Group. We compared
the forecasted cash flows with historical data.
Where the forecasted cash flows differed from our
expectations given the current environment and
historical data, we obtained supporting
explanations. We assessed assumptions in
comparison to external market data. We performed
sensitivity analyses around the key assumptions
such as projected cash flows, discount rates, and
terminal growth rates.
With the assistance of our valuation specialists we
assessed the appropriateness of key assumptions,
including discount rates and terminal growth rates,
including independently deriving a range of
discount rates and terminal growth rates, and we
recalculated the recoverable amount and
impairment, where applicable, determined by
management. Further, we assessed the
appropriateness of the methodology used and the
consistent application thereof to the CGUs tested.
We assessed the adequacy of the disclosure
provided in Note 9 of the financial statements in
relation to the relevant accounting standards.
Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2021 11
Completeness and valuation of uncertain tax positions
As described in Note 13 of the consolidated
financial statements, the taxes and fiscal risks
recognized in the consolidated financial
statements reflect NHI Group management’s best
estimate of the outcome based on the facts known
at the balance sheet date. These facts may
include, but are not limited to, changes in tax laws
and interpretations thereof in the United States.
NHI Group is regularly subject to examination and
audits by tax authorities, including the United
States Internal Revenue Services. Certain matters
involving transactions with other Nestlé S.A.
affiliates, including royalty arrangements,
financing arrangements, other transaction-related
matters give rise to uncertain tax positions, and
the related transfer pricing impacts. These
uncertain tax positions inherently result in the
application of management judgment in
ascertaining reasonable estimates, which may
lead to liabilities for uncertain tax positions being
understated or overstated.
The identification and valuation of uncertain tax
positions is a key audit matter because of the
significant level of judgment and expertise
required to interpret tax legislation and the related
estimation uncertainty.
We assessed the application of the relevant
standards, including but not limited to IFRIC 23,
Uncertainty over Income Tax Treatments, in the
accounting for uncertain tax positions.
We obtained an understanding of the uncertain
tax positions arising from the transactions with
other Nestlé S.A. affiliates, and we assessed the
potential outcome of investigations by the
authorities and whether uncertain tax positions
are complete and reasonably measured.
Our tax specialists, including transfer pricing
specialists, considered impacts of changes in tax
legislation or business operations in the
identification, measurement and recognition of
uncertain tax positions. We reviewed available
information related to significant on-going tax
audits. We reviewed the recognized and
unrecognized positions in comparison to tax
audits’ outcomes, when available, and gained an
understanding if there were any deviations in
outcome compared to amounts recognized. The
significant intercompany transfer pricing models
were assessed for compliance with, among other
things, applicable laws, regulations and transfer
guidance and we evaluated management’s
judgments regarding tax risks.
We assessed the adequacy of the disclosure
provided in Note 13 of the consolidated financial
statements in relation to the relevant accounting
standards.
Responsibilities of Management and Those Charged with Governance for the Financial
Statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with International Financial Reporting Standards promulgated by the International
Accounting Standards Board; and for the design, implementation, and maintenance of internal
control relevant to the preparation and fair presentation of financial statements that are free of
material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the NHI Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless management either intends to liquidate the NHI
Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the NHI Group’s financial reporting
process.
12 Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2021
Auditors Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free of material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance
and therefore is not a guarantee that an audit conducted in accordance with GAAS and ISAs will always
detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control. Misstatements are considered
material if there is a substantial likelihood that, individually or in the aggregate, they would influence the
judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS and ISAs, we:
Exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, and design and perform audit procedures responsive to those risks. Such procedures
include examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the NHI Group’s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluate the overall presentation of the
financial statements.
Conclude on the appropriateness of managements use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists to events or
conditions that may cast significant doubt on NHI Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditors
report to the related disclosures in the financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditors report. However, future events or conditions may cause the NHI Group to cease to
continue as a going concern.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the NHI Group to express an opinion on the financial statements. We are
responsible for the direction, supervision, and performance of the group audit of the NHI Group.
We remain solely responsible for our audit opinion.
We are required to communicate with those charged with governance regarding, among other matters,
the planned scope and timing of the audit, significant audit findings, and certain internal control-related
matters that we identified during the audit.
Nestlé Holdings, Inc. and Subsidiaries – Annual Financial Report 2021 13
Other information
Management is responsible for the other information. The other information comprises Management’s
Report included in the annual report but does not include the financial statements and our auditors
report thereon. Our opinion on the financial statements does not cover the other information, and we do
not express an opinion or any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and consider whether a material inconsistency exists between the other information and the financial
statements, or the other information otherwise appears to be materially misstated. If, based on the work
performed, we conclude that an uncorrected material misstatement of the other information exists, we
are required to describe it in our report.
The partner in charge of the audit resulting in this report of independent auditors is Michelle Montes.
March 17, 2022
14 Consolidated Financial Statements of the NHI Group 2021
In millions of Dollars
Notes 2021 2020
Sales 3 26 945 23 585
Cost of goods sold (15 3 03) (13 267)
Distribution expenses (2 792) (2 050)
Marketing and administrative expenses (3 761) (3 383)
Royalties to affiliated company 16 (3 794) (2 524)
Other trading income 4 61 1 72
Other trading expenses 4 (256) (11 9)
Trading operating profit 3 1 100 2 414
Other operating income 4 5 05 2 067
Other operating expenses 4 (8 03) (389)
Operating profit 802 4 092
Financial income 5 48 0 499
Financial expense 5 (65 4) (667)
Profit before taxes and associates 628 3 924
Taxes 13 60 (8 3 3)
Income from associates 14 19 4
Profit for the year 688 3 285
of which attributable to non-controlling interests (1) (5)
of which attributable to shareholders of the parent (Net profit) 68 9 3 290
Consolidated income statement
for the year ended December 31, 2021
Consolidated Financial Statements of the NHI Group 2021 15
In millions of Dollars
Notes 2021 2020
Profit for the year recognized in the consolidated income statement 688 3 285
Changes in cash flow hedge and cost of hedge reserves, net of taxes 6 4 (28)
Items that are or may be reclassified subsequently to the consolidated income statement 6 4 (28)
Remeasurement of defined benefit plans, net of taxes 10 15 7 (17 1)
Items that will never be reclassified to the consolidated income statement 15 7 (17 1)
Other comprehensive income/(loss) for the year 221 (19 9)
Total comprehensive income for the year 909 3 086
of which attributable to non-controlling interests (1) (5)
of which attributable to shareholders of the parent 910 3 091
Consolidated statement of comprehensive income
for the year ended December 31, 2021
16 Consolidated Financial Statements of the NHI Group 2021
In millions of Dollars
Notes 2021 2020
Assets
Current assets
Cash and cash equivalents 12/15 493 350
Short-term investments 12 3 212 18
Inventories 6 3 056 2 596
Trade and other receivables 7/12 2 654 2 275
Loans to parent and affiliates 12/16 20 947 19 844
Prepayments and accrued income 57 33
Derivative assets 12 42 75
Assets held for sale 2 35
Total current assets 30 461 25 226
Non-current assets
Property, plant and equipment 8 8 178 6 633
Goodwill 9 15 110 15 209
Intangible assets 9 4 619 4 572
Investments in associates 14 18 17
Financial assets 12 1 350 1 334
Loans to parent and affiliates 16 1 000 1 224
Employee benefits assets 10 201 17 9
Total non-current assets 30 476 29 168
Total assets 60 937 54 394
Consolidated balance sheet
as at December 31, 2021
Consolidated Financial Statements of the NHI Group 2021 17
In millions of Dollars
Notes 2021 2020
Liabilities and equity
Current liabilities
Financial debt 12 2 764 7 036
Trade and other payables 7/12 4 581 3 050
Loans from affiliates 16 3 068 442
Accruals and deferred income 2 242 2 053
Provisions 11 10 4 75
Derivative liabilities 12 12 6 13
Current income tax liabilities 4 04 8 74
Liabilities directly associated with assets held for sale 2 1
Total current liabilities 13 289 13 544
Non-current liabilities
Financial debt 12 22 329 15 919
Employee benefits liabilities 10 1 736 1 810
Provisions 11 55 58
Deferred tax liabilities 13 1 029 8 15
Other payables 41 637
Total non-current liabilities 25 190 19 239
Total liabilities 38 479 32 783
Equity
Share capital, $100 par value. Authorized, issued and outstanding 1,000 shares
Additional paid-in capital 5 680 5 705
Other reserves (94 5) (1 166)
Retained earnings 17 723 17 030
Total equity attributable to shareholders of the parent 22 458 21 569
Non-controlling interests 42
Total equity 22 458 21 611
Total liabilities and equity 60 937 54 394
Consolidated balance sheet as at December 31, 2021
18 Consolidated Financial Statements of the NHI Group 2021
In millions of Dollars
Notes 2021 2020
Operating activities
Operating profit 15 802 4 092
Depreciation and amortization 15 771 697
Impairment 569 16
Net result on disposal of businesses 4 24 (1 943)
Other non-cash items of income and expense (455) (8 8)
Cash flow before changes in operating assets and liabilities 1 711 2 774
Decrease/(increase) in working capital 15 582 (262)
Variation of other operating assets and liabilities 15 262 (222)
Cash generated from operations 2 555 2 290
Interest paid (82 5) (6 4 9)
Interest received on loans to affiliates, net 4 80 480
Taxes paid (16 6) (33 8)
Operating cash flow 2 044 1 783
Investing activities
Capital expenditure 8 (1 841) (1 203)
Expenditure on intangible assets 9 (79) (71)
Acquisition of businesses 2 (70 8) (849)
Disposal of businesses 2 (13) 4 007
(Investments) in associates and joint ventures, net of divestments (61) (60)
Outflows from short-term treasury investments (3 19 4) (6)
Other investing activities 22 309
Investing cash flow (5 874) 2 127
Financing activities
Loans (to)/from parent and affiliates, net 16 1 916 (4 391)
Inflows from bonds and other non-current financial debt 12 8 249 3 976
Outflows from bonds and other non-current financial debt 12 (3 048) (2 080)
Outflows from current financial debt 12 (3 14 4) (1 38 8)
Financing cash flow 3 973 (3 883)
Increase in cash and cash equivalents 143 27
Cash and cash equivalents at beginning of year 350 323
Cash and cash equivalents at end of year 15 493 350 
Consolidated cash flow statement
for the year ended December 31, 2021
Consolidated Financial Statements of the NHI Group 2021 19
In millions of Dollars
Share capital
Additional
paid-in capital
Other reserves
Retained earnings
Total equity
attributable
to shareholders
of the parent
Non-controlling
interests
Total equity
Equity as at January 1, 2020 5 624 (96 7) 13 937 18 594 18 594
Profit for the year 3 290 3 290 (5) 3 285
Other comprehensive income for the year
(a)
(19 9) (19 9) (19 9)
Total comprehensive income/(loss) for the year (19 9) 3 290 3 091 (5) 3 086
Changes in non-controlling interest, net of tax
(b)
(197) (19 7) 47 (15 0)
Capital contribution (see Note 16) 81 81 81
Equity as at December 31, 2020 5 705 (1 166) 17 030 21 569 42 21 611
Equity as at January 1, 2021 5 705 (1 166) 17 030 21 569 42 21 611
Profit for the year 68 9 68 9 (1) 6 8 8
Other comprehensive income for the year
(a)
2 21 2 21 221
Total comprehensive income/(loss) for the year 221 689 9 10 (1) 9 09
Distributions paid to non-controlling interests (8) (8)
Changes in non-controlling interest, net of tax
(b)
4 4 (3 3) (29)
Capital distribution (see Note 16)
(c)
(25) (2 5) (25)
Equity as at December 31, 2021 5 680 (9 45) 17 723 22 458 22 458
(a) Related to changes in cash flow hedge and cost of hedge reserves, net of taxes and remeasurement of defined benefit plans,
net of taxes.
(b) Movements reported under retained earnings include put options for the acquisition of non-controlling interests.
(c) Related to transfer of net liabilities of BBC Intermediate Holdings to the NHI Group. See Note 16.
Consolidated statement of changes in equity
for the year ended December 31, 2021
20 Consolidated Financial Statements of the NHI Group 2021
1. Accounting policies
Accounting convention and accounting standards
The Consolidated Financial Statements comply with International Financial Reporting Standards
(IFRS) issued by the International Accounting Standards Board (IASB).
They have been prepared on a historical cost basis, unless stated otherwise. All consolidated
companies and associates have a December 31 accounting year-end. The Consolidated
Financial Statements 2021 were authorized for issuance by NHI’s directors on March 17, 2022.
Accounting policies
Accounting policies are included in the relevant notes to the Consolidated Financial
Statements and are presented as text highlighted with a grey background. The accounting
policies below are applied throughout the Consolidated Financial Statements. Management
believes that the financial statements as of December 31, 2021, reflect the most reasonable
view of the value of the assets and liabilities at this date.
Key accounting judgements, estimates and assumptions
The preparation of the Consolidated Financial Statements requires management to exercise
judgment and to make estimates and assumptions that affect the application of policies, the
reported amounts of revenues, expenses, assets, liabilities and disclosures. Estimated climate
impacts, current and probable stated regulatory changes and Nestlé’s environmental
commitments have been taken into account. These estimates and associated assumptions are
based on historical experience and various other factors that are believed to be reasonable
under the circumstances. The estimates and underlying assumptions are reviewed on an
ongoing basis. Actual results may differ from these estimates.
