Financial Statements 2023 Consolidated Financial Statements of the Nestlé Group 2023 157th Financial Statements of Nestlé S.A. Consolidated Financial Statements of the Nestlé Group 2023 73 Consolidated Financial Statements of the Nestlé Group 2023 74 Consolidated Financial Statements of the Nestlé Group 2023 75 76 77 78 80 81 83 83 85 89 98 100 101 103 107 114 124 127 142 146 148 149 151 156 157 158 Principal exchange rates Consolidated income statement for the year ended December 31, 2023 Consolidated statement of comprehensive income for the year ended December 31, 2023 Consolidated balance sheet as at December 31, 2023 Consolidated cash flow statement for the year ended December 31, 2023 Consolidated statement of changes in equity for the year ended December 31, 2023 Notes 1. Accounting policies 2. Scope of consolidation, acquisitions and disposals of businesses 3. Analyses by segment 4. Net other trading and operating income/ (expenses) 5. Net financial income/(expense) 6. Inventories 7. Trade and other receivables/payables 8. Property, plant and equipment 9. Goodwill and intangible assets 10. Employee benefits 11. Provisions and contingencies 12. Financial instruments 13. Taxes 14. Associates and joint ventures 15. Earnings per share 16. Cash flow statement 17. Equity 18. Transactions with related parties 19. Guarantees 20. Effects of hyperinflation 21. Events after the balance sheet date Companies of the Nestlé Group, joint arrangements and associates Report of the statutory auditor Financial information – 5-year review 159 177 188 Consolidated Financial Statements of the Nestlé Group 2023 75 Principal exchange rates CHF per 2023 2022 2023 2022 Year-end rates Weighted average annual rates 1 US Dollar USD 0.841 0.925 0.898 0.956 1 Euro EUR 0.931 0.985 0.971 1.004 100 Chinese Yuan Renminbi CNY 11.859 13.297 12.689 14.148 100 Brazilian Reais BRL 17.381 17.722 17.989 18.555 100 Mexican Pesos MXN 4.964 4.743 5.063 4.750 1 Pound Sterling GBP 1.072 1.116 1.116 1.175 100 Philippine Pesos PHP 1.519 1.660 1.614 1.752 1 Canadian Dollar CAD 0.636 0.682 0.665 0.735 100 Indian Rupee INR 1.012 1.117 1.088 1.216 1 Australian Dollar AUD 0.575 0.627 0.596 0.663 100 Chilean Pesos CLP 0.095 0.108 0.107 0.109 76 Consolidated Financial Statements of the Nestlé Group 2023 Consolidated income statement for the year ended December 31, 2023 In millions of CHF Notes 2023 2022 Sales 3 92 998 94 424 Other revenue 353 356 Cost of goods sold (50 328) (51 745) Distribution expenses (7 765) (8 386) Marketing and administration expenses (17 549) (16 850) Research and development costs (1 656) (1 696) Other trading income 4 132 107 Other trading expenses 4 (1 665) (3 015) Trading operating profit 3 14 520 13 195 Other operating income 4 298 340 Other operating expenses 4 (755) (1 209) Operating profit 14 063 12 326 Financial income 5 284 210 Financial expense 5 (1 644) (1 250) Profit before taxes, associates and joint ventures 12 703 11 286 Taxes 13 (2 314) (2 730) Income from associates and joint ventures 14 1 120 1 040 Profit for the year 11 509 9 596 of which attributable to non-controlling interests 300 326 of which attributable to shareholders of the parent (Net profit) 11 209 9 270 As percentages of sales Trading operating profit 15.6% 14.0% Profit for the year attributable to shareholders of the parent (Net profit) 12.1% 9.8% Earnings per share (in CHF) Basic earnings per share 15 4.24 3.42 Diluted earnings per share 15 4.23 3.42 Consolidated Financial Statements of the Nestlé Group 2023 77 Consolidated statement of comprehensive income for the year ended December 31, 2023 In millions of CHF Notes 2023 2022 Profit for the year recognized in the income statement 11 509 9 596 Currency retranslations, net of taxes 17 (4 154) (1 399) Changes in cash flow hedge and cost of hedge reserves, net of taxes 194 214 Share of other comprehensive income of associates and joint ventures 14/17 (197) 167 Items that are or may be reclassified subsequently to the income statement (4 157) (1 018) Remeasurement of defined benefit plans, net of taxes 10/17 (623) (378) Fair value changes of equity instruments, net of taxes 17 163 167 Share of other comprehensive income of associates and joint ventures 14/17 (40) 95 Items that will never be reclassified to the income statement (500) (116) Other comprehensive income for the year 17 (4 657) (1 134) Total comprehensive income for the year 6 852 8 462 of which attributable to non-controlling interests 175 342 of which attributable to shareholders of the parent 6 677 8 120 78 Consolidated Financial Statements of the Nestlé Group 2023 Consolidated balance sheet as at December 31, 2023 before appropriations In millions of CHF Notes 2023 2022 Assets Current assets Cash and cash equivalents 12/16 4 816 5 511 Short-term investments 12 1 035 1 176 Inventories 6 11 896 15 019 Trade and other receivables 7/12 10 995 11 116 Prepayments 521 549 Derivative assets 12 278 309 Current income tax assets 1 284 1 285 Assets held for sale 32 97 Total current assets 30 857 35 062 Non-current assets Property, plant and equipment 8 30 467 30 141 Goodwill 9 28 693 31 262 Intangible assets 9 18 225 20 237 Investments in associates and joint ventures 14 13 088 13 023 Financial assets 12 2 947 3 253 Derivative assets 12 130 — Employee benefits assets and reimbursement rights 10 962 1 161 Deferred tax assets 13 1 181 1 043 Total non-current assets 95 693 100 120 Total assets 126 550 135 182 Consolidated Financial Statements of the Nestlé Group 2023 79 Consolidated balance sheet as at December 31, 2023 In millions of CHF Notes 2023 2022 Liabilities and equity Current liabilities Financial debt 12 9 416 10 892 Derivative liabilities 12 317 352 Trade and other payables 7/12 19 204 20 523 Accruals 5 112 5 114 Provisions 11 675 620 Current income tax liabilities 2 360 2 447 Liabilities directly associated with assets held for sale — 28 Total current liabilities 37 084 39 976 Non-current liabilities Financial debt 12 45 825 43 420 Derivative liabilities 12 239 470 Employee benefits liabilities 10 2 718 2 884 Provisions 11 1 303 1 113 Deferred tax liabilities 13 2 886 3 671 Other payables 12 108 856 Total non-current liabilities 53 079 52 414 Total liabilities 90 163 92 390 Equity 17 Share capital 267 275 Treasury shares (5 155) (9 303) Translation reserve (27 581) (23 559) Other reserves (50) (63) Retained earnings 68 261 74 632 Total equity attributable to shareholders of the parent 35 742 41 982 Non-controlling interests 645 810 Total equity 36 387 42 792 Total liabilities and equity 126 550 135 182 80 Consolidated Financial Statements of the Nestlé Group 2023 Consolidated cash flow statement for the year ended December 31, 2023 In millions of CHF Notes 2023 2022 Operating activities Operating profit 16 14 063 12 326 Depreciation and amortization 16 3 458 3 541 Impairment 16 647 2 726 Net result on disposal of businesses 4 221 79 Other non-cash items of income and expense 16 82 216 Cash flow before changes in operating assets and liabilities 18 471 18 888 Decrease/(increase) in working capital 16 1 134 (3 133) Variation of other operating assets and liabilities 16 (425) (514) Cash generated from operations 19 180 15 241 Interest paid (1 330) (953) Interest and dividends received 193 118 Taxes paid (2 801) (3 107) Dividends and interest from associates and joint ventures 14 699 608 Operating cash flow 15 941 11 907 Investing activities Capital expenditure 8 (5 714) (5 095) Expenditure on intangible assets 9 (489) (266) Acquisition of businesses, net of cash acquired 2 (211) (1 710) Disposal of businesses, net of cash disposed of 2 215 160 Investments (net of divestments) in associates and joint ventures 14 (582) (918) Inflows/(outflows) from treasury investments (80) 5 902 Other investing activities (a) 665 24 Investing cash flow (6 196) (1 903) Financing activities Dividend paid to shareholders of the parent 17 (7 829) (7 618) Dividends paid to non-controlling interests (323) (284) Acquisition of non-controlling interests (52) (605) Purchase of treasury shares (b) (5 234) (10 679) Inflows from bonds and other long-term financial debt 12 9 806 10 936 Outflows from bonds, lease liabilities and other long-term financial debt 12 (3 589) (3 283) Inflows/(outflows) from short-term financial debt 12 (2 537) 148 Financing cash flow (9 758) (11 385) Currency retranslations (682) (100) Increase/(decrease) in cash and cash equivalents (695) (1 481) Cash and cash equivalents at beginning of year (c) 5 511 6 992 Cash and cash equivalents at end of year 4 816 5 511 (a) Mainly composed of the proceeds of the disposal of a financial asset in Prometheus Biosciences. The accounting gain of the transaction is recorded under other comprehensive income. (b) Mostly relates to a share buyback program launched in 2022. (c) As at January 1, 2022, cash and cash equivalents included CHF 4 million of cash and cash equivalents classified as assets held for sale. Consolidated Financial Statements of the Nestlé Group 2023 81 Consolidated statement of changes in equity for the year ended December 31, 2023 In millions of CHF Share capitalTreasurysharesTranslation reserveOtherreservesRetainedearningsTotal equityattributable toshareholders of the parentNon-controlling interestsTotal equity Equity as at January 1, 2022 282 (6 194) (22 266) (45) 81 363 53 140 587 53 727 Profit for the year — — — — 9 270 9 270 326 9 596 Other comprehensive income for the year — — (1 408) 380 (122) (1 150) 16 (1 134) Total comprehensive income for the year — — (1 408) 380 9 148 8 120 342 8 462 Dividends — — — — (7 618) (7 618) (284) (7 902) Movement of treasury shares — (10 653) — — (93) (10 746) — (10 746) Equity compensation plans — 209 — — (69) 140 (1) 139 Changes in non-controlling interests (a) — — — — (685) (685) 168 (517) Reduction in share capital (b) (7) 7 335 — — (7 328) — — — Total transactions with owners (7) (3 109) — — (15 793) (18 909) (117) (19 026) Other movements (c) — — 115 (398) (86) (369) (2) (371) Equity as at December 31, 2022 275 (9 303) (23 559) (63) 74 632 41 982 810 42 792 Equity as at January 1, 2023 275 (9 303) (23 559) (63) 74 632 41 982 810 42 792 Profit for the year — — — — 11 209 11 209 300 11 509 Other comprehensive income for the year — — (4 022) (11) (499) (4 532) (125) (4 657) Total comprehensive income for the year — — (4 022) (11) 10 710 6 677 175 6 852 Dividends — — — — (7 829) (7 829) (323) (8 152) Movement of treasury shares — (5 142) — — 6 (5 136) — (5 136) Equity compensation plans — 154 — — (2) 152 — 152 Changes in non-controlling interests (a) — — — — (55) (55) (15) (70) Reduction in share capital (b) (8) 9 136 — — (9 128) — — — Total transactions with owners (8) 4 148 — — (17 008) (12 868) (338) (13 206) Other movements (c) — — — 24 (73) (49) (2) (51) Equity as at December 31, 2023 267 (5 155) (27 581) (50) 68 261 35 742 645 36 387 (a) Movements reported under retained earnings include put options for the acquisition of non-controlling interests. (b) Reduction in share capital, see Note 17.1. (c) Other movements in Other reserves relate to cash flow hedge transactions. Other movements in Retained earnings relate mainly to other equity movements in associates and joint ventures explained further in Note 14 in the table of movement of carrying amount of associates and joint ventures. 82 Consolidated Financial Statements of the Nestlé Group 2023 Consolidated Financial Statements of the Nestlé Group 2023 83 Notes 1. Accounting policies Accounting convention and accounting standards The Consolidated Financial Statements comply with IFRS Accounting Standards issued by the International Accounting Standards Board (IASB) and with Swiss law. They have been prepared on a historical cost basis, unless stated otherwise. All significant consolidated companies, joint arrangements and associates have a December 31 accounting year-end. The Consolidated Financial Statements 2023 were approved for issue by the Board of Directors on February 21, 2024, and are subject to approval by the Annual General Meeting on April 18, 2024. 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. Key accounting judgments, estimates and assumptions The preparation of the Consolidated Financial Statements requires Group Management to exercise judgment and to make estimates and assumptions that affect the application of policies, reported amounts of revenues, expenses, assets and liabilities as well as 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. Information about potential impacts under alternative scenarios (including, among others, the policies aligned with the Paris ambition and Nestlé’s environmental commitments) on the medium and long term, aligned with the Task Force on Climate-related Financial Disclosures (TCFD) methodology, has been considered. Management believes that the Financial Statements as at December 31, 2023 reflect the most reasonable view of the value of the assets and liabilities at this date. The implications for the Group and the global economy of the war in Ukraine (described in Note 2) as well as potential escalations are highly uncertain, and remain difficult to predict or quantify. Actual results and outcomes could differ from the judgments and estimates taken into account in these Consolidated Financial Statements. Those areas that involved a higher degree of judgment or uncertainty are explained further in the relevant Notes, including: – assessment of control and estimation of the fair value of net assets acquired in business combinations and the fair value of considerations received with regard to disposal of businesses (see Note 2); – recognition and estimation of revenue (see Note 3); – presentation of additional line items and subtotals in the income statement (see Note 4); – identification of a lease and lease term (see Note 8); – identification of cash generating units (CGUs) and estimation of recoverable amount for impairment tests (see Note 9); – assessment of useful lives of intangible assets, including assessment 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). Foreign currencies The functional currency of the Group’s entities is the currency of their primary economic environment. 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 income statement, except when deferred in other comprehensive income as qualifying cash flow hedges. On consolidation, assets and liabilities of foreign operations reported in their functional currencies are translated into Swiss Francs, the Group’s presentation currency, at year-end exchange rates. Income and expense are translated into Swiss Francs at the annual weighted average rates of exchange or at the rate on the date of the transaction for significant items. Differences arising from the retranslation of opening net assets of foreign operations, together with differences arising from the translation of the net results for the year of foreign operations, are recognized in other comprehensive income. When there is a change of control in a foreign operation, exchange differences that were recorded in equity are recognized in the income statement as part of the gain or loss on disposal. 84 Consolidated Financial Statements of the Nestlé Group 2023 1. Accounting policies Hyperinflationary economies Several factors are considered when evaluating whether an economy is hyperinflationary, including the cumulative three-year inflation, and the degree to which the population’s behaviors and government policies are consistent with such a condition. The balance sheet and results of subsidiaries operating in hyperinflationary economies are restated for the changes in the general purchasing power of the local currency, using official indices at the balance sheet date, before translation into Swiss Francs and, as a result, are stated in terms of the measuring unit current at the balance sheet date. The hyperinflationary economies in which the Group operates are listed in Note 20. Other revenue Other revenue are primarily sales-based royalties and license fees from third parties (including associates and joint ventures) which have been earned during the period. Expenses Operating expenses are presented in the income statement using the function of expense method, as this is the method used by management to analyze performance and is commonly used in the consumer goods industry, and thus provides more relevant information. 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. It includes the cost of royalties due to third-party licensors for the use of their intellectual property, which are accrued in accordance with the respective agreement. Cost of goods sold also includes amortization of intangible assets related to acquired licenses to sell products or to use technology, as well as maintenance and depreciation of equipment used in the sales process like coffee machines and water coolers. All other expenses, including those in respect of advertising and promotions, are recognized when the 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 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 research and development, other trading income and expenses and other operating income and expenses are provided in the respective Notes. Changes in IFRS Accounting Standards In May 2023, the IASB issued International Tax Reform – Pillar Two Model Rules (Amendments to IAS 12). The Group has applied the exception to recognizing and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes. The Group made the required disclosures in the full year 2023 Consolidated Financial Statements (see Note 13.5) in accordance with the amendment. IFRS 17 Insurance Contracts became effective in 2023, but did not have a material impact on the Group’s Financial Statements. Several other amendments apply for the first time in 2023 including, among others, Definition of Accounting Estimates (Amendments to IAS 8), Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) and Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12). None of these had a material impact on the Group’s Financial Statements. Changes in IFRS Accounting Standards that may affect the Group after December 31, 2023 The following standards have been issued and will become effective after December 31, 2023: Lease Liability in a Sale and Leaseback (Amendments to IFRS 16), Non-current Liabilities with Covenants (Amendments to IAS 1), Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7), and Lack of Exchangeability (Amendments to IAS 21). The Group is currently evaluating the effects of these new amendments; they are not expected to have a material impact on the Group’s Financial Statements in the period of initial adoption, based on the analysis so far. Consolidated Financial Statements of the Nestlé Group 2023 85 2. Scope of consolidation, acquisitions and disposals of businesses Scope of consolidation The Consolidated Financial Statements comprise those of Nestlé S.A. and of its subsidiaries (the Group). Companies which the Group controls are fully consolidated from the date at which the Group obtains control. The 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. Though the Group generally holds a majority of voting rights in the companies which are controlled, this applies irrespective of the percentage of interest in the share capital if control is obtained through agreements with other shareholders. The war in Ukraine and the related sanctions imposed on Russia, Belarus and certain regions in Ukraine still continue to limit the freedom of Nestlé Russia Region businesses to operate. In accordance with the accounting policy described above, the Group has re-assessed and confirmed that the changes in the legal and operating environment of Russia and Ukraine have not impacted the ability to exercise control over the Group entities in these countries. As part of the Consolidated Financial Statements, the list of the principal subsidiaries is provided in the section Companies of the Nestlé Group, joint arrangements and associates after Note 21. 2.1 Change of scope of consolidation Acquisitions There were no significant acquisitions in 2023. In 2022, the significant acquisition was: – Orgain, North America – nutritional health products (Nutrition and Health Science) – 51%, April. Among several other non-significant acquisitions, in September Nestlé Health Science closed the acquisitions of Puravida in Brazil (a premium consumer health business) and The Better Health Company in New Zealand (a vitamins, minerals and supplements business). Disposals In 2023, there were no significant disposals. Among several non-significant disposals, the European frozen pizza business has been contributed in September to a newly created joint venture company European Pizza Group (see Note 14). In addition, in September as well, the Group disposed of Palforzia, its peanut allergy treatment business, for future royalty and milestone payments dependent on the achievement of sales targets. The disposal transaction has an insignificant income statement impact, as impairment charges had been recorded in 2022 (see Note 9). 86 Consolidated Financial Statements of the Nestlé Group 2023 2. Scope of consolidation, acquisitions and disposals of businesses In 2022, there was no significant disposal. Among several non-significant disposals, Freshly, a healthy prepared meals business, has been contributed to a newly created associated company Sous Chef TopCo, L.P. (“Sous Chef”) over which Nestlé has significant influence (see Note 14), resulting in loss of control. Before the disposal, impairment charges have been recorded through the year, primarily in Other trading expenses (see Note 4.1). 2.2 Acquisitions of businesses The major classes of assets acquired and liabilities assumed at the acquisition date are: In millions of CHF 2023 2022 Total Orgain Other Total Inventories 20 172 61 233 Other assets 25 36 100 136 Property, plant and equipment 32 3 63 66 Intangible assets (a) 19 623 209 832 Financial debt (5) (3) (42) (45) Other liabilities (11) (63) (52) (115) Deferred taxes 3 (40) (16) (56) Fair value of identifiable net assets/(liabilities) 83 728 323 1 051 (a) Mainly intellectual property rights, customer lists, trademarks and trade names, composed of CHF 14 million (2022: CHF 102 million) of finite life, and of CHF 5 million (2022: CHF 730 million) of indefinite life intangible assets. Since the valuation of the assets and liabilities of acquired businesses is still in process, the values are determined provisionally. The goodwill arising on acquisitions and the cash outflow are: In millions of CHF 2023 2022 Total Orgain Other Total Fair value of consideration transferred 203 896 825 1 721 Non-controlling interests — 193 1 194 Subtotal 203 1 089 826 1 915 Fair value of identifiable net (assets)/liabilities (83) (728) (323) (1 051) Goodwill 120 361 503 864 Consolidated Financial Statements of the Nestlé Group 2023 87 In millions of CHF 2023 2022 Total Orgain Other Total Fair value of consideration transferred 203 896 825 1 721 Cash and cash equivalents acquired (4) 6 (15) (9) Consideration payable (7) — (89) (89) Payment of consideration payable on prior-year acquisitions 19 — 87 87 Cash outflow on acquisitions 211 902 808 1 710 The consideration transferred consists of payments made in cash with some consideration remaining payable. Orgain On April 1, 2022, the Group purchased a majority stake in Orgain, a leader in plant-based nutrition, from founder Dr. Andrew Abraham and Butterfly Equity, who continue to be minority share owners. The agreement includes options giving the right to Dr. Abraham and Butterfly Equity to sell their shares and an option for Nestlé Health Science to buy their shares, both based on the 12-month period ending June 2024 results. Orgain complements Nestlé Health Science’s existing portfolio of nutrition products that support healthier lives. The goodwill arising on this acquisition includes synergies with existing Nestlé Health Science’s organization and growth expansion in geography and in new channels of distribution for plant-based nutrition. It is expected to be deductible for tax purposes. Acquisition-related costs Acquisition-related costs have been recognized under Other operating expenses in the income statement (see Note 4.2) for an amount of CHF 27 million (2022: CHF 46 million). 2. Scope of consolidation, acquisitions and disposals of businesses 88 Consolidated Financial Statements of the Nestlé Group 2023 2.3 Disposals of businesses There were no significant disposals of business during the year 2023 nor during the year 2022. In millions of CHF 2023 2022 Cash, cash equivalents and short-term investments 20 12 Inventories 72 58 Trade and other receivables, prepayments and other assets 74 16 Deferred tax assets 19 11 Property, plant and equipment 150 175 Goodwill and intangible assets 231 333 Financial liabilities (15) (27) Trade and other payables, accruals and other liabilities (90) (31) Employee benefits and provisions (5) (14) Deferred tax liabilities (7) — Non-controlling interests (22) — Net assets disposed of 427 533 Cumulative other comprehensive income items, net, reclassified to income statement 187 29 Profit/(loss) on disposals, net of disposal costs (221) (79) Total disposal consideration, net of disposal costs 393 483 Cash and cash equivalents disposed of (20) (12) Disposal costs not yet paid 44 — Shares in joint ventures and associates (a) (126) (296) Loans granted to joint ventures (a) (100) — Consideration receivable (5) (32) Receipt of consideration receivable on prior-year disposals 29 17 Cash inflow on disposals, net of disposal costs 215 160 (a) In 2023, mainly related to the fair value of the equity interest in European Pizza Group based on discounted cashflow, and related loans granted to this joint venture (see Notes 2.1 and 14) part of the Zone EUR operating segment. In 2022, related to the fair value of the equity interest in Sous Chef received as part of the disposal of Freshly (see Notes 2.1 and 14), which was determined using a discounted cash flows methodology based on the forecasted business plans of entities held by Sous Chef (the combination of Freshly and Kettle Cuisine, see Notes 2.1 and 14). 