NESTLÉ FINANCE INTERNATIONAL LTD.
(Société Anonyme)
Annual Financial Report
Management Report
and
Financial Statements
1 January – 31 December 2022
(With Report of the Réviseur d’Entreprises Agréé thereon)
Registered Address: 7, rue Nicolas Bové
L-1253, Luxembourg
Grand Duchy of Luxembourg
R.C.S. No B136737
Subscribed capital: EUR 440 000
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 1 -
Contents
1. Management Report ................................................................................................... 2-5
2. Report of the Réviseur d’Entreprises Agréé .............................................................. 6-10
3. Financial Statements for the year ended 31 December 2022 .................................. 11-34
4. Responsibility Statement ..............................................................................................35
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 2 -
Nestlé Finance International Ltd.
Nestlé Finance International Ltd. (“NFI” or the “Company”) presents its annual financial report for the
financial year ended 31 December 2022. NFI is a public limited company (société anonyme) organised
under the laws of Luxembourg and is a wholly-owned subsidiary of Nestlé S.A. which is the holding company
of the Nestlé Group of companies (the “Nestlé Group” or the “Group”). NFI is established for an unlimited
duration. The Nestlé Group manufactures and sells food and beverages, as well as products related to the
nutrition, health and wellness industries. The Nestlé Group product portfolio has seven product categories,
distributed throughout the world: powdered and liquid beverages, water, milk products and ice cream, infant
nutrition, prepared dishes and cooking aids, confectionery and pet care. The Nestlé Group also
manufactures and distributes nutritional science products through its globally managed business Nestlé
Health Science.
The principal business activity of NFI is the financing of members of the Nestlé Group including by the sale,
exchange, issue, transfer or otherwise, as well as the acquisition by purchase, subscription or in any other
manner, of stock, bonds, debentures, notes, debt instruments or other securities or any kind of instrument
and contracts thereon or relative thereto. NFI may further assist the members of the Nestlé Group, in
particular by granting them loans, facilities or guarantees in any form and for any term whatsoever and
provide any of them with advice and assistance in any form whatsoever.
1. Management Report
(A) Review of the development and performance of NFI’s business during the financial year
and the position of NFI’s business at the end of the year:
As at 31 December 2022, a total equivalent of EUR 19 012 million of loans and advances granted to Nestlé
Group companies was outstanding, compared to EUR 17 761 million as at 31 December 2021. These were
financed mainly through the issuance of bonds, commercial papers and loans and advances received from
Nestlé Group companies. Other assets and liabilities comprise mainly derivatives and cash and cash
equivalents (consisting of, cash balances, deposits at banks) and short term investments. The
aforementioned transactions are further detailed in the notes to the financial statements of NFI for the
financial year ended 31 December 2022.
Total assets increased at 31 December 2022 (EUR 19 040 million) as compared to 31 December 2021
(EUR 19 012 million). The increase in total assets (by EUR 28 million) results mainly from an increase in
loans and advances granted to Nestlé Group companies (by EUR 1 251 million), from a decrease in
derivative assets (by EUR 24 million), and a decrease in cash and cash equivalents (by EUR 104 million),
from a decrease in short term investments (by EUR 1 084 million) and a decrease in deferred tax assets
(by EUR 10 million). On the liabilities side, debt securities (bonds and commercial paper) outstanding at 31
December 2022 (EUR 18 628 million) increased by EUR 2 334 million as compared to 31 December 2021
(EUR 16 294 million) mainly as a result of an increase in the issuance of bonds. Loans and advances
received from Nestlé Group companies outstanding at 31 December 2022 (EUR 0 million) decreased by
EUR 2 267 million as compared to 31 December 2021 (EUR 2 267 million).
The operations reported a net gain of EUR 30.5 million for the financial year ended 31 December 2022
compared to a net loss of EUR 17.9 million for the financial year ended 31 December 2021.
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 3 -
Net gain before tax for the financial year ended 31 December 2022 was EUR 55.6 million, compared to a
net loss before tax of EUR 12.3 million for the financial year ended 31 December 2021. The movement was
due to an increase in interest income (by EUR 152.3 million) resulting from the loans and advances granted
to Nestlé Group companies, an increase in interest expense (by EUR 46 million) resulting from an increase
of the debt securities with higher interest rate, a decrease in net fee and commission expense (by EUR 169
million) arising from fluctuations of foreign exchange rates borne by a related party; partially offset by a
decrease in other operating income (by EUR 221 million) resulting from foreign exchange gain on non-EUR
denominated instruments and an increase in financial income (by EUR 13.9 million).