Those areas that involved a higher degree of judgment or uncertainty are explained further
in the relevant notes, including assessment of control and estimating the fair value of net
assets acquired in business combinations (see Note 2), recognition and estimation of revenue
(see Note 3), identification of cash generating units (CGUs) and estimation of recoverable
amount for impairment tests (see Note 9), assessment of useful lives of intangible assets as
finite or indefinite (see Note 9), measurement of employee benefit obligations (see Note 10),
recognition and measurement of provisions (see Note 11) and estimation of current and
deferred taxes, including uncertain tax positions (see Note 13). The impacts of COVID-19 on
those judgements and uncertainties have been taken into account considering that the long-
term economic impacts of COVID-19 remain difficult to predict or quantify due to its pervasive
effects.
Foreign Currency
The functional currency of the NHI Group’s entities (as defined herein) is the currency of their
primary economic environment which is the “US Dollar”.
In individual companies, transactions in foreign currencies are recorded at the rate of
exchange at the date of the transaction. Monetary assets and liabilities in foreign currencies are
translated at year-end rates. Any resulting exchange differences are taken to the consolidated
income statement, except when deferred in Other comprehensive income as qualifying cash
flow hedges.
Expenses
Cost of goods sold is determined on the basis of the cost of purchase or of production
(comprised of the costs of raw and packaging material, direct labor, energy, manufacturing
overheads and depreciation of factory assets, which are allocated to products using activity-
based drivers), adjusted for the variation of inventories.
Notes
Consolidated Financial Statements of the NHI Group 2021 21
All other expenses, including those in respect of advertising and promotions, are recognized
when the NHI Group receives the risks and rewards of ownership of the goods or when it
receives the services. Government grants that are not related to assets are credited to the
consolidated income statement as a deduction of the related expense when they are received,
if there is reasonable assurance that the terms of the grant will be met.
Distribution expenses encompass the costs of storing products and transporting products
between factories, warehouses and customer locations. It includes the costs of outsourced
transportation services, salaries and wages of drivers, warehouse employees and customer
service staff, as well as depreciation and running costs of warehouses and related storage,
transportation and handling equipment.
Marketing and administration expenses include the costs of advertising and consumer
promotion activities, merchandising, sales teams and head office functions such as finance,
human resources, legal, information technology, supply chain and general management. It is
primarily comprised of salaries, depreciation and maintenance of real estate, and the costs of
third-party services.
Additional details of other trading income and expenses and other operating income and
expenses are provided in the respective notes.
Changes in Accounting Standards
A number of standards have been modified on miscellaneous points with effect from January
1, 2021 which have no material impact on the NHI Group’s Financial Statements. These include
COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendments to IFRS 16), and
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 - Interest rate benchmark reform -
Phase 2.
Changes in IFRS that may affect the NHI Group after December 31, 2021
There are no standards that are not yet effective and that would be expected to have a material
impact on the NHI Group in the current or future reporting periods.
1. Accounting policies
22 Consolidated Financial Statements of the NHI Group 2021
2. Scope of consolidation, acquisitions and disposals of businesses,
assets held for sale and acquisitions of non-controlling interests
Scope of consolidation
Nestlé Holdings, Inc. (“NHI”) (herein, together with its subsidiaries, referred to as the “NHI
Group”) incorporated in the State of Delaware, United States, is a wholly owned subsidiary
of NIMCO US, Inc., which is an indirect wholly owned subsidiary of Nestlé S.A., incorporated
in Switzerland, which is the Parent company of the Nestlé group of companies (hereinafter,
referred to as the “Nestlé Group”). The NHI Group’s registered office is The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801,
United States and its principal place of business is located at 1812 North Moore Street,
Arlington, Virginia 22209, United States.
The Consolidated Financial Statements comprise those of Nestlé Holdings Inc. and of its
subsidiaries (the NHI Group). Companies which the NHI Group controls are fully consolidated
from the date at which the NHI Group obtains control. The NHI Group controls a company
when it is exposed to, or has rights to, variable returns from its involvement with the company
and has the ability to affect those returns through its power over the company.
As part of the Consolidated Financial Statements, the list of principal subsidiaries are included
below:
Gerber Products Company
Nespresso USA, Inc.
Nestlé Capital Corporation
Nestlé HealthCare Nutrition, Inc.
Nestlé Insurance Holdings, Inc.
Nestlé Purina PetCare Company
Nestlé Regional Globe Office North America, Inc.
Nestlé USA, Inc.
TSC Holdings, Inc.
Business Combinations
Where not all of the equity of a subsidiary is acquired, the non-controlling interests are
recognized at the non-controlling interests share of the acquiree’s net identifiable assets.
Upon obtaining control in a business combination achieved in stages, the NHI Group
remeasures its previously held equity interest at fair value and recognizes a gain or a loss in
the consolidated income statement.
2. Scope of consolidation, acquisitions and disposals of businesses, assets held for sale and acquisitions
of non-controlling interests
Consolidated Financial Statements of the NHI Group 2021 23
2.1 Modification of the scope of consolidation
Acquisitions
In 2021, the significant acquisition was:
Essentia Water – Premium functional water brand – 100% owned by the NHI Group, early
March.
Cash outflows in 2021 are mainly related to the Essentia Water acquisition.
In 2020, the significant acquisition was: Freshly – healthy prepared meals – 92% owned by
Honey Holdings LLC (which was 74% owned by the NHI Group at the time of acquisition),
end of October.
Among several other non-significant acquisitions, Nations Pizza was acquired in 2020.
Disposals
There were no significant disposals during 2021.
In 2020, there was one significant disposal:
Ice Cream business (part of the Brands segment) – 100% owned by the NHI group, end of
January.
Cash outflows during 2021 are related mainly to other non-significant disposals. Cash inflows
during 2020 mainly relate to the Ice Cream business and other non-significant disposals.
2.2 Acquisitions of businesses
The fair value of the major classes of assets acquired and liabilities assumed at the acquisition
date are:
In millions of Dollars
2021 2020
Total
(a)
Total
(b)
Property, plant and equipment 22 106
Intangible assets 310 613
Inventories, prepaid inventories and other assets 25 126
Financial debt (20) (95)
Deferred taxes (3) (120)
Other liabilities
(20) (85)
Fair value of identifiable net assets 314 545
(a) Related mainly to Essentia Water acquisition.
(b) Related mainly to Freshly acquisition.
2. Scope of consolidation, acquisitions and disposals of businesses, assets held for sale and acquisitions
of non-controlling interests
24 Consolidated Financial Statements of the NHI Group 2021
The goodwill arising on acquisitions and the cash outflows are:
In millions of Dollars
2021 2020
Total
(a)
Total
(b)
Fair value of consideration transferred 709 1 224
Non-controlling Interests 38
Fair value of pre-existing interests 220
Subtotal 709 1 482
Fair value of identifiable net (assets)/ liabilities (314) (545)
Goodwill 395 937
Fair value of consideration transferred 709 1 224
Cash and cash equivalents acquired (1) (52)
Consideration payable (328)
Payment of consideration payable on prior years acquisitions 5
Cash outflow on acquisitions 708 849
(a) Related mainly to Essentia Water acquisition.
(b) Related mainly to Freshly acquisition.
With regards to Freshly for the year ended December 31, 2020, the consideration payable
included an amount of contingent consideration with an estimated fair value of $313 million
at the date of acquisition (categorized within Level 3 of the fair value hierarchy). The contingent
consideration is in the form of an earn-out. Using the valuation methodology consistent with
the prior year, updated with the revised forecasts, it has been reassessed as of December 31, 2021
and adjusted downwards by $288 million (reflected in Other operating income and expenses,
see Note 4.2)
Essentia Water
On March 5, 2021, the NHI Group acquired 100% of the ownership interests of Essentia Sub, LLC
(“Essentia”) from Essentia Water, LLC, with consideration paid in cash. Essentia is a premium
ionized alkaline bottled water. This transaction brings together NHI Group’s expertise in the
water business with Essentia’s premium products and distribution network to fuel growth
opportunities within the Nestlé Premium Waters business and across NHI Group’s portfolio.
The goodwill arising on this acquisition includes elements such as market share and growth
potential in premium water as well as leveraging the Nestlé Group’s expertise and research
and development. This goodwill is expected to be deductible for tax purposes.
Impacts of Essentia on the sales and profit for the year
Amounts included in the 2021 Consolidated Financial Statements from Essentia were sales
of $229 million and a profit of the year of $40 million.
The NHI Group’s total sales and profit for the year would have respectively amounted
to $26 978 million and $632 million if the acquisition had been effective January 1, 2021.
Freshly
On October 30, 2020, the NHI Group acquired a controlling stake in Freshly, through its 74%
holding in Honey Holdings LLC. Freshly was previously held as an associate.
Freshly delivers a menu of fresh, prepared meals to customers across the United States.
This transaction brings together Nestlé’s deep understanding of what and how people eat at
home with Freshly’s highly specialized consumer analytics platform and distribution network
to fuel growth opportunities within the Freshly business and across Nestlé’s portfolio.
2. Scope of consolidation, acquisitions and disposals of businesses, assets held for sale and acquisitions
of non-controlling interests
Consolidated Financial Statements of the NHI Group 2021 25
The goodwill arising on this acquisition includes elements such as market share and growth
potential in direct-to-consumer food as well as leveraging Nestlé expertise and presence in
large-scale prepared meal manufacturing and research and development. It is not expected
to be deductible for tax purposes.
Impacts of Freshly on the sales and profit for the year
Amounts included in the 2020 Consolidated Financial Statements from Freshly were sales
of $76 million and a loss of $3 million.
The NHI Group’s total sales and profit for the year would have respectively amounted
to $24.0 billion and $3.3 billion if the acquisition had been effective January 1, 2020.
2.3 Disposals of businesses
There were no significant disposals during 2021. In 2020, the gain on disposal of businesses,
recorded in Other operating income, is mainly composed of the gain on disposal of the US
Ice Cream business.
2021 2020
Total
(a)
US Ice Cream Other Total
Property, plant and equipment 458 51 509
Goodwill and intangible assets 1 407 14 1 421
Cash, cash equivalents and short-term investments 1 1
Inventories 9 193 10 203
Other assets 3 39 39
Financial liabilities (17) (17)
Deferred tax liabilities (88) (88)
Other liabilities (1) (8) (13) (21)
Net assets disposed of 11 1 985 62 2 047
Profit/(loss) on disposals, net of disposal costs (24) 2 011 (68) 1 943
Total disposal consideration, net of disposal costs (13) 3 996 (6) 3 990
Cash and cash equivalents disposed of (1) (1)
Disposal costs not yet paid 14 4 18
Cash inflow/(outflow) on disposals, net of disposal costs (13) 4 009 (2) 4 007
(a) Relates to true-up of previous disposals.
2. Scope of consolidation, acquisitions and disposals of businesses, assets held for sale and acquisitions
of non-controlling interests
26 Consolidated Financial Statements of the NHI Group 2021
2.4 Assets held for sale
Assets held for sale and disposal groups
Non-current assets held for sale and disposal groups are presented separately in the current
section of the consolidated balance sheet when the following criteria are met: the NHI Group
is committed to selling the asset or disposal group, it is available for immediate sale in its
current condition, an active plan of sale has commenced, and in the judgment of management
it is highly probable that the sale is expected to be completed within 12 months. Immediately
before the initial classification of the assets and disposal groups as held for sale, the carrying
amounts of the assets (or all the assets and liabilities in the disposal groups) are measured in
accordance with their applicable accounting policy. Assets held for sale and disposal groups
are subsequently measured at the lower of their carrying amount and fair value less cost to
sell. Assets held for sale are no longer amortized or depreciated.
As of December 31, 2021 and December 31, 2020, there were no significant assets and
liabilities held for sale.
2.5 Acquisitions of non-controlling interests
The NHI Group treats transactions with non-controlling interests that do not result in loss of
control as transactions with equity holders in their capacity as equity holders. For purchases
of shares from non-controlling interests, the difference between any consideration paid and
the relevant share acquired of the carrying amount of net assets of the subsidiary is recorded
in equity.
In 2021, the NHI Group increased its ownership interests in Freshly and Vital Proteins leading
to a decrease of non-controlling interests amounting to $33 million. The consideration to
non-controlling interests in 2021 was in the form of cash of $72 million and the recognition of
a payable of $181 million. Part of the consideration was recorded as a liability in previous years
for $196 million.
2. Scope of consolidation, acquisitions and disposals of businesses, assets held for sale and acquisitions
of non-controlling interests
Consolidated Financial Statements of the NHI Group 2021 27
3. Analyses by segment
Segment reporting
Basis for segmentation
Operating segments reflect the NHI Group’s management structure and the way financial
information is regularly reviewed by the chief operating decision maker (CODM). The CODM
has been defined as a body comprising the members of the Nestlé Group Executive Board to
whom the various operating segments report, since this is the level at which resources are
allocated and results are assessed.
The NHI Groups management structure is aligned with the Nestlé Group management
structure and is organized around products.
The Nestlé USA Brands segment forms part of the Nestlé Group Zone Americas segment.
It consists primarily of beverages, snacks, frozen prepared foods, pizza, and other food
products.
The PetCare segment also forms part of the Nestlé Group Zone Americas segment and
sells products for domestic pets.
The Other businesses segment category comprises other operating segments that do not
meet the criteria for separate reporting, such as the Nutrition segment (forming part of the
Nestlé Group Zone Americas segment) and consists primarily of infant and baby food
products; Nestlé Professional (forming part of the Nestlé Professional Regionally Managed
Business (RMB) within Nestlé Group Zone Americas), which sells products for the food
services industry; and Nestlé Health Science which provides pioneering science based
nutritional solutions to deliver improved personalized health care for people with medical
conditions, and the Nespresso business unit.
Revenue and results by segment
Segment results (Trading operating profit) represent the contribution of the different segments
to the trading operating profit of the NHI Group. In addition to the Trading operating profit,
Underlying Trading operating profit is shown on a voluntary basis because it is one of the key
metrics used by the Company to monitor the segment performance of the NHI Group.