2. Scope of consolidation, acquisitions and disposals of businesses Consolidated Financial Statements of the Nestlé Group 2023 89 3. Analyses by segment Nestlé is organized into five geographic Zones as well as Globally Managed Businesses. The Company manufactures and distributes food and beverage products in the following categories: powdered and liquid beverages, water, milk, ice cream and nutrition products, prepared dishes and cooking aids, confectionery and petcare. Nestlé also manufactures and distributes nutritional science products through its globally managed business Nestlé Health Science. The Group has factories in 76 countries and sales in 188 countries and employs around 270 000 people. Segment reporting Basis for segmentation Operating segments reflect the Group’s management structure and the way financial information is regularly reviewed by the Group’s chief operating decision maker (CODM), which is defined as the Executive Board. The CODM considers the business from both a geographic and product perspective, through geographic Zones as well as Globally Managed Businesses (GMB). Zones and GMBs that meet the quantitative threshold of 10% of total sales, trading operating profit or assets for all operating segments are presented on a stand-alone basis as reportable segments. Even though it does not meet the reporting threshold, Nespresso is voluntarily reported separately considering its financial contribution to the Group. The Group is organized into five Zones and two significant GMBs. Therefore, the Group’s reportable segments are: – Zone North America (NA); – Zone Europe (EUR); – Zone Asia, Oceania and Africa (AOA); – Zone Latin America (LATAM); – Zone Greater China (GC); – Nestlé Health Science; and – Nespresso. Other business activities and operating segments are combined and presented in Other businesses. As most operating segments represent geographic Zones, information by product is also disclosed. The seven product groups that are disclosed represent the highest categories of products that are followed internally. Revenue and results by segment Segment results (Trading operating profit) represent the contribution of the different segments to central overheads, unallocated research and development costs and the trading operating profit of the Group. Specific corporate expenses are allocated to the corresponding segments. 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 Group Management to monitor the performance of the Group. Depreciation and amortization include depreciation of property, plant and equipment (including right-of-use assets under leases) and amortization of intangible assets. 90 Consolidated Financial Statements of the Nestlé Group 2023 3. Analyses by segment 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 Group discloses the invested capital, goodwill and intangible assets by segment and by product on a voluntary basis, and uses the assets directly allocated to the segments to determine if a segment is reportable. Invested capital comprises property, plant and equipment, trade receivables and some other receivables, assets held for sale, inventories, prepayments, less trade payables, accruals and some other payables, liabilities directly associated with assets held for sale and non-current other payables. 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 the accounting standards that were applicable at various points in time when the Group undertook significant acquisitions. Nevertheless, allocations of goodwill and intangible assets by segment and product and the related impairment expenses are provided. Inter-segment eliminations represent inter-company balances between the different segments. Invested capital and goodwill and intangible assets by segment represent the situation at the end of the year, while the figures by product represent the annual average, as this provides a better indication of the level of invested capital. 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. Unallocated items Unallocated items represent items whose allocation to a segment or product would be arbitrary. They mainly comprise: – corporate expenses and related assets/liabilities; – research and development costs and related assets/liabilities; and – some goodwill and intangible assets. Revenue Sales represent amounts received and receivable from third parties for goods supplied to the customers and for services rendered. 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 which the 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 Group has a range of credit terms which are typically short term, in line with market practice and without any financing component. Consolidated Financial Statements of the Nestlé Group 2023 91 The Group does not generally accept sales returns, 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 and water coolers) may be sold or leased separately to customers. Arrangements where the 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. Sales are disaggregated by product group and geography in Notes 3.2 and 3.4. 3. Analyses by segment 92 Consolidated Financial Statements of the Nestlé Group 2023 3. Analyses by segment 3.1 Operating segments Revenue and results In millions of CHF 2023 Sales (a)Underlying tradingoperating profit (b)Tradingoperating profitNet other tradingincome/(expenses) (c)of whichimpairment of property, plant and equipmentof whichrestructuring costsDepreciation and amortization Zone NA 25 995 5 768 5 546 (222) (83) (84) (701) Zone EUR 19 098 3 127 2 698 (429) (71) (267) (812) Zone AOA 17 519 4 109 3 944 (165) (89) (57) (508) Zone LATAM 12 196 2 520 2 346 (174) (19) (36) (390) Zone GC 5 037 832 468 (364) (170) (191) (159) Nestlé Health Science 6 498 777 670 (107) (16) (47) (300) Nespresso 6 372 1 291 1 283 (8) (16) (8) (274) Other businesses (d) 283 (12) (15) (3) (2) — (37) Unallocated items (e) — (2 359) (2 420) (61) (24) (33) (277) Total 92 998 16 053 14 520 (1 533) (490) (723) (3 458) In millions of CHF 2022 Sales (a)Underlying tradingoperating profit (b)Tradingoperating profitNet other tradingincome/(expenses) (c)of whichimpairment of property, plant and equipmentof whichrestructuring costsDepreciation and amortization Zone NA 26 328 5 528 4 904 (624) (82) (43) (713) Zone EUR 19 128 3 138 2 719 (419) (199) (92) (829) Zone AOA 18 484 4 237 4 133 (104) (26) (44) (566) Zone LATAM 11 819 2 501 2 401 (100) (16) (11) (366) Zone GC 5 351 862 840 (22) (12) (15) (179) Nestlé Health Science 6 602 899 (596) (1 495) (41) (42) (287) Nespresso 6 448 1 388 1 309 (79) (24) (7) (290) Other businesses (d) 264 (17) (19) (2) (4) — (38) Unallocated items (e) — (2 433) (2 496) (63) 1 (19) (273) Total 94 424 16 103 13 195 (2 908) (403) (273) (3 541) (a) Inter-segment sales are not significant. (b) Trading operating profit before Net other trading income/(expenses). (c) Included in Trading operating profit. (d) Composed of businesses not under the direct control of the Zones or GMBs and Group procurement activities. (e) Refer to the Segment reporting accounting policies above for the definition of unallocated items. Consolidated Financial Statements of the Nestlé Group 2023 93 3. Analyses by segment Invested capital and other information In millions of CHF 2023 Invested capitalGoodwill andintangible assetsImpairment ofgoodwill and non-commercialized intangible assets (c)Impairment ofintangible assets (d)Capital additions Zone NA 8 749 18 149 — (44) 2 401 Zone EUR 7 977 4 412 — (27) 1 680 Zone AOA 4 389 6 846 — (6) 928 Zone LATAM 4 974 1 925 — (13) 923 Zone GC 194 1 583 — (1) 161 Nestlé Health Science 2 674 12 848 (45) (21) 478 Nespresso 1 422 560 — — 282 Other businesses (a) (827) 92 — — 88 Unallocated items (b) and inter-segment eliminations 1 294 503 — — 218 Total 30 846 46 918 (45) (112) 7 159 In millions of CHF 2022 Invested capitalGoodwill andintangible assetsImpairment ofgoodwill and non-commercialized intangible assets (c)Impairment ofintangible assets (d)Capital additions Zone NA 8 218 19 870 (71) (311) 2 272 Zone EUR 7 997 4 932 — — 1 489 Zone AOA 5 188 7 677 — — 930 Zone LATAM 5 185 1 962 — — 805 Zone GC 572 1 725 — — 207 Nestlé Health Science 2 825 14 060 (565) (1 373) 1 795 Nespresso 1 616 600 — (3) 520 Other businesses (a) (1 175) 102 — — 43 Unallocated items (b) and inter-segment eliminations 1 513 571 — — 203 Total 31 939 51 499 (636) (1 687) 8 264 (a) Composed of businesses not under the direct control of the Zones or GMBs and Group procurement activities. (b) Refer to the Segment reporting accounting policies above for the definition of unallocated items. (c) Included in Operating profit. (d) Included in Trading operating profit. 94 Consolidated Financial Statements of the Nestlé Group 2023 3. Analyses by segment 3.2 Products Revenue and results In millions of CHF 2023 SalesUnderlying tradingoperating profit (a)Tradingoperating profitNet other tradingincome/(expenses) (b)of whichimpairment of property, plant and equipmentof whichrestructuring costs Powdered and Liquid Beverages 24 786 5 130 4 945 (185) (70) (104) Water 3 320 351 161 (190) (41) (99) Milk products and Ice cream 10 981 2 688 2 601 (87) (26) (40) Nutrition and Health Science 15 278 2 831 2 291 (540) (207) (267) Prepared dishes and cooking aids 11 666 2 136 1 849 (287) (97) (113) Confectionery 8 107 1 364 1 231 (133) (11) (41) PetCare 18 860 3 912 3 862 (50) (14) (26) Unallocated items (c) — (2 359) (2 420) (61) (24) (33) Total 92 998 16 053 14 520 (1 533) (490) (723) In millions of CHF 2022 SalesUnderlying tradingoperating profit (a)Tradingoperating profitNet other tradingincome/(expenses) (b)of whichimpairment of property, plant and equipmentof whichrestructuring costs Powdered and Liquid Beverages 25 218 5 593 5 358 (235) (63) (47) Water 3 536 277 241 (36) (8) (21) Milk products and Ice cream 11 289 2 568 2 508 (60) (17) (16) Nutrition and Health Science 15 678 2 990 1 323 (1 667) (62) (68) Prepared dishes and cooking aids 12 484 2 038 1 508 (530) (101) (57) Confectionery 8 118 1 364 1 259 (105) (42) (14) PetCare 18 101 3 706 3 494 (212) (111) (31) Unallocated items (c) — (2 433) (2 496) (63) 1 (19) Total 94 424 16 103 13 195 (2 908) (403) (273) (a) Trading operating profit before Net other trading income/(expenses). (b) Included in Trading operating profit. (c) Refer to the Segment reporting accounting policies above for the definition of unallocated items. Consolidated Financial Statements of the Nestlé Group 2023 95 Invested capital and other information In millions of CHF 2023 Invested capitalGoodwill andintangible assetsImpairment ofgoodwill and non-commercialized intangible assets (b)Impairment of intangible assets (c) Powdered and Liquid Beverages 7 032 6 587 — (2) Water 1 432 1 087 — (25) Milk products and Ice cream 2 907 1 191 — — Nutrition and Health Science 6 153 23 806 (45) (24) Prepared dishes and cooking aids 3 169 5 611 — (31) Confectionery 2 483 682 — (11) PetCare 8 604 9 385 — (19) Unallocated items (a) and intra-group eliminations 1 433 1 678 — — Total 33 213 50 027 (45) (112) In millions of CHF 2022 Invested capitalGoodwill andintangible assetsImpairment ofgoodwill and non-commercialized intangible assets (b)Impairment of intangible assets (c) Powdered and Liquid Beverages 6 377 7 016 — (3) Water 1 455 1 093 — — Milk products and Ice cream 2 834 1 050 — — Nutrition and Health Science 5 906 26 075 (565) (1 373) Prepared dishes and cooking aids 2 943 6 258 (71) (311) Confectionery 2 431 757 — — PetCare 7 354 9 759 — — Unallocated items (a) and intra-group eliminations 1 700 1 836 — — Total 31 000 53 844 (636) (1 687) (a) Refer to the Segment reporting accounting policies above for the definition of unallocated items. (b) Included in Operating profit. (c) Included in Trading operating profit. 3. Analyses by segment 96 Consolidated Financial Statements of the Nestlé Group 2023 3.3a Reconciliation from Underlying trading operating profit to Profit before taxes, associates and joint ventures In millions of CHF 2023 2022 Underlying trading operating profit (a) as per Note 3.1 16 053 16 103 Net other trading income/(expenses) as per Note 4.1 (1 533) (2 908) Trading operating profit as per Note 3.1 14 520 13 195 Impairment of goodwill and non-commercialized intangible assets (45) (636) Net other operating income/(expenses) excluding impairment of goodwill and non-commercialized intangible assets (412) (233) Operating profit 14 063 12 326 Net financial income/(expense) (1 360) (1 040) Profit before taxes, associates and joint ventures 12 703 11 286 (a) Trading operating profit before Net other trading income/(expenses). 3.3b Reconciliation from invested capital and goodwill and intangible assets to total assets In millions of CHF 2023 2022 Invested capital as per Note 3.1 30 846 31 939 Liabilities included in invested capital 23 057 24 977 Subtotal 53 903 56 916 Intangible assets and goodwill as per Note 3.1 46 918 51 499 Other assets 25 729 26 767 Total assets 126 550 135 182 3. Analyses by segment Consolidated Financial Statements of the Nestlé Group 2023 97 3.4 Disaggregation of sales by geographic area (country and type of market) The Group disaggregates revenue from the sale of goods by major product group as shown in Note 3.2. Disaggregation of sales by geographic area is based on customer location and is therefore not a view by management responsibility as disclosed by operating segments in Note 3.1. In millions of CHF 2023 2022 NA 32 553 33 000 United States 30 034 30 314 Canada 2 519 2 686 EUR 22 291 22 291 France 3 546 3 558 United Kingdom 3 529 3 409 Germany 2 212 2 316 Other markets of geographic area 13 004 13 008 of which Switzerland 1 101 1 109 AOA 19 870 20 967 Philippines 2 677 2 667 India 1 993 1 960 Australia 1 450 1 510 Other markets of geographic area 13 750 14 830 LATAM 12 760 12 323 Brazil 4 131 3 756 Mexico 3 937 3 457 Chile 1 312 1 302 Other markets of geographic area 3 380 3 808 GC 5 524 5 843 Greater China 5 524 5 843 Total sales 92 998 94 424 of which developed markets 54 829 55 112 of which emerging markets 38 169 39 312 3. Analyses by segment 98 Consolidated Financial Statements of the Nestlé Group 2023 3.5 Geography Sales and non-current assets in Switzerland and countries which individually represent at least 10% of Group sales or 10% of Group non-current assets are disclosed separately. The analysis of sales is stated by customer location. Non-current assets relate to property, plant and equipment (including right-of-use assets under leases), intangible assets and goodwill. Property, plant and equipment and intangible assets are attributed to the country of their legal owner. Goodwill is attributed to the countries generating the cash flows supporting the goodwill. In millions of CHF 2023 2022 Sales Non-current assets Sales Non-current assets United States 30 034 30 182 30 314 31 630 Switzerland 1 101 16 893 1 109 18 006 Rest of the world 61 863 30 310 63 001 32 004 Total 92 998 77 385 94 424 81 640 3.6 Customers There is no single customer accounting for 10% or more of Group revenues. 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 and non-commercialized intangible assets), litigations and onerous contracts, results on disposals 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 and non-commercialized intangible assets, 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, the effect of hyperinflation accounting, and income and expenses that fall beyond the control of operating segments or relate to events such as wars and natural disasters including extreme weather events linked to climate change, as well as expropriation of assets. 3. Analyses by segment Consolidated Financial Statements of the Nestlé Group 2023 99 4.1 Net other trading income/(expenses) In millions of CHF Notes 2023 2022 Other trading income 132 107 Restructuring costs (723) (273) Impairment of property, plant and equipment (a) and intangible assets (b)/(c) 8/9 (602) (2 090) Litigations and onerous contracts (173) (400) Miscellaneous trading expenses (167) (252) Other trading expenses (1 665) (3 015) Total net other trading income/(expenses) (1 533) (2 908) (a) Including impairment and/or reversal of impairment of assets held for sale. (b) Excluding impairment of non-commercialized intangible assets. (c) In 2022, including mainly: i) CHF 1373 million related to Palforzia (see Note 9.1) – Nestlé Health Science operating segment; and ii) CHF 311 million related to the Freshly’s brand before disposal (see Note 2.1 and 14) – Zone NA operating segment. 4.2 Net other operating income/(expenses) In millions of CHF Notes 2023 2022 Profit on disposal of businesses 2 3 20 Miscellaneous operating income (a) 295 320 Other operating income 298 340 Loss on disposal of businesses 2 (224) (99) Impairment of goodwill and non-commercialized intangible assets (b) 9 (45) (636) Miscellaneous operating expenses (c) (486) (474) Other operating expenses (755) (1 209) Total net other operating income/(expenses) (457) (869) (a) Including CHF 156 million (2022: CHF 136 million) of hyperinflation adjustments. (b) In 2022, mainly includes CHF 553 million related to Palforzia’s non-commercialized intangible assets (see Note 9.1). (c) Miscellaneous operating expenses include, among others, expenses of transitional services provided to disposed businesses and natural disasters. 4. Net other trading and operating income/(expenses) 100 Consolidated Financial Statements of the Nestlé Group 2023 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 and short-term investments, as well as the interest expense on financial debt (including leases), collectively termed “net financial debt” (see Note 16.5). These headings also include other income and expenses 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 in the Note on Property, plant and equipment (see Note 8). In millions of CHF Notes 2023 2022 Interest income 192 140 Interest expense (1 500) (1 124) Net financing cost of net financial debt (1 308) (984) Interest income on defined benefit plans 92 70 Interest expense on defined benefit plans (143) (125) Net interest income/(expense) on defined benefit plans 10 (51) (55) Other financial income/(expense) (1) (1) Net financial income/(expense) (1 360) (1 040) 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 CHF 2023 2022 Raw materials, work in progress and sundry supplies 5 725 7 529 Finished goods 6 509 7 818 Allowance for write-down to net realizable value (338) (328) 11 896 15 019 Inventories amounting to CHF 251 million (2022: CHF 294 million) are pledged as security for financial liabilities. Inventories amounting to CHF 48 336 million (2022: CHF 49 889 million) were recognized as an expense during the year and included in Cost of goods sold. Consolidated Financial Statements of the Nestlé Group 2023 101 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 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 for forward-looking information where relevant (such as a significant deterioration in the economic environment). The Group’s credit loss experience has shown that aging of receivable balances is primarily due to negotiations about variable consideration. The 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 administration expenses. In millions of CHF 2023 2022 Gross carrying amount Expected credit loss allowance Total Gross carrying amount Expected credit loss allowance Total Trade receivables (not credit impaired) 9 092 (100) 8 992 8 884 (89) 8 795 Other receivables (not credit impaired) 2 002 (8) 1 994 2 294 (9) 2 285 Credit impaired trade and other receivables 179 (170) 9 247 (211) 36 Total 11 273 (278) 10 995 11 425 (309) 11 116 The top five major customers represent 15% (2022: 15%) of trade and other receivables, none of them individually exceeding 6% (2022: 8%). Based on the historic trend and expected performance of the customers, the Group believes that the above expected credit loss allowance sufficiently covers the risk of default. 102 Consolidated Financial Statements of the Nestlé Group 2023 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 Group participates in supplier finance arrangements under which suppliers may elect to receive early payment from financial institutions by factoring their receivables from the Group. The arrangements avoid concentration of liquidity risk, since the due dates of the payments by the 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 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 CHF 2023 2022 Due within one year Trade payables 14 195 15 798 Social security and sundry taxes and levies 1 665 1 766 Other payables 3 344 2 959 19 204 20 523 7. Trade and other receivables/payables Consolidated Financial Statements of the Nestlé Group 2023 103 8. Property, plant and equipment Property, plant and equipment comprise owned and leased assets. In millions of CHF Notes 2023 2022 Property, plant and equipment – owned 8.1 27 888 27 540 Right-of-use assets – leased 8.2b 2 579 2 601 30 467 30 141 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 homogeneous useful lives by using the straight-line method to depreciate the initial cost down to the residual value over the estimated useful lives. The residual values are 30% on head offices and nil for all other asset types. The useful lives are as follows: Buildings 20–40 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, the evolution of technology and competitive pressures. Depreciation of property, plant and equipment is allocated to the appropriate headings of expenses by function in the 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 income statement over the useful life of the related assets. 104 Consolidated Financial Statements of the Nestlé Group 2023 In millions of CHF Land and buildings Machinery and equipment Tools, furniture and other equipment Vehicles Assets under construction and advance payments Total Net carrying amount As at January 1, 2023 9 043 10 169 1 699 102 6 527 27 540 Additions (a) 355 700 451 61 4 108 5 675 Acquisitions through business combinations 7 8 3 — 6 24 Reclassification from assets under construction 895 1 378 290 8 (2 571) — Depreciation (423) (1 322) (586) (20) — (2 351) Impairments (136) (319) (35) — — (490) Disposals (16) (30) (15) (7) (1) (69) Classification (to)/from held-for-sale and disposals of businesses (59) (85) 4 — (2) (142) Currency retranslations and others (671) (867) (130) (28) (603) (2 299) As at December 31, 2023 8 995 9 632 1 681 116 7 464 27 888 Gross value 15 053 26 623 6 442 287 7 464 55 869 Accumulated depreciation and impairments (6 058) (16 991) (4 761) (171) — (27 981) Net carrying amount As at January 1, 2022 8 981 10 231 1 631 92 4 704 25 639 Additions (a) 293 666 439 15 4 041 5 454 Acquisitions through business combinations 11 27 9 — 4 51 Reclassification from assets under construction 548 1 289 270 3 (2 110) — Depreciation (435) (1 400) (593) (22) — (2 450) Impairments (97) (216) (16) (1) — (330) Disposals (29) (34) (20) (1) (1) (85) Classification (to)/from held-for-sale and disposals of businesses (106) (99) (1) — (3) (209) Currency retranslations and others (123) (295) (20) 16 (108) (530) As at December 31, 2022 9 043 10 169 1 699 102 6 527 27 540 Gross value 15 117 27 852 6 750 313 6 527 56 559 Accumulated depreciation and impairments (6 074) (17 683) (5 051) (211) — (29 019) (a) Including borrowing costs. As at December 31, 2023, net property, plant and equipment of CHF 88 million are pledged as security for financial liabilities (2022: CHF 118 million). As at December 31, 2023, the Group was committed to expenditure amounting to CHF 2829 million (2022: CHF 3326 million). 8. Property, plant and equipment Consolidated Financial Statements of the Nestlé Group 2023 105 Impairment of property, plant and equipment Reviews of the carrying amount of the Group’s property, plant and equipment are performed when there is an indication of impairment. An indicator could be technological obsolescence, 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. Earlier than planned retirement of property, plant and equipment due to a transition to a low carbon economy, Nestlé’s commitments regarding recyclable or reusable packaging, reduction of virgin plastic and Nestlé’s Net Zero Roadmap on greenhouse gas emissions are also considered as triggers for impairment. In assessing value in use, the estimated future cash flows are discounted to their present value, based on the time value of money and the risks specific to the country where the assets are located. The risks specific to the asset are included in the determination of the cash flows. Impairment of property, plant and equipment arises mainly from plans to optimize industrial manufacturing capacities by closing or selling inefficient production facilities and underperforming businesses. The majority of Nestlé’s emissions are classified as Scope 3 (i. e. indirect emissions that occur across Nestlé’s value chain and outside of Nestlé’s direct control), and the property, plant and equipment are geographically widespread. Therefore, property, plant and equipment are not materially exposed to climate transition risks nor to physical climate risks, and no significant climate-related triggers for impairment have been identified. 8.2 Leases – Group as a lessee The 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 Group obtains substantially all the economic benefits from the use of that asset, and whether the Group has the right to the direct use of the asset. The 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 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 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 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, or in case of reassessment of options. At inception, the ROU asset comprises the initial lease liability, initial direct costs and the obligation 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. 8. Property, plant and equipment 106 Consolidated Financial Statements of the Nestlé Group 2023 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 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 Group exercised all extension options not currently included in the lease liability, the additional payments would amount to CHF 0.9 billion (undiscounted) as at December 31, 2023. Vehicle leases The 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 Group also leases machinery and equipment, and tools, furniture and other equipment that are each insignificant to the total leased asset portfolio. 