NFI’s net operating cash outflow (“Net cash used in operating activities”) was EUR 2 323 million for the
financial year ended 31 December 2022 compared to net operating cash outflow of EUR 4 256 million for
the financial year ended 31 December 2021.
To limit the risk of the foreign exchange currencies and the risk of counterparties NFI has transferred during
2022 the major part of the loans granted to Nestlé Group entities to a unique Nestlé Group entity. The
remaining part of the loans will be transferred during 2023. In exchange, NFI lend loans, denominated in
EUR, to this unique entity (Note 9). Future financial performance will depend largely on the net interest
margin earned on loans and investments, funded by existing and possible further issues of bonds,
commercial paper and loans and advances received from Nestlé Group companies and results from
derivative transactions.
(B) Risks and Uncertainties
NFI is exposed to certain risks and uncertainties: banking credit risk, credit risk, market risk (including
currency fluctuations and interest rate movements), liquidity risk and risk of an increase in cost of capital,
treasury operations and other risks that could have a material adverse impact on its financial condition and
operating results. The detailed discussion of these risks and uncertainties and NFI’s objectives, policies and
processes for managing these risks and uncertainties are disclosed in the notes to the financial statements
of NFI for the year ended 31 December 2022, in particular Note 11. NFI is engaged in hedging activities to
limit its exposure to risk, for further information, please refer to Note 11.
(C) Other items
NFI has no research and development costs nor any treasury shares or branches.
(D) Corporate governance status
Overall control environment
The Board of Directors of NFI has overall responsibility for its control environment. The Board of Directors
is responsible for monitoring the internal control and risk management systems that are related to the
financial reporting process on an ongoing basis.
The internal control and risk management systems are designed to mitigate, rather than eliminate, the risks
identified in the financial reporting process. In particular, internal controls related to the financial reporting
process are established to mitigate, detect and correct material misstatements in the financial statements.
NFI has a number of policies and procedures in key areas of financial reporting, which are derived from the
Nestlé Group’s Accounting Standards, Risk Management Policy, Treasury Policy, Information Security
Policy and Business Ethics Policy. These policies and procedures apply to all subsidiaries of the Nestlé
Group, including NFI. NFI complies with the corporate governance code of its parent Nestlé S.A. available
on the website.
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 4 -
Structure of capital
The share capital of NFI is divided in 220 000 shares having a nominal amount of EUR 2 each. There is
only one class of share in issue and all provide the same rights to the shareholder. NFI does not have own
shares. There are neither restrictions to the transfer of the issued shares in NFI nor any agreement issued
by the shareholder which may result in restrictions on the transfer of NFI shares.
Instruments traded on a regulated market
NFI has issued bonds which are admitted to trading on the London Stock Exchange’s regulated market and
the Luxembourg Stock Exchange but no other instruments, such as NFI’s shares, are admitted to trading
on any regulated market. Therefore the disclosure requirements included in Article 10. paragraph 1. points
c), d), f), h) and i) of Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004
on takeover bids as required by Article 68ter. paragraph (1) letter d) of Luxembourg modified law of 19
December 2002, are not applicable.
Control activities
Nestlé Group has established minimum requirements for the conduct and documentation of IT and manual
control activities to mitigate identified significant financial reporting risks. NFI establishes and implements
internal controls comprising relevant control activities for significant processes.
NFI’s management is responsible for ensuring that the internal control activities are performed and
documented, and is required to report on their compliance with Nestlé Group’s internal control policies to
Nestlé Group’s finance function.
In addition, the Nestlé Group has implemented a formalised financial reporting process for the budget
process and monthly reporting on actual performance. The accounting information reported by NFI is
reviewed both by Nestlé Group central treasury and by technical accounting specialists at Nestlé.
Information and communication
The Nestlé Group has established information and communication systems to ensure that accounting and
internal control compliance procedures are established, including a finance manual and internal control
requirements.
All Nestlé Group companies, including NFI, use a standardised financial reporting system.
Monitoring
The monitoring of the internal control and risk management systems related to financial reporting is
performed at various levels within the Nestlé Group, such as periodic reviews of control documentation,
controller visits, audits performed by Nestlé Group Internal Audit and monitoring by the Nestlé Group’s Audit
Committee.
Subsequent events
As at March 21, 2023, there is no subsequent events which either warrant a modification of the value of its
assets and liabilities or any additional disclosure.