Depreciation and amortization include depreciation of property, plant and equipment
(including right-of-use assets under leases) and amortization of intangible assets.
Invested capital and other information by segment
No segment assets and liabilities are regularly provided to the CODM to assess segment
performance or to allocate resources and therefore segment assets and liabilities are not
disclosed. However, the NHI Group discloses the invested capital, goodwill and intangible
assets by segment on a voluntary basis.
Invested capital comprises property, plant and equipment, trade receivables and some
other receivables, assets held for sale, inventories, prepayments and accrued income as well
as specific financial assets associated to the segments, less trade payables and some other
payables, liabilities directly associated with assets held for sale, non-current other payables
as well as accruals and deferred income.
Goodwill and intangible assets are not included in invested capital since the amounts
recognized are not comparable between segments due to differences in the intensity of
acquisition activity and changes in accounting standards, which were applicable at various
points in time when the NHI Group undertook significant acquisitions. Nevertheless, an
allocation of goodwill and intangible assets by segment and the related impairment
expenses are provided.
Invested capital and goodwill and intangible assets by segment represent the position at
the end of the year.
3. Analyses by segment
28 Consolidated Financial Statements of the NHI Group 2021
3. Analyses by segment
Capital additions represent the total cost incurred to acquire property, plant and
equipment (including right-of-use assets under leases), intangible assets and goodwill,
including those arising from business combinations.
Revenue
Sales represent amounts received and receivables from third parties for goods supplied
and for services rendered to customers and affiliates (outside of the NHI Group). Sales are
recognized when control of the goods has transferred to the customer, which is mainly upon
arrival at the domestic customer and in accordance with International Commercial Terms
(“incoterms”) for exports.
Revenue is measured as the amount of consideration which the NHI Group expects to
receive, based on the list price applicable to a given distribution channel after deduction of
returns, sales taxes, pricing allowances, other trade discounts and couponing and price
promotions to consumers. The level of discounts, allowances and promotional rebates is
recognized as a deduction from revenue at the time that the related sales are recognized or
when the rebate is offered to the customer (or consumer if applicable). They are estimated
using judgments based on historical experience and the specific terms of the agreements
with the customers. Payments made to customers for commercial services received are
expensed. The NHI Group has a range of credit terms that are typically short term, in line
with market practice and without any financing component. Sales returns are generally not
allowed, except in limited cases mainly in the Infant Nutrition business. Historical experience
is used to estimate such returns at the time of sale. No asset is recognized for products to be
recoverable from these returns, as they are not anticipated to be resold.
Trade assets (mainly coffee machines) may be sold or leased separately to customers.
Arrangements where the NHI Group transfers substantially all the risks and rewards
incidental to ownership to the customer are treated as finance lease arrangements.
Operating lease revenue for trade asset rentals is recognized on a straight-line basis over
the lease term.
Consolidated Financial Statements of the NHI Group 2021 29
3.1 Operating segments
Revenue and results
In millions of Dollars
2021
Brands
(a)
PetCare Other
(a)
Total
Sales 11 490 9 980 5 475 26 945
Underlying Trading operating profit
(b)
648 633 14 1 295
Trading operating profit (loss)
(c)
608 616 (124) 1 100
Net other trading (expenses) income
(d)
(40) (18) (137) (195)
Of which impairment of property, plant and equipment (10) (65) (75)
Of which restructuring costs (9) (39) (48)
Depreciation and amortization (266) (300) (205) (771)
2020
Brands
(a)
PetCare Other
(a)
Total
Sales 10 279 9 131 4 175 23 585
Underlying Trading operating profit
(b)
843 1 314 204 2 361
Trading operating profit (loss)
(c)
900 1 322 192 2 414
Net other trading (expenses) income
(d)
57 8 (12) 53
Of which impairment of property, plant and equipment (10) (6) (16)
Of which restructuring costs 28 (2) (3) 23
Depreciation and amortization (276) (285) (136) (697)
(a) Nestlé USA Brands primarily consists of Nestlé Coffee Partners, beverage, prepared foods, snacks, and other food products.
Other primarily consists of Freshly, Nutrition, Nestlé Professional, Nespresso, and Nestlé Health Science, which do not meet the
criteria for separate disclosure.
(b) Trading operating profit before Net other trading income (expenses).
(c) The NHI Group determines trading operating profit by allocating corporate expenses to its operating segments based on
activity-based cost drivers.
(d) Included in Trading operating profit.
Invested capital and other information
In millions of Dollars
2021
Brands
(a)
PetCare Other Total
Invested capital 1 569 4 458 1 536 7 563
Goodwill and intangible assets 9 057 8 888 1 784 19 729
Impairment of goodwill (494) (494)
Capital additions 1 119 1 401 268 2 788
2020
Brands
(a)
PetCare Other Total
Invested capital 1 981 3 126 1 382 6 489
Goodwill and intangible assets 9 446 8 890 1 445 19 781
Impairment of goodwill
Capital additions 2 001 855 207 3 063
(a) Nestlé USA Brands primarily consists of beverage (including Nestlé Coffee Partners), prepared foods, snacks, and other food
products. Nutrition primarily consists of infant and baby food products. Other primarily consists of Freshly, Nestlé Professional,
Nespresso, and Nestlé Health Science which do not meet the criteria for separate disclosure.
3. Analyses by segment
30 Consolidated Financial Statements of the NHI Group 2021
3. Analyses by segment
3.2a Reconciliation from Underlying Trading operating profit to Profit before taxes and
associates
In millions of Dollars
2021 2020
Underlying Trading operating profit
(a)
as per Note 3.1 1 295 2 361
Net other trading income/(expenses) as per Note 4.1 (195) 53
Trading operating profit as per Note 3.1 1 100 2 414
Net other operating income/(expenses) (298) 1 678
Operating profit 802 4 092
Net financial expense (174) (168)
Profit before taxes and associates 628 3 924
(a) Trading operating profit before Net other trading income/(expenses).
3.2b Reconciliation from invested capital, goodwill and intangible assets to total assets
In millions of Dollars
2021 2020
Invested capital as per Note 3.1 7 563 6 489
Liabilities included in invested capital 7 058 5 085
Subtotal 14 621  11 574
Intangible assets and goodwill as per Note 3.1 19 729 19 781
Other assets 26 587 23 039
Total assets 60 937  54 394
3.3 Customers
The NHI Group has one customer, with sales in all segments of the business, amounting to
20% and 23% of the NHI Group’s sales for the years ended December 31, 2021 and 2020,
respectively.
Consolidated Financial Statements of the NHI Group 2021 31
4. Net other trading and operating income/(expenses)
Other trading income/(expenses)
These comprise restructuring costs, impairment of property, plant and equipment and
intangible assets (other than goodwill), litigation (related legal, advisory, and other
professional fees) and onerous contracts, result of disposal of property, plant and equipment,
and specific other income and expenses that fall within the control of operating segments.
Restructuring costs are restricted to dismissal indemnities and employee benefits paid to
terminated employees upon the reorganization of a business or function.
Other operating income/(expenses)
These comprise impairment of goodwill, results on disposals of businesses (including
impairment and subsequent remeasurement of businesses classified as held for sale, as well
as other directly related disposal costs like restructuring costs directly linked to businesses
disposed of and legal, advisory and other professional fees), acquisition related costs, and
income and expenses that fall beyond the control of operating segments or relate to events
such as natural disasters including extreme weather events linked to climate change, as well
as expropriation of assets.
4.1 Net other trading income/(expenses)
In millions of Dollars
2021 2020
Return on company-owned life insurance 53 81
Reversal of unused restructuring provisions 7 43
Miscellaneous trading income 1
Gain on sale of real estate 48
Other trading income 61 172
Restructuring costs (56) (20)
Impairment of property, plant and equipment and intangible assets (75) (16)
Litigation and onerous contracts
(a)
(61) (29)
Result on deferred compensation (51) (43)
Miscellaneous trading expenses (13) (11)
Other trading expenses (256) (119)
Total net other trading (expenses)/income (195) 53
(a) Relating principally to a number of separate legal cases, liabilities linked to voluntary product withdrawals and various separate
onerous contracts.
4. Net other trading and operting income/(expenses)
32 Consolidated Financial Statements of the NHI Group 2021
4.2 Net other operating income/(expenses)
In millions of Dollars
2021 2020
Gain on disposal of businesses
(a)
2 011
Re-measurement of contingent consideration
and other compensation liabilities
(b)
378
Miscellaneous operating income
(c)
127 56
Other operating income 505 2 067
Loss/expenditures on disposal of business
(a)
31 (68)
Impairment of goodwill
(d)
(494)
Miscellaneous operating expenses
(c)
(340) (321)
Other operating expenses (803) (389)
Total net other operating (expenses)/income (298) 1 678
(a) See disposals of businesses. See Note 2.3.
(b) Mainly related to Freshly items. See Note 2.2.
(c) Miscellaneous operating income mainly consists of transitional services provided to disposed businesses. Miscellaneous
operating expenses include mainly expenses of transitional services provided to disposed businesses, natural disasters and
costs related to COVID-19. COVID-19 expenses relate primarily to safety related costs (gloves, masks, cleaning and sanitizing,
screening, and vaccines among others).
(d) See goodwill and intangible assets. See Note 9.
In 2020, profit on disposal of businesses relates to the result of disposal of the Ice Cream business
(see Note 2.3).
4. Net other trading and operting income/(expenses)
Consolidated Financial Statements of the NHI Group 2021 33
5. Net financial income/(expense)
Net financial income/(expense) includes net financing cost of net financial debt and net
interest income/(expense) on defined benefit plans.
Net financing cost comprises the interest income earned on cash and cash equivalents,
short- term investments and loans to parent and affiliates, as well as the interest expense on
financial debt (including leases), and loans from affiliates, collectively termed “net financial
debt. These headings also include other income and expense such as exchange differences
on net financial debt and results on related foreign currency and interest rate hedging
instruments. Certain borrowing costs are capitalized as explained under the section
“Property, plant and equipment.
In millions of Dollars
Notes 2021 2020
Interest income 464 486
Interest expense (621) (638)
Net financing cost of net debt (157) (152)
Interest income on defined benefit plans 7 16 13
Interest expense on defined benefit plans 7 (33) (33)
Net interest expense on defined benefit plans (17) (20)
Other 4
Net financial (expenses)/income (174) (168)
Interest expense on amounts due to affiliated companies, and bonds and commercial paper
guarantee fees to Nestlé S.A. amounted to $89 million and $80 million in 2021 and 2020,
respectively. Interest income on amounts due from parent and affiliated companies amounted
to $464million and $486 million in 2021 and 2020, respectively.
5. Net financial income/(expense)
34 Consolidated Financial Statements of the NHI Group 2021
6. Inventories
Raw materials are valued at the lower of purchase cost calculated using the FIFO (first-in,
first-out) method and net realizable value. Work in progress, sundry supplies and finished
goods are valued at the lower of their weighted average cost (including an allocation of
factory overheads and depreciation) and net realizable value. The cost of inventories includes
the gains/losses on cash flow hedges for the purchase of raw materials and finished goods.
In millions of Dollars
2021 2020
Raw materials and work in progress 845 738
Finished goods 2 261 1 897
Allowance for write-down to net realizable value (50) (39)
Total 3 056 2 596
Inventories amounting to $15 000 million (2020: $12 909 million) were recognized as an expense
during the year and included in Cost of goods sold.
7. Trade and other receivables/payables
7.1 Trade and other receivables
Recognition and measurement
Trade and other receivables are recognized initially at their transaction price and subsequently
measured at amortized cost less loss allowances. Other receivables are comprised mainly of
receivables for indirect taxes.
Expected credit losses
The NHI Group applies the IFRS 9 simplified approach to measuring expected credit losses
(ECLs) for trade receivables at an amount equal to lifetime ECLs. The ECLs on trade receivables
are calculated based on actual credit loss experience over the preceding three to five years
on the total balance of non-credit impaired trade receivables, adjusted considering forward-
looking information where relevant (such as significant deterioration in the economic
environment). The NHI Group’s credit loss experience has shown that the aging of receivable
balances is primarily due to negotiations about variable consideration.
The NHI Group considers a trade receivable to be credit impaired when one or more
detrimental events have occurred such as:
significant financial difficulty of the customer; or
it is becoming probable that the customer will enter bankruptcy or other financial
reorganization.
Impairment losses related to trade and other receivables are not presented separately in the
consolidated income statement but are reported under the heading Marketing and
administrative expenses.
6. Inventories
Consolidated Financial Statements of the NHI Group 2021 35
In millions of Dollars
2021 2020
Gross carrying
amount
Expected credit
loss allowance Total
Gross carrying
amount
Expected credit
loss allowance Total
Trade receivables (not credit impaired) 2 415 (7) 2 408 1 950 (10) 1 940
Other receivables (not credit impaired) 245 245 335 335
Credit impaired trade and other
receivables 2 (1) 1 1 (1)
Total 2 662 (8) 2 654 2 286 (11) 2 275
The five major customers represent 40% (2020: 40%) of trade and other receivables, none of
them individually exceeding 19% (2020: 19%).
Based on the historic trends and the expected performance of the customers, the NHI Group
believes that the above expected credit loss allowance sufficiently covers for the risk of default.
7.2 Trade and other payables by type
Recognition and measurement
Trade and other payables are recognized initially at their transaction price and subsequently
measured at amortized cost.