8.2b Right-of-use assets In millions of CHF Land and buildings Vehicles Other Total Net carrying amount As at January 1, 2023 2 203 152 246 2 601 Additions 523 128 173 824 Depreciation (465) (82) (95) (642) Impairments — — — — Classification (to)/from held-for-sale and change of scope of consolidation, net 3 — — 3 Currency retranslations and others (169) (19) (19) (207) As at December 31, 2023 2 095 179 305 2 579 Net carrying amount As at January 1, 2022 2 307 169 230 2 706 Additions 612 78 92 782 Depreciation (476) (86) (85) (647) Impairments (76) — — (76) Classification (to)/from held-for-sale and change of scope of consolidation, net (3) — 1 (2) Currency retranslations and others (a) (161) (9) 8 (162) As at December 31, 2022 2 203 152 246 2 601 (a) Including CHF 101 million of derecognition of right-of-use assets that are being sub-leased. 8. Property, plant and equipment Consolidated Financial Statements of the Nestlé Group 2023 107 8.2c Other lease disclosures A maturity analysis of lease liabilities is shown in Note 12.2b. The Group incurred interest expense on lease liabilities of CHF 86 million (2022: CHF 72 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 CHF 930 million (2022: CHF 877 million). There are no significant lease commitments for leases not commenced at year-end. 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 (mainly 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. Payments made to third parties in order to in-license or acquire intellectual property rights, compounds and products are capitalized as non-commercialized intangible assets, as they are separately identifiable and are expected to generate future benefits. Non-commercialized intangible assets are not amortized, but tested for impairment (see Impairment of goodwill and intangible assets below). Any impairment charge is recorded in the consolidated income statement under Other operating expenses. They are reclassified as commercialized intangible assets once development is complete, usually when approval for sales has been granted by the relevant regulatory authority. Commercialized indefinite life intangible assets mainly comprise certain brands, trademarks, operating rights and intellectual property 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 present. 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. 8. Property, plant and equipment 108 Consolidated Financial Statements of the Nestlé Group 2023 Finite life intangible assets are amortized over the shorter of their contractual or useful economic lives. They comprise mainly management information systems and commercialized patents and rights to carry on an activity (e.g. exclusive rights to sell products or to perform a supply activity). They are amortized assuming a zero residual value on a straight-line basis. Useful lives are as follows: management information systems over 3 to 8 years; other finite intangible assets over the shorter of the estimated useful life or the related contractual period, from 5 to 25 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 income statement. Any impairment charge is recorded in the consolidated income statement under Other trading expenses. Research and development Internal research costs are charged to the income statement in the year in which they are incurred. Development costs are only recognized as assets on the balance sheet if all the recognition criteria set by IAS 38 – Intangible Assets are met before the products are launched on the market. Development costs are generally charged to the income statement in the year in which they are incurred due to uncertainties inherent in the development of new products because the expected future economic benefits cannot be reliably determined. As long as the products have not reached the market place (or obtained regulatory approval if necessary), there is no reliable evidence that positive future cash flows would be obtained. Capitalized development costs are subsequently accounted for as described in the section Intangible assets above. 9. Goodwill and intangible assets Consolidated Financial Statements of the Nestlé Group 2023 109 In millions of CHF GoodwillBrands andintellectualproperty rightsOperatingrightsand othersManagementinformationsystemsTotalintangibleassetsof whichinternallygenerated Net carrying amount As at January 1, 2023 31 262 13 278 5 997 962 20 237 889 Expenditure — 99 119 271 489 263 Acquisitions through business combinations 120 5 14 — 19 1 Amortization — (41) (106) (318) (465) (296) Impairments (a) — (107) (46) (4) (157) (3) Disposals — — — — — — Classification (to)/from held-for-sale and disposals of businesses (49) (182) — — (182) — Currency retranslations (2 640) (1 152) (523) (41) (1 716) (32) As at December 31, 2023 28 693 11 900 5 455 870 18 225 822 of which indefinite useful life (c) — 11 705 4 027 — 15 732 — of which non-commercialized intangible assets — 33 14 — 47 — As at December 31, 2023 Gross value 32 070 13 616 6 221 5 232 25 069 4 886 Accumulated amortization and impairments (3 377) (1 716) (766) (4 362) (6 844) (4 064) Net carrying amount As at January 1, 2022 31 012 15 199 5 981 1 043 22 223 948 Expenditure — 30 8 228 266 211 Acquisitions through business combinations 864 731 96 5 832 3 Amortization — (47) (93) (304) (444) (270) Impairments (b) (71) (2 238) (13) (1) (2 252) — Disposals — — — — — — Classification (to)/from held-for-sale and disposals of businesses (22) (299) (6) (6) (311) — Currency retranslations (521) (98) 24 (3) (77) (3) As at December 31, 2022 31 262 13 278 5 997 962 20 237 889 of which indefinite useful life (c) — 13 002 4 428 — 17 430 — of which non-commercialized intangible assets — 56 198 — 254 — As at December 31, 2022 Gross value 34 926 17 213 6 654 5 240 29 107 4 869 Accumulated amortization and impairments (3 664) (3 935) (657) (4 278) (8 870) (3 980) (a) Of which CHF 45 million of non-commercialized intangible assets. (b) Total impairment of intangible assets of CHF 2252 million includes CHF 1926 million related to Palforzia’s intangible assets (see Note 9.1.1) including CHF 553 million of non-commercialized intangible assets and CHF 311 million related to Freshly’s brand before disposal (see Note 2.1). (c) Of which CHF 4019 million (2022: CHF 4412 million) are perpetual rights to market, sell and distribute certain Starbucks consumer and food service products globally, classified under the caption Operating rights and others. 9. Goodwill and intangible assets 110 Consolidated Financial Statements of the Nestlé Group 2023 In addition to the above, the Group has entered into long-term agreements to in-license or acquire intellectual property or operating rights from third parties. If agreed objectives or performance targets are achieved, these agreements would require potential milestone payments and other payments by the Group, which may be capitalized as intangible assets (see accounting policy in Note 9 – Intangible assets). As at December 31, 2023, the Group’s committed payments (undiscounted and not riskadjusted) and their estimated timing are: In millions of CHF 2023 2022 Unconditional commitments Potential milestone payments Total Unconditional commitments Potential milestone payments Total Within one year — 30 30 — 168 168 In the second year — 20 20 — 69 69 In the third and fourth years — 85 85 — 70 70 Thereafter — 862 862 — 1 112 1 112 Total — 997 997 — 1 419 1 419 Impairment of goodwill and intangible assets (including non-commercialized intangible assets) Goodwill and intangible assets with an indefinite life or not yet available for use are tested for impairment at least annually and whenever 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 Group defines its groups of CGUs for goodwill impairment testing based on the way that it monitors and derives economic benefits from the acquired goodwill. The CGUs are generally defined at the level of the product category per Zone, or at the level of the GMB if the products are managed on a global basis. For indefinite life intangible assets, the Group performs the test at the level of the smallest identifiable assets or group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Finally, non-commercialized intangible assets are tested at the level of the intangible asset itself. The impairment tests are performed by comparing the carrying amount of the assets of these CGUs 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. Goodwill and intangible assets Consolidated Financial Statements of the Nestlé Group 2023 111 9.1 Impairment 9.1.1 Impairment charge during the year The 2023 impairment charge relates to various impairments of intangible assets. None of them are individually significant. In 2022, the impairment charge mainly related to the impairment of Palforzia’s intangible assets composed of intellectual property rights, trademarks and trade names and noncommercialized intangibles (operating segment Nestlé Health Science) and other various non-significant impairments of intangible assets and goodwill (predominantly in Zone NA operating segment, which related to Freshly’s brand, see Notes 2.1 and 14). Slower than expected adoption by patients and healthcare professionals had impacted the penetration of the United States market for Palforzia, the peanut allergy treatment that was acquired in 2020 under the Aimmune Therapeutics acquisition. Considering this situation, the Group announced in the second half of the year 2022 that it had decided to explore strategic options for Palforzia and had decided to cease investments in further developments of non-commercialized intangibles. As a result, an impairment charge of CHF 1.6 billion was recorded in the second half of the year 2022 for brand and intellectual property rights based on a fair value less costs of disposal valuation. Before this change of strategy, an impairment charge of CHF 0.3 billion had been recognized in the first half of the year 2022 under Impairment of intangible assets on the intellectual property rights after revisions to projected cash flows considering the business performance since acquisition. Impairments for Palforzia were recognized under the heading Other trading expenses (see Note 4.1) for the patents and brand, and under the heading Other operating expenses (see Note 4.2) for non-commercialized intangible assets (capitalized cost of trials prior to granting of approval by the relevant authorities). 9.1.2 Annual impairment tests Goodwill impairment reviews have been conducted for more than 30 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. 9. Goodwill and intangible assets 112 Consolidated Financial Statements of the Nestlé Group 2023 The following table sets out the key assumptions for CGUs that have significant goodwill or IAIUL allocated to them. Goodwillcarryingamount (a)IAIULcarryingamount (a)Period ofcash flowprojectionsAverageannual salesgrowthAnnualmarginevolutionTerminalgrowthrateDiscountrate CGU PetCare Zone NA 6 417 194 5 years 6.8% Stable 2.6% 7.1% Nutrition Zone AOA 4 635 1 084 5 years 4.4% Stable 4.8% 11.7% Food Zone NA 2 654 1 446 5 years 3.6% Improvement 2.6% 7.1% Nestlé Health Science 5 888 5 406 5 years 6.4% Improvement 2.1% 7.0% Coffee Zone NA 863 3 736 5 years 5.2% Stable 2.5% 6.9% Subtotal 20 457 11 866 Other CGUs 8 236 3 866 Total 28 693 15 732 CGU PetCare Zone NA 7 003 222 5 years 6.3% Stable 2.0% 5.9% Nutrition Zone AOA 5 207 1 185 5 years 2.4% Stable 3.0% 10.9% Food Zone NA 2 914 1 621 5 years 3.9% Stable 2.0% 5.9% Nestlé Health Science 6 427 5 917 5 years 6.6% Improvement 2.7% 6.9% Coffee Zone NA 947 4 006 5 years 4.7% Stable 2.0% 5.9% Subtotal 22 498 12 951 Other CGUs 8 764 4 479 Total 31 262 17 430 (a) In millions of CHF For each significant CGU, the recoverable amount is higher than its carrying amount. 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 are projected over 5 years. They are extrapolated using a steady or declining terminal growth rate. Finally, the following are taken into account in the impairment tests: – The cash flows are discounted at post-tax weighted average rates. The discount rates are computed based on external sources of information and reflect the time value of money and country specific risk. – The cash flows are based upon financial plans approved by Group Management which are consistent with the Group’s approved strategy for this period. They are based on past performance and current initiatives. The business risk is included in the determination of the cash flows. 9. Goodwill and intangible assets 2023 2022 Consolidated Financial Statements of the Nestlé Group 2023 113 – Climate change risks, including transition and physical risks, over the medium to longer term are taken into account in assessing the risks of the cash flows. Impacts on the underlying assumptions on future forecasts of CGUs and their portfolio strategy are considered. Sales growth, margin evolution and terminal growth are adjusted if necessary, considering the resilience of the CGUs to climate change risks as well as Nestlé’s commitments to tackle climate change (including the Group’s “Net Zero Roadmap”). In addition, the headroom of the CGUs is compared to information obtained from Nestlé’s climate scenario modeling prepared in accordance with the Task Force on Climate-related Financial Disclosures (TCFD) framework. The outcomes of the scenarios analyzed (selected high, intermediate and low emissions scenarios) are probability weighted and proportionally allocated and compared to the headroom of each CGU. The process did not lead to any impairment charges. – The terminal growth rates are 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, discount rates and terminal growth rates include inflation. The Group assesses the uncertainty of these estimates by performing sensitivity analyses. Management believes that no reasonably possible change in any of the above key assumptions would cause the CGU’s recoverable amount to fall below its carrying amount except for the CGU Nestlé Health Science. For this CGU, changes in the key assumptions greater than the amounts below (most likely for the discount rate or annual margin evolution) would lead to the fair value less costs of disposal being less than the carrying amount: Nestlé Health Science Sensitivity Average annual sales growth Decrease by 400 basis points Annual margin evolution Decrease by 230 basis points Terminal growth rate Decrease by 100 basis points Discount rate Increase by 80 basis points 9.Goodwill and intangible assets 114 Consolidated Financial Statements of the Nestlé Group 2023 10. Employee benefits 10.1 Employee remuneration The Group’s salary expenses of CHF 10 399 million (2022: CHF 10 756 million) and welfare expenses of CHF 3938 million (2022: CHF 4117 million) represent a total of CHF 14 337 million (2022: CHF 14 873 million). In addition, certain Group employees are eligible for long-term incentives in the form of equity compensation plans, for which the cost amounts to CHF 207 million (2022: CHF 181 million). Employee remuneration is allocated to the appropriate headings of expenses by function (see Note 1, section Expenses). 10.2 Post-employment benefits The liabilities of the 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 Group. The actuarial assumptions used to calculate the defined benefit obligations vary according to the economic conditions of the country in which the plan is located. Such plans are either funded or unfunded. The deficit or excess of the fair value of plan assets over the present value of the defined benefit obligations is recognized as a liability or an asset on the balance sheet. Pension costs charged to the income statement consist 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 income statement as incurred. Certain disclosures are presented by geographic area. The five regions disclosed are North America (NA), Europe (EUR), Asia, Oceania and Africa including Middle East (AOA), Latin America (LATAM) and Greater China (GC). Each region includes the corresponding Zones as well as the portion of the GMB activity in that region. Pensions and retirement benefits Apart from legally required social security arrangements, the majority of Group employees are eligible for benefits through pension plans in case of retirement, death in service, disability and resignation. Those plans are either defined contribution plans or defined benefit plans based on pensionable remuneration and length of service. The Group manages its pension plans by geographic area and the major plans, classified as defined benefit plans under IAS 19, are located in EUR (Switzerland, United Kingdom and Germany) and in NA (USA). In accordance with applicable legal frameworks, these plans have governing bodies which have a fiduciary responsibility to oversee the management of the plans. The Group oversees the pension plans through the Group Corporate Pension Board. Consolidated Financial Statements of the Nestlé Group 2023 115 In Switzerland, Nestlé’s pension plan is a cash balance plan where contributions are expressed as a percentage of the pensionable salary. The pension plan guarantees the amount accrued on members’ savings accounts, as well as a minimum interest on those savings accounts. At retirement date, the savings accounts are converted into pensions. However, members may opt to receive part of the pension as a lump sum. Increases of pensions in payment are granted on a discretionary basis by the Board of Trustees, subject to the financial situation of the plan. There is also a defined benefit plan that was closed to new entrants in 2013 and whose members below age 55 on that date were transferred to the cash balance plan. This heritage plan is a hybrid between a cash balance plan and a plan based on a final pensionable salary. Finally, the Group has committed to make additional contributions in coordination with a decrease in conversion rates applicable since July 1, 2018. CHF 237 million had been contributed as at December 31, 2023, and CHF 67 million is expected to be paid until 2038. In the United Kingdom, Nestlé’s pension plan is a hybrid arrangement combining a defined benefit career average section plus a defined contribution section. The defined benefit section was closed to new entrants during 2016. In the defined benefit section, from August 2017 onwards, members accrue a pension defined on their capped salary each year, plus defined contribution provision above the capped salary. Accrued pensions are automatically revalued according to inflation, subject to caps. Similarly, pensions in payment are increased annually in line with inflation, subject to caps as applicable. At retirement, there is a lump sum option. Finally, the funding of the Nestlé UK Pension Fund is defined on the basis of a triennial independent actuarial valuation in accordance with local regulations. As a result, an amount of CHF 438 million (equivalent GBP 348 million) was paid by Nestlé UK Ltd in 2021 in accordance with the previous valuation as at December 31, 2018. The last triennial valuation as at December 31, 2021 was completed in 2022 and confirmed that no deficit contributions were required. In Germany, there are cash balance plans, where members benefit from a guarantee on their savings accounts. Contributions to the plans are expressed as a percentage of the pensionable salary. Increases to pensions in payment are granted in accordance with legal requirements. There is also a heritage plan, based on final pensionable salary, which has been closed to new entrants since 2006. 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 member’s 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. The plan does not provide for automatic pension increases and members do not contribute to the plan. This plan was closed to new entrants at the end of 2015 and replaced by a defined contribution scheme. Finally, in August 2022, a buyout transaction with a third-party insurance company was completed and USD 819 million (equivalent CHF 783 million) of defined benefit obligations were removed from the Group balance sheet. This transaction did not change the pension benefits provided to pensioners. Post-employment medical benefits and other employee benefits Subsidiaries, principally in NA and LATAM, maintain 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 end-of-service indemnities, which do not have the character of pensions. 10. Employee benefits 116 Consolidated Financial Statements of the Nestlé Group 2023 Risks related to defined benefit plans The main risks to which the 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 when relevant. – mortality risk: the assumptions adopted by the Group make allowance for future improvements in life expectancy. However, if life expectancy improves at a faster rate than assumed, this would generally result in greater payments from the plans and consequent increases in the plans’ liabilities. In order to minimize this risk, mortality assumptions are reviewed on a regular basis. As certain of the Group’s pension arrangements permit benefits to be adjusted in the case that downside risks emerge, the Group does not always have full exposure to the risks described above. Plan amendments and restructuring events Plans within the Group are regularly reviewed as to whether they are aligned with market practice in the local context. Should a review indicate that a plan needs to be changed, prior agreement with the local governing body, the regulator and, if applicable, the members is sought before implementing plan changes. In 2023, as in 2022, there were plan amendments and restructuring activities (among others risk transfer transactions related to medical and retirement liabilities of pensioners) leading to curtailments and settlements, individually not significant, amounting to a net cost of CHF 23 million (2022: CHF 78 million net income). Asset-liability management and funding arrangement Governing bodies are responsible for determining the mix of asset classes and target allocations of Nestlé’s plans with the support of investment advisors and/or local asset management firms. Periodic reviews of the asset mix are made by external parties to assess the adequacy of the portfolio’s structure. Such analyses aim at dynamically comparing the fair value of the assets and liabilities in order to determine the most adequate strategic asset allocation. The overall investment policy and strategy for the Group’s funded defined benefit plans are 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. To the extent possible, the risks are shared equally amongst the different stakeholders. As those risks evolve with the development of capital markets and asset management activities, the Group addresses the assessment and control process of the major investment pension risks. In order to protect the Group’s defined benefit plans funding ratio and to mitigate the financial risks, protective measures on the investment strategies are in force. Risks pertaining to sustainability, social and climate factors are also taken into consideration. The Group has a policy guiding the pension plan governing bodies to review the impact of climate risk on their investment portfolios and apply TCFD recommendations in case it is required by local pension legislation. 10. Employee benefits Consolidated Financial Statements of the Nestlé Group 2023 117 10.2a Reconciliation of assets and liabilities recognized in the balance sheet In millions of CHF 2023 2022 Defined benefitretirement plansPost-employment medical benefits and other benefitsTotalDefined benefitretirement plansPost-employment medical benefits and other benefitsTotal Present value of funded obligations 17 063 342 17 405 16 819 64 16 883 Fair value of plan assets (18 158) (129) (18 287) (18 817) (38) (18 855) Excess of liabilities/(assets) over funded obligations (1 095) 213 (882) (1 998) 26 (1 972) Present value of unfunded obligations 734 710 1 444 765 1 199 1 964 Unrecognized assets (a) 765 3 768 1 240 3 1 243 Net defined benefit liabilities/(assets) 404 926 1 330 7 1 228 1 235 Reimbursement rights (125) (147) Other employee benefit liabilities 551 635 Net liabilities 1 756 1 723 Reflected in the balance sheet as follows: Employee benefit assets and reimbursement rights (962) (1 161) Employee benefit liabilities 2 718 2 884 Net liabilities 1 756 1 723 (a) Primarily from Swiss and German pension plans for which the net asset is limited to an amount totalling CHF 17 million as at December 31, 2023 and CHF nil as at December 31, 2022 based on economic benefits allowing an asset to be recognized. 10.2b Funding situation by geographic area of defined benefit plans (a) In millions of CHF 2023 2022 EUR NA AOA LATAM GC Total EUR NA AOA LATAM GC Total Present value of funded obligations 13 774 2 576 592 436 27 17 405 13 315 2 344 781 408 35 16 883 Fair value of plan assets (14 961) (2 197) (668) (439) (22) (18 287) (15 166) (2 332) (883) (445) (29) (18 855) Excess of liabilities/(assets) over funded obligations (1 187) 379 (76) (3) 5 (882) (1 851) 12 (102) (37) 6 (1 972) Present value of unfunded obligations 172 435 450 387 — 1 444 171 880 480 433 — 1 964 (a) Before asset ceiling. 10. Employee benefits 118 Consolidated Financial Statements of the Nestlé Group 2023 10.2c Movement in the present value of defined benefit obligations In millions of CHF 2023 2022 Defined benefitretirement plansPost-employment medical benefits and other benefitsTotalDefined benefitretirement plansPost-employment medical benefits and other benefitsTotal As at January 1 17 584 1 263 18 847 25 399 1 573 26 972 of which funded defined benefit plans 16 819 64 16 883 24 617 67 24 684 of which unfunded defined benefit plans 765 1 199 1 964 782 1 506 2 288 Currency retranslations (663) (88) (751) (673) 35 (638) Service cost 297 47 344 470 (55) 415 of which current service cost 296 25 321 460 33 493 of which past service cost and (gains)/losses arising from settlements 1 22 23 10 (88) (78) Interest expense 653 78 731 384 65 449 Actuarial (gains)/losses 1 365 22 1 387 (5 949) (195) (6 144) Employee contributions 109 — 109 110 — 110 Benefits paid on funded defined benefit plans (a) (1 464) (99) (1 563) (2 094) (7) (2 101) Benefits paid on unfunded defined benefit plans (75) (170) (245) (71) (112) (183) Classification (to)/from held-for-sale and change of scope of consolidation, net (8) (1) (9) (1) — (1) Reclassification from other benefits to defined benefit retirement plans — — — 41 (41) — Transfer from/(to) defined contribution plans (1) — (1) (32) — (32) As at December 31 17 797 1 052 18 849 17 584 1 263 18 847 of which funded defined benefit plans 17 063 342 17 405 16 819 64 16 883 of which unfunded defined benefit plans 734 710 1 444 765 1 199 1 964 (a) In 2022, including the buyout transaction in the USA described in Note 10.2, section Pensions and retirement benefits. 