Supplier finance arrangements
The NHI Group participates in supplier finance arrangements under which suppliers may elect
to receive early payment from financial institutions by factoring their receivables from the NHI
Group. The arrangements avoid concentration of liquidity risk, since the due dates of the
payments by the NHI Group are based on the agreed trade terms with the suppliers, are
compliant with the applicable regulations and remain consistent with the normal operating
cycle of its business. The NHI Group continues to present invoices eligible to be settled
through these programs as Trade payables considering that the original liability is neither
legally released nor substantially modified on entering into such arrangements. Related
payments are included within operating cash flows because they remain operational in nature.
In millions of Dollars
2021 2020
Due within one year
Trade payables 4 383 3 046
Other payables 198 4
Total 4 581 3 050
7. Trade and other receivables/payables
36 Consolidated Financial Statements of the NHI Group 2021
8. Property, plant and equipment
Property, plant and equipment comprises owned and leased assets.
In millions of Dollars
2021 2020
Property, plant and equipment – owned 7 407 5 968
Right-of-use assets – leased 771 665
Total 8 178 6 633
8.1 Owned assets
Owned property, plant and equipment are shown on the balance sheet at their historical cost.
Depreciation is assessed on components that have homogenous useful lives by using the
straight-line method so as to depreciate the initial cost down to the residual value over the
estimated useful lives. The residual values are up to 30% on the head office and nil for all
other asset types. The useful lives are as follows:
Buildings 2040 years
Machinery and equipment 10–25 years
Tools, furniture, information technology
and sundry equipment 3–15 years
Vehicles 3–10 years
Land is not depreciated
Useful lives, components, and residual amounts are reviewed annually. Such a review takes
into consideration the nature of the assets, their intended use including but not limited to the
closure of facilities and the evolution of the technology and competitive pressures that may
lead to technical obsolescence.
Depreciation of property, plant and equipment is allocated to the appropriate headings of
expenses by function in the consolidated income statement.
Borrowing costs incurred during the course of construction are capitalized if the assets
under construction are significant and if their construction requires a substantial period to
complete (typically more than one year). The capitalization rate is determined on the basis of
the short-term borrowing rate for the period of construction. Government grants are
recognized as deferred income, which is released to the consolidated income statement over
the useful life of the related assets.
8. Property, plant and equipment
Consolidated Financial Statements of the NHI Group 2021 37
8. Property, plant and equipment
In millions of Dollars
2021
Land and
buildings
Plant and
machinery
Tools, furniture,
and sundry
Vehicles
Information
technology
equipment
Assets under
Construction
Total
Net carrying amount
At January 1, 2021 2 190 2 313 195 6 84 1 180 5 968
Additions
(a)
144 96 77 3 1 659 1 979
Classification from assets under construction 136 378 11 11 24 (560)
Acquisitions through business combinations 48 8 1 57
Depreciation (121) (336) (68) (6) (40) (571)
Impairment of assets (Note 4) (1) (6) (3) (3) (13)
Disposals (4) (12) (16)
Classification (to)/from held for sale and disposals of
businesses 3 3
At December 31, 2021 2 396 2 449 203 11 69 2 279 7 407
Gross value 3 772 6 495 786 88 335 2 279 13 755
Accumulated depreciation and impairments (1 376) (4 046) (583) (77) (266) (6 348)
In millions of Dollars
2020
Land and
buildings
Plant and
machinery
Tools, furniture,
and sundry
Vehicles
Information
technology
equipment
Assets under
Construction
Total
Net carrying amount
At January 1, 2020 2 220 2 237 183 6 101 569 5 316
Additions
(a)
49 29 5 2 1 130 1 215
Classification from assets under construction 16 364 94 13 32 (519)
Acquisitions through business combinations 46 45 3 1 3 98
Depreciation (104) (326) (62) (6) (53) (551)
Impairment of assets (Note 4) 6 (1) (13) (8) (16)
Disposals (12) (11) (14) (1) (38)
Classification (to)/from held for sale and disposals of
businesses (31) (24) (1) (56)
At December 31, 2020 2 190 2 313 195 6 84 1 180 5 968
Gross value 3 399 6 086 790 88 363 1 180 11 906
Accumulated depreciation and impairments (1 209) (3 773) (595) (82) (279) (5 938)
(a) Including borrowing costs.
There were $909 million and $1735 million in commitments for future capital expenditures as of
December 31, 2021 and 2020, respectively.
38 Consolidated Financial Statements of the NHI Group 2021
8. Property, plant and equipment
Impairment of property, plant and equipment
Reviews of the carrying amounts of the NHI Group’s property, plant and equipment are
performed when there is an indication of impairment. An indicator could be technological
obsolescence (including changes due to a transition to a low carbon economy), unfavorable
development of a business under competitive pressures or severe economic slowdown in a
given market as well as reorganization of the operations to leverage their scale.
In assessing value in use, the estimated future cash flows are discounted to their present
value, based on the time value of money and any risks specific to the assets location. The
risks specific to the asset are included in the determination of the cash flows.
Impairment of property, plant and equipment arises mainly from the plans to optimize
industrial manufacturing capacities by closing or selling inefficient production facilities as well
as underperforming businesses.
8.2 Leases – Group as a lessee
The NHI Group assesses whether a contract is or contains a lease at inception of the contract.
This assessment involves the exercise of judgment about whether it depends on a specified
asset, whether the NHI Group obtains substantially all the economic benefits from the use of
that asset, and whether the NHI Group has the right to direct the use of the asset.
The NHI Group recognizes a right-of-use (ROU) asset and a lease liability at the lease
commencement date, except for short-term leases of 12 months or less which are expensed
in the consolidated income statement on a straight-line basis over the lease term.
The lease liability is initially measured at the present value of the lease payments that are
not paid at the commencement date, discounted using the interest rate implicit in the lease.
If this rate cannot be readily determined, the NHI Group uses an incremental borrowing rate
specific to the country, term and currency of the contract. Lease payments can include fixed
payments; variable payments that depend on an index or rate known at the commencement
date; and extension option payments or purchase options which the NHI Group is reasonably
certain to exercise. The lease liability is subsequently measured at amortized cost using the
effective interest rate method and remeasured (with a corresponding adjustment to the
related ROU asset) when there is a change in future lease payments in case of renegotiation,
changes of an index or rate in case of reassessment of options.
At inception, the ROU asset comprises the initial lease liability, initial direct costs and the
obligations to refurbish the asset, less any incentives granted by the lessors. The ROU asset
is depreciated over the shorter of the lease term or the useful life of the underlying asset.
The ROU asset is subject to testing for impairment if there is an indicator for impairment, as
for owned assets.
ROU assets are included in the heading Property, plant and equipment, and the lease
liability is included in the headings current and non-current Financial debt.
8.2a Description of lease activities
Real estate leases
The NHI Group leases land and buildings for its office and warehouse space and retail stores.
Lease terms are negotiated on an individual basis and contain a wide range of different terms
and conditions. Leases are typically made for a fixed period of 5–15 years and may include
extension options which provide operational flexibility. If the NHI Group exercised all extension
options not currently included in the lease liability, the additional undiscounted payments
would amount to $613 million at December 31, 2021 (2020: $578 million).
Consolidated Financial Statements of the NHI Group 2021 39
Vehicle leases
The NHI Group leases trucks for distribution in specific businesses and cars for management
and sales functions. The average contract duration is 6 years for trucks and 3 years for cars.
Other leases
The NHI Group also leases Machinery and equipment and Tools, furniture and other equipment
that combined are insignificant to the total leased asset portfolio.
8.2b Right-of-use assets
In millions of Dollars
2021
Land and
buildings Vehicles Other Total
Net carrying amount
At January 1, 2021 609 28 28 665
Additions 126 7 17 150
Depreciation (101) (14) (17) (132)
Impairments (62) (62)
Classification to/from held for sale and change of scope of
consolidation, net 149 1 150
At December 31, 2021 721 21 29 771
2020
Land and
buildings Vehicles Other Total
Net carrying amount
At January 1, 2020 515 44 34 593
Additions 50 35 10 95
Depreciation (55) (16) (17) (88)
Impairments 15 (14) 1
Classification to/from held for sale and change of scope of
consolidation, net 84 (21) 1 64
At December 31, 2020 609 28 28 665
8.2c Other lease disclosures
A maturity analysis of lease liabilities is shown in Note 12.2b.
The NHI Group incurred interest expense on lease liabilities of $25 million (2020: $22million).
The expense relating to short-term leases and variable lease payments not included in the
measurement of lease liabilities is not significant. The total cash outflow for leases amounted
to $129 million (2020: $135 million).
There are no significant lease commitments for leases not commenced at year-end.
8. Property, plant and equipment
40 Consolidated Financial Statements of the NHI Group 2021
9. Goodwill and intangible assets
Goodwill
Goodwill is initially recognized during a business combination (see Note 2). Subsequently it is
measured at cost less impairment.
Intangible Assets
This heading includes intangible assets that are internally generated or acquired, either
separately or in a business combination, when they are identifiable and can be reliably
measured. Internally generated intangible assets (essentially management information
system software) are capitalized provided that there is an identifiable asset that will be useful
in generating future benefits in terms of savings, economies of scale, etc.
Indefinite life intangible assets mainly comprise operating rights which can be renewed
without significant cost and are supported by ongoing marketing activities. They are not
amortized but are tested for impairment annually or more frequently if an impairment indicator
is triggered. Any impairment charge is recorded in the consolidated income statement under
Other trading expenses. The assessment of the classification of intangible assets as indefinite
is reviewed annually.
Finite life intangible assets are amortized over the shorter of their contractual or useful
economic lives. They comprise mainly management information systems, rights and
customer relationships. They are amortized on a straight-line basis assuming a zero residual
value. Useful lives are as follows: management information systems over 3 to 8 years; other
finite intangible assets over the estimated useful life or the related contractual period,
generally 5 to 20 years. Useful lives and residual values are reviewed annually. Amortization
of finite life intangible assets starts when they are available for use and is allocated to the
appropriate headings of expenses by function in the consolidated income statement under
Other trading expenses.
9. Goodwill and intangible assets
Consolidated Financial Statements of the NHI Group 2021 41
In millions of Dollars
2021
Goodwill Intangible assets
Net carrying amount
At January 1, 2021 15 209 4 572
Expenditure 79
Acquisitions through business combinations
(a)
395 423
Amortization (68)
Impairment
(b)
(494)
Disposals
(c)
(387)
Classification to held for sale and disposals of businesses
At December 31, 2021 15 110 4 619
of which indefinite useful life
(d)
4 198
At December 31, 2021
Gross value 19 063 5 753
Accumulated amortization and impairments (3 953) (1 134)
2020
Goodwill Intangible assets
Net carrying amount
At January 1, 2020 14 286 4 598
Expenditure 97
Acquisitions through business combinations 937 613
Amortization (59)
Disposals
(c)
(667)
Classification to held for sale and disposals of businesses (14) (10)
At December 31, 2020 15 209 4 572
of which indefinite useful life
(d)
4 200
At December 31, 2020
Gross value 18 668 5 736
Accumulated amortization and impairments (3 459) (1 164)
(a) Includes intangible assets received from common control business combinations. See Note 16.
(b) Refer to Note 9.1.1.
(c) Includes the sale of a trademark to a Nestlé Group affiliate. See Note 16.
(d) Of which $4,198 million (2019: $4,200 million) are perpetual rights to market, sell and distribute certain Starbucks’ consumer
and foodservice products globally.
9. Goodwill and intangible assets
42 Consolidated Financial Statements of the NHI Group 2021
Impairment of goodwill and intangible assets
Goodwill and intangible assets with an indefinite life or not yet available for use are tested for
impairment at least annually and when there is an indication of impairment. Finite life
intangible assets are tested when there is an indication of impairment.
The annual impairment tests are performed at the same time each year and at the cash
generating unit (CGU) level. The NHI Group defines its CGU for goodwill impairment testing
based on the way that it monitors and derives economic benefits from the acquired goodwill.
For indefinite life intangible assets, the NHI Group performs the test at the level of the
smallest identifiable assets or group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets.
The impairment tests are performed by comparing the carrying value of the assets of
these CGU with their recoverable amount, usually based on their fair value less costs of
disposal, but occasionally on their value in use.
An impairment loss in respect of goodwill is never subsequently reversed.
9.1 Impairment
9.1.1 Impairment charge during the year
The impairment charge for 2021 relates to the goodwill associated with the Freshly CGU which
is included in Other segments. The Freshly CGU is comprised of the net assets related only to
the Freshly acquisition.
As a result of the prolonged continuation of COVID-19, Freshly experienced a change in market
conditions resulting in sales and the operating profit delivering below projections during the
second half of the year. These factors, along with increasing competitive pressures and net
cost of customer acquisition, resulted in downward revision of projected cash flows and a
recoverable amount of the CGU lower than its carrying amount. Consequently, a goodwill
impairment charge amounting to $494 million has been recognized for the year ended
December 31, 2021 in net other operating expenses (see Note 4.2) of the consolidated income
statement. There was no impairment of the carrying amounts of other assets of the CGU. The
recoverable amount has been determined based upon a fair value less costs of disposal
calculation (see Note 9.1.2), as follows:
Freshly
Key assumptions
(a)
Sales growth Low double digit
Margin evolution Moderate improvement
Terminal growth rate 3.0%
Discount rate 8.5%
Financial impact (in millions)
Impairment 494
Recoverable amount after impairment 399
(a) Assumptions are based on a period of cash flow projections of 10 years.
9. Goodwill and intangible assets
Consolidated Financial Statements of the NHI Group 2021 43
9.1.2 Annual impairment tests
Impairment reviews have been conducted for ten Cash Generating Units (CGU). Impairment
reviews on intangible assets with indefinite useful life (“IAIUL”) were performed at the level of
the smallest identifiable assets or group of assets.
The following table sets out the key assumptions for CGUs that have significant Goodwill or
IAIUL allocated to them.
Goodwill
carrying
amount
IAIUL carrying
amount
Period of
cash flow
projections
Average
annual sales
growth
Annual
margin
evolution
Terminal
growth
rate
Discount
rate
CGU
PetCare 8 814  — 5 years 5.1% Improvement 1.5% 5.4%
Food 3 059  — 5 years 3.8% Stable 1.5% 5.4%
Beverages 1 134  4 195  5 years 2.6% Improvement 1.5% 5.4%
Subtotal 13 007  4 195 
Other CGUs 2 103  3 
Total Goodwill 15 110  4 198 
CGU
PetCare 8 814 — 5 years 4.3% Declining 1.5% 6.0%
Food 3 059 — 5 years 2.6% Improvement 1.5% 6.8%
Beverages 1 134 4 195 5 years 1.9% Declining 1.7% 6.8%
Subtotal 13 007 4 195
Other CGUs 2 202 5
Total Goodwill 15 209 4 200
For each CGU the recoverable amount is higher than its carrying amount, except for the
Freshly CGU. The recoverable amount has been determined based upon a fair value less costs
of disposal calculation. Generally, no directly observable market inputs are available to assess
the fair value less costs of disposal. Therefore, the calculation is based on net present value
techniques (fair value measurements categorized within Level 3 of the fair value hierarchy).
Cash flows for all CGUs except Freshly (see Note 9.1.1) have been projected over 5 years. They
have been extrapolated using a steady or declining terminal growth rate.
The following has been taken into account in the impairment tests:
The cash flows have been discounted at post-tax weighted average rates. The discount
rates have been computed based on external sources of information and reflect the time
value of money and the risks specific to the CGU.
The cash flows were based upon financial plans approved by Nestlé Group Management
which are consistent with the NHI Group’s approved strategy for this period. They are based
on past performance and current initiatives. The business risk was included in the
determination of the cash flows.
The terminal growth rates have been determined to reflect the long-term view of the
nominal evolution of the business taking into account the latest outlook for long-term
inflation.
The cash flows, the discount rates and the terminal growth rates include inflation.
The NHI Group assesses the uncertainty of these estimates by performing sensitivity analyses.
Management believes that no reasonably possible material change in any of the above key
assumptions would cause the CGU’s recoverable amount to fall below the carrying value of the
CGUs.
9. Goodwill and intangible assets
2021
2020
44 Consolidated Financial Statements of the NHI Group 2021
10. Employee benefits
10. Employee benefits
10.1 Employee remuneration
The NHI Group’s salaries of $2499 million (2020: $2673 million) and welfare expenses of
$1099 million (2020: $736 million) represent a total of $3598 million (2020: $3409 million). In
addition, certain NHI Group employees are eligible to receive long-term incentives in the form
of equity compensation plans, for which the cost amounts to $112 million (2020: $124 million).
Employee remuneration is allocated to the appropriate headings of expenses by function.
10.2 Post-employment benefits
The liabilities of the NHI Group arising from defined benefit obligations, and the related
current service cost, are determined using the projected unit credit method. Actuarial advice
is provided both by external consultants and by actuaries employed by the NHI Group who
perform valuations on an annual basis. Such plans are either externally funded (in the form of
independently administered funds) or unfunded. The deficit or excess of the fair value of plan
assets over the present value of the defined benefit obligation is recognized as a liability or
an asset on the balance sheet.
Pension cost charged to the consolidated income statement consists of service cost
(current and past service cost, gains and losses arising from curtailment and settlement) and
administration costs (other than costs of managing plan assets), which are allocated to the
appropriate heading by function, and net interest expense or income, which is presented as
part of net financial income/(expense). The actual return less interest income on plan assets,
changes in actuarial assumptions, and differences between actuarial assumptions and what
has actually occurred are reported in other comprehensive income. Some benefits are also
provided by defined contribution plans. Contributions to such plans are charged to the
consolidated income statement as incurred.
Pensions and retirement benefits
In the USA, Nestlé’s primary pension plan is a pension equity design, under which members
earn pension credits each year based on a schedule related to the sum of their age and service
with Nestlé. A members benefit is the sum of the annual pension credits earned multiplied by
an average earning payable as a lump sum. However, in lieu of the lump sum, members have
the option of converting the benefit to a monthly pension annuity. With the exception of certain
Nestlé Purina hourly employees, The Nestlé Pension Plan was closed to new entrants at the
end of 2015 and replaced by a defined contribution scheme. The pension plan is sufficiently
funded on a local statutory basis such that no contributions were required in 2021, however,
expected contributions for 2022 will be approximately $64 million.
Post-employment medical benefits and other employee benefits
The NHI Group maintains medical benefit plans, classified as defined benefit plans under IAS
19, which cover eligible retired employees. The obligations for other employee benefits consist
mainly of post service healthcare benefits, which do not have the characteristics of pensions.
Multi-employer pension plans
NHI entities are collectively members of four multi-employer defined benefit pension plans,
including the Central States Southeast and Southwest Areas Pension Fund (“Central States”),
the Western Conference of Teamsters Pension Trust Fund, the Stationary Engineers Local 39
Pension Trust Fund and the Central Pension Fund of the International Union of Operating
Engineers and Participating Employers.
NHI makes contributions to these plans based on a rate per hour as agreed under collective
bargaining arrangements with the applicable Unions.
Consolidated Financial Statements of the NHI Group 2021 45
10. Employee benefits
No NHI entity was listed on available plan tax filings as an entity that provides more than 5
percent of any of the plans’ contributions.
These plans are managed by an independent trustee board typically appointed in equal
number by employers and unions. The trustees, not NHI or its entities, are responsible for the
investment of plan assets and the administration of the plans, including maintenance of
participant records.
The actuarial risks of participating in multiemployer pension plans are different from single-
employer plans. Assets contributed to a multiemployer plan by one employer may be used to
provide benefits to employees of other participating employers. If a participating employer
ceases contributions to a plan, the unfunded obligations of the plan are allocated to the
remaining participating employers.
Information about a participating employers allocation of a plan’s unfunded actuarial
liability is only made available upon request to the trustees. The Central States plan has
a Pension Protection Act (PPA) zone status of “Red” as of the most recent publicly available
tax form filing. A PPA red zone status means that the plan is generally less than 65 percent
funded. The remaining plans in which NHI participates are in a green PPA zone status as of
their most recent government form filings. A PPA green zone status means that the plan is
at least 80 percent funded. The American Rescue Plan passed by Congress in March 2021
is expected to substantially improve the funded status of the Central States plan once it is able
to apply for and receive the funds that will be allocated to it.
If an NHI entity were to cease participation in any of the multi-employer pension plans, that
entity would be allocated a portion of the plan’s unfunded actuarial liability, otherwise known
as withdrawal liability. A cessation of participation in a multi-employer plan would most
commonly be triggered through negotiation with the union. NHI entities have no current
existing negotiated withdrawals from any of the named multi-employer pension plans.
Risks related to defined benefit plans
The main risks to which the NHI Group is exposed in relation to operating defined benefit plans
are:
market and liquidity risks: these are the risks that the investments do not meet the expected
returns over the medium to long term. This also encompasses the mismatch between assets
and liabilities. In order to minimize the risks, the structure of the portfolios is reviewed and
asset-liability matching analyses are performed on a regular basis.
mortality risk: the assumptions adopted by the NHI Group make allowance for future
improvements in life expectancy. However, if life expectancy improves at a faster rate than
assumed, this would result in greater payments from the plans and consequently increases
in the plans’ liabilities. In order to minimize this risk, mortality assumptions are reviewed
on a regular basis.
As certain of the NHI Group’s pension arrangements permit benefits to be adjusted in the case
that downside risks emerge, the NHI Group does not always have full exposure to the risks
described above.
Plan amendments and restructuring events
Plans within the NHI Group are regularly reviewed by management as to whether they are
aligned with market practice in the local context.
During the year, there were individually non-significant plan amendments and restructuring
events which have been recognized as past service cost. The related past service costs in 2021
were $7 million (2020: ($5) million) and have been recognized in the consolidated income
statement primarily under Net other operating expenses.
46 Consolidated Financial Statements of the NHI Group 2021
10. Employee benefits
Asset-liability management and funding arrangement
The NHI Group’s investment committee is responsible for determining the mix of asset classes
and target allocations of the NHI Group’s plans with the support of investment advisors.
Periodic reviews of the asset mix are made by mandating external consultants to perform asset
liability matching analyses. Such analyses aim at comparing dynamically the fair value of assets
and the liabilities in order to determine the most adequate strategic asset allocation.
The overall investment policy and strategy for the NHI Group’s funded defined benefit plans
is guided by the objective of achieving an investment return which, together with the contributions
paid, is sufficient to maintain reasonable control over the various funding risks of the plans. As
those risks evolve with the development of capital markets and asset management activities,
the NHI Group addresses the assessment and control process of the major investment pension
risks. In order to protect the NHI Group’s defined benefit plans funding ratio and to mitigate
the financial risks, protective measures on the investment strategies are in force. To the extent
possible, the risks are shared equally amongst the different stakeholders.
10.2a Reconciliation of assets and liabilities recognized in the balance sheet
In millions of Dollars
2021 2020
Defined benefit
retirement plans
Post
employment
medical benefits Total
Defined benefit
retirement plans
Post
employment
medical benefits Total
Present value of funded obligations 4 147 4 147 4 398 4 398
Fair value of plan assets (4 348) (4 348) (4 577) (4 577)
Excess of liabilities/(assets) over funded
obligations (201) (201) (179) (179)
Present value of unfunded obligations 532 582 1 114 565 630 1 195
Net Defined Benefit Liabilities 331 582 913 386 630 1 016
Other employee benefit liabilities 622 615
Net Liabilities 1 535 1 631
Reflected in the consolidated balance
sheet as follows:
Employee benefit assets (201) (179)
Employee benefit liabilities 1 736 1 810
Net Liabilities 1 535 1 631
Consolidated Financial Statements of the NHI Group 2021 47
10. Employee benefits
10.2b Movement in present value of defined benefit obligations
In millions of Dollars
2021 2020
Defined benefit
retirement plans
Post
employment
medical benefits Total
Defined benefit
retirement plans
Post
employment
medical benefits Total
At January 1 4 963 630 5 593 4 503 577 5 080
of which funded defined benefit plans 4 398 4 398 4 058 4 058
of which unfunded defined benefit
plans 565 630 1 195 445 577 1 022
Service cost 176 10 186 140 10 150
of which current service cost 169 10 179 143 12 155
of which past service cost and (gains)/
losses arising from settlements 7 7 (3) (2) (5)
Interest expense 115 13 128 141 17 158
Actuarial losses (147) (34) (181) 549 60 609
Benefits paid on funded defined benefit
plans (366) (366) (403) (403)
Benefits paid on unfunded defined benefit
plans (65) (37) (102) (55) (34) (89)
Plan Mergers 3 3
Reclassification of Executive savings plan 88 88
At December 31 4 679 582 5 261 4 963 630 5 593
of which funded defined benefit plans 4 147 4 147 4 398 4 398
of which unfunded defined benefit
plans 532 582 1 114 565 630 1 195
10.2c Movement in the fair value of defined benefit assets
In millions of Dollars
2021 2020
Defined benefit
retirement plans
Defined benefit
retirement plans
At January 1 4 577 4 461
Interest income 109 140
Actual return on plan assets, excluding interest income 29 379
Employer contributions 64 55
Benefits paid on funded/unfunded defined benefit plans (431) (458)
At December 31 4 348 4 577
48 Consolidated Financial Statements of the NHI Group 2021
10. Employee benefits
The major categories of plan assets as a percentage of total plan assets:
In millions of Dollars
2021 2020
December 31:
Equities 23% 25%
Debts 63% 63%
of which government debts 36% 34%
of which corporate debts 27% 29%
Alternative investments 14% 12%
Equities and government debts represent 59% (2020: 59%) of the plan assets. Almost all of
them are quoted in an active market. Corporate debts, real estate and hedge funds represent
41% (2020: 41%) of the plan assets. Almost all of them are either not quoted or quoted in
a market which is not active.
10.2d Expenses recognized in the consolidated income statement
In millions of Dollars
2021 2020
Defined benefit
retirement plans
Post
employment
medical benefits
and other
benefits Total
Defined benefit
retirement plans
Post
employment
medical benefits
and other
benefits Total
Service cost 169 10 179 134 9 143
Net interest (income)/expense 5 12 17 3 17 20
Administration expenses 12 12 10 10
Defined benefit expenses 186 22 208 147 26 173
Defined contribution expenses 120 92
Total expenses 328 265
The expenses for defined benefit and defined contribution plans are allocated to the
appropriate headings of expenses by function.
Consolidated Financial Statements of the NHI Group 2021 49
10.2e Remeasurement of defined benefit plans reported in other comprehensive income
In millions of Dollars
2021 2020
Defined benefit
retirement plans
Post
employment
medical benefits Total
Defined benefit
retirement plans
Post
employment
medical benefits Total
Actual return on plan assets, excluding
interest income 29 29 379 379
Experience adjustments on plan liabilities (65) 9 (56) (63) (2) (65)
Change in demographic assumptions on
plan liabilities (10) (10) (20)
Change in financial assumptions on plan
liabilities 212 25 237 (475) (48) (523)
Remeasurement of defined benefit plans 176 34 210 (169) (60) (229)
10.2f Principal financial actuarial assumptions
The principal financial actuarial assumptions are presented below. Each item is a weighted
average in relation to the relevant underlying component.