10. Employee benefits Consolidated Financial Statements of the Nestlé Group 2023 119 10.2d Movement in fair value of defined benefit plan assets In millions of CHF 2023 2022 Defined benefitretirement plansPost-employment medical benefits and other benefitsTotalDefined benefitretirement plansPost-employment medical benefits and other benefitsTotal As at January 1 (18 817) (38) (18 855) (26 220) (40) (26 260) Currency retranslations 642 11 653 739 3 742 Interest income (712) (6) (718) (395) (1) (396) Actual return on plan assets, excluding interest income (104) (10) (114) 5 385 2 5 387 Employee contributions (109) — (109) (110) — (110) Employer contributions (548) (185) (733) (357) (9) (366) Benefits paid on funded defined benefit plans (a) 1 464 99 1 563 2 094 7 2 101 Administration expenses 18 — 18 18 — 18 Classification (to)/from held-for-sale and change of scope of consolidation, net 8 — 8 — — — Transfer (from)/to defined contribution plans — — — 29 — 29 As at December 31 (18 158) (129) (18 287) (18 817) (38) (18 855) (a) In 2022, including the buyout transaction in the USA described in Note 10.2, section Pensions and retirement benefits. The major classes of plan assets as a percentage of total plan assets of the Group’s defined benefit plans are as follows: 2023 2022 Equities (a) 19% 17% of which US equities 4% 4% of which European equities 12% 9% of which other equities 3% 4% Debts 51% 52% of which government debts (a) 35% 37% of which corporate debts (b) 16% 15% Real estate (b) 12% 14% Alternative investments (b) 9% 8% of which hedge funds 2% 2% of which private equities 6% 6% of which infrastructure 1% 0% Cash/deposits 9% 9% (a) Almost all have a quoted market price in an active market. (b) Almost all are either not quoted or are quoted in a market which is not active. Equities and government debts represent 54% (2022: 54%) of the plan assets. Almost all of them are quoted in an active market. Corporate debts, real estate, hedge funds, private equities and infrastructure represent 37% (2022: 37%) of the plan assets. Almost all of them are either not quoted or quoted in a market which is not active. 10. Employee benefits 120 Consolidated Financial Statements of the Nestlé Group 2023 The plan assets of funded defined benefit plans include property occupied by subsidiaries with a fair value of CHF 8 million (2022: CHF 8 million). Furthermore, funded defined benefit plans may invest in Nestlé S.A. (or related) shares. The Group’s investment management principles allow such investment only when the position in Nestlé S.A. (or related) shares is passive, i.e. in line with the weighting in the underlying benchmark. There was no direct active investment as at the end of 2023 and 2022. The Group expects to contribute CHF 413 million to its funded defined benefit plans in 2024. 10.2e Unrecognized assets Movements of unrecognized assets and fair value of plan assets including asset ceiling are as follows: In millions of CHF 2023 2022 Defined benefitretirement plansPost-employment medical benefits and other benefitsTotalDefined benefitretirement plansPost-employment medical benefits and other benefitsTotal As at January 1 1 240 3 1 243 27 — 27 Currency retranslations (25) — (25) (9) — (9) Limitation of interest income 38 — 38 2 — 2 Changes due to asset ceiling (488) — (488) 1 220 3 1 223 As at December 31 765 3 768 1 240 3 1 243 The maximum economic benefit available was determined in the form of both refunds and reduction in future contributions. In millions of CHF 2023 2022 Defined benefitretirement plansPost-employment medical benefits and other benefitsTotalDefined benefitretirement plansPost-employment medical benefits and other benefitsTotal Fair value of plan assets as at December 31 Excluding limit on asset recognition (18 158) (129) (18 287) (18 817) (38) (18 855) Asset ceiling 765 3 768 1 240 3 1 243 Including limit on asset recognition (17 393) (126) (17 519) (17 577) (35) (17 612) 10. Employee benefits Consolidated Financial Statements of the Nestlé Group 2023 121 10.2f Expenses recognized in the income statement In millions of CHF 2023 2022 Defined benefitretirement plansPost-employment medical benefits and other benefitsTotalDefined benefitretirement plansPost-employment medical benefits and other benefitsTotal Service cost 297 47 344 470 (55) 415 Net interest (income)/expenses (21) 72 51 (9) 64 55 Administration expenses 18 — 18 18 — 18 Defined benefit expenses 294 119 413 479 9 488 Defined contribution expenses 393 365 Total 806 853 10.2g Remeasurement of defined benefit plans reported in other comprehensive income In millions of CHF 2023 2022 Defined benefitretirement plansPost-employment medical benefits and other benefitsTotalDefined benefitretirement plansPost-employment medical benefits and other benefitsTotal Actual return on plan assets, excluding interest income 104 10 114 (5 385) (2) (5 387) Experience adjustments on plan liabilities (168) 13 (155) (611) (51) (662) Change in demographic assumptions on plan liabilities 134 1 135 165 15 180 Change in financial assumptions on plan liabilities (1 331) (36) (1 367) 6 395 231 6 626 Transfer from/(to) unrecognized assets and other 488 — 488 (1 220) (3) (1 223) Remeasurement of defined benefit plans – actuarial gains/(losses) (773) (12) (785) (656) 190 (466) 10. Employee benefits 122 Consolidated Financial Statements of the Nestlé Group 2023 10.2h Principal financial actuarial assumptions The principal financial actuarial assumptions are presented by geographic area. Each item is a weighted average in relation to the relevant underlying component. 2023 2022 EUR NA AOA LATAM GC Total EUR NA AOA LATAM GC Total Discount rates 2.6% 5.0% 5.8% 8.7% 3.0% 3.5% 3.3% 5.4% 5.6% 9.3% 3.2% 4.1% Expected rates of salary increases 2.0% 3.6% 4.7% 4.4% 3.1% 2.6% 2.0% 3.6% 4.7% 3.8% 3.3% 2.7% Expected rates of pension adjustments 1.0% 0.0% 1.7% 2.1% 0.0% 0.9% 1.2% 0.0% 1.7% 1.7% 0.0% 1.0% Medical cost trend rates (a) 6.3% 6.6% 6.4% 6.4% 6.6% 6.5% (a) Medical cost trend rates represent the expected medical cost trend rates for next year. For plans in USA and Canada, medical cost trend rate is assumed to decrease to 4.5% by 2031 and 4% by 2040. As for the largest plan in LATAM, the related medical cost trend of 6.6% corresponds to an estimated long-term average increase. Some non-material post-employment medical plans in EUR and AOA have not been included in the average. 10.2i Mortality tables and life expectancies by geographic area for the Group’s major defined benefit pension plans Expressed in years 2023 2022 2023 2022 Country Mortality table Life expectancy at age 65 for a male member currently aged 65 Life expectancy at age 65 for a female member currently aged 65 EUR Switzerland LPP 2020 21.9 21.8 23.6 23.5 United Kingdom S3NA 20.6 21.0 23.3 23.8 Germany Heubeck Richttafeln 2018 21.4 21.3 23.8 23.7 NA USA Pri-2012 20.7 20.6 22.6 22.6 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 Consolidated Financial Statements of the Nestlé Group 2023 123 10.2j Sensitivity analyses on present value of defined benefit obligations by geographic area The table below gives the present value of the defined benefit obligations when major assumptions are changed. In millions of CHF EUR NA AOA LATAM GC Total As reported 13 946 3 011 1 042 823 27 18 849 Discount rates Increase of 50 basis points 13 100 2 875 1 006 786 26 17 793 Decrease of 50 basis points 14 889 3 161 1 077 862 28 20 017 Expected rates of salary increases Increase of 50 basis points 14 000 3 037 1 061 825 28 18 951 Decrease of 50 basis points 13 895 2 986 1 021 820 26 18 748 Expected rates of pension adjustments Increase of 50 basis points 14 541 3 036 1 061 831 27 19 496 Decrease of 50 basis points 13 714 3 011 1 021 816 27 18 589 Medical cost trend rates Increase of 50 basis points 13 947 3 016 1 042 834 27 18 866 Decrease of 50 basis points 13 946 3 006 1 039 813 27 18 831 Mortality assumption Setting forward the tables by 1 year 13 478 2 973 1 027 803 27 18 308 Setting back the tables by 1 year 14 419 3 049 1 054 841 27 19 390 As reported 13 486 3 224 1 261 841 35 18 847 Discount rates Increase of 50 basis points 12 708 3 077 1 219 805 34 17 843 Decrease of 50 basis points 14 345 3 386 1 309 883 36 19 959 Expected rates of salary increases Increase of 50 basis points 13 541 3 250 1 282 846 36 18 955 Decrease of 50 basis points 13 429 3 198 1 243 839 34 18 743 Expected rates of pension adjustments Increase of 50 basis points 14 091 3 288 1 282 850 35 19 546 Decrease of 50 basis points 13 228 3 223 1 248 836 35 18 570 Medical cost trend rates Increase of 50 basis points 13 487 3 228 1 263 852 35 18 865 Decrease of 50 basis points 13 481 3 219 1 261 833 35 18 829 Mortality assumption Setting forward the tables by 1 year 13 048 3 181 1 244 822 35 18 330 Setting back the tables by 1 year 13 930 3 265 1 279 861 35 19 370 All sensitivities are calculated using the same actuarial method as for the disclosed present value of the defined benefit obligations at year-end. 10. Employee benefits 2023 2022 124 Consolidated Financial Statements of the Nestlé Group 2023 10.2k Weighted average duration of defined benefit obligations by geographic area Expressed in years 2023 2022 EUR NA AOA LATAM GC Total EUR NA AOA LATAM GC Total As at December 31 13.2 9.9 9.5 10.1 5.8 12.3 12.5 10.1 10.5 10.2 6.2 11.9 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 Group Management’s best estimate 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 Group. 10. Employee benefits Consolidated Financial Statements of the Nestlé Group 2023 125 11.1 Provisions In millions of CHF Restructuring Environmental Legal and indirect tax Other Total As at January 1, 2023 401 70 811 451 1 733 Currency retranslations (38) (6) (47) (34) (125) Provisions made during the year (a) 722 3 321 324 1 370 Amounts used (382) (6) (95) (71) (554) Reversal of unused amounts (34) (1) (183) (227) (445) Change of scope of consolidation — — — (1) (1) As at December 31, 2023 669 60 807 442 1 978 of which expected to be settled within 12 months 675 As at January 1, 2022 463 63 758 354 1 638 Currency retranslations (12) (3) (6) (12) (33) Provisions made during the year (a) 264 16 298 376 954 Amounts used (264) (6) (96) (132) (498) Reversal of unused amounts (46) — (143) (127) (316) Change of scope of consolidation (4) — — (8) (12) As at December 31, 2022 401 70 811 451 1 733 of which expected to be settled within 12 months 620 (a) Including discounting of provisions. Restructuring Restructuring provisions arise from a number of projects across the Group. These include plans to optimize production, sales and administration structures, mainly allocated to Zone EUR and Zone GC. Restructuring provisions are expected to result in future cash outflows when implementing the plans (usually over one to three years). Legal and indirect tax Legal provisions have been established to cover legal and administrative settlements that arise in the course of business. Indirect tax provisions include disputes and uncertainties on non-income taxes (mainly VAT and sales taxes). They cover numerous separate cases whose detailed disclosure could be detrimental to the Group’s interests. The 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. Group Management does not believe it is possible to make assumptions on the evolution of these cases beyond the balance sheet date. Other Other provisions are mainly constituted by onerous contracts and various damage claims that occurred during the year but were not covered by insurance companies. Onerous contracts result from the 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. Provisions and contingencies 126 Consolidated Financial Statements of the Nestlé Group 2023 11.2 Contingencies The Group is exposed to contingent liabilities amounting to a maximum possible payment of CHF 2405 million (2022: CHF 2019 million) representing possible payments for litigations of CHF 2401 million (2022: CHF 2002 million) and payments for other items of CHF 4 million (2022: CHF 17 million). Possible payments for litigations relate mainly to various investigations as well as labor, civil and tax litigations in LATAM. With food safety as a primary goal, operating practices at some of Nestlé’s natural mineral water production sites may not be in line with the applicable regulatory framework. The Group has not identified material liabilities as at the balance sheet date related to such practices. In this context, no provisions were recognized nor were material contingent liabilities identified. On January 11, 2024, the French Competition Authority (Autorité de la concurrence) published its decision related to its October 12, 2021 Statement of Objections regarding allegations against certain Nestlé subsidiaries in France (namely allegations of restricted competition relating to, among others, communication on the removal of bisphenol A from metal packaging). Nestlé had notified the receipt of this statement in its press release of October 13, 2021. In the decision published on January 11, 2024, Nestlé was not fined nor sanctioned in any way. Contingent assets for litigation claims in favor of the Group amount to a probable recoverable amount of CHF 18 million (2022: CHF 60 million), mainly in LATAM. 11. Provisions and contingencies Consolidated Financial Statements of the Nestlé Group 2023 127 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 as well as its contractual cash flow characteristics. The 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 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 market place (regular-way purchase or sale). Financial assets are derecognized when substantially all of the Group’s rights to cash flows from the financial assets have expired or have been transferred and the 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 category, which is revisited at each reporting date. Commercial paper and time deposits are held by the Group’s treasury unit in a separate portfolio in order to mitigate the credit risk exposure of the Group and provide interest income. The 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 Group assesses whether its financial assets carried at amortized cost and FVOCI are impaired on the basis of expected credit losses (ECL). This analysis requires the identification of significant increases in the credit risk of the counterparties. Considering that the majority of the 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. 128 Consolidated Financial Statements of the Nestlé Group 2023 12. Financial instruments The 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 months’ expected credit losses. The 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 Group 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 the cash flows in accordance with the contract and the cash flows that the Group expects to receive). Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognized in Other comprehensive income, instead of reducing the carrying amount of the asset. Impairment losses on other financial assets related to treasury activities are presented under Financial expenses. 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 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 income statement over the contractual term, using the effective interest rate method. This category includes the following classes of financial liabilities: trade and other payables, commercial papers, bonds, lease liabilities and other financial liabilities. Financial liabilities at amortized cost are classified as current or non-current, depending on whether they are due within 12 months after the balance sheet date or beyond. Financial liabilities are derecognized (in full or partly) when either the Group is discharged from its obligation, they expire, they are cancelled or they are replaced by a new liability with substantially modified terms. Consolidated Financial Statements of the Nestlé Group 2023 129 12.1 Financial assets and liabilities 12.1a By class and by category In millions of CHF 2023 2022 Classes At amortized cost (a)At fair value to income statementAt fair value to other comprehensiveincomeTotalcategoriesAt amortized cost (a)At fair value to income statementAt fair value to other comprehensiveincomeTotalcategories Cash at bank and in hand 2 315 — — 2 315 2 466 — — 2 466 Commercial paper 2 201 — — 2 201 3 040 — — 3 040 Time deposits 923 — — 923 671 — — 671 Bonds and debt funds 43 778 1 822 63 709 2 774 Equity and equity funds — 303 389 692 — 268 769 1 037 Other financial assets 1 249 596 — 1 845 1 271 681 — 1 952 Liquid assets (b) and non-current financial assets 6 731 1 677 390 8 798 7 511 1 658 771 9 940 Trade and other receivables 10 995 — — 10 995 11 116 — — 11 116 Derivative assets (c) — 408 — 408 — 309 — 309 Total financial assets 17 726 2 085 390 20 201 18 627 1 967 771 21 365 Trade and other payables (19 312) — — (19 312) (21 379) — — (21 379) Financial debt (55 241) — — (55 241) (54 312) — — (54 312) Derivative liabilities (c) — (556) — (556) — (822) — (822) Total financial liabilities (74 553) (556) — (75 109) (75 691) (822) — (76 513) Net financial position (56 827) 1 529 390 (54 908) (57 064) 1 145 771 (55 148) of which at fair value — 1 529 390 1 919 — 1 145 771 1 916 (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) Include derivatives held in hedge relationships and those that are undesignated (categorized as held-for-trading), see Note 12.2d. 12. Financial instruments 130 Consolidated Financial Statements of the Nestlé Group 2023 12.1b Fair value hierarchy of financial instruments The 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 based on 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 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 Group carries such instruments at cost less impairment, if applicable. In millions of CHF 2023 2022 Derivative assets 132 73 Bonds and debt funds 284 225 Equity and equity funds 115 535 Other financial assets 38 58 Derivative liabilities (52) (70) Prices quoted in active markets (Level 1) 517 821 Derivative assets 267 222 Bonds and debt funds 435 468 Equity and equity funds 447 405 Other financial assets 557 609 Derivative liabilities (504) (752) Valuation techniques based on observable market data (Level 2) 1 202 952 Financial assets 200 143 Valuation techniques based on unobservable input (Level 3) 200 143 Total financial instruments at fair value 1 919 1 916 There have been no significant transfers between the different hierarchy levels in 2023 and in 2022. 12. Financial instruments Consolidated Financial Statements of the Nestlé Group 2023 131 12.1c Changes in liabilities arising from financing activities In millions of CHF 2023 2022 As at January 1 (54 846) (46 907) Currency retranslations and exchange differences 3 765 644 Changes in fair value 199 31 Changes arising from acquisition and disposal of businesses and classification to/(from) held-for-sale (10) (8) Interest (inflows)/outflows on derivatives (98) (20) Increase in lease liabilities (819) (785) Inflows from bonds and other long-term financial debt (9 806) (10 936) Outflows from bonds, lease liabilities and other long-term financial debt 3 589 3 283 (Inflows)/outflows from short-term financial debt 2 537 (148) As at December 31 (55 489) (54 846) of which current financial debt (9 416) (10 892) of which non-current financial debt (45 825) (43 420) of which derivatives hedging financial debt (248) (534) 12. Financial instruments 132 Consolidated Financial Statements of the Nestlé Group 2023 12.1d Bonds In millions of CHF Issuer Face valuein millionsCouponEffectiveinterestrateYear ofissue/maturityComments2023 2022 Nestlé S.A., Switzerland CHF 900 0.25% 0.26% 2018–2024 900 900 CHF 600 0.75% 0.69% 2018–2028 602 602 CHF 675 1.63% 1.65% 2022–2026 675 674 CHF 475 2.13% 2.15% 2022–2030 474 474 CHF 350 2.50% 2.46% 2022–2034 351 351 CHF 360 1.63% 1.67% 2022–2025 360 360 CHF 260 2.63% 2.57% 2022–2035 261 262 CHF 310 2.25% 2.18% 2022–2029 311 311 CHF 300 1.88% 1.87% 2023–2029 301 — CHF 450 2.00% 2.01% 2023–2033 450 — CHF 400 2.13% 2.06% 2023–2038 403 — CHF 155 1.63% 1.54% 2023–2027 155 — CHF 215 1.88% 1.75% 2023–2031 216 — CHF 210 2.00% 1.96% 2023–2036 210 — Nestlé Holdings, Inc., USA EUR 850 0.88% 0.92% 2017–2025 (a) 791 836 CHF 550 0.25% 0.24% 2017–2027 (a) 550 550 CHF 150 0.55% 0.54% 2017–2032 (a) 150 150 USD 600 3.13% 3.28% 2018–2023 — 555 USD 1 500 3.35% 3.41% 2018–2023 (b) — 1 386 USD 900 3.50% 3.59% 2018–2025 (b) 756 830 USD 1 250 3.63% 3.72% 2018–2028 (b) 1 047 1 150 USD 1 250 3.90% 4.01% 2018–2038 (b) 1 038 1 140 USD 2 100 4.00% 4.11% 2018–2048 (b) 1 736 1 907 USD 1 150 0.38% 0.49% 2020–2024 (b) 968 1 062 USD 750 0.63% 0.77% 2020–2026 (b) 629 690 USD 1 100 1.00% 1.06% 2020–2027 (b) 923 1 014 USD 1 000 1.25% 1.37% 2020–2030 (b) 835 917 GBP 600 0.63% 0.75% 2021–2025 (a) 643 668 GBP 400 1.38% 1.46% 2021–2033 (a) 425 442 USD 300 1.13% 1.19% 2021–2026 252 277 USD 1 500 0.61% 0.66% 2021–2024 (b) 1 262 1 386 USD 1 000 1.50% 1.58% 2021–2028 (b) 838 920 USD 1 000 1.88% 1.91% 2021–2031 (b) 839 922 USD 500 2.50% 2.55% 2021–2041 (b) 418 459 USD 500 1.15% 1.22% 2021–2027 (b) 420 461 Subtotal 20 189 21 656 12. Financial instruments Consolidated Financial Statements of the Nestlé Group 2023 133 In millions of CHF Issuer Face valuein millionsCouponEffectiveinterestrateYear ofissue/maturityComments2023 2022 Subtotal from previous page 20 189 21 656 USD 500 2.63% 2.69% 2021–2051 (b) 415 456 CAD 2 000 2.19% 2.23% 2021–2029 (a) 1 271 1 365 GBP 300 2.13% 2.25% 2022–2027 (a) 320 333 GBP 600 2.50% 2.53% 2022–2032 (a) 642 668 USD 750 4.00% 4.07% 2022–2025 (b) 630 692 USD 500 4.13% 4.20% 2022–2027 (b) 420 461 USD 500 4.25% 4.31% 2022–2029 (b) 419 461 USD 1 250 4.30% 4.38% 2022–2032 (b) 1 046 1 149 USD 1 000 4.70% 4.76% 2022–2053 (b) 833 915 USD 1 000 5.25% 5.32% 2023–2026 (b) 840 — USD 850 5.00% 5.06% 2023–2028 (b) 713 — USD 500 4.95% 5.01% 2023–2030 (b) 419 — USD 650 4.85% 4.90% 2023–2033 (b) 545 — USD 500 5.00% 5.06% 2023–2028 (b) 420 — USD 500 5.00% 5.10% 2023–2030 (b) 418 — USD 500 5.00% 5.09% 2023–2033 (b) 418 — GBP 400 5.25% 5.39% 2023–2026 (a) 428 — GBP 400 5.13% 5.28% 2023–2032 (a) 425 — Nestlé Finance International Ltd., Luxembourg GBP 400 2.25% 2.34% 2012–2023 (c) — 437 EUR 500 0.75% 0.92% 2015–2023 (d) — 487 EUR 500 0.38% 0.54% 2017–2024 465 492 EUR 750 1.25% 1.32% 2017–2029 696 735 EUR 750 1.75% 1.83% 2017–2037 692 731 EUR 1 000 1.13% 1.27% 2020–2026 928 980 EUR 1 000 1.50% 1.63% 2020–2030 924 976 EUR 850 0.13% 0.25% 2020–2027 787 832 EUR 650 0.00% 0.05% 2020–2024 605 640 EUR 1 000 0.38% 0.56% 2020–2032 917 969 EUR 500 0.00% (0.26%) 2020–2025 468 496 EUR 500 0.00% 0.16% 2020–2033 459 485 EUR 500 0.38% 0.40% 2020–2040 464 491 EUR 1 250 0.00% 0.00% 2021–2026 1 164 1 231 EUR 750 0.25% 0.32% 2021–2029 696 736 EUR 500 0.63% 0.69% 2021–2034 463 489 EUR 650 0.88% 1.01% 2021–2041 592 626 Subtotal 41 131 39 989 12. Financial instruments 134 Consolidated Financial Statements of the Nestlé Group 2023 In millions of CHF Issuer Face valuein millionsCouponEffective interest rateYear of issue/ maturityComments2023 2022 Subtotal from previous page 41 131 39 989 EUR 600 0.88% 0.95% 2022–2027 557 589 EUR 600 1.25% 1.33% 2022–2031 556 587 EUR 800 1.50% 1.63% 2022–2035 735 777 EUR 500 3.00% 3.13% 2022–2028 463 489 EUR 500 3.25% 3.38% 2022–2031 462 488 EUR 500 3.38% 3.49% 2022–2034 461 487 EUR 850 3.50% 3.66% 2023–2027 787 — EUR 850 3.75% 3.85% 2023–2033 785 — EUR 500 3.50% 3.56% 2023–2030 464 — EUR 500 3.75% 3.84% 2023–2035 462 — GBP 400 5.13% 5.16% 2023–2038 427 — Nestlé Hungária Kft., Hungary HUF 115 000 1.75% 1.53% 2021–2028 283 286 Other bonds 45 92 Total carrying amount (*) 47 618 43 784 of which due within one year 4 200 2 905 of which due after one year 43 418 40 879 Fair value (*) of bonds, based on prices quoted (level 2) 45 473 39 293 (*) Carrying amount and fair value of bonds exclude accrued interest. Several bonds are hedged by currency and/or interest derivatives. The fair value of these derivatives is shown under derivative assets for CHF 130 million (2022: CHF 11 million) and under derivative liabilities for CHF 239 million (2022: CHF 484 million). (a) Subject to an interest rate and currency swap that creates a liability at fixed rates in the currency of the issuer. (b) Sold in the United States only to qualified institutional buyers and outside the United States to non-US persons. (c) Subject to an interest rate swap. (d) Out of which EUR 375 million subject to an interest rate swap. 12. Financial instruments Consolidated Financial Statements of the Nestlé Group 2023 135 12.2 Financial risks In the course of its business, the 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 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. The Asset and Liability Management Committee (ALMC) chaired by the Chief Financial Officer, is the governing body for the establishment and subsequent execution of the Nestlé Group’s Financial Asset and Liability Management Policy. It ensures implementation of strategies and achievement of objectives of the Group’s financial asset and liabilities management, which are executed by the Center Treasury, the Regional Treasury Centers 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 Center Treasury and of the Regional Treasury Centers 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 Group. Credit risk arises on financial assets (liquid, noncurrent and derivatives) and on trade and other receivables. The 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 counterparty’s size and risk of default. The methodology used to set the credit limit considers the counterparty’s 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 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 geographic base and number of customers, the Group is not exposed to material concentrations of credit risk on its trade receivables (see Note 7.1). Nevertheless, commercial counterparties are constantly monitored in accordance with the same 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 Group’s financial assets. 12. Financial instruments 136 Consolidated Financial Statements of the Nestlé Group 2023 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 Group uses an internationally recognized credit scale to present the information. The Group deals mainly with financial institutions located in Switzerland, the European Union and North America. In millions of CHF 2023 2022 A– and above 5 934 6 432 BBB+, BBB and BBB– 575 722 BB+ and below 1 258 1 455 Not rated (a) 1 439 1 640 9 206 10 249 (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 Group’s objective is to manage this risk by limiting exposures to financial instruments that may be affected by liquidity problems and by maintaining sufficient back-up facilities. The Group does not expect any refinancing issues and in October 2023 successfully extended the term of both its revolving credit facilities: – A USD 3.0 billion and EUR 3.7 billion revolving credit facility with an initial maturity date of November 2024. The Group has the ability to convert the facility into a one-year term loan. – A USD 2.2 billion and EUR 2.3 billion revolving credit facility with a new maturity date of October 2028. The facilities serve primarily as a backstop to the Group’s short-term debt. 12. Financial instruments Consolidated Financial Statements of the Nestlé Group 2023 137 Contractual maturities of financial liabilities and derivatives (including interest) In millions of CHF In the first yearIn the second yearIn the thirdto the fifth yearsAfter the fifth yearContractual amountCarrying amount Trade and other payables (19 204) (71) (21) (16) (19 312) (19 312) Commercial paper (a) (2 224) — — — (2 224) (2 213) Bonds (a) (5 248) (4 737) (16 850) (30 992) (57 827) (47 618) Lease liabilities (875) (540) (1 092) (893) (3 400) (2 909) Other financial debt (2 425) (83) (107) (60) (2 675) (2 501) Total financial debt (10 772) (5 360) (18 049) (31 945) (66 126) (55 241) Financial liabilities (excluding derivatives) (29 976) (5 431) (18 070) (31 961) (85 438) (74 553) Non-currency derivative assets 130 2 9 — 141 141 Non-currency derivative liabilities (51) (1) — — (52) (52) Gross amount receivable from currency derivatives 18 850 1 566 1 558 3 122 25 096 24 092 Gross amount payable from currency derivatives (18 983) (1 705) (1 541) (3 278) (25 507) (24 329) Net derivatives (54) (138) 26 (156) (322) (148) of which derivatives under cash flow hedges (b) 90 1 — — 91 91 Trade and other payables (20 523) (475) (418) (23) (21 439) (21 379) Commercial paper (a) (3 829) — — — (3 829) (3 822) Bonds (a) (3 707) (5 214) (14 008) (29 702) (52 631) (43 784) Lease liabilities (658) (546) (1 119) (1 016) (3 339) (2 992) Other financial debt (3 769) (54) (72) (55) (3 950) (3 714) Total financial debt (11 963) (5 814) (15 199) (30 773) (63 749) (54 312) Financial liabilities (excluding derivatives) (32 486) (6 289) (15 617) (30 796) (85 188) (75 691) Non-currency derivative assets 71 10 5 1 87 87 Non-currency derivative liabilities (82) (1) — — (83) (83) Gross amount receivable from currency derivatives 23 126 82 2 590 2 801 28 599 27 460 Gross amount payable from currency derivatives (23 179) (137) (2 882) (3 118) (29 316) (27 977) Net derivatives (64) (46) (287) (316) (713) (513) of which derivatives under cash flow hedges (b) 8 1 — — 9 9 (a) Commercial paper of CHF 1980 million (2022: CHF 3829 million) and bonds of CHF 1774 million (2022: CHF 864 million) have maturities of less than three months. (b) The periods when the cash flow hedges affect the income statement do not differ significantly from the maturities disclosed above. 12.2c Market risk The 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. 12. Financial instruments 2023 2022 138 Consolidated Financial Statements of the Nestlé Group 2023 Foreign currency risk The Group is exposed to foreign currency risk from transactions and translation. Transactional exposures arise from transactions in foreign currency. They are managed within a prudent and systematic hedging policy in accordance with the Group’s specific business needs through the use of currency forwards, futures, swaps and options. Exchange differences recorded in the income statement represented a loss of CHF 452 million in 2023 (2022: loss of CHF 202 million). They are allocated to the appropriate headings of expenses by function. Translation exposure arises from the consolidation of the financial statements of foreign operations in Swiss Francs, which can be subject to hedge. Value at Risk (VaR) based on historic data for a 250-day period and a confidence level of 95% results in a potential one-day loss for currency risk of less than CHF 10 million in 2023 (2022: less than CHF 15 million). The Group cannot predict future movements in exchange rates, therefore the above VaR neither represents actual losses nor considers the effects of favorable movements in underlying variables. Accordingly, the VaR may only be considered indicative of future movements to the extent that historic market patterns repeat in the future. Interest rate risk The Group is exposed primarily to fluctuations in USD and EUR interest rates. 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 83% (2022: 80%). Based on the level of Liquid assets and Debt exposed to floating interest rates at year-end, an increase in interest rates of 100 basis points would cause an increase in Net financing cost of CHF 12 million on an annualized basis (2022: an increase in Net financing cost of CHF 41 million). Price risk Commodity price risk Commodity price risk arises from transactions on the world commodity markets to secure supplies of green coffee, cocoa beans, cereals and grains and other commodities necessary for the manufacture of some of the Group’s products. The Group’s objective is to minimize the impact of commodity price fluctuations and this exposure is hedged in accordance with the Nestlé Group’s 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 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 Group is exposed to equity price risk on investments. To manage the price risk arising from these investments, the Group diversifies its portfolios in accordance with the guidelines set by the Board of Directors. 12. Financial instruments Consolidated Financial Statements of the Nestlé Group 2023 139 12.2d Derivative assets and liabilities and hedge accounting Derivative financial instruments The 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 Note 12.2c Market risk. Derivatives are initially recognized at fair value at the trade date. They are subsequently remeasured at fair value on a regular basis and at each reporting date as a minimum. The Group applies hedge accounting to hedging relationships that meet the qualifying criteria. Hedge accounting The Group designates and documents the use of certain derivatives and other financial assets or financial liabilities as hedging instruments against changes in fair value of recognized assets and liabilities (fair value hedges) and highly probable forecast transactions (cash flow hedges), and against the effects of the translation of net investments in foreign operations (net investment 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 the hedging instrument. The Group generally excludes from the designation of the hedging relationship the hedging cost element. Subsequently, this cost element impacts the income statement at the same time as the underlying hedged item. For the designation of hedging relationships on commodities, the 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 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 value 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 income statement. Cash flow hedges The 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 income statement. Ineffectiveness for hedges of foreign currency and commodity price risk may result from changes in the timing of the forecast transactions. 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 of the liability. Otherwise the gains or losses previously recognized in Other comprehensive income are recognized in the income statement at the same time as the hedged transaction. 12. Financial instruments 140 Consolidated Financial Statements of the Nestlé Group 2023 Net investment hedges The Group uses net investment hedges to mitigate translation exposure on its net investments in subsidiaries. The effective changes in fair values of hedging instruments are transferred directly to other comprehensive income together with gains or losses on the foreign currency translation of the hedged net investments in the foreign operations. The effective results of net investment hedges are recycled to the income statement when the hedged foreign operation is disposed of. 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. Derivatives by hedged risks In millions of CHF 2023 2022 Contractualor notionalamountsFair valueassetsFair valueliabilitiesContractualor notionalamountsFair valueassetsFair valueliabilities Fair value hedges (a) Foreign currency and interest rate risk on net financial debt 12 678 145 392 13 282 57 594 Cash flow hedges Foreign currency risk on future purchases or sales 9 201 110 99 9 192 139 133 Commodity price risk on future purchases 1 288 132 52 1 911 73 70 Designated in a hedging relationship 23 167 387 543 24 385 269 797 Undesignated derivatives 21 13 40 25 Total derivatives 408 556 309 822 Conditional offsets (b) Derivative assets and liabilities (139) (139) (135) (135) Use of cash collateral received or deposited (76) (101) (28) (226) Balances after conditional offsets 193 316 146 461 (a) The carrying amount of the hedged item recognized in the statement of financial position is approximately equal to the notional amounts of the hedging instruments. (b) Represent amounts that would be offset in case of default, insolvency or bankruptcy of counterparties. A description of the types of hedging instruments by risk category is included in Note 12.2c Market risk. The majority of hedge relationships is established to ensure a hedge ratio of 1:1. 12. Financial instruments Consolidated Financial Statements of the Nestlé Group 2023 141 Impact on the income statement of fair value hedges The majority of fair value hedges are related to financing activities and are included in Net financing cost. In millions of CHF 2023 2022 on hedged items (20) 592 on hedging instruments 15 (593) Ineffective results of cash flow and net investment hedges are not significant. 12.2e Capital risk management The Group’s capital risk management is driven by the impact on shareholders of the level of total capital employed. It is the Group’s policy to maintain a sound capital base to support the continued development of its business. The Board of Directors seeks to maintain a prudent balance between different components of the Group’s capital. The ALMC monitors the capital structure and net financial debt by currency (see Note 16.5 for the definition of net financial debt). The operating cash flow-to-net financial debt ratio highlights the ability of a business to repay its debts. As at December 31, 2023, the ratio was 32.1% (2022: 24.7%). The Group’s subsidiaries have complied with local statutory capital requirements as appropriate. 12. Financial instruments 142 Consolidated Financial Statements of the Nestlé Group 2023 13. Taxes The Group is subject to taxes in different countries all over the world. Taxes and fiscal risks recognized in the Consolidated Financial Statements reflect Group Management’s best estimate of the outcome based on the facts known at the balance sheet date in each individual country. These facts may include but are not limited to changes in tax laws and interpretation thereof in the various jurisdictions where the Group operates. 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 income statement in the period in which they are incurred, unless anticipated. Taxes include current and deferred taxes on profit as well as actual or potential withholding taxes on current and expected transfers of income from subsidiaries and tax adjustments relating to prior years. Income tax is recognized in the 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 arise 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 in the tax rates are recognized in the 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. 13.1 Components of taxes recognized in the income statement In millions of CHF 2023 2022 Current taxes (a) (2 891) (2 566) Deferred taxes 784 (48) Taxes reclassified to other comprehensive income (215) (9) Taxes reclassified to equity 8 (107) Total taxes (2 314) (2 730) (a) Current taxes relating to prior years include a tax income of CHF 8 million (2022: tax expense of CHF 30 million). Consolidated Financial Statements of the Nestlé Group 2023 143 13. Taxes 13.2 Reconciliation of taxes recognized in the income statement In millions of CHF 2023 2022 Profit before taxes 12 703 11 286 Expected tax expense at weighted average applicable tax rate (a) 19.3% (2 455) 20.9% (2 357) Tax effect of permanent differences on disposal of businesses 0.1% (13) (1.3%) 151 Tax effect of permanent differences on impairment of goodwill 0.0% — 0.1% (16) Tax effect of other permanent differences (1.0%) 131 (1.0%) 113 Prior-year taxes (b) (1.6%) 201 0.2% (19) Transfers to unrecognized deferred tax assets 1.2% (151) 1.1% (119) Transfers from unrecognized deferred tax assets (0.2%) 24 (0.3%) 33 Changes in tax rate and similar on deferred taxes (3.2%) 413 0.1% (12) Withholding tax on transfers of income 3.4% (437) 4.0% (449) Other 0.2% (27) 0.4% (55) Tax expense at effective tax rate 18.2% (2 314) 24.2% (2 730) (a) The weighted average applicable tax rate in 2023 decreased compared to 2022 as a result of a change in the geographical mix of profits. (b) In 2023, the prior-year tax credits include a revision of prior-year tax exposure due to progress on resolving audits and agreeing the tax treatment of major intercompany transactions with the tax authorities in certain jurisdictions. The expected tax expense at the weighted average applicable tax rate is the result from applying the domestic statutory tax rates to profits before taxes of each entity in the country in which it operates. For the Group, the weighted average applicable tax rate varies from one year to the other depending on the relative weight of the profit of each individual entity in the Group’s profit as well as changes to the statutory tax rates. 144 Consolidated Financial Statements of the Nestlé Group 2023 13.3 Reconciliation of deferred taxes by type of temporary differences recognized in the balance sheet In millions of CHF Property, plant and equipmentGoodwill andintangible assetsEmployee benefitsWorking capital, provisions and otherUnused tax losses andunused tax creditsTotal As at January 1, 2023 (1 319) (2 526) 378 608 231 (2 628) Currency retranslations 107 276 (39) (177) (19) 148 (Expense)/income in income statement (3) 360 (236) 289 111 521 (Expense)/income in other comprehensive income and equity — — 162 101 — 263 Change of scope of consolidation — 2 — (1) (10) (9) As at December 31, 2023 (1 215) (1 888) 265 820 313 (1 705) As at January 1, 2022 (1 317) (2 419) 359 613 228 (2 536) Currency retranslations 27 26 17 (53) (1) 16 (Expense)/income in income statement (25) (119) (83) 8 3 (216) (Expense)/income in other comprehensive income and equity — — 87 81 — 168 Change of scope of consolidation (4) (14) (2) (41) 1 (60) As at December 31, 2022 (1 319) (2 526) 378 608 231 (2 628) In millions of CHF 2023 2022 Reflected in the balance sheet as follows: Deferred tax assets 1 181 1 043 Deferred tax liabilities (2 886) (3 671) Net assets/(liabilities) (1 705) (2 628) 13. Taxes Consolidated Financial Statements of the Nestlé Group 2023 145 13.4 Unrecognized deferred taxes As at December 31, 2023, the unrecognized deferred tax assets amount to CHF 1108 million (2022: CHF 1072 million). The deductible temporary differences as well as the unused tax losses and tax credits for which no deferred tax assets are recognized expire as follows: In millions of CHF 2023 2022 Within one year 30 233 Between one and five years 444 349 More than five years 3 406 3 300 3 880 3 882 In addition, the Group has unremitted earnings that are either considered indefinitely reinvested in foreign subsidiaries or not. For the component of unremitted earnings which is expected to be repatriated in the foreseeable future and which is subject to withholding and other taxes on remittance, a deferred tax liability has been recorded. The unrecognized deferred tax liability on unremitted earnings that are considered indefinitely reinvested is not significant for the Group as the major part of these earnings is not subject to withholding and other taxes on remittance. 13.5 Developments in international taxation The Organisation for Economic Co-operation and Development (OECD) initiative to combat base erosion and profit shifting (BEPS) has led to the development of a number of measures which countries have already introduced or plan to introduce. These include the Pillar Two initiative, focused on the introduction of a minimum corporate tax rate, with the possibility of top-up taxes being introduced in cases where jurisdictions do not have the minimum tax rate. Pillar Two legislation has been enacted or substantively enacted in Switzerland and in other jurisdictions where the Group operates. The legislation will come into effect for the Group’s fiscal year commencing on January 1, 2024. Certain jurisdictions fall within the scope of the enacted or substantively enacted legislation and the Group has performed an assessment of the potential exposure to Pillar Two income taxes. The assessment of the potential exposure to Pillar Two income taxes is based on the latest available information concerning the financial performance of the constituent entities within the Nestlé Group. Based on this assessment, the Pillar Two effective tax rates in the majority of the relevant jurisdictions in which the Group operates exceeds 15%. However, there are a limited number of jurisdictions where the transitional safe harbor relief may not apply and the Pillar Two effective tax rate is projected to be below 15%. The jurisdictions where the anticipated Pillar Two effective tax rate falls below the minimum rate of 15% are not material for the Group and related top-up taxes are not expected to have a material impact on the Group. 13. Taxes 146 Consolidated Financial Statements of the Nestlé Group 2023 14. Associates and joint ventures Associates are companies where the 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 decisions of the investee, and the determination of whether the Group has significant influence requires the exercise of judgment. It may be evidenced when the 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. Joint ventures are contractual arrangements over which the Group exercises joint control with partners and where the parties have rights to the net assets of the arrangement. Associates and joint ventures are accounted for using the equity method. The interest in the associate or joint venture also includes long-term loans which are in substance extensions of the Group’s investment in the associate or joint venture. Share of results include the interest income related to those loans. The net assets and results are adjusted to comply with the Group’s accounting policies. The carrying amount of goodwill arising from the acquisition of associates and joint ventures is included in the carrying amount of Investments in associates and joint ventures. In millions of CHF 2023 2022 L’Oréal Other associates Joint ventures Total L’Oréal Other associates Joint ventures Total As at January 1 7 909 3 294 1 820 13 023 7 554 2 545 1 707 11 806 Currency retranslations (439) (226) (141) (806) (362) (174) (46) (582) Investments — 558 253 811 — 1 147 22 1 169 Divestments and reclassifications — (71) (11) (82) — (5) — (5) Share of results 1 208 (215) 150 1 143 1 151 (213) 156 1 094 Impairment — (6) 15 9 — (106) (3) (109) Share of other comprehensive income (138) (58) (41) (237) 173 63 26 262 Dividends and interest received (639) (23) (37) (699) (530) (33) (45) (608) Other (a) (61) 25 (38) (74) (77) 70 3 (4) As at December 31 7 840 3 278 1 970 13 088 7 909 3 294 1 820 13 023 (a) Other movements of carrying amount of associates and joint ventures relate mainly to the Group’s share in other movements included in the associates and joint ventures statement of changes in equity. In 2022, other movements in Other associates include also additional recognition of an increase of the Group’s share of the net assets in IVC Evidensia following the merger with VetStrategy in November 2021. In 2023, the increase in investments of Joint ventures is mainly related to the creation with private equity firm PAI Partners of a joint venture for the European frozen pizza business (see Note 2.1). In 2023, the increase in investments of Other associates is mainly related to the investment of CHF 212 million into 49.95% shares of YFOOD, a Germany-based company offering ready-to-drink meals across Europe, and to the participation on fund raising of IVC Evidensia of CHF 200 million proportional to our current stake. In 2022, the increase in investments of Other associates mainly relates to the fair value of a non-controlling equity interest received in Sous Chef TopCo, L.P. in exchange for the contribution of the Freshly business (see Notes 2.1 and 2.2), and loans granted to the associate at its formation. Freshly was combined with Kettle Cuisine, a US supplier of Consolidated Financial Statements of the Nestlé Group 2023 147 prepared food, to form Sous Chef, which is controlled by L Catterton. Sous Chef is involved in offering a wide assortment of fresh food products to customers across geographies and a variety of channels. As part of the carrying amount of the investment, the value for Associates and joint ventures as at December 31, 2023 includes loans granted by the Group to Associates and joint ventures of CHF 1535 million (2022: CHF 2315 million). The decrease in 2023 related mainly to conversion of loan notes to equity issued by Froneri. In addition, as at December 31, 2023, the Group has potential commitments to acquire other parties’ ownership interests in some associates through put mechanisms, which are exercisable in the future, and in some cases, dependent on certain performance conditions. Income from associates and joint ventures In millions of CHF 2023 2022 Share of results 1 143 1 094 Impairment, net of reversal 9 (109) Profit/(loss) on disposal of Other associates (32) 55 1 120 1 040 14.1 Associate – L’Oréal The Group holds 107 621 021 shares in L’Oréal (whose ultimate parent company is domiciled in France), the world leader in cosmetics, representing a 20.1% participation in its equity after elimination of its treasury shares (2022: 107 621 021 shares representing a 20.1% participation). As at December 31, 2023, the market value of the shares held amounts to CHF 45.1 billion (2022: CHF 35.4 billion). Summarized financial information of L’Oréal In billions of CHF 2023 2022 Total current assets 15.2 13.8 Total non-current assets 33.1 32.3 Total assets 48.3 46.1 Total current liabilities 13.9 13.5 Total non-current liabilities 7.3 5.8 Total liabilities 21.2 19.3 Total equity 27.1 26.8 Total sales 40.0 38.4 Profit from continuing operations 6.0 5.7 Other comprehensive income (0.7) 0.9 Total comprehensive income 5.3 6.6 14. Associates and joint ventures 148 Consolidated Financial Statements of the Nestlé Group 2023 Reconciliation of the carrying amount In billions of CHF 2023 2022 Share held by the Group in the equity of L’Oréal 5.4 5.4 Goodwill and other adjustments 2.4 2.5 Carrying amount of L’Oréal 7.8 7.9 14.2 Other associates The Group holds a number of other associates that are individually not significant, the main ones being IVC Evidensia (veterinary services provider in Europe and North America), Lactalis Nestlé Produits Frais (chilled dairy business in Europe), Herta (cold cuts and meatbased products in Europe) and Sous Chef (fresh food products in North America). 14.3 Joint ventures The Group holds a number of joint ventures operating in the food and beverage sectors. These joint ventures are individually not significant to the Group, the main ones being Froneri, European Pizza Group and Cereal Partners Worldwide, from which the Group earned CHF 225 million (2022: CHF 220 million) in royalties (see Note 18.2) for the use of its brands, trademarks and other intellectual property. A list of the principal joint ventures and associates is provided in the section Companies of the Nestlé Group, joint arrangements and associates. 