In millions of Dollars
2021 2020
Principal financial actuarial assumptions:
Discount rates 2.79% 2.50%
Expected rates of salary increases 3.50% 3.50%
Medical cost trend rates 4.5%-6.00% 4.5%-6.25%
10.2g Mortality tables and life expectancies
In millions of Dollars
Life expectancy at age 65 for a male
member currently aged 65 (in years)
Life expectancy at age 65 for a female
member currently aged 65 (in years)
2021 2020 2021 2020
Mortality table
PRI-2012 20.9 20.8 22.9 22.8
Life expectancy is reflected in the defined benefit obligations by using the best estimate of the
mortality of plan members. When appropriate, base tables are adjusted to take into consideration
expected changes in mortality e.g. allowing for future longevity improvements.
10. Employee benefits
50 Consolidated Financial Statements of the NHI Group 2021
10.2h Sensitivity analyses on present value of defined benefit obligations
The table below gives the present value of the defined benefit obligations when major
assumptions are changed.
In millions of Dollars
2021 2020
As reported 5 261 5 593
Discount rates
Increase of 50 basis points 4 974 5 259
Decrease of 50 basis points 5 581 5 964
Expected rates of salary increases
Increase of 50 basis points 5 300 5 633
Decrease of 50 basis points 5 227 5 554
Medical cost trend rates
Increase of 50 basis points 5 263 5 596
Decrease of 50 basis points 5 259 5 590
Mortality assumption
Setting forward the tables by one year 5 153 5 529
Setting back the tables by one year 5 354 5 742
All sensitivities are calculated using the same actuarial method as for the disclosed present
value of the defined benefit obligations at year-end.
10.2i Weighted average duration of defined benefit obligations
At December 31, 2021, the weighted-average duration of the defined benefit obligation was 12
years (2020: 12.5 years).
10. Employee benefits
Consolidated Financial Statements of the NHI Group 2021 51
11. Provisions and contingencies
Provisions
Provisions comprise liabilities of uncertain timing or amount that arise from restructuring
plans, environmental, litigation, and other risks. Provisions are recognized when a legal or
constructive obligation stemming from a past event exists and when the future cash outflows
can be reliably estimated. Provisions are measured at the present value of the expenditures
unless the impact of discounting is immaterial. Obligations arising from restructuring plans
are recognized when detailed formal plans have been established and when there is a valid
expectation that such plans will be carried out by either starting to implement them or
announcing their main features. Obligations under litigation reflect Management’s best
estimates of the outcome based on the facts known at the balance sheet date.
Contingent assets and liabilities
Contingent assets and liabilities are possible rights and obligations that arise from past events
and whose existence will be confirmed only by the occurrence or non-occurrence of one or
more uncertain future events not fully within the control of the NHI Group.
11.1 Provisions
Provisions are as follows:
In millions of Dollars
Restructuring Environmental Legal Other Total
At December 31, 2020 44 23 10 56 133
Provisions made in the year 56 23 71 150
Amounts used (40) (1) (17) (58) (116)
Reversal of unused amounts (7) (1) (8)
At December 31, 2021 53 22 16 68 159
of which expected to be settled within 12 months 52 10 42 104
In millions of Dollars
Restructuring Environmental Legal Other Total
At December 31, 2019 231 25 12 84 352
Provisions made in the year 20 1 3 7 31
Amounts used (164) (3) (2) (30) (199)
Reversal of unused amounts (43) (3) (5) (51)
At December 31, 2020 44 23 10 56 133
of which expected to be settled within 12 months 42 4 28 75
Restructuring
Restructuring provisions arise from a number of projects across the NHI Group. These include
plans to optimize production, sales, and administration structures. Restructuring provisions are
expected to result in future cash outflows when implementing the plans (usually over one to
three years).
During 2021, the NHI Group initiated and continued with a number of reorganizations within
all of the operating segments to reduce structural costs and to optimize efficiencies.
Environmental
Situations where the NHI Group is found liable for remediation or cleanup efforts by the U.S.
environmental Protection Agency (“EPA) or other governmental agencies on specific sites
represent known liabilities.
11. Provisions and contingencies
52 Consolidated Financial Statements of the NHI Group 2021
In these instances, it is the NHI Group’s policy to accrue for environmental cleanup costs
when they are assessed. As assessments and cleanups proceed, these liabilities are reviewed
and adjusted as additional information becomes available regarding the nature and extent of
contamination, methods of remediation required, other actions by governmental agencies or
private parties, and the amount, if any, of available coverage by the NHI Group’s insurance
carriers.
Legal
Legal provisions have been set up to cover legal and administrative proceedings that arise in
the ordinary course of the business. They cover numerous separate cases whose detailed
disclosure could be detrimental to the NHI Group interests. The NHI Group does not believe
that any of these cases will have a material adverse impact on its financial position. The timing
of outflows is uncertain as it depends upon the outcome of the cases.
Other
Other provisions are mainly constituted by onerous contracts and various damage claims
having occurred during the year but not covered by insurance companies. Onerous contracts
result from termination of contracts or supply agreements above market prices in which the
unavoidable costs of meeting the obligations under the contracts exceed the economic
benefits expected to be received or for which no benefits are expected to be received.
11.2 Contingencies
Litigation
The NHI Group is exposed to a number of asserted claims and unasserted potential claims
encountered in the normal course of business. In the opinion of NHI Group management, the
resolution of these matters will not have a material impact on the NHI Group’s consolidated
financial position.
Exposure for environmental matters
The NHI Group has contingent liabilities related to environmental matters where the NHI Group
has received “Notices of Potential Liability” from, or has been identified as a “Potentially
Responsible Party” by, the EPA or other government agencies regarding the alleged disposal
of hazardous material at various sites around the country that allegedly require environmental
cleanup.
These proceedings are being vigorously defended or resolutions are being negotiated.
Although the outcome of these proceedings is unknown, NHI Group management does not
believe that any resulting liability would be material to the consolidated financial position of
NHI Group.
11. Provisions and contingencies
Consolidated Financial Statements of the NHI Group 2021 53
12. Financial instruments
Financial assets – Classes and categories
The classification of financial assets is generally based on the business model in which
a financial asset is managed and its contractual cash flow characteristics. The NHI Group
classifies financial assets in the following categories:
measured at amortized cost;
measured at fair value through the income statement (abbreviated as FVTPL, fair value
through profit or loss); and
measured at fair value through Other comprehensive income (abbreviated as FVOCI).
For an equity investment that is not held for trading, the NHI Group may irrevocably elect to
classify it as measured at FVOCI. This election is made at initial recognition on an investment
by investment basis.
Financial assets – Recognition and derecognition
The settlement date is used for initial recognition and derecognition of financial assets as
these transactions are generally under contracts whose terms require delivery within the
time frame established by regulation or convention in the marketplace (regular-way purchase
or sale). Financial assets are derecognized when substantially all of the NHI Group’s rights to
cash flows from the financial assets have expired or have been transferred and the NHI Group
has transferred substantially all the risks and rewards of ownership.
Financial assets – Measurement
Financial assets are initially recognized at fair value plus directly attributable transaction
costs. However, when a financial asset measured at FVTPL is recognized, the transaction
costs are expensed immediately. Subsequent remeasurement of financial assets is
determined by their categorization, which is revisited at each reporting date.
Commercial paper and time deposits are held by the NHI Group’s treasury unit in a separate
portfolio in order to provide interest income and mitigate the credit risk exposure of the NHI
Group. The NHI Group considers that these investments are held within a business model
whose objective is achieved by collecting contractual cash flows. The contractual terms of
these financial assets give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding. These assets have therefore been
classified as measured at amortized cost.
Investments in equities, debt funds, equity funds as well as other financial assets not
giving rise on specified dates to cash flows that are solely payments of principal and interest
are classified at FVTPL. These investments are mainly related to liquidity management and
self-insurance activities.
Financial assets – Impairment
The NHI Group assesses whether its financial assets carried at amortized cost and FVOCI
are impaired on the basis of expected credit losses (ECL). The analysis requires the
identification of significant increases in the credit risk of the counterparties. Considering
that the majority of the NHI Group’s financial assets are trade receivables, the analysis also
integrates statistical data reflecting the past experience of losses incurred due to default,
as well as any relevant forward-looking information. See Note 7.1 for impairments related
to trade receivables.
The NHI Group measures loss allowances for investments in debt securities and time
deposits that are determined to have low credit risk at the reporting date at an amount equal
to 12 month expected credit losses.
The NHI Group considers a debt security to have low credit risk when the credit rating is
‘investment grade‘ according to internationally recognized rating agencies. To assess
whether there is a significant increase in credit risk since initial recognition, the NHI Group
12. Financial instruments
54 Consolidated Financial Statements of the NHI Group 2021
considers available reasonable and supportive information such as changes in the credit
rating of the counterparty. If there is a significant increase in credit risk the loss allowance is
measured at an amount equal to lifetime expected losses.
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as
the present value of all cash shortfalls due to a credit default event of the counterparty (i.e.
the difference between cash flows in accordance with the contract and the cash flows that
the NHI Group expects to receive).
Loss allowances for financial assets measured at amortized cost are deducted from the
gross carrying amount of the assets.
Impairment losses on other financial assets related to treasury activities are presented
under Financial expense.
The model and some of the assumptions used in calculating these ECLs are key sources
of estimation uncertainty.
Financial liabilities at amortized cost
Financial liabilities are initially recognized at the fair value, net of transaction costs incurred.
Subsequent to initial measurement, financial liabilities are recognized at amortized cost.
The difference between the initial carrying amount of the financial liabilities and their
redemption value is recognized in the consolidated income statement over the contractual
terms using the effective interest rate method. This category includes the following classes
of financial liabilities: trade and other payables; commercial paper; bonds; lease liabilities
and other financial liabilities.
Financial liabilities at amortized cost are classified as current or non-current depending
whether these will fall due within 12 months after the balance sheet date or beyond.
Financial liabilities are derecognized (in full or partly) when either the NHI Group is
discharged from its obligation, they expire, are canceled or replaced by a new liability with
substantially modified terms.
12. Financial instruments
Consolidated Financial Statements of the NHI Group 2021 55
12.1 Financial assets and liabilities
12.1a By class and by category
In millions of Dollars
2021 2020
Classes
At amortized cost
(a)
At fair value
to income statement
At fair value to
Other comprehensive
income
Total
categories
At amortized cost
(a)
At fair value
to income statement
At fair value to
Other comprehensive
income
Total
categories
Cash at bank and in hand 493 493 350 350
Bonds and debt funds 3 557 93 3 650 342 342
Equity and equity funds 255 3 258 337 6 343
Other financial assets 53 595 6 654 54 613 667
Liquid assets
(b)
and non-current
financial assets 546 4 407 102 5 055 404 1 292 6 1 702
Trade and other receivables 2 654 2 654 2 275 2 275
Loans to parent and affiliates 21 947 21 947 21 068 21 068
Derivative assets
(c)
42 42 75 75
Total financial assets 25 147 4 449 102 29 698 23 747 1 367 6 25 120
Trade and other payables (4 597) (25) (4 622) (3 374) (313) (3 687)
Financial debt (25 093) (25 093) (22 955) (22 955)
Loans from affiliates (3 068) (3 068) (442) (442)
Derivative liabilities
(c)
(126) (126) (13) (13)
Total financial liabilities (32 758) (151) (32 909) (26 771) (326) (27 097)
Net financial position (7 611) 4 298 102 (3 211) (3 024) 1 041 6 (1 977)
of which at fair value 4 298 102 4 400 1 041 6 1 047
(a) Carrying amount of these instruments is a reasonable approximation of their fair value. For bonds included in financial debt.
See Note 12.1d.
(b) Liquid assets are composed of cash and cash equivalents and short-term investments.
(c) Includes derivatives held in hedge relationships and those that are undesignated (categorized as held-for-trading).
See Note 12.2d.
12. Financial instruments
56 Consolidated Financial Statements of the NHI Group 2021
12.1b Fair value hierarchy of financial instruments
The NHI Group classifies the fair value of its financial instruments in the following hierarchy,
based on the inputs used in their valuation:
Level 1: The fair value of financial instruments quoted in active markets is based on their
quoted closing price at the balance sheet date. Examples include exchange-traded
commodity derivatives and financial assets such as investments in equity and debt
securities.
Level 2: The fair value of financial instruments that are not traded in an active market is
determined by using valuation techniques using observable market data. Such valuation
techniques include discounted cash flows, standard valuation models based on market
parameters for interest rates, yield curves or foreign exchange rates, dealer quotes for
similar instruments and use of comparable arm’s length transactions. For example, the fair
value of forward exchange contracts, currency swaps and interest rate swaps is determined
by discounting estimated future cash flows.
Level 3: The fair value of financial instruments that are measured on the basis of entity
specific valuations using inputs that are not based on observable market data (unobservable
inputs). When the fair value of unquoted instruments cannot be measured with sufficient-
reliability, the NHI Group carries such instruments at cost less impairment, if applicable.
In millions of Dollars
2021 2020
Derivative assets 39 29
Bonds and debt funds 3 200 2
Other financial assets 2
Prices quoted in active markets (Level 1) 3 241 31
Derivative assets 3 46
Bonds and debt funds 340 342
Equity and equity funds 348 337
Investments in life insurance company general accounts 595 613
Derivative liabilities (126) (13)
Valuation techniques based on observable market data (Level 2) 1 160 1 325
Financial assets 24 4
Financial liabilities
(a)
(25) (313)
Valuation techniques based on unobservable input (Level 3) (1) (309)
Total financial instruments at fair value 4 400 1 047
(a) Contingent consideration on acquisition. See Note 2.2 Acquisitions of businesses for description.
There have been no significant transfers between the different hierarchy levels in 2021 and
in 2020.