15. Earnings per share 2023 2022 Basic earnings per share (in CHF) 4.24 3.42 Net profit (in millions of CHF) 11 209 9 270 Weighted average number of shares outstanding (in millions of units) 2 646 2 707 Diluted earnings per share (in CHF) 4.23 3.42 Net profit, net of effects of dilutive potential ordinary shares (in millions of CHF) 11 209 9 270 Weighted average number of shares outstanding, net of effects of dilutive potential ordinary shares (in millions of units) 2 648 2 709 Reconciliation of weighted average number of shares outstanding (in millions of units) Weighted average number of shares outstanding used to calculate basic earnings per share 2 646 2 707 Adjustment for share-based payment schemes, where dilutive 2 2 Weighted average number of shares outstanding used to calculate diluted earnings per share 2 648 2 709 14. Associates and joint ventures Consolidated Financial Statements of the Nestlé Group 2023 149 16. Cash flow statement 16.1 Operating profit In millions of CHF 2023 2022 Profit for the year 11 509 9 596 Income from associates and joint ventures (1 120) (1 040) Taxes 2 314 2 730 Financial income (284) (210) Financial expense 1 644 1 250 14 063 12 326 16.2 Non-cash items of income and expense In millions of CHF 2023 2022 Depreciation of property, plant and equipment 2 993 3 097 Impairment of property, plant and equipment 490 403 Impairment of goodwill — 71 Amortization of intangible assets 465 444 Impairment of intangible assets 157 2 252 Net result on disposal of businesses 221 79 Net result on disposal of assets 11 (11) Non-cash items in financial assets and liabilities 84 235 Equity compensation plans 142 128 Other (155) (136) 4 408 6 562 16.3 Decrease/(increase) in working capital In millions of CHF 2023 2022 Inventories 1 756 (3 428) Trade and other receivables (1 027) (321) Prepayments and accrued income (11) 9 Trade and other payables 65 492 Accruals 351 115 1 134 (3 133) 150 Consolidated Financial Statements of the Nestlé Group 2023 16.4 Variation of other operating assets and liabilities In millions of CHF 2023 2022 Variation of employee benefits assets and liabilities (622) (296) Variation of provisions 369 143 Other (172) (361) (425) (514) 16.5 Reconciliation of free cash flow and net financial debt In millions of CHF 2023 2022 Operating cash flow 15 941 11 907 Capital expenditure (5 714) (5 095) Expenditure on intangible assets (489) (266) Other investing activities 665 24 Free cash flow 10 403 6 570 Acquisition of businesses (211) (1 710) Financial liabilities and short-term investments acquired in business combinations (5) (40) Disposal of businesses 215 160 Financial liabilities and short-term investments transferred on disposal of businesses and reclassification to/(from) held-for-sale (5) 37 Acquisition (net of disposal) of non-controlling interests (52) (605) Investments (net of divestments) in associates and joint ventures (582) (918) Dividend paid to shareholders of the parent (7 829) (7 618) Dividend paid to non-controlling interests (323) (284) Purchase (net of sale) of treasury shares (5 234) (10 679) Increase in lease liabilities (819) (785) Currency retranslations and exchange differences 2 855 597 Other movements 108 33 (Increase)/decrease of net financial debt (1 479) (15 242) Net financial debt at beginning of year (48 159) (32 917) Net financial debt at end of year (49 638) (48 159) of which Current financial debt (9 416) (10 892) Non-current financial debt (45 825) (43 420) Cash and cash equivalents 4 816 5 511 Short-term investments 1 035 1 176 Derivatives (a) (248) (534) (a) Related to Net debt and included in Derivative assets and Derivative liabilities balances of the Consolidated balance sheet. 16. Cash flow statement Consolidated Financial Statements of the Nestlé Group 2023 151 16.6 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. In millions of CHF 2023 2022 Cash at bank and in hand 2 315 2 466 Time deposits 916 667 Commercial paper 1 585 2 378 Cash and cash equivalents (a) 4 816 5 511 (a) of which approximately CHF 0.4 billion of cash and cash equivalents in countries where there is limited availability of foreign currency or other legal restrictions resulting in limitations on remittances. These balances remain available for use locally. 17. Equity 17.1 Share capital issued The ordinary share capital of Nestlé S.A. issued and fully paid is composed of 2 670 000 000 registered shares with a nominal value of CHF 0.10 each (2022: 2 750 000 000 registered shares). Each share confers the right to one vote. No shareholder may be registered with the right to vote for shares which it holds, directly or indirectly, in excess of 5% of the share capital. Shareholders have the right to receive dividends. The share capital changed in 2023 and 2022 as a consequence of the share buyback programs launched in January 2020 and in January 2022. The cancellation of shares was approved at the Annual General Meetings on April 20, 2023 and April 7, 2022. The share capital was reduced by 80 000 000 shares from CHF 275 million to CHF 267 million in 2023 and by 65 000 000 shares from CHF 282 million to CHF 275 million in 2022. The current share buyback program of up to CHF 20 billion started on January 3, 2022 and is expected to be completed by the end of December 2024. The volume of monthly share buybacks depends on market conditions. Should any sizeable acquisitions take place during the period of the share buyback, the amount of the share buyback will be reduced accordingly. 17.2 Conditional share capital The conditional capital of Nestlé S.A. amounts to CHF 10 million as in the preceding year. It confers the right to increase the ordinary share capital, through the exercise of conversion or option rights granted in connection with convertible debentures or debentures with option rights or other financial market instruments, by the issue of a maximum of 100 000 000 registered shares with a nominal value of CHF 0.10 each. Thus, the Board of Directors has at its disposal a flexible instrument enabling it, if necessary, to finance the activities of the Company through convertible debentures. 16. Cash flow statement 152 Consolidated Financial Statements of the Nestlé Group 2023 17.3 Treasury shares Number of shares in millions of units 2023 2022 Purpose of holding Share buyback program 44.7 77.6 Long-term incentive plans 4.0 4.3 48.7 81.9 As at December 31, 2023, the treasury shares held by the Group represent 1.8% of the share capital (2022: 3.0%). Their market value amounts to CHF 4748 million (2022: CHF 8770 million). 17.4 Number of shares outstanding Number of shares in millions of units Shares issued Treasury shares Outstanding shares As at January 1, 2023 2 750.0 (81.9) 2 668.1 Purchase of treasury shares — (48.2) (48.2) Treasury shares delivered in respect of equity compensation plans — 1.4 1.4 Treasury shares cancelled (80.0) 80.0 — As at December 31, 2023 2 670.0 (48.7) 2 621.3 As at January 1, 2022 2 815.0 (55.4) 2 759.6 Purchase of treasury shares — (93.2) (93.2) Treasury shares delivered in respect of equity compensation plans — 1.7 1.7 Treasury shares cancelled (65.0) 65.0 — As at December 31, 2022 2 750.0 (81.9) 2 668.1 17.5 Translation reserve and other reserves The translation reserve and other reserves represent the cumulative amount attributable to shareholders of the parent of items that may be subsequently reclassified to the income statement. The translation reserve comprises the cumulative gains and losses arising from translating the financial statements of foreign operations that use functional currencies other than Swiss Francs. It also includes the changes in the fair value of hedging instruments used for net investments in foreign operations. The other reserves mainly comprise the Group’s share in the items that may be reclassified subsequently to the income statement by the associates and joint ventures (equity reserves accounted for). The other reserves also comprise the hedging reserve of the subsidiaries. The hedging reserve consists of the effective portion of the gains and losses on hedging instruments related to hedged transactions that have not yet occurred. 17. Equity Consolidated Financial Statements of the Nestlé Group 2023 153 2023 17.6 Retained earnings Retained earnings represent the cumulative profits as well as remeasurement of defined benefit plans attributable to shareholders of the parent. 17.7 Non-controlling interests The non-controlling interests comprise the portion of equity of subsidiaries that are not owned, directly or indirectly, by Nestlé S.A. These non-controlling interests are individually not material for the Group. 17.8 Other comprehensive income In millions of CHF Translation reserveHedgingreservesReservesof associates andjoint venturesRetainedearningsTotal equityattributable toshareholders of the parentNon-controlling interestsTotal equity Currency retranslations – Recognized (a) (4 348) (7) — — (4 355) (148) (4 503) – Reclassified to income statement 199 — — — 199 — 199 – Taxes 127 — — — 127 23 150 (4 022) (7) — — (4 029) (125) (4 154) Fair value changes on equity instruments – Recognized — — — 207 207 — 207 – Taxes — — — (44) (44) — (44) — — — 163 163 — 163 Changes in cash flow hedges and cost of hedge reserves – Recognized — 350 — — 350 1 351 – Reclassified to income statement — (105) — — (105) — (105) – Taxes — (52) — — (52) — (52) — 193 — — 193 1 194 Remeasurement of defined benefit plans – Recognized — — — (784) (784) (1) (785) – Taxes — — — 162 162 — 162 — — — (622) (622) (1) (623) Share of other comprehensive income of associates and joint ventures – Recognized — — (197) (40) (237) — (237) – Reclassified to income statement — — — — — — — — — (197) (40) (237) — (237) Other comprehensive income for the year (4 022) 186 (197) (499) (4 532) (125) (4 657) (a) Includes CHF 41 millions of effective result of net investment hedges. 17. Equity 154 Consolidated Financial Statements of the Nestlé Group 2023 In millions of CHF Translation reserveHedgingreservesReservesof associates andjoint venturesRetainedearningsTotal equityattributable toshareholders of the parentNon-controlling interestsTotal equity Currency retranslations – Recognized (1 476) 1 — — (1 475) 8 (1 467) – Reclassified to income statement 34 — — — 34 — 34 – Taxes 34 — — — 34 — 34 (1 408) 1 — — (1 407) 8 (1 399) Fair value changes on equity instruments – Recognized — — — 231 231 — 231 – Taxes — — — (64) (64) — (64) — — — 167 167 — 167 Changes in cash flow hedges and cost of hedge reserves – Recognized — 290 — — 290 1 291 – Reclassified to income statement — (29) — — (29) 2 (27) – Taxes — (49) — — (49) (1) (50) — 212 — — 212 2 214 Remeasurement of defined benefit plans – Recognized — — — (474) (474) 8 (466) – Taxes — — — 90 90 (2) 88 — — — (384) (384) 6 (378) Share of other comprehensive income of associates and joint ventures – Recognized — — 167 95 262 — 262 – Reclassified to income statement — — — — — — — — — 167 95 262 — 262 Other comprehensive income for the year (1 408) 213 167 (122) (1 150) 16 (1 134) 17. Equity 2022 Consolidated Financial Statements of the Nestlé Group 2023 155 17.9 Reconciliation of the other reserves In millions of CHF HedgingreservesReservesof associates andjoint venturesTotal As at January 1, 2023 (11) (52) (63) Other comprehensive income for the year 186 (197) (11) Other movements 24 — 24 As at December 31, 2023 199 (249) (50) As at January 1, 2022 174 (219) (45) Other comprehensive income for the year 213 167 380 Other movements (398) — (398) As at December 31, 2022 (11) (52) (63) 17.10 Dividend In accordance with Swiss law, the dividend is treated as an appropriation of profit in the year in which it is approved at the Annual General Meeting and subsequently paid. The dividend relating to 2022 was paid on April 26, 2023, in accordance with the decision taken at the Annual General Meeting on April 20, 2023. Shareholders approved the proposed dividend of CHF 2.95 per share, resulting in a total dividend of CHF 7829 million. Dividend payable is not accounted for until it has been ratified at the Annual General Meeting. At the Annual General Meeting on April 18, 2024, a dividend of CHF 3.00 per share will be proposed, resulting in an estimated total dividend of CHF 8010 million. For further details, refer to the Financial Statements of Nestlé S.A. The Consolidated Financial Statements for the year ended December 31, 2023, do not reflect this proposed distribution, which will be treated as an appropriation of profit in the year ending December 31, 2024. 17. Equity 156 Consolidated Financial Statements of the Nestlé Group 2023 18. Transactions with related parties 18.1 Compensation of the Board of Directors and the Executive Board Board of Directors Members of the Board of Directors receive an annual compensation that varies with the Board and the Committee responsibilities as follows: – Board members: CHF 280 000; – members of the Chair’s and Corporate Governance Committee: additional CHF 200 000 (Chair: CHF 300 000); – members of the Compensation Committee, the Nomination Committee and the Sustainability Committee: additional CHF 70 000 (Chair: CHF 150 000); and – members of the Audit Committee: additional CHF 100 000 (Chair: CHF 150 000). The fees for the Chair of the Board and the CEO are included in their total compensation. Half of the compensation is paid through the granting of Nestlé S.A. shares at the ex-dividend closing price. These shares are subject to a three-year blocking period. The full compensation is paid in arrears. With the exception of the Chair and the CEO, members of the Board of Directors also receive an annual expense allowance of CHF 15 000 each. This allowance covers travel and hotel accommodation in Switzerland, as well as sundry out-of-pocket expenses. For Board members from outside Europe, the Company reimburses additionally their airline tickets. When the Board meets outside of Switzerland, all expenses are borne and paid directly by the Company. The Chair of the Board is entitled to Nestlé S.A. shares which are blocked for three years. In millions of CHF 2023 2022 Chair’s compensation 3 3 Other Board members Remuneration – cash 4 3 Shares 3 3 Total (a) 10 9 (a) For the detailed disclosures regarding the remunerations of the Board of Directors that are required by Swiss law, refer to the Compensation report of Nestlé S.A. with the audited sections highlighted with a blue bar. Consolidated Financial Statements of the Nestlé Group 2023 157 Executive Board The total annual remuneration of the members of the Executive Board comprises a salary, a bonus (based on the achievement of the Group’s objectives, the business and functional objectives as well as the Environmental, Social and Governance (ESG) objectives), equity compensation and other benefits. Members of the Executive Board can choose to receive part or all of their bonus in Nestlé S.A. shares* at the average closing price of the last ten trading days of January of the year of the payment of the bonus. The CEO has to take a minimum of 50% in shares. These shares are subject to a three-year blocking period. In millions of CHF 2023 2022 Remuneration – cash 19 18 Bonus – cash 16 13 Bonus – shares * 5 4 Equity compensation plans (a) 17 17 Pension 3 3 Total (b) 60 55 (a) Equity compensation plans are equity-settled share-based payment transactions whose cost is recognized over the vesting period as required by IFRS 2. (b) For the detailed disclosures regarding the remunerations of the Executive Board that are required by Swiss law, refer to the Compensation report of Nestlé S.A. with the audited sections highlighted with a blue bar. * or American Depositary Receipts. 18.2 Transactions with associates and joint ventures The main transactions with associates and joint ventures are: – royalties received on brand licensing (see Note 14.3); – dividends and interest received as well as loans granted (see Note 14); – purchases and sales of finished and unfinished goods. 18.3 Other transactions – Group’s pension plans considered as related parties, refer to Note 10 Employee benefits; – Directors of the Group: no personal interest in any transaction of significance for the business of the Group. 19. Guarantees As at December 31, 2023 and December 31, 2022, the Group has no significant guarantees given to third parties. 18. Transactions with related parties 158 Consolidated Financial Statements of the Nestlé Group 2023 20. Effects of hyperinflation The 2023 and 2022 figures include the following countries considered as hyperinflationary economies: – Argentina; – Iran; – Lebanon; – Syria; – Türkiye; – Venezuela; – Zimbabwe; and – Ghana since 2023. None of them has a significant impact on the Group accounts. 21. Events after the balance sheet date The values of assets and liabilities at the balance sheet date are adjusted if there is evidence that subsequent adjusting events warrant a modification of these values. These adjustments are made up to the date of approval of the Consolidated Financial Statements by the Board of Directors. With food safety as a primary goal, operating practices at some of Nestlé’s natural mineral water production sites may not be in line with the applicable regulatory framework. The Group is currently engaging with the relevant authorities to ensure that its operating practices are fully compliant. As at February 21, 2024, the date of approval of the Consolidated Financial Statements by the Board of Directors, it is not possible to assess nor to quantify any potential future liabilities related to these events. The Group has no other material subsequent events which either warrant a modiﬁcation of the value of its assets and liabilities, or any additional disclosures. Companies of the Nestlé Group, joint arrangements and associates In the context of the SIX Swiss Exchange Directive on Information relating to Corporate Governance, the principal affiliated companies are disclosed if they meet at least two of the following three disclosure criteria: 1) The amount exceeds CHF 40 million or equivalent on: – total sales/services for operating companies; – financial/property income for sub-holding, financial and property companies; – the share held by the Group in their profit for joint ventures and associates; and/or 2) The amount exceeds CHF 20 million or equivalent on: – the total balance sheet for affiliated companies; – the Group‘s investment for joint ventures and associates; and/or 3) The average number of employees during the financial year is equal or greater than 250 FTE. Entities directly held by Nestlé S.A. that fall below the disclosure criteria are listed with a °. A main operating entity in a given country that falls below the disclosure criteria is listed with a NiM. Europe Austria Nespresso Österreich GmbH & Co. OHG Wien 100% EUR 35 000 Nestlé Österreich GmbH Wien 100% EUR 7 270 000 Azerbaijan Nestlé Azerbaijan LLC ° Baku <0.1% 100% USD 200 020 Belarus LLC Nestlé Bel ° Minsk <0.1% 100% BYN 410 000 Belgium Nespresso Belgique S.A. Bruxelles 100% EUR 550 000 Nestlé Belgilux S.A. Bruxelles 100% EUR 3 818 140 Bosnia and Herzegovina Nestlé Adriatic BH d.o.o. ° Sarajevo 9.4% 100% BAM 21 359 Bulgaria Nestlé Bulgaria A.D. Sofia 100% BGN 10 234 933 Solgar Bulgaria EOOD (a) Sofia 100% BGL 10 000 Countries within the continents are listed according to the alphabetical order of the country names. The percentage of capital shareholding corresponds to voting powers unless stated otherwise. ∆ Companies listed on the stock exchange ◊ Sub-holding, financial and property companies All companies listed below are fully consolidated except for: 1) Joint ventures accounted for using the equity method; 2) Joint operations accounted for in proportion to the Nestlé contractual specified share (usually 50%); 3) Associates accounted for using the equity method. (a) Below disclosure criteria but required under local law Consolidated Financial Statements of the Nestlé Group 2023 159 Companies City % capital shareholdings by Nestlé S.A. % ultimate capital shareholdings Currency Capital Croatia Nestlé Adriatic d.o.o. Zagreb 100% HRK 14 685 500 Czech Republic Nestlé Cesko s.r.o. Praha 100% CZK 300 000 000 Tivall CZ, s.r.o. Krupka 100% CZK 400 000 000 Denmark Nestlé Danmark A/S Copenhagen 100% DKK 44 000 000 Finland Suomen Nestlé Oy Espoo 100% EUR 6 000 000 France Centres de Recherche et Développement Nestlé S.A.S. Issy-les-Moulineaux 100% EUR 3 138 230 Nespresso France S.A.S. Paris 100% EUR 1 360 000 Nestlé Excellence Supports France S.A.S. Issy-les-Moulineaux 100% EUR 1 356 796 Nestlé France S.A.S. Issy-les-Moulineaux 100% EUR 130 925 520 Nestlé Health Science France S.A.S. Issy-les-Moulineaux 100% EUR 57 943 072 Nestlé Holding France S.A.S. ◊ Issy-les-Moulineaux 100% EUR 740 548 192 Nestlé Purina PetCare Commercial Operations France S.A.S. Issy-les-Moulineaux 100% EUR 48 666 450 Nestlé Purina PetCare France S.A.S. Issy-les-Moulineaux 100% EUR 21 091 872 Nestlé Waters S.A.S. ◊ Issy-les-Moulineaux 100% EUR 254 825 042 Nestlé Waters EMENA S.A.S. ◊ Issy-les-Moulineaux 100% EUR 44 856 149 Nestlé Waters Management & Technology S.A.S. Issy-les-Moulineaux 100% EUR 10 538 113 Nestlé Waters Marketing & Distribution S.A.S. Issy-les-Moulineaux 100% EUR 106 536 520 Nestlé Waters Supply Est S.A.S. Issy-les-Moulineaux 100% EUR 17 539 660 Nestlé Waters Supply Sud S.A.S. Issy-les-Moulineaux 100% EUR 7 309 106 Société Industrielle de Transformation de Produits Agricoles S.A.S. Issy-les-Moulineaux 100% EUR 9 718 000 Cereal Partners France SNC 1) Issy-les-Moulineaux 50% EUR 3 000 000 L’Oréal S.A. ∆3) Paris 20.1% 20.1% EUR 107 082 474 Listed on the Paris stock exchange, market capitalization EUR 241.0 billion, quotation code (ISIN) FR0000120321 Lactalis Nestlé Produits Frais S.A.S. 3) Laval 40% EUR 69 208 832 Georgia Nestlé Georgia LLC NiM Tbilisi 100% CHF 700 000 Germany Mucos Emulsionsgesellschaft MbH Chemisch-Pharmazeutische Betriebe Berlin 100% EUR 102 258 Nestlé Deutschland AG Frankfurt am Main 100% EUR 214 266 628 Nestlé Product Technology Centre Lebensmittelforschung GmbH Freiburg i. Br. 100% EUR 52 000 Companies of the Nestlé Group, joint arrangements and associates Companies City % capital shareholdings by Nestlé S.A. % ultimate capital shareholdings Currency Capital 160 Consolidated Financial Statements of the Nestlé Group 2023 Germany (continued) Nestlé Purina PetCare Deutschland GmbH Bonn 100% EUR 30 000 Nestlé Unternehmungen Deutschland GmbH ◊ Frankfurt am Main 15% 100% EUR 60 000 000 Nestlé Waters Deutschland GmbH Frankfurt am Main 100% EUR 10 566 000 Greece Nestlé Hellas Single Member SA Maroussi 100% EUR 5 269 765 Hungary Nestlé Hungária Kft. Budapest 100% HUF 6 000 000 000 Ireland (Republic of) Nestlé (lreland) Ltd Dublin 100% EUR 1 270 Wyeth Nutritionals Ireland Ltd Askeaton 100% EUR 8 741 000 Italy Nespresso Italiana S.p.A. – Societa Benefit Assago 100% EUR 250 000 Nestlé ltaliana S.p.A. Assago 100% EUR 25 582 492 Nestlé Purina Commerciale Srl Assago 100% EUR 1 000 000 Sanpellegrino S.p.A. San Pellegrino Terme 100% EUR 58 742 145 Kazakhstan Nestlé Food Kazakhstan LLP Almaty <0.1% 100% KZT 91 900 Lithuania UAB “Nestlé Baltics” Vilnius 100% EUR 31 856 Luxembourg Compagnie Financière du Haut-Rhin S.A. ◊ Luxembourg 100% EUR 105 200 000 Nestlé Finance International Ltd ◊ Luxembourg 100% 100% EUR 440 000 Nestlé Treasury International S.A. °◊ Luxembourg 100% 100% EUR 1 000 000 European Pizza Group Topco Sàrl 1) Luxembourg 50% EUR 1 162 000 Froneri Lux Topco Sàrl (b) 1) Luxembourg 45.5% EUR 119 648 Islay New Group Holding S.A. (c) 3) Luxembourg 19% GBP 120 517 071 Macedonia Nestlé Adriatik Makedonija d.o.o.e.l. NiM Skopje-Karpos 100% MKD 31 060 400 Malta Nestlé Malta Ltd NiM Lija 100% EUR 116 470 Moldova LLC Nestlé ° Chișinău 100% 100% MDL 18 615 (b) Voting powers amount to 50% (c) Voting powers amount to 22% Companies of the Nestlé Group, joint arrangements and associates Consolidated Financial Statements of the Nestlé Group 2023 161 Companies City % capital shareholdings by Nestlé S.A. % ultimate capital shareholdings Currency Capital Montenegro Nestle Adriatic Crna Gora d.o.o. NiM Podgorica 100% EUR 5 307 Netherlands MCO Health B.V. Almere 100% EUR 418 000 Nespresso Nederland B.V. Amsterdam 100% EUR 680 670 Nestlé Nederland B.V. Amsterdam 100% EUR 11 346 000 Norway AS Nestlé Norge Bærum 100% NOK 10 010 000 Poland Nestlé Polska S.A. Warszawa 100% PLN 42 459 600 Nestlé Purina Manufacturing Operations Poland Sp. Z o.o. Nowa Wieś Wroclawska 100% PLN 895 923 700 Cereal Partners Poland Torun-Pacific Sp. Z o.o. 1) Toruń 50% PLN 14 572 838 Portugal Nestlé Portugal, Unipessoal, Lda. Oeiras 100% EUR 30 000 000 Romania Nestlé Romania S.R.L. Bucharest 100% RON 132 906 800 Russia Nestlé Kuban LLC Timashevsk 100% RUB 21 041 793 Nestlé Rossiya LLC Moscow 100% RUB 880 154 115 Serbia (Republic of) Nestlé Adriatic S d.o.o., Beograd-Surcin Beograd-Surcin 100% RSD 3 413 568 644 Slovak Republic Nestlé Slovensko s.r.o. Prievidza 100% EUR 13 277 568 Slovenia Nestlé Adriatic Trgovina d.o.o. NiM Ljubljana 100% EUR 8 763 Spain Nestlé España S.A. Esplugues de Llobregat 100% EUR 100 000 000 Nestlé Global Services Spain, S.L. Esplugues de Llobregat 100% EUR 3 000 Nestlé Purina Petcare España, S.A. Castellbisbal 100% EUR 12 000 000 Herta Foods, S.L. 3) Gurb 40% EUR 489 113 988 Sweden Nestlé Sverige AB Helsingborg 100% SEK 20 000 000 Companies of the Nestlé Group, joint arrangements and associates Companies City % capital shareholdings by Nestlé S.A. % ultimate capital shareholdings Currency Capital 162 Consolidated Financial Statements of the Nestlé Group 2023 Switzerland Intercona Re AG ◊ Châtel-St-Denis 100% CHF 35 000 000 Maggi-Unternehmungen AG ◊ Cham 100% 100% CHF 100 000 Nestlé Enterprises SA Vevey 100% CHF 3 514 000 Nestlé Nespresso SA Vevey 100% CHF 2 000 000 Nestlé Operational Services Worldwide SA Vevey 100% CHF 100 000 Nestlé Orange Holdings GmbH °◊ Cham 100% 100% CHF 20 000 Nestlé Suisse S.A. NiM Vevey 100% CHF 250 000 Nestlé Ventures SA °◊ Vevey 100% 100% CHF 250 000 Nestlé Waters (Suisse) SA Henniez 100% CHF 5 000 000 Nestrade SA La Tour-de-Peilz 100% CHF 6 500 000 NIFS SA ◊ Vevey 100% CHF 100 000 NTC-Europe S.A. ◊ Vevey 100% 100% EUR 3 565 000 Nutrition-Wellness Venture SA °◊ Vevey 100% 100% CHF 100 000 Société des Produits Nestlé S.A. Vevey 100% 100% CHF 8 900 000 Sofinol S.A. Manno 100% CHF 3 000 000 CPW Operations S.à r.l. °1) Prilly 50% 50% CHF 40 000 Türkiye Erikli Su ve Mesrubat Sanayi ve Ticaret A.S. Bursa 100% TRY 20 700 000 Nestlé Türkiye Gida Sanayi A.S. Istanbul 99.9% TRY 35 000 000 Dikey Vitamin Kozmetik ve Gida Takviveleri Pazarlama Ticaret A.S. 3) Istanbul 37.5% TRY 5 694 070 Ukraine LLC Nestlé Ukraine Kyiv 100% UAH 88 911 025 LLC Technocom Kharkiv 100% 100% UAH 119 658 066 LLC Volynholding Torchyn 100% UAH 100 000 United Kingdom Lily’s Kitchen Ltd London 100% GBP 1 164 Mindful Chef Ltd London 69.6% GBP 534 Nespresso UK Ltd York 100% GBP 275 000 Nestlé Holdings (UK) PLC ◊ York 100% GBP 77 940 002 Nestlé NB Financing (International) Ltd °◊ York 100% 100% CHF 2 Nestlé NB Financing (UK) Ltd °◊ York 100% 100% CHF 2 Nestlé Purina UK Commercial Operations Ltd York 100% GBP 10 001 Nestlé Purina UK Manufacturing Operations Ltd York 100% GBP 44 000 000 Nestlé UK Ltd York 100% GBP 129 972 342 Nestlé VP LLP ° London <0.1% 100% GBP 0 Nestlé Waters UK Ltd York 100% GBP 640 Tailsco Ltd London 100% GBP 17 The Nature’s Bounty Co. Ltd York 99.9% GBP 1 089 Vitaflo (International) Ltd Liverpool 100% GBP 625 379 Phagenesis Ltd °3) Manchester 29.2% 29.2% GBP 16 146 Companies of the Nestlé Group, joint arrangements and associates Consolidated Financial Statements of the Nestlé Group 2023 163 Companies City % capital shareholdings by Nestlé S.A. % ultimate capital shareholdings Currency Capital Africa Algeria Nestlé Algérie SpA ° Alger <0.1% 49% DZD 650 000 000 Nestlé Industrie Algérie SpA ° Alger 49% 49% DZD 1 100 000 000 Angola Nestlé Angola Lda Luanda 100% AOA 1 791 870 000 Burkina Faso Nestlé Burkina Faso S.A. Ouagadougou 100% XOF 50 000 000 Cameroon Nestlé Cameroun S.A. Douala 100% XAF 4 323 960 000 Côte d’Ivoire Nestlé Côte d’Ivoire S.A. ∆ Abidjan 88.1% XOF 5 517 600 000 Listed on the Abidjan stock exchange, market capitalization XOF 163.0 billion, quotation code (ISIN) CI0009240728 Egypt Nestlé Egypt S.A.E. Giza 100% 100% EGP 80 722 000 Nestlé Waters Egypt S.A.E. Cairo 99.8% EGP 90 140 000 Gabon Nestlé Gabon, S.A. NiM Libreville 90% XAF 344 000 000 Ghana Nestlé Central and West Africa Ltd Accra 100% GHS 145 746 000 Nestlé Ghana Ltd Accra 76% GHS 20 100 000 Kenya Nestlé Equatorial African Region Ltd ° Nairobi 100% 100% KES 132 000 000 Nestlé Kenya Ltd Nairobi 100% KES 226 100 400 Mauritius Nestlé’s Products (Mauritius) Ltd NiM Port Louis 100% MUR 2 488 071 Morocco Nestlé Maroc S.A. El Jadida 94.6% MAD 156 933 000 Mozambique Nestlé Mocambique Lda ° Maputo <0.1% 100% MZN 2 631 711 200 Nigeria Nestlé Nigeria Plc ∆ Ilupeju 4.6% 70.8% NGN 396 328 126 Listed on the Nigerian Stock Exchange, market capitalization NGN 871.9 billion, quotation code (ISIN) NGNESTLE0006 Companies of the Nestlé Group, joint arrangements and associates Companies City % capital shareholdings by Nestlé S.A. % ultimate capital shareholdings Currency Capital 164 Consolidated Financial Statements of the Nestlé Group 2023 Senegal Nestlé Sénégal S.A. Dakar 100% XOF 1 620 000 000 South Africa Nestlé (South Africa) (Pty) Ltd Johannesburg 100% ZAR 759 735 000 Zambia Nestlé Zambia Trading Ltd ° Lusaka 0.2% 100% ZMW 2 317 500 Zimbabwe Nestlé Zimbabwe (Private) Ltd Harare 100% ZWL 19 626 000 Companies of the Nestlé Group, joint arrangements and associates Consolidated Financial Statements of the Nestlé Group 2023 165 Companies City % capital shareholdings by Nestlé S.A. % ultimate capital shareholdings Currency Capital Americas Argentina Eco de Los Andes S.A. Buenos Aires 50.9% ARS 92 524 285 Enzimas S.A. ° Buenos Aires 99.9% 100% ARS 9 000 000 Nestlé Argentina S.A. Buenos Aires 49.3% 100% ARS 18 868 633 000 Bolivia Industrias Alimentícias Fagal S.R.L. Santa Cruz 1.5% 100% BOB 120 556 000 Nestlé Bolivia S.A. NiM Santa Cruz <0.1% 100% BOB 45 431 900 Brazil Chocolates Garoto Ltda Vila Velha 100% BRL 575 615 927 Nestlé Brasil Ltda São Paulo 53.4% 100% BRL 3 910 325 621 Nestlé Nordeste Alimentos e Bebidas Ltda Feira de Santana 15.8% 100% BRL 1 674 270 610 SOCOPAL – Sociedade Comercial de Corretagem de Seguros e de Participações Ltda ° São Paulo 100% 100% BRL 2 155 600 Tradal Brazil Comércio, Importações e Exportações Ltda São Paulo 100% BRL 15 577 426 Canada Atrium Innovations Inc. Westmount (Québec) 100% CAD 229 364 710 Bountiful Canada Vitamins ULC Vancouver (British Columbia) 99.9% CAD 100 Nestlé Canada Inc. Toronto (Ontario) 100% CAD 219 097 536 Cayman Islands Hsu Fu Chi International Limited ◊ Grand Cayman 60% SGD 7 950 000 Chile Chocolates del Mundo SpA Quilicura 99.8% CLP 8 001 000 000 Nestlé Chile S.A. Santiago de Chile 99.8% 99.8% CLP 11 832 926 000 Aguas CCU – Nestlé Chile S.A. 3) Santiago de Chile 49.8% CLP 49 799 375 321 Colombia Comestibles La Rosa S.A. Bogotá <0.1% 100% COP 126 397 400 Dairy Partners Americas Manufacturing Colombia Ltda Bogotá 100% COP 200 000 000 Nestlé de Colombia S.A. Bogotá <0.1% 100% COP 1 291 305 400 Nestlé Purina PetCare de Colombia S.A. Bogotá <0.1% 100% COP 17 030 000 000 Costa Rica Compañía Nestlé Costa Rica S.A. Heredia 100% CRC 18 000 000 Cuba Nescor, S.A. ° Artemisa 50.9% USD 32 200 000 Companies of the Nestlé Group, joint arrangements and associates Companies City % capital shareholdings by Nestlé S.A. % ultimate capital shareholdings Currency Capital 166 Consolidated Financial Statements of the Nestlé Group 2023 Dominican Republic Nestlé Dominicana S.A. Santo Domingo 98.5% 99.9% DOP 1 657 445 000 Silsa Dominicana S.A. ° Santo Domingo 6% 99.9% USD 50 000 Ecuador Ecuajugos S.A. Quito <0.1% 100% USD 521 583 Industrial Surindu S.A. Quito <0.1% 100% USD 3 000 000 Nestlé Ecuador S.A. Quito <0.1% 100% USD 1 776 760 Terrafertil S.A. Tabacundo 80% USD 525 800 El Salvador Nestlé El Salvador, S.A. de C.V. San Salvador <0.1% 100% USD 4 457 200 Guatemala Genoveva, S.A. ° Ciudad de Guatemala <0.1% 100% GTQ 5 069 414 Malher Export, S.A. ° Ciudad de Guatemala <0.1% 100% GTQ 5 000 Nestlé Guatemala S.A. Ciudad de Guatemala <0.1% 100% GTQ 123 535 600 Honduras Malher de Honduras, S.A. de C.V. ° Tegucigalpa <0.1% 100% HNL 25 000 Nestlé Hondureña S.A. Tegucigalpa 100% PAB 200 000 Jamaica Nestlé Jamaica Ltd Kingston 100% JMD 49 200 000 Mexico Marcas Nestlé, S.A. de C.V. Ciudad de México 100% MXN 500 051 000 Nespresso México, S.A. de C.V. Ciudad de México 100% MXN 210 050 000 Nestlé México, S.A. de C.V. Ciudad de México 100% MXN 24 721 767 730 Manantiales La Asunción, S.A.P.I. de C.V. 1) Ciudad de México 40% MXN 1 036 427 490 Nicaragua Compañía Centroamericana de Productos Lácteos, S.A. Managua 92.6% NIO 10 294 900 Nestlé Nicaragua, S.A. Managua 100% NIO 555 000 Panama Nestlé Centroamerica, S.A. Ciudad de Panamá 100% USD 10 588 706 Nestlé Panamá, S.A. Ciudad de Panamá 100% PAB 7 911 294 Paraguay Nestlé Paraguay S.A. NiM Asunción 100% PYG 100 000 000 Companies of the Nestlé Group, joint arrangements and associates Consolidated Financial Statements of the Nestlé Group 2023 167 Companies City % capital shareholdings by Nestlé S.A. % ultimate capital shareholdings Currency Capital Peru Nestlé Marcas Perú, S.A.C. Lima 50% 100% PEN 5 536 832 Nestlé Perú, S.A. Lima 99.5% 99.5% PEN 88 964 263 Puerto Rico Swirl, Corp. NiM Guaynabo 100% USD 100 Trinidad and Tobago Nestlé Caribbean, Inc. Valsayn 100% USD 100 000 Nestlé Trinidad and Tobago Ltd Valsayn 100% 100% TTD 35 540 000 United States Blue Bottle Coffee, LLC Wilmington (Delaware) 100% USD 0 Essentia Sub, LLC Wilmington (Delaware) 100% USD — Garden of Life LLC Wilmington (Delaware) 100% USD — Gerber Products Company Fremont (Michigan) 100% USD 1 000 HVL LLC Wilmington (Delaware) 100% USD — Malher, Inc. Stafford (Texas) 100% USD 1 000 Nation Pizza Products, LLC Wilmington (Delaware) 100% USD — NDHH, LLC ◊ Wilmington (Delaware) 100% USD 0 Nespresso USA, Inc. Wilmington (Delaware) 100% USD 1 000 Nestlé Capital Corporation ◊ Wilmington (Delaware) 100% USD 1 000 000 Nestlé HealthCare Nutrition, Inc. Wilmington (Delaware) 100% USD 50 000 Nestlé Holdings, Inc. ◊ Wilmington (Delaware) 100% USD 100 000 Nestlé Nutrition R&D Centers, Inc. Wilmington (Delaware) 100% USD 10 000 Nestlé Prepared Foods Company Philadelphia (Pennsylvania) 100% USD 476 760 Nestlé Purina PetCare Company St. Louis (Missouri) 100% USD 1 000 Nestlé Purina PetCare Global Resources, Inc. Wilmington (Delaware) 100% USD 0 Nestlé R&D Center, Inc. Wilmington (Delaware) 100% USD 10 000 Nestlé Regional GLOBE Office North America, Inc. Wilmington (Delaware) 100% USD 1 000 Nestlé USA, Inc. Wilmington (Delaware) 100% USD 1 000 NHS U.S., LLC Wilmington (Delaware) 99.9% USD — Nuun & Company, Inc. Wilmington (Delaware) 100% USD 0 Orgain, LLC Wilmington (Delaware) 51% USD — Pure Encapsulations, LLC Wilmington (Delaware) 100% USD — Puritan’s Pride, LLC New York (New York) 99.9% USD 0 Tejas Industries, LLC Dallas (Texas) 100% USD 1 000 Vital Proteins LLC Wilmington (Delaware) 100% USD 100 000 000 Vitality Foodservice, Inc. Dover (Delaware) 100% USD 1 240 JustForFoodDogs, Inc. 3) Irvine (California) 29% USD 1 069 Sous Chef TopCo, L.P. 3) Greenwich (Connecticut) 45.5% USD 1 100 000 Companies of the Nestlé Group, joint arrangements and associates Companies City % capital shareholdings by Nestlé S.A. % ultimate capital shareholdings Currency Capital 168 Consolidated Financial Statements of the Nestlé Group 2023 Uruguay Nestlé del Uruguay S.A. Montevideo 100% UYU 375 426 189 Venezuela Nestlé Venezuela, S.A. Caracas 100% 100% VES 0 Companies of the Nestlé Group, joint arrangements and associates Consolidated Financial Statements of the Nestlé Group 2023 169 Companies City % capital shareholdings by Nestlé S.A. % ultimate capital shareholdings Currency Capital Asia Afghanistan Nestlé Afghanistan Ltd ° Kabul 100% 100% USD 1 000 000 Bahrain Nestlé Bahrain Trading WLL NiM Manama 49% BHD 200 000 Bangladesh Nestlé Bangladesh PLC Dhaka 99.4% 100% BDT 100 000 000 Greater China Dongguan Hsu Chi Food Co., Limited Dongguan 60% HKD 700 000 000 Guangzhou Refrigerated Foods Limited Guangzhou 95.5% CNY 390 000 000 Nestlé (China) Limited ◊ Beijing 100% CNY 3 525 353 500 Nestlé Dongguan Limited Dongguan 100% CNY 536 000 000 Nestlé Health Science (China) Limited Taizhou City 100% USD 32 640 000 Nestlé Hong Kong Limited Hong Kong 100% HKD 250 000 000 Nestlé Nespresso Beijing Limited Beijing 100% CNY 7 000 000 Nestlé Purina PetCare Tianjin Limited Tianjin 100% CNY 240 000 000 Nestlé Qingdao Limited Laixi 100% CNY 930 000 000 Nestlé Shanghai Limited Shanghai 95% CNY 200 000 000 Nestlé Shuangcheng Limited Shuangcheng 97% CNY 435 000 000 Nestlé Taiwan Limited Taipei 100% TWD 100 000 000 Nestlé Tianjin Limited Tianjin 100% CNY 785 000 000 Shanghai Nestlé Product Services Limited Shanghai 100% CNY 83 000 000 Shanghai Totole First Food Limited Shanghai 100% CNY 72 000 000 Shanghai Totole Food Limited Shanghai 100% USD 7 800 000 Sichuan Haoji Food Co., Limited Puge 80% CNY 80 000 000 Suzhou Hexing Food Co., Limited Suzhou 100% CNY 40 000 000 Wyeth (Hong Kong) Holding Co., Limited ◊ Hong Kong 100% HKD 1 354 107 000 Wyeth (Shanghai) Trading Co., Limited Shanghai 100% CNY 15 316 450 Wyeth Nutritional (China) Co., Limited Suzhou 100% CNY 900 000 000 India Nestlé India Ltd ∆ New Delhi 34.3% 62.8% INR 964 157 160 Listed on the National Stock Exchange, market capitalization INR 2562.8 billion, quotation code (ISIN) INE239A01024 Indonesia P.T. Nestlé Indonesia Jakarta 91.7% KIDR 152 753 440 P.T. Wyeth Nutrition Sduaenam Jakarta 99.2% KIDR 2 500 000 Iran Nestlé Iran (Private Joint Stock Company) Tehrān 95.9% KIRR 358 538 000 Companies of the Nestlé Group, joint arrangements and associates Companies City % capital shareholdings by Nestlé S.A. % ultimate capital shareholdings Currency Capital 170 Consolidated Financial Statements of the Nestlé Group 2023 Israel Materna Industries Limited Partnership Kibbutz Maabarot 100% ILS 10 000 Nespresso Israel Ltd Tel Aviv 100% ILS 1 000 OSEM Food Industries Ltd Shoham 100% ILS 176 OSEM Investments Ltd Shoham 100% ILS 110 644 443 Tivall Food Industries Ltd Kiryat Gat 100% ILS 41 861 167 Japan Blue Bottle Coffee Japan, G.K. Tokyo 25% 100% JPY 10 000 000 Nestlé Japan Ltd Kōbe 100% JPY 4 000 000 000 Nestlé Nespresso K.K. Kōbe 100% JPY 10 000 000 Jordan Ghadeer Mineral Water Co. WLL Amman 100% JOD 1 785 000 Nestlé Jordan Trading Company Ltd Amman 87% JOD 410 000 Korea (Republic of) Blue Bottle Coffee Korea Ltd ° Seoul 25% 100% KRW 1 785 540 000 Nestlé Korea Yuhan Chaegim Hoesa Seoul 100% KRW 15 594 500 000 LOTTE-Nestlé (Korea) Co., Ltd 1) Cheongju 50% KRW 52 783 120 000 Kuwait Nestlé Kuwait General Trading Company WLL Safat 49% 49% KWD 300 000 Lebanon Société pour l’Exportation des Produits Nestlé S.A. Baabda 100% 100% CHF 1 750 000 Malaysia Nestlé (Malaysia) Bhd. ∆◊ Petaling Jaya 72.6% MYR 267 500 000 Listed on the Kuala Lumpur stock exchange, market capitalization MYR 27.6 billion, quotation code (ISIN) MYL4707OO005 Nestlé Asean (Malaysia) Sdn. Bhd. Petaling Jaya 72.6% MYR 42 000 000 Nestlé Manufacturing (Malaysia) Sdn. Bhd. Petaling Jaya 72.6% MYR 132 500 000 Nestlé Products Sdn. Bhd. Petaling Jaya 72.6% MYR 28 500 000 Myanmar Nestlé Myanmar Limited NiM Yangon 95% USD 11 311 710 Oman Nestlé Oman Trading LLC Muscat 49% OMR 300 000 Pakistan Nestlé Pakistan Ltd ∆ Lahore 61.6% PKR 453 495 840 Listed on the Pakistan Stock Exchange, market capitalization PKR 372.0 billion, quotation code (ISIN) PK0025101012 Companies of the Nestlé Group, joint arrangements and associates Consolidated Financial Statements of the Nestlé Group 2023 171 Companies City % capital shareholdings by Nestlé S.A. % ultimate capital shareholdings Currency Capital Palestinian Territories Nestlé Trading Private Limited Company ° Bethlehem 97.5% 97.5% JOD 200 000 Philippines Nestlé Business Services AOA, Inc. ° Bulacan 100% 100% PHP 70 000 000 Nestlé Philippines, Inc. Cabuyao 100% PHP 2 300 927 400 Wyeth Philippines, Inc. Makati City 100% PHP 743 134 900 Qatar Nestlé Qatar Trading LLC Doha 49% 49% QAR 1 680 000 Saudi Arabia Al Manhal Water Factory Co. Ltd Riyadh 90% SAR 10 213 000 Nestlé Saudi Arabia LLC Jeddah 75% SAR 27 000 000 Singapore Nestlé Singapore (Pte) Ltd Singapore 100% SGD 1 000 000 Nestlé TC Asia Pacific Pte Ltd ◊ Singapore 100% 100% JPY SGD 10 000 000 000 2 Wyeth Nutritionals (Singapore) Pte Ltd Singapore 100% SGD 220 506 420 Sri Lanka Nestlé Lanka PLC Colombo 97.2% 97.2% LKR 537 254 630 Syria Nestlé Syria S.A. NiM Damascus 100% SYP 800 000 000 Thailand Nestlé (Thai) Ltd Bangkok 100% THB 880 000 000 Nestlé Roh (Thailand) Ltd ° Bangkok <0.1% 100% THB 250 000 000 Perrier Vittel (Thailand) Ltd Bangkok 100% THB 235 000 000 Quality Coffee Products Ltd Bangkok 30% 50% THB 500 000 000 United Arab Emirates Nestlé Dubai Manufacturing LLC Dubai 49% AED 300 000 Nestlé Middle East FZE Dubai 100% AED 3 000 000 Nestlé Middle East Manufacturing LLC Dubai 49% AED 300 000 Nestlé Treasury Centre-Middle East & Africa Ltd ◊ Dubai 100% USD 2 997 343 684 Nestlé UAE LLC Dubai 49% AED 2 000 000 Nestlé Waters Factory H&O LLC Dubai 51% AED 71 886 000 Uzbekistan Nestlé Food MChJ XK Tashkent <0.1% 100% UZS 12 922 977 969 Companies of the Nestlé Group, joint arrangements and associates Companies City % capital shareholdings by Nestlé S.A. % ultimate capital shareholdings Currency Capital 172 Consolidated Financial Statements of the Nestlé Group 2023 Vietnam La Vie Limited Liability Company Long An 65% USD 2 663 400 Nestlé Vietnam Ltd Bien Hoa 100% 100% KVND 1 261 151 498 Companies of the Nestlé Group, joint arrangements and associates Consolidated Financial Statements of the Nestlé Group 2023 173 Companies City % capital shareholdings by Nestlé S.A. % ultimate capital shareholdings Currency Capital Oceania Australia Nestlé Australia Ltd Sydney 100% AUD 274 000 000 Cereal Partners Australia Pty Ltd 1) Sydney 50% AUD 107 800 000 Fiji Nestlé (Fiji) Pte Ltd NiM Lami 100% FJD 3 677 000 French Polynesia Nestlé Polynésie S.A.S. NiM Papeete 100% XPF 5 000 000 New Caledonia Nestlé Nouvelle-Calédonie S.A.S. NiM Nouméa 100% XPF 64 000 000 New Zealand Nestlé New Zealand Limited Auckland 100% NZD 50 300 000 New Zealand Health Manufacturing Limited Auckland 100% NZD 0 Papua New Guinea Nestlé (PNG) Ltd Lae 100% PGK 11 850 000 Companies of the Nestlé Group, joint arrangements and associates Companies City % capital shareholdings by Nestlé S.A. % ultimate capital shareholdings Currency Capital 174 Consolidated Financial Statements of the Nestlé Group 2023 Switzerland Nestlé Research Ecublens R Nestlé Product Technology Centre Coffee Orbe PTC Nestlé Product Technology Centre Dairy Konolfingen PTC Nestlé Product Technology Centre Nutrition Konolfingen PTC Nestlé Product Technology Centre Nestlé Professional Orbe PTC Nestlé Research Lausanne R Nestlé System Technology Centre Orbe R and PTC Société des Produits Nestlé S.A. Vevey TA Chile Nestlé Development Centre Santiago de Chile D Côte d’Ivoire Nestlé R&D Centre Abidjan R&D France Nestlé Development Centre Lisieux D Nestlé Product Technology Centre Waters Vittel PTC Nestlé R&D Centre Aubigny R&D Nestlé Research Tours R Germany Nestlé Product Technology Centre Food Singen PTC Greater China Nestlé R&D Centre Beijing R&D Technical assistance, research and development units All scientific research and technological development is undertaken in a number of dedicated centres, specialized as follows: Technical Assistance centre TA Development centres D Research centres R Research & Development centres R&D Product Technology centres PTC The Technical Assistance centre is Société des Produits Nestlé S.A. (SPN), a technical, scientific, commercial and business assistance company. The units of SPN, specialized in all areas of the business, supply permanent know-how and assistance to operating companies in the Group within the framework of licence and equivalent contracts. SPN is also responsible for all scientific research and technological development, which it undertakes itself or through affiliated companies. The centres involved are listed below: Companies of the Nestlé Group, joint arrangements and associates Consolidated Financial Statements of the Nestlé Group 2023 175 City of operations India Nestlé Development Centre Gurgaon D Ireland (Republic of) Nestlé Development Centre Askeaton D Singapore Nestlé R&D Centre Singapore R&D United Kingdom Nestlé Product Technology Centre Confectionery York PTC United States Nestlé Development Centre Fremont (Michigan) D Nestlé Development Centre Marysville (Ohio) D Nestlé Development Centre Solon (Ohio) D Nestlé Product Technology Centre Nestlé Health Science Bridgewater (New Jersey) PTC Nestlé Product Technology Centre PetCare St. Louis (Missouri) PTC Nestlé R&D Centre St. Joseph (Missouri) R&D Companies of the Nestlé Group, joint arrangements and associates 176 Consolidated Financial Statements of the Nestlé Group 2023 City of operations Consolidated Financial Statements of the Nestlé Group 2023 177 To the General Meeting of Lausanne, 21 February 2024 Nestlé S.A., Cham & Vevey Report of the statutory auditor Report on the audit of the consolidated financial statements Opinion We have audited the consolidated financial statements of Nestlé S.A. and its subsidiaries (the Group), which comprise the consolidated balance sheet as at 31 December 2023, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated cash flow statement and the consolidated statement of changes in equity for the year then ended, and notes to the consolidated financial statements, including material accounting policy information. In our opinion, the consolidated financial statements (pages 76 to 176 give a true and fair view of the consolidated financial position of the Group as at 31 December 2023, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with IFRS Accounting Standards and comply with Swiss law. Basis for opinion We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISA) and Swiss Standards on Auditing (SA-CH). Our responsibilities under those provisions and standards are further described in the “Auditor’s responsibilities for the audit of the consolidated financial statements” section of our report. We are independent of the Group in accordance with the provisions of Swiss law, together with the requirements of the Swiss audit profession, as well as those of the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. Ernst & Young Ltd Avenue de la Gare 39a P.O. Box CH-1002 Lausanne Phone: +41 58 286 51 11 www.ey.com/en_ch 178 Consolidated Financial Statements of the Nestlé Group 2023 We have fulfilled the responsibilities described in the “Auditor’s responsibilities for the audit of the consolidated financial statements” section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the consolidated financial statements. Measurement of revenue as it relates to trade spend Risk As described in Notes 1 and 3 of the consolidated financial statements, revenue from the sale of goods is recognized when control of the goods has transferred to the customer and is measured net of discounts, allowances and promotional rebates (collectively ‘trade spend’). For certain trade spend arrangements settled retrospectively, Management estimates the level of trade spend using judgments based on historical experience and the specific terms of the agreements with the customers. The measurement of revenue, therefore, involves estimates related to various arrangements with a broad customer base across different countries. Organic growth, which represents sales growth after removing the impact of acquisitions and divestitures and exchange rate movements, is an important component in the determination of measurable financial objectives linked to management incentive schemes. There is a risk of revenue being misstated, through error, misinterpretation or misapplication of accounting standards and policies or intentional manipulation, as a result of the pressure that local management may feel to achieve organic growth targets. The nature of the misstatements may include bias in estimates, unrecorded accruals, or the misclassification of trade spend in the 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 by customers. The estimates require the use of assumptions that are complex, given the high volume and diversity of trade spend arrangements as well as the uncertainty related to future outcomes, including changes in buying patterns resulting from the current economic environment. Consolidated Financial Statements of the Nestlé Group 2023 179 Our audit response Our audit procedures included the following: Accounting policies: We assessed the Group’s revenue recognition accounting policies, including the recognition and classification criteria for trade spend. Processes and controls: We gained an understanding of the types of arrangements, processes, systems and internal controls related to trade spend. – We tested the integrity of the general IT control environment relating to the most significant IT system relevant to revenue recognition and tested selected IT application controls. – We tested selected internal controls in some markets related to measuring and accounting for trade spend. Data analytics: We evaluated quarterly trends of sales and trade spend. We performed relationship analysis focused on the change in trade spend as a percentage of sales to assess the level of trade spend by category, and by customer, in the context of the local markets. For a sample of trade spend, we considered if those items were classified according to the Group’s accounting policies. Test of details: 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 income statement amounts to test mathematical accuracy. We reviewed manual journal entries impacting trade spend to identify significant or unusual items and obtained underlying documentation. We assessed the ageing of trade spend accruals. We tested transactions with customers recorded after the reporting date to assess the completeness of accruals and whether recorded in the correct period. Assessing disclosure: We assessed the disclosure provided in Note 1 and Note 3 of the consolidated financial statements in relation to the relevant accounting standards. 180 Consolidated Financial Statements of the Nestlé Group 2023 Our results: Our audit procedures did not lead to any reservations concerning the trade spend accrual and related net revenue recognized. Carrying value of goodwill and indefinite useful life intangibles assets Risk As described in Notes 1 and 9 of the consolidated financial statements, the Company has CHF 28.7 billion of goodwill and CHF 15.7 billion of indefinite useful life intangible assets, the sum of which represents 35% of total assets and 122% of equity. For all cash generating units (CGUs) with goodwill and for indefinite useful life intangible assets, indicators of impairment are assessed at each reporting date and an impairment test is performed at least annually. In 2023, due to increased sensitivity, management has placed additional focus on the Nestlé Health Science CGU. The sensitivity analysis is disclosed in the Note 9 of the consolidated financial statements. The assessment of indicators of impairment and impairment testing are subjective in nature. The recoverability of goodwill and indefinite useful life intangible assets is assessed using forecasted financial information within a discounted cash flow model. The recoverable amount is sensitive to changes in key assumptions, including sales growth, operating margins, discount and terminal growth rates. The inputs, including the impacts that climate risks and environmental commitments may have on future cashflows, as well as allocation of assets to CGUs, are subject to management judgment. Consolidated Financial Statements of the Nestlé Group 2023 181 Our audit response Our audit procedures included the following: Determination of cash generating units (CGUs): We gained an understanding of management’s judgements with respect to the determination of CGUs, including the changes to the CGUs in the current year. We gained an understanding of the judgements and inputs applied in the allocation of assets to CGUs and recalculated key inputs. We assessed the determination of CGUs and the allocation of assets to those CGUs. Process and controls: We gained an understanding of the impairment process and confirmed the existence of key controls. Historical comparisons and current context: We obtained an understanding of the current macro-economic context on forecasted financial information and the outlook for each CGU through both external research and discussions with selected stakeholders within the Group. We compared the forecasted financial information (sales growth and operating margins) with historical data. Where the forecasted financial information differed from our expectations given the current context and historical data, we obtained supporting explanations. We obtained an understanding of how management considered climate change risks, including transition and physical risks, in the future cashflows of its CGUs. With assistance from our sustainability specialists, we challenged management’s assessment and the consistency of potential climate risks across the CGUs as it related to sales growth and operating margin evolution. We evaluated any adjustments made to sales growth, annual operating margin evolution, and terminal growth rates in the impairment models and performed additional sensitivities over these assumptions where needed. Additionally, we gained an understanding of how management used information prepared in accordance with the Taskforce on Climate-related Financial Disclosure (TCFD) framework (as described in Note 9). We assessed the consistency of information used, including the scenario’s analyzed and the probability weighting used and recalculated the allocation of the potential climate transition risk. 182 Consolidated Financial Statements of the Nestlé Group 2023 Personnel interviews: Forecasted financial information (sales growth and operating margins) is forecasted bottom-up and reviewed centrally. We compared judgments made and information obtained both at the local level and at Group level for consistency. We assessed and challenged assumptions with reference to information from market research and perspectives from product category, Zone and Globally Managed Business leadership. Assessment of methodology: With the assistance of our valuation specialists, we replicated management’s impairment models and tested the mathematical accuracy. Further, we assessed the appropriateness of the methodology used and the consistent application thereof to the CGUs tested. Evaluation of technical parameters: We independently derived a range of weighted average cost of capital (WACC) and terminal growth rates, with the assistance of our valuation specialists, compared these to those calculated by the Group and identified differences in assumptions between the two calculations. We challenged the Group on such differences and assessed the discount rates in relation to other key inputs, including whether the uncertainty with respect to future cashflows is adequately considered in the WACC. Sensitivity analysis: Using data analytics, we performed sensitivity analysis around the key assumptions such as sales growth rate, operating margin, terminal growth rate, and WACC. We focused on those assumptions and CGUs that were most sensitive and judgmental. Assessing indicators of impairment: We obtained management’s assessment regarding indicators of impairment and challenged selected indicators based on our knowledge of internal and external factors. Assessing disclosure: We assessed the adequacy of the disclosure provided in Note 1 and Note 9 of the consolidated financial statements in relation to the relevant accounting standards. Our results: Our audit procedures did not lead to any reservations concerning the valuation, presentation and disclosure of goodwill or indefinite useful life intangible assets. Consolidated Financial Statements of the Nestlé Group 2023 183 Completeness and valuation of uncertain tax positions Risk Nestlé’s global footprint results in significant complexity as its worldwide operations are subject to a diversity of international tax regulations. The cross-border activity and scrutiny of the transfer pricing applied to intercompany transactions vary by tax jurisdiction. In addition to the complexity of its tax environment, there is a level of unpredictability of tax authority’s assessment of Nestlé’s tax filings, which inherently results 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 local country tax legislation and corresponding risks. Nestlé’s policy on uncertain tax position can be found in Notes 1 and 13 of the consolidated financial statements. Our audit response Our audit procedures included the following: Processes and controls: We gained an understanding of the processes for identifying, measuring, and recognizing uncertain tax positions both centrally and locally, and confirmed the existence of controls in the process. Historical comparisons and current context: We obtained an understanding of the current macro-economic context that may affect uncertain tax positions which are recognized or unrecognized. We validated our understanding of the current environment in relation to other key areas of the audit. Furthermore, 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 the outcome compared to amounts recognized. Personnel interviews: Through interviews in the local markets and at Group level, we compared judgments made and information obtained for consistency. 