12. Financial instruments
Consolidated Financial Statements of the NHI Group 2021 57
12. Financial instruments
12.1c Changes in liabilities arising from financing activities
In millions of Dollars
2021 2020
At January 1 (22 928) (21 993)
Changes in fair values 86 (88)
Changes arising from acquisition and disposal of businesses (129) (210)
Increase in lease liabilities, net (189) (133)
Inflows from bonds and other long-term financial debt (8 249) (3 976)
Outflows from bonds, lease liabilities, and other long-term financial debt 3 048 2 080
Outflows from current financial debt 3 144 1 388
Other (2) 4
At December 31 (25 219) (22 928)
of which current financial debt (2 764) (7 036)
of which non-current financial debt (22 329) (15 919)
of which derivatives hedging financial debt (126) 27
58 Consolidated Financial Statements of the NHI Group 2021
12. Financial instruments
12.1d Bonds
In millions of Dollars
Comments Coupon
Effective
interest rate
Years of issue/
maturity 2021 2020
USD 400 1.88% 2.02% 2016-2021 400
USD 150 1.88% 2.05% 2016-2021 150
USD 600 1.38% 1.52% 2016-2021 600
GBP 500
(a)
1.00% 1.17% 2017-2021 682
USD 1,000 3.10 % 3.17% 2018-2021 1 000
USD 650 2.38% 2.50% 2017-2022 650 649
USD 300 2.25% 2.35% 2017-2022 300 300
USD 800 2.38% 2.55% 2017-2022 799 797
EUR 850
(a)
0.88% 0.92% 2017-2025 959 1 043
CHF 550
(a)
0.25% 0.24% 2017-2027 602 625
CHF 150 0.55% 0.54% 2017-2032 164 170
USD 550 3.13 % 3.28% 2018-2023 549 548
USD 50 3.13 % 3.24% 2018-2023 50 50
USD 1,500
(b)
3.35% 3.41% 2018-2023 1 499 1 499
USD 900
(b)
3.50% 3.59% 2018-2025 897 897
USD 1,250
(b)
3.63% 3.72% 2018-2028 1 243 1 243
USD 1,250
(b)
3.90% 4.01% 2018-2038 1 233 1 233
USD 2 ,10 0
(b)
4.00% 4.11% 2018-2048 2 062 2 062
USD 1,150
(b)
0.38% 0.49% 2020-2024 1 147 1 148
USD 750
(b)
0.63% 0.77% 2020-2026 746 745
USD 1,10 0
(b)
1.00% 1.06% 2020-2027 1 096 1 095
USD 1,000
(b)
1.25% 1.37% 2020-2030 990 989
USD 1,500
(b)
0.61% 0.66% 2021-2024 1 498
GBP 600
(b)
0.63% 0.75% 2021-2025 808
USD 300 1.13% 1.19% 2021-2026 299
USD 500
(b)
1.15% 1.22% 2021-2027 498
USD 1,000
(b)
1.50% 1.58% 2021-2028 995
CAD 2,000
(a)
2.19% 2.23% 2021-2029 1 571
USD 1,000
(b)
1.88% 1.91% 2021-2031 997
GBP 400
(b)
1.38% 1.46% 2021-2033 535
USD 500
(b)
2.50% 2.55% 2021-2041 496
USD 500
(b)
2.63% 2.69% 2021-2051 493
USD 63 9.30% 6.46% 1991-2021 63
USD 79 8.63% 6.46% 1992-2022 79 79
USD 44 8.13% 6.47% 1993-2023 45 44
USD 51 7.8 8 % 6.45% 1995-2025 53 51
Other Bonds 2 2
Total carrying amount
(c)
23 355 18 164
of which due within one year 1 828 2 895
of which due after one year 21 527 15 269
Fair value
(c)
of bonds, based on prices quoted (level 2) 24 255 19 937
(a) Subject to an interest rate and currency swap that creates a U.S. dollar asset or liability at fixed rates.
(b) Subject to an interest rate and currency swap that creates a U.S. dollar asset or liability at floating rates.
(c) Carrying amount and fair value of bonds exclude accrued interest.
Consolidated Financial Statements of the NHI Group 2021 59
12. Financial instruments
Several bonds are hedged by currency and/or interest derivatives. The fair value of these
derivatives is shown under derivative assets of $0 million (2020: $37 million) and under
derivative liabilities of $126 million (2020: $2 million).
12.2 Financial risks
In the course of its business, the NHI Group is exposed to a number of financial risks: credit
risk, liquidity risk, market risk (including foreign currency risk and interest rate risk, commodity
price risk and equity price risk). This note presents the Group’s objectives, policies and
processes for managing its financial risk and capital.
Financial risk management is an integral part of the way the NHI Group is managed. The
Board of Directors determines the financial control principles as well as the principles of
financial planning. The Chief Executive Officer organizes, manages, and monitors all financial
risks, including asset and liability matters.
A Nestlé S.A. Asset and Liability Management Committee (“ALMC”), under the supervision
of the Chief Financial Officer of Nestlé S.A., is the governing body for the establishment and
subsequent execution of Nestlé S.A.’s Financial Asset and Liability Management Policy, to
which NHI is subject. It ensures implementation of strategies and achievement of objectives
of Nestlé S.A.’s Financial Asset and Liabilities Management Policy, which are executed by the
Centre Treasury, the Regional Treasury Centres, and in specific local circumstances, by the
subsidiaries. Approved Treasury Management Guidelines define and classify risks as well as
determine, by category of transaction, specific approval, execution, and monitoring procedures.
The activities of the Centre Treasury and of the Regional Treasury Centres are monitored by
an independent Middle Office, which verifies the compliance of the strategies and/or operations
with the approved guidelines and decisions taken by the ALMC.
12.2a Credit risk
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations
resulting in financial loss to the NHI Group. Credit risk arises on financial assets (liquid,
non-current and derivative) and on trade and other receivables.
The NHI Group aims to minimize the credit risk of liquid assets, non-current financial assets
and derivative assets through the application of risk management policies. Credit limits are set
based on each counterpartys size and risk of default. The methodology used to set the credit
limit considers the counterpartys balance sheet, credit ratings, risk ratios and default
probabilities. Counterparties are monitored regularly, taking into consideration the evolution of
the above parameters, as well as their share prices and credit default swaps. As a result of this
review, changes on credit limits and risk allocation are carried out. The NHI Group avoids the
concentration of credit risk on its liquid assets by spreading them over several institutions and
sectors.
Trade receivables are subject to credit limits, control, and approval procedures in all the
subsidiaries. Due to its large number of customers, the NHI Group is not exposed to material
concentrations of credit risk on its trade receivables (see Note 7.1). Nevertheless, commercial
counterparties are constantly monitored following the similar methodology used for financial
counterparties.
The maximum exposure to credit risk resulting from financial activities, without considering
netting agreements and without taking into account any collateral held or other credit
enhancements, is equal to the carrying amount of the NHI Group’s financial assets.
60 Consolidated Financial Statements of the NHI Group 2021
12. Financial instruments
Credit rating of financial assets
This includes liquid assets, non-current financial assets and derivative assets. The credit risk of
the financial assets is assessed based on the risk of the counterparties including the associated
country risk. The NHI Group uses an internationally recognized credit scale to present the
information. The NHI Group deals mainly with financial institutions located in Switzerland, the
European Union, and North America.
In millions of Dollars
2021 2020
Investment grade (A- and above) 4 593 1 270
Investment grade (BBB+, BBB and BBB-) 76 80
Non-investment grade (BB+ and below) 19 16
Not rated
(a)
409 411
Total financial assets (excluding receivables and inter-group loans) 5 097 1 777
(a) Mainly equity securities and other investments for which no credit rating is available.
12.2b Liquidity risk
Liquidity risk management
Liquidity risk is the risk that a company may encounter difficulties in meeting its obligations
associated with financial liabilities that are settled by delivering cash or other financial assets.
Such risk may result from inadequate market depth or disruption or refinancing problems. The
NHI Group’s objective is to manage this risk by limiting exposures in financial instruments that
may be affected by liquidity problems and by maintaining sufficient back-up facilities.
Consolidated Financial Statements of the NHI Group 2021 61
12. Financial instruments
Contractual maturities of financial liabilities and derivatives (including interest)
In millions of Dollars
2021
1st year 2nd year 3rd to 5th year
After
the 5th year
Contractual
amount
Carrying
amount
Trade and other payables 4 581 4 581 4 581
Loan from affiliates 3 068 3 068 3 068
Commercial paper 512 512 512
Bonds 2 316 2 596 7 487 16 449 28 848 23 355
Lease liabilities 154 113 285 431 983 953
Other financial debt 237 237 237
Other financial liabilities 44 17 61 61
Total financial debt 3 263 2 726 7 772 16 880 30 641 25 118
Financial liabilities (excluding derivatives) 10 912 2 726 7 772 16 880 38 290 32 767
Non-currency derivative assets (42) (42) (42)
Non-currency derivative liabilities
Gross amount receivable from currency
derivatives (36) (16) (1 806) (773) (2 631) (2 595)
Gross amount payable from currency
derivatives 79 59 1 956 770 2 864 2 721
Net derivatives 1 43 150 (3) 191 84
of which derivatives under cash flow hedges 3 42 150 (3) 192 84
2020
1st year 2nd year 3rd to 5th year
After
the 5th year
Contractual
amount
Carrying
amount
Trade and other payables 3 050 173 464 3 687 3 687
Loan from affiliates 442 442 442
Commercial paper 3 713 3 713 3 711
Bonds 3 332 2 204 6 127 11 045 22 708 18 164
Lease liabilities 115 139 247 305 806 783
Other financial debt 297 297 297
Total financial debt 7 457 2 343 6 374 11 350 27 524 22 955
Financial liabilities (excluding derivatives) 10 949 2 516 6 838 11 350 31 653 27 084
Non-currency derivative assets 35 1 36 36
Non-currency derivative liabilities (11) (11) (11)
Gross amount receivable from currency
derivatives 765 12 1 081 805 2 663 2 719
Gross amount payable from currency
derivatives (785) (50) (1 121) (791) (2 747) (2 682)
Net derivatives 4 (37) (40) 14 (59) 62
of which derivatives under cash flow hedges 25 2 27 27
62 Consolidated Financial Statements of the NHI Group 2021
12.2c Market risk
The NHI Group is exposed to risk from movements in foreign currency exchange rates, interest
rates and market prices that affect its assets, liabilities and future transactions.
Foreign currency risk
The NHI Group is exposed to foreign currency risk from transactions. Transactional exposures
arise from transactions in foreign currency. They are managed within a prudent and systematic
hedging policy in accordance with the NHI Group’s specific business requirements through the
use of currency forwards, swaps and options.
Value at Risk (VaR) based on historic data for a 250-day period and a confidence level of 95%
results in no VaR in 2021 and a non-significant potential one-day loss in 2020.
Interest rate risk
Interest rate risk on financial debt is managed based on duration and interest management
targets set by the ALMC through the use of fixed rate debt and interest rate swaps.
Taking into account the impact of interest derivatives, the proportion of financial debt
subject to fixed interest rates for a period longer than one year represents 89% (2020: 69%).
Price risk
Commodity price risk
Commodity price risk arises from transactions on the world commodity markets for securing
the supplies of green coffee, cocoa beans, cereals and grains and other commodities necessary
for the manufacture of some of the NHI Group’s products.
The NHI Group’s objective is to minimize the impact of commodity price fluctuations and
this exposure is hedged in accordance with the Nestlé Group policy on commodity price risk
management. The Global Procurement Organization is responsible for managing commodity
price risk based on internal directives and centrally determined limits, generally using exchange-
traded commodity derivatives. The commodity price risk exposure of future purchases is
managed using a combination of derivatives (mainly futures and options) and executory contracts.
This activity is monitored by an independent Middle Office. Given the short product business
cycle of the NHI Group, the majority of the anticipated future raw material transactions
outstanding at the balance sheet date are expected to occur in the next year.
Equity price risk
The NHI Group is exposed to equity price risk on investments. To manage the price risk arising
from these investments, the NHI Group diversifies its portfolios in accordance with the
guidelines set by the Board of Directors of Nestlé S.A.
12. Financial instruments
Consolidated Financial Statements of the NHI Group 2021 63
12.2d Derivative assets and liabilities and hedge accounting
Derivative financial instruments
The NHI Group’s derivatives mainly consist of currency forwards, options and swaps;
commodity futures and options and interest rate swaps. Derivatives are mainly used to
manage exposures to foreign exchange, interest rate and commodity price risk as described
in section 12.2c Market risk.
Derivatives are initially recognized at fair value. They are subsequently remeasured at fair
value on a regular basis and at each reporting date at a minimum, with all their gains and
losses, realized and unrealized, recognized in the consolidated income statement unless they
are in a qualifying hedging relationship.
Hedge accounting
The NHI Group designates and documents the use of certain derivatives and other financial
assets or financial liabilities as hedging instruments against changes in fair values of
recognized assets and liabilities (fair value hedges) and highly probable forecast transactions
(cash flow hedges). The effectiveness of such hedges is assessed at inception and verified at
regular intervals and at least on a quarterly basis to ensure that an economic relationship
exists between the hedged item and hedging instrument.
The NHI Group excludes from the designation of the hedging relationship the hedging
cost element. Subsequently, this cost element impacts the consolidated income statement
at the same time as the underlying hedged item.
For the designation of hedging relationships on commodities, the NHI Group applies the
component hedging model when the hedged item is separately identifiable and measurable
in the contract to purchase the materials.
Fair value hedges
The NHI Group uses fair value hedges to mitigate foreign currency and interest rate risks
of its recognized assets and liabilities, being mostly financial debt.
Changes in fair values of hedging instruments designated as fair value hedges and the
adjustments for the risks being hedged in the carrying amounts of the underlying
transactions are recognized in the consolidated income statement.