184 Consolidated Financial Statements of the Nestlé Group 2023 Methodology implementation: We assessed the application of the relevant standards, including but not limited to IFRIC 23, Uncertainty over Income Tax Treatments, in the identification, measurement and recognition of uncertain tax positions. With the assistance of our tax specialists, including transfer pricing specialists, we assessed the intercompany transfer pricing models for compliance with applicable laws, regulations and transfer pricing guidelines and evaluated management’s judgment regarding tax risks. We reperformed management’s calculations of uncertain tax positions. Key assumptions: In reviewing the calculations, we identified the key assumptions of identified risk provisions, whether recognized or unrecognized, and tested the validity of these assumptions with our tax specialists. The key assumptions include, but are not limited to, number of years for which the risk occurs, use of generally accepted benchmarks, business models within the Group and availability of mutual agreement procedures in the case of disputes related to profit allocation across the Group to reduce double taxation. We focused our attention on those assumptions and inputs that were most sensitive and judgmental. Our results: Our audit procedures did not lead to any reservations concerning the completeness and valuation of uncertain tax positions. Other information The Board of Directors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the consolidated financial statements, the stand-alone financial statements, the Compensation Report and our auditor’s reports thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Consolidated Financial Statements of the Nestlé Group 2023 185 Board of Directors’ responsibilities for the consolidated financial statements The Board of Directors is responsible for the preparation of the consolidated financial statements, which give a true and fair view in accordance with IFRS Accounting Standards and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the 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 the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from 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 a guarantee that an audit conducted in accordance with Swiss law, ISA and SA-CH will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. A further description of our responsibilities for the audit of the consolidated financial statements is located on EXPERTsuisse’s website at: https://www.expertsuisse.ch/en/auditreport. This description forms an integral part of our report. 186 Consolidated Financial Statements of the Nestlé Group 2023 In accordance with Art. 728a para. 1 item 3 CO and PS-CH 890, we confirm that an internal control system exists, which has been designed for the preparation of the consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved. Ernst & Young Ltd Jeanne Boillet André Schaub Licensed audit expert Licensed audit expert (Auditor in charge) Report on other legal and regulatory requirements Consolidated Financial Statements of the Nestlé Group 2023 187 188 Consolidated Financial Statements of the Nestlé Group 2023 Financial information – 5-year review In millions of CHF (except for data per share and employees) 2023 2022 Results Sales 92 998 94 424 Underlying trading operating profit (a) 16 053 16 103 as % of sales 17.3% 17.1% Trading operating profit (a) 14 520 13 195 as % of sales 15.6% 14.0% Taxes 2 314 2 730 Profit for the year attributable to shareholders of the parent (Net profit) 11 209 9 270 as % of sales 12.1% 9.8% Total amount of dividend 8 010 (c) 7 829 Depreciation of property, plant and equipment 2 993 3 097 Balance sheet and cash flow statement Current assets 30 857 35 062 Non-current assets 95 693 100 120 Total assets 126 550 135 182 Current liabilities 37 084 39 976 Non-current liabilities 53 079 52 414 Total equity 36 387 42 792 Net financial debt (a) 49 638 48 159 Ratio of net financial debt to total equity (gearing) 136.4% 112.5% Operating cash flow 15 941 11 907 as % of net financial debt 32.1% 24.7% Free cash flow (a) 10 403 6 570 Capital additions 7 159 8 264 as % of sales 7.7% 8.8% Data per share Weighted average number of shares outstanding (in millions of units) 2 646 2 707 Basic earnings per share 4.24 3.42 Underlying earnings per share (a) 4.80 4.80 Dividend 3.00 (c) 2.95 Pay-out ratio based on basic earnings per share 70.8% (c) 86.3% Stock prices (high) 116.46 129.50 Stock prices (low) 96.57 104.98 Yield (b) 2.6/3.1 (c) 2.3/2.8 Market capitalization 255 604 285 865 Number of employees (in thousands) 270 275 (a) Certain financial performance measures, that are not defined by IFRS Accounting Standards, are used by management to assess the financial and operational performance of the Group. The “Alternative Performance Measures” document published under https://www.nestle.com/investors/publications provides the definition of these non-IFRS Accounting Standards financial performance measures. (b) Calculated on the basis of the dividend for the year concerned, which is paid in the following year, and on high/low stock prices. (c) As proposed by the Board of Directors of Nestlé S.A. Consolidated Financial Statements of the Nestlé Group 2023 189 2021 2020 2019 Results 87 088 84 343 92 568 Sales 15 119 14 903 16 260 Underlying trading operating profit (a) 17.4% 17.7% 17.6% as % of sales 12 159 14 233 13 674 Trading operating profit (a) 14.0% 16.9% 14.8% as % of sales 2 261 3 365 3 159 Taxes 16 905 12 232 12 609 Profit for the year attributable to shareholders of the parent (Net profit) 19.4% 14.5% 13.6% as % of sales 7 618 7 681 7 700 Total amount of dividend 3 056 3 127 3 488 Depreciation of property, plant and equipment Balance sheet and cash flow statement 39 257 34 068 35 663 Current assets 99 885 89 960 92 277 Non-current assets 139 142 124 028 127 940 Total assets 40 020 39 722 41 615 Current liabilities 45 395 37 792 33 463 Non-current liabilities 53 727 46 514 52 862 Total equity 32 917 31 319 27 138 Net financial debt (a) 61.3% 67.3% 51.3% Ratio of net financial debt to total equity (gearing) 13 864 14 377 15 850 Operating cash flow 42.1% 45.9% 58.4% as % of net financial debt 8 715 10 245 11 934 Free cash flow (a) 12 977 11 367 5 482 Capital additions 14.9% 13.5% 5.9% as % of sales Data per share 2 788 2 845 2 929 Weighted average number of shares outstanding (in millions of units) 6.06 4.30 4.30 Basic earnings per share 4.42 4.21 4.41 Underlying earnings per share (a) 2.80 2.75 2.70 Dividend 46.2% 64.0% 62.8% Pay-out ratio based on basic earnings per share 128.90 112.62 113.20 Stock prices (high) 95.00 83.37 79.86 Stock prices (low) 2.2/2.9 2.4/3.3 2.4/3.4 Yield (b) 351 682 293 644 301 772 Market capitalization 276 273 291 Number of employees (in thousands) Financial information – 5 year review 190 Consolidated Financial Statements of the Nestlé Group 2023 157th Financial Statements of Nestlé S.A. 157th Financial Statements of Nestlé S.A. 157th 192 Financial Statements of Nestlé S.A. Income statement for the year ended December 31, 2023 Balance sheet as at December 31, 2023 Notes to the annual accounts 1. Accounting policies 2. Income from Group companies 3. Profit on disposal and revaluation of assets 4. Financial income 5. Financial expenses 6. Taxes 7. Cash and cash equivalents 8. Other current receivables 9. Financial assets 10. Shareholdings and associates 11. Interest-bearing liabilities 12. Other current liabilities 13. Provisions 14. Share capital 15. Changes in equity 16. Treasury shares 17. Contingencies 18. Performance Share Units, Restricted Stock Units, Phantom Shares and Shares granted 19. Full-time equivalents 20. Events after the balance sheet date Proposed appropriation of available earnings Report of the statutory auditor 193 194 195 195 196 197 198 199 200 201 202 204 157th Financial Statements of Nestlé S.A. 193 Income statement for the year ended December 31, 2023 In millions of CHF Notes 2023 2022 Income from Group companies 2 12 569 8 989 Profit on disposal and revaluation of assets 3 297 12 Other income 6 14 Financial income 4 404 190 Total income 13 276 9 205 Personnel expenses (141) (107) Other expenses (53) (63) Write-downs and amortization of shareholdings and loans (21) (98) Financial expenses 5 (284) (27) Taxes 6 (106) (75) Total expenses (605) (370) Profit for the year 12 671 8 835 157th 194 Financial Statements of Nestlé S.A. Balance sheet as at December 31, 2023 before appropriations In millions of CHF Notes 2023 2022 Assets Current assets Cash and cash equivalents 7 160 155 Other current receivables 8 1 368 443 Prepayments and accrued income 16 53 Total current assets 1 544 651 Non-current assets Financial assets 9 18 687 17 672 Shareholdings and associates 10 13 005 13 881 Property, plant and equipment 1 1 Total non-current assets 31 693 31 554 Total assets 33 237 32 205 Liabilities Current liabilities Interest-bearing liabilities 11 3 061 7 076 Other current liabilities 12 235 623 Accruals and deferred income 222 92 Provisions 13 202 232 Total current liabilities 3 720 8 023 Non-current liabilities Interest-bearing liabilities 11 9 536 4 058 Provisions 13 19 16 Total non-current liabilities 9 555 4 074 Total liabilities 13 275 12 097 Equity Share capital 14 /15 267 275 Legal retained earnings 15 1 968 1 960 Voluntary retained earnings – Special reserve 15 2 859 2 859 – Profit brought forward 15 7 352 15 482 – Profit for the year 15 12 671 8 835 Treasury shares 15/16 (5 155) (9 303) Total equity 19 962 20 108 Total liabilities and equity 33 237 32 205 157th Financial Statements of Nestlé S.A. 195 Notes to the annual accounts 1. Accounting policies General Nestlé S.A. (the Company) is the ultimate holding company of the Nestlé Group, domiciled in Cham and Vevey, which comprises subsidiaries, associated companies and joint ventures throughout the world. The accounts are prepared in accordance with accounting principles required by Swiss law (32nd chapter of the Swiss Code of Obligations). They are prepared under the historical cost convention and on an accrual basis. Where not prescribed by law, the significant accounting and valuation principles applied are described below. Foreign currency translation Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction or, if hedged forward, at the rate of exchange under the related forward contract. Non-monetary assets and liabilities are carried at historical rates. Monetary assets and liabilities in foreign currencies are translated at year-end rates. Any resulting exchange differences are included in the respective income statement captions depending upon the nature of the underlying transactions. The aggregate unrealized exchange difference is calculated by reference to original transaction date exchange rates and includes hedging transactions. Where this gives rise to a net loss, it is charged to the income statement whilst a net gain is deferred. Hedging The Company can use forward foreign exchange contracts, options and currency swaps to hedge foreign currency flows and positions. Unrealized foreign exchange differences on hedging instruments are matched and accounted for with those on the underlying asset or liability. Long-term loans, in foreign currencies, used to finance investments in shareholdings are generally not hedged. The Company also uses interest rate swaps to manage interest rate risk. The swaps are accounted for at fair value at each balance sheet date and changes in the market price are recorded in the income statement. The positive fair values of forward exchange contracts and interest rate swaps are included in prepayments and accrued income. The negative fair values of forward exchange contracts and interest rate swaps are included in accruals and deferred income. Income statement In accordance with Swiss law dividends are treated as an appropriation of profit in the year in which they are ratified at the Annual General Meeting rather than as an appropriation of profit in the year to which they relate. Taxes This caption includes taxes on profit, capital and withholding taxes on transfers from Group companies. Financial assets and shareholdings The carrying amount of financial assets and shareholdings comprises the cost of investment, excluding the incidental costs of acquisition, less any write-downs. Financial assets and shareholdings are written down on a conservative basis, taking into account the profitability of the company concerned. Property, plant and equipment The Company owns land and buildings which have been depreciated in the past. Office furniture and equipment are fully depreciated on acquisition. Provisions Provisions include present obligations as well as contingencies. Provisions for Swiss taxes are made on the basis of the Company’s taxable capital, reserves and profit for the year. Additional information The Company is integrated within the operations of the Nestlé Group, which presents its consolidated financial statements under IFRS Accounting Standards. In line with art. 961d of the Swiss Code of Obligations, the Company decided to forego presenting the additional information in the notes, the cash flow statement and the management report. 157th 196 Financial Statements of Nestlé S.A. 2. Income from Group companies This represents dividends and other income from Group companies. 3. Profit on disposal and revaluation of assets This represents mainly the net gains realized on the sale of shareholdings and financial assets. 4. Financial income In millions of CHF 2023 2022 Income on loans to Group companies 387 135 Other financial income 17 55 404 190 5. Financial expenses In millions of CHF 2023 2022 Expenses related to loans from Group companies (214) (3) Other financial expenses (70) (24) (284) (27) 6. Taxes In millions of CHF 2023 2022 Direct taxes (76) (57) Prior-year adjustments 13 21 Withholding taxes on income from foreign sources (43) (39) (106) (75) 157th Financial Statements of Nestlé S.A. 197 7. Cash and cash equivalents Cash and cash equivalents include deposits with maturities of less than three months. 8. Other current receivables In millions of CHF 2023 2022 Amounts owed by Group companies (current accounts) 1 343 386 Other receivables 25 57 1 368 443 9. Financial assets In millions of CHF 2023 2022 Loans to Group companies 18 639 17 636 Other investments 48 36 18 687 17 672 10. Shareholdings and associates In millions of CHF 2023 2022 As at January 1 13 881 13 266 Net increase/(decrease) (805) 609 Revaluation/(write-down) (71) 6 As at December 31 13 005 13 881 A list of direct and significant indirect Group companies held by Nestlé S.A. with the percentage of the capital controlled is included in the Consolidated Financial Statements of the Nestlé Group. In 2023, Nestlé S.A. sold or contributed shareholdings with a net carrying amount of CHF 2587 million (2022: CHF 536 million) to its subsidiary Société des Produits Nestlé S.A. 157th 198 Financial Statements of Nestlé S.A. 11. Interest-bearing liabilities Current interest-bearing liabilities include amounts owed to Group companies (CHF 2160 million) and one bond issued by Nestlé S.A. Non-current interest-bearing liabilities include two amounts owed to Group companies (CHF 4768 million) and thirteen bonds issued by Nestlé S.A. In millions of CHF Issuer Face valuein millionsCouponEffectiveinterestrateYear ofissue/maturity2023 2022 Nestlé S.A., Switzerland CHF 900 0.25% 0.26% 2018–2024 900 900 CHF 600 0.75% 0.69% 2018–2028 602 602 CHF 675 1.63% 1.65% 2022–2026 675 674 CHF 475 2.13% 2.15% 2022–2030 474 474 CHF 350 2.50% 2.46% 2022–2034 351 351 CHF 360 1.63% 1.67% 2022–2025 360 360 CHF 260 2.63% 2.57% 2022–2035 261 262 CHF 310 2.25% 2.18% 2022–2029 311 311 CHF 300 1.88% 1.87% 2023–2029 301 — CHF 450 2.00% 2.01% 2023–2033 450 — CHF 400 2.13% 2.06% 2023–2038 403 — CHF 155 1.63% 1.54% 2023–2027 155 — CHF 215 1.88% 1.75% 2023–2031 216 — CHF 210 2.00% 1.96% 2023–2036 210 — Total carrying amount 5 669 3 934 12. Other current liabilities In millions of CHF 2023 2022 Amounts owed to Group companies 46 330 Other liabilities 189 293 235 623 157th Financial Statements of Nestlé S.A. 199 13. Provisions In millions of CHF 2023 2022 Swiss and foreign taxes Other Total Total As at January 1 191 57 248 330 Provisions made in the period 125 64 189 69 Amounts used (147) (1) (148) (76) Unused amounts reversed (58) (10) (68) (75) As at December 31 111 110 221 248 of which expected to be settled within 12 months 202 232 14. Share capital 2023 2022 Number of registered shares with nominal value CHF 0.10 each 2 670 000 000 2 750 000 000 In millions of CHF 267 275 According to article 5 of the Company’s Articles of Association, no person or entity shall be registered with voting rights for more than 5% of the share capital as recorded in the commercial register. This limitation on registration also applies to persons who hold some or all of their shares through nominees pursuant to this article. In addition, article 11 provides that no person may exercise, directly or indirectly, voting rights, with respect to own shares or shares represented by proxy, in excess of 5% of the share capital as recorded in the commercial register. Apart from BlackRock, Inc., which disclosed holding 5.04% on January 3, 2022, the Company was not aware of any shareholder holding, directly or indirectly, 5% or more of the share capital. 15. Changes in equity In millions of CHF Share capital Legal retained earnings Special reserve Retained earnings Treasury shares Total As at January 1, 2023 275 1 960 2 859 24 317 (9 303) 20 108 Cancellation of 80 000 000 shares (share buyback program) (8) 8 — (9 136) 9 136 — Profit for the year — — — 12 671 — 12 671 Dividend for 2022 — — — (7 829) — (7 829) Movement of treasury shares — — — — (4 988) (4 988) As at December 31, 2023 267 1 968 2 859 20 023 (5 155) 19 962 157th 200 Financial Statements of Nestlé S.A. 16. Treasury shares In millions of CHF 2023 2022 Number Amount Number Amount Share buyback program 44 718 276 4 745 77 534 276 8 863 Long-term incentive plans 3 975 433 410 4 324 340 440 48 693 709 5 155 81 858 616 9 303 The share capital has been reduced by 80 000 000 shares from CHF 275 million to CHF 267 million through the cancellation of shares purchased as part of the share buyback program. The purchase value of those cancelled shares amounts to CHF 9136 million. During the year, 47 184 000 shares were purchased as part of the share buyback program for CHF 5018 million. The Company held 3 975 433 shares to cover long-term incentive plans. During the year, 1 444 149 shares were delivered as part of the Nestlé Group remuneration plans for a total value of CHF 154 million. All treasury shares are valued at acquisition cost. The total of own shares of 48 693 709 held by Nestlé S.A. as at December 31, 2023 represents 1.8% of the Nestlé S.A. share capital (81 858 616 own shares held as at December 31, 2022 by Nestlé S.A. representing 3.0% of the Nestlé S.A. share capital). 17. Contingencies As at December 31, 2023, the total of the guarantees mainly for credit facilities granted to Group companies, bonds and commercial paper programs, together with the buyback agreements relating to notes issued, amounted to a maximum of CHF 95 478 million (2022: CHF 93 562 million). 157th Financial Statements of Nestlé S.A. 201 18. Performance Share Units, Restricted Stock Units, Phantom Shares and Shares granted In millions of CHF 2023 2022 Number Amount Number Amount Performance Share Units, Restricted Stock Units and Phantom Shares granted to Nestlé S.A. employees (a) 184 130 20 159 822 19 Share plan for short-term bonus Executive Board (b) 41 683 5 39 400 5 Share plan for Board members (c) — 6 — 6 225 813 31 199 222 30 (a) Performance Shares and Restricted Stock Units are valued at the average closing price of the first ten trading days, after the publication of the annual results (for the Grant in March) and of the last ten trading days of September (for the Grant in October), corresponding to CHF 108.40 (Grant in March) and CHF 105.59 (Grant in October). Includes 161 202 Performance Share Units granted to Executive Board by Nestlé S.A. (2022: 130 162). There were no Phantom Shares in 2023. Note that Performance Share Units and Phantom Shares allocated and revoked in the same year are not disclosed. (b) Nestlé S.A. shares received as part of the short-term bonus are valued at the average closing price of the last ten trading days of January. (c) The Board is paid in arrears (25% in October 2023 and 75% in April 2024). The Nestlé S.A. shares equivalent to 50% of the annual remuneration will be delivered at the end of the Board year in April 2024. They will be valued at the closing price of the share on the SIX Swiss Exchange on the ex-dividend date 2024. The actual number of shares delivered will be published in the Nestlé S.A. 2024 Financial Statements. In 2023, 55 042 shares were delivered to the Board. 19. Full-time equivalents For Nestlé S.A., the annual average number of full-time equivalents for the reporting year, as well as the previous year, did not exceed 250. 20. Events after the balance sheet date There are no subsequent events which either warrant a modification of the value of the assets and liabilities or any additional disclosure. 157th 202 Financial Statements of Nestlé S.A. Proposed appropriation of available earnings In CHF 2023 2022 Retained earnings Profit brought forward 16 204 510 328 22 553 014 974 Dividends on own shares not distributed (a) 283 919 753 263 816 717 Cancellation of 80 000 000 shares (share buyback program) (2022: cancellation of 65 000 000 shares) (9 136 617 465) (7 335 027 036) Profit for the year 12 671 082 922 8 835 205 673 20 022 895 538 24 317 010 328 We propose the following appropriation: Dividend for 2023, CHF 3.00 per share on 2 670 000 000 shares (b) (2022: CHF 2.95 on 2 750 000 000 shares) 8 010 000 000 8 112 500 000 8 010 000 000 8 112 500 000 Retained earnings to be carried forward 12 012 895 538 16 204 510 328 (a) The amount of CHF 8 112 500 000 proposed to be distributed as dividend for 2022 was reduced by CHF 283 919 753 due to 96 243 984 treasury shares held by the Nestlé Group at the dividend payment date. (b) Depending on the number of shares issued as of the last trading day with entitlement to receive the dividend (April 19, 2024). No dividend is paid on treasury shares held by the Nestlé Group. Provided that the proposal of the Board of Directors is approved by the Annual General Meeting, the gross dividend will amount to CHF 3.00 per share, representing a net amount of CHF 1.95 per share after payment of the Swiss withholding tax of 35%. The last trading day with entitlement to receive the dividend is April 19, 2024. The shares will be traded ex-dividend as of April 22, 2024. The net dividend will be payable as from April 24, 2024. The Board of Directors Cham and Vevey, February 21, 2024 157*h Financial Statements of Nestlé S.A. 203

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