Cash flow hedges
The NHI Group uses cash flow hedges to mitigate a particular risk associated with
a recognized asset or liability or highly probable forecast transactions, such as anticipated
future export sales, purchases of equipment, and goods, as well as the variability of
expected interest payments and receipts.
The effective part of the changes in fair value of hedging instruments is recognized in
other comprehensive income, while any ineffective part is recognized immediately in the
consolidated income statement. Ineffectiveness for hedges of foreign currency and
commodity price risk may result from changes in the timing of the forecast transactions than
was originally foreseen. When the hedged item results in the recognition of a non-financial
asset or liability, including acquired businesses, the gains or losses previously recognized in
other comprehensive income are included in the measurement of the cost of the asset or the
liability. Otherwise the gains or losses previously recognized in other comprehensive income
are recognized in the consolidated income statement at the same time as the hedge
transaction.
Undesignated derivatives
Derivatives which are not designated in a hedging relationship are classified as undesignated
derivatives. They are used in the framework of approved risk management policies.
12. Financial instruments
64 Consolidated Financial Statements of the NHI Group 2021
Derivatives by hedged risks
In millions of Dollars
2021 2020
Fair value assets
Fair value liabilities
Contractual or
notional amounts
Fair value assets
Fair value liabilities
Contractual or
notional amounts
Fair value hedges:
Foreign currency and interest rate risk on net financial debt
Cash flow hedges:
Currency risk on future purchases or sales 20
Foreign currency and interest rate risk on net financial debt 125 2 537 39 11 3 088
Commodity price risk on future purchases 42 1 165 36 206
Undesignated derivatives 2
Total derivatives 42 126 2 722 75 13 3 294
Derivative assets and liabilities (3) (80) (83)
Balance after conditional offset 39 46 2 639 75 13 3 294
A description of the types of hedging instruments by risk category is included in Note 12.2c
Market risk.
The majority of hedge relationships are established to ensure a hedge ratio of 1:1.
Impact on the consolidated income statement of fair value and cash flow hedges
The majority of fair value hedges are related to financing activities and are presented in Net
financing cost. Ineffective portion of gains/(losses) of fair value and cash flow hedges is not
significant.
12.2e Capital risk management
The NHI Group‘s capital risk management strategy is to maintain a sound capital base to
support the continued development of the NHI Group’s operations, utilizing various funding
sources available to it. Substantially all of the NHI Group’s debt is guaranteed by Nestlé S.A.,
which allows the NHI Group to borrow from third parties at lower interest rates. In order to
ensure that the return on invested capital is optimized, the NHI Group establishes strict limits
on annual additions of property, plant and equipment.
12. Financial instruments
Consolidated Financial Statements of the NHI Group 2021 65
13. Taxes
13. Taxes
The NHI Group files a consolidated return with Nestlé US Holdco Inc. However, the NHI Group
also records its own tax expense and liability as if it filed on a standalone basis. Taxes and
fiscal risks recognized in the consolidated financial statements reflect NHI Group management’s
best estimate of the outcome based on the facts known at the balance sheet date. These
facts may include, but are not limited to, changes in tax laws and interpretations thereof in
the United States. They may have an impact on the income tax as well as the resulting assets
and liabilities. Any differences between tax estimates and final tax assessments are charged
to the consolidated income statement in the period in which they are incurred, unless
anticipated.
Taxes include current and deferred taxes on profit and tax adjustments relating to prior
years. Income tax is recognized in the consolidated income statement, except to the extent
that it relates to items directly taken to equity or other comprehensive income, in which case it
is recognized against equity or other comprehensive income.
Deferred taxes are based on the temporary differences that arise when taxation authorities
recognize and measure assets and liabilities with rules that differ from the principles of the
Consolidated Financial Statements. They also arises on temporary differences stemming
from tax losses carried forward.
Deferred taxes are calculated under the liability method at the rates of tax expected to
prevail when the temporary differences reverse subject to such rates being substantially
enacted at the balance sheet date. Any changes of tax rates are recognized in the consolidated
income statement unless related to items directly recognized against equity or other
comprehensive income. Deferred tax liabilities are recognized on all taxable temporary
differences excluding non-deductible goodwill. Deferred tax assets are recognized on all
deductible temporary differences provided that it is probable that future taxable income will
be available.
66 Consolidated Financial Statements of the NHI Group 2021
13. Taxes
13.1 Components of taxes recognized in the consolidated income statement
In millions of Dollars
2021 2020
Current taxes 223 (571)
Deferred taxes (163) (262)
Taxes reclassified to equity
Income tax (expense) 60 (833)
13.2 Reconciliation of taxes recognized in the consolidated income statement
In millions of Dollars
2021 2020
Tax at theoretical rate (157) (1 005)
Tax effect on non-deductible amortization and impairment of goodwill and other intangible assets (125) (2)
Permanent differences on company-owned life insurance policies 16 25
Tax effect of non-deductible or non-taxable items 34 (139)
Prior years’ taxes 275 294
Transfers from unrecognized deferred tax assets 18
Other taxes (1) (6)
Income tax (expense) 60 (833)
The components of deferred tax (expense)/benefit by type are as follows:
In millions of Dollars
2021 2020
Tangible fixed assets (37) (52)
Goodwill and other intangible assets (104) 30
Employee benefits 1 37
Inventories, receivables, payables, accruals, and provisions 25 (50)
Financial instruments (4)
Net operating losses (35) (40)
Other (13) (183)
Deferred tax (expense)/benefit (163) (262)
Taxes recognized in other comprehensive income/(loss):
In millions of Dollars
2021 2020
Tax effect relating to:
Fair value adjustments on cash flow hedges (22) 9
Defined benefit plan actuarial losses (53) 58
Total taxes recognized (75) 67
Consolidated Financial Statements of the NHI Group 2021 67
13. Taxes
13.3 Reconciliation of deferred taxes by type of temporary differences recognized
on the balance sheet
Deferred tax assets by types of temporary differences are as follows:
In millions of Dollars
2021 2020
Employee benefits 450 500
Inventories, receivables, payables, accruals, and provisions 176 152
Financial instruments 16
Net operating losses 22 7
Others 10
Total deferred tax assets 658 675
Deferred tax liabilities by types of temporary differences are as follows:
In millions of Dollars
2021 2020
Tangible fixed assets 639 615
Goodwill and other intangible assets 1 023 865
Financial instruments 5
Others 20 10
Total deferred tax liabilities 1 687 1 490
Deferred tax is presented as a net deferred tax liability in the 2021 consolidated balance sheet
at an amount of $1029 million (2020: $815 million).
13.4 Unrecognized deferred taxes
At December 31, 2021 and 2020, deferred taxes were recognized for all temporary differences,
unless an exception from the general principal applied.
68 Consolidated Financial Statements of the NHI Group 2021
14. Associates
Associates are companies where the NHI Group has the power to exercise a significant
influence but does not exercise control. Significant influence is the power to participate in
the financial and operating policy decision of the investee, and the determination of whether
the NHI Group has significant influence requires the exercise of judgment. It may be
evidenced when the NHI Group has 20% or more of the voting rights in the investee or has
obtained representation on the Board of Directors or otherwise participates in the policy-
making process of the investee.
Associates are accounted for using the equity method. The net assets and results are
adjusted to comply with the NHI Group’s accounting policies. The carrying amount of
goodwill arising from the acquisition of associates is included in the carrying amount of
investments in associates.
In % and in millions of Dollars
Ownership interest Net book value
2021 2020 2021 2020
TE Taygete Energy Holdco LLC 48% 48% 18 17
Total investments in associated companies 18 17
In December 2020, the NHI Group acquired an interest of 48% in TE Taygete Energy
Holdco LLC, which is a renewable energy project in the US.
15. Cash flow statement
15.1 Operating profit
In millions of Dollars
2021 2020
Profit for the year 688 3 285
Income from associates (194)
Taxes (60) 833
Financial income (480) (499)
Financial expense 654 667
Total 802 4 092
15.2 Non-cash items of income and expense
In millions of Dollars
2021 2020
Depreciation of property, plant and equipment 703 639
Impairment of property, plant and equipment 75 16
Amortization of intangible assets 68 59
Impairment of goodwill 494
Net result on disposal of businesses 24 (1 943)
Net result on disposal of assets (2) (106)
Non-cash items in financial assets and liabilities (453) 18
Total 909 (1 317)
14. Associates
Consolidated Financial Statements of the NHI Group 2021 69
14. Associates
15.3 Decrease/(increase) in working capital
In millions of Dollars
2021 2020
Inventories (447) (548)
Trade and other receivables (301) 56
Prepayments and accrued income (25) 15
Trade and other payables 1 345 35
Accruals and deferred income 10 180
Total 582 (262)
15.4 Variation of other operating assets and liabilities
In millions of Dollars
2021 2020
Variation of employee benefits and liabilities 109 (9)
Variation of provisions 26 (207)
Other 127 (6)
Total 262 (222)
15.5 Cash and cash equivalents at end of year
Cash and cash equivalents include cash at bank and in hand and other short-term highly
liquid investments with maturities of three months or less from the initial recognition.
70 Consolidated Financial Statements of the NHI Group 2021
16. Transactions with related parties
Compensation of key management personnel
Key management personnel comprise five high-ranking officers in each of the following
subsidiaries: Nestlé USA, Inc., Nestlé Purina PetCare Company, and Gerber Products
Company. These officers hold the positions of Chief Executive Officer, Chief Financial Officer,
Head of Human Resources, General Counsel, and Head of Sales or Sales/Marketing. The Chief
Executive Officer and the Chief Financial Officer of Nestlé USA, Inc. are directors of NHI. There
is one non-executive director.
The compensation paid or payable to key Company management for employee services is
shown below:
In millions of Dollars
2021 2020
Salaries and other short-term employee benefits 17 14
Share-based payments 12 11
Post-employment benefits 2 1
Total compensation 31 27
Loans with related parties
In millions of Dollars
2021 2020
Loans to NIMCO US, Inc. (Parent) and NUSHI (NIMCO Parent):
At January 1 14 963 12 502
Loans granted during year 2 937 2 461
Loan repayments (302)
Adjustments due to scope change (2)
At December 31 17 596 14 963
Loans to affiliates:
At January 1 6 105 3 219
Loans granted during year 2 185 3 165
Loan repayments (3 715) (279)
Adjustments due to scope change (224)
At December 31 4 351 6 105
Total loans to parent, NIMCO and affiliates 21 947 21 068
Of which current 20 947 19 844
Of which non-current 1 000 1 224
Loans from affiliates:
At January 1 442 79
Loans received during year 3 047 364
Loan repayments (421) (1)
Total loans from affiliates at December 31 3 068 442
16. Transactions with related parties
Consolidated Financial Statements of the NHI Group 2021 71
Transactions under common control
BBC Intermediate Holdings, high-end specialty coffee roaster, was acquired by the Nestlé Group
and transferred to the NHI Group by NIMCO (Parent of NHI) in July 2021 at book value with net
liabilities of $25 million contributed. Included in these net liabilities are $113 million of intangible
assets, $115 million of ROU assets and $64 million of property, plant and equipment. In 2021, the
NHI Group sold its participation in two BBC Intermediate Holdings subsidiaries to a Nestlé Group
affiliate for a net gain of $55 million.
Vital Proteins, a collagen brand and a lifestyle and wellness platform business, was
acquired by the Nestlé Group and contributed to the NHI Group by NIMCO (Parent of NHI),
in September 2020, resulting in an increase of $21 million to additional paid in capital and
included $115 million of financial debt. The Nestlé Group contributed $60 million of equity
in Honey Holdings LLC (Freshly) to the NHI Group resulting in an increase to additional paid
in capital of $60 million. The International Premium Waters business, IPW, was transferred
on December 31, 2020 at book value from Nestlé Waters North America, a Nestlé affiliated
company, to the NHI Group mainly consisting of $130 million of inventory and $38 million
of leased assets and associated lease liabilities.
On March 5, 2021, the NHI Group sold the Essentia trademark to a Nestlé Group affiliate for
its provisional fair value of $278 million, in consideration thereof, the NHI Group had a loan due
from the Nestlé Group affiliate for $278 million. As of December 31, 2021, the final value of the
trademark sold was $273 million with a loan due from the Nestlé Group affiliate of $273 million.
On November 30, 2020, the NHI Group sold the Freshly trademark to a Nestlé Group affiliate
for its fair value of $593 million, in consideration thereof, the NHI Group had a loan due from
the Nestlé Group affiliate for $593 million as of December 31, 2020. During 2021, the loan due
from the Nestlé Group affiliate was transferred to an affiliate within the NHI Group scope of
consolidation.
Royalties to Nestlé Group
The NHI Group is granted use in the United States of licensed brands and other intellectual
property and obtains technical assistance from a Nestlé Group affiliated company via a general
license agreement. In 2021, the NHI Group incurred royalties of $3794 million to the Nestlé Group
affiliated company (2020: $2524 million).
17. Events after the balance sheet date
The Company was not aware of any specific events or transactions, except for noted below,
occurring after December 31, 2021 and up to March 17, 2022, that could have a material impact
on the presentation of the accompanying consolidated financial statements.
Following the military escalation of the situation in Ukraine in late February 2022, certain
countries announced sanctions relating to Russia and Belarus, with new designations of
individuals and Russian and Belarusian entities.
Due to the growing geopolitical tensions, since February 2022, there has been a significant
increase in volatility on the commodities and currency markets, as well as a significant
depreciation of the ruble against the US dollar and the Euro.
Despite the uncertainty of the situation, the Company regards these events as non-adjusting
events after the reporting period, the quantitative effect of which cannot be estimated at the
moment with a sufficient degree of confidence. The Company will continue to monitor the
areas of risk for material changes.
16. Transactions with related parties