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 5 -
Future developments
It is expected that NFI’s business activities will remain unchanged in 2023. NFI will primarily continue to
provide financing to members of the Nestlé Group.
Going concern
NFI’s management has made an assessment of its ability to continue as a going concern and is satisfied
that it has the resources to continue in business for the foreseeable future. Furthermore, management is
not aware of any material uncertainties that may cast significant doubt on the NFI’s ability to continue as a
going concern. Therefore, the financial statements continue to be prepared on the going concern basis.
As at 31 December 2022, the total current assets is EUR 6 447 million and the total current liabilities is EUR
4 436 million. NFI will be able to face the current debt with the current asset available and the different debt
program in place. For the next year, 72% (86% in 2022) of the debts have a maturity between 3 years and
more than 5 years.
Based on the capital management the equity is high enough to cover the risk of default and the loss of the
year.
- 6 -
A member firm of Ernst & Young Global Limited
Independent auditor’s report
To the Shareholder of
Nestlé Finance International Ltd. S.A.
7, rue Nicolas Bové
L-1253 Luxembourg
Report on the audit of the financial statements
Opinion
We have audited the financial statements of Nestlé Finance International Ltd. S.A. (the “Company” or “NFI”),
which comprise the statement of financial position as at 31 December 2022, and the statement of
comprehensive income, the statement of changes in equity and the statement of cash flows for the year then
ended, and the notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements give a true and fair view of the financial position of the
Company as at 31 December 2022, and of its financial performance and cash flows for the year then ended
in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union.
Basis for opinion
We conducted our audit in accordance with EU Regulation N° 537/2014, the Law of 23 July 2016 on the
audit profession (the “Law of 23 July 2016”) and with International Standards on Auditing (“ISAs”) as
adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier” (“CSSF”). Our
responsibilities under the EU Regulation Nº 537/2014, the Law of 23 July 2016 and ISAs are further
described in the “Responsibilities of the “réviseur d’entreprises agréé” for the audit of the financial
statements” section of our report. We are also independent of the Company in accordance with the
International Code of Ethics for Professional Accountants, including International Independence Standards,
issued by the International Ethics Standards Board for Accountants (“IESBA Code”) as adopted for
Luxembourg by the CSSF together with the ethical requirements that are relevant to our audit of the financial
statements, and have fulfilled our other ethical responsibilities under those ethical 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 financial statements of the current period. These matters were addressed in the context of the audit of
the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
- 7 -
A member firm of Ernst & Young Global Limited
1. Hedge accounting
Risk identified
NFI designates and documents certain derivatives as fair value hedge and therefore applies hedge
accounting to limit its exposure to the variability of interest rates and the fluctuations in foreign currency rates
in relation to certain bonds and commercial papers.
Hedge accounting is complex in terms of accounting and disclosures. The implementation of hedge
accounting and the adequacy of the related disclosures especially in accordance with the requirements of
IFRS 9 and IFRS 7 involves management's judgement and estimation.
Given the degree of management’s judgement and estimation involved regarding the application of hedge
accounting, we consider it as a key audit matter.
Our answer
Our audit procedures over hedge accounting included, among others:
- We obtained an understanding of the hedge accounting process and tested key controls.
- We assessed the Company’s procedures to ensure adequate segregation of duties within the
treasury function.
- We evaluated the assumptions, calculation, classification and documentation for hedge accounting
including hedge effectiveness and compliance with disclosure requirements also with the support of
internal specialists.
- We inspected new hedge relationships entered into and assessed the process around ensuring
compliance with the requirements or IFRS 9.
- We assessed the adequacy of the Company’s disclosures in respect of the hedging as disclosed in
Notes 3 and 11 of the financial statements.
2. Credit risk related to loans and advances to Nestlé Group entities
Risk identified
NFI is a financing entity granting loans and advances to entities within the Nestlé Group referred to as Nestlé
Group entities.
As of 31 December 2022, the current portion of loans and advances granted to Nestlé entities amounted to
KEUR 6,442,480 whilst the non-current portion amounted to KEUR 12,569,090 both totalling K EUR
19,011,570 and representing 99.8% of the total assets of the company.
As detailed in note 1 and note 4 to the financial statements, loans to Nestlé Group entities are classified as
debt instruments measured at Amortized cost and subject to impairment.
An expected credit loss (ECL) analysis was performed by the Management as at 31 December 2022 based
on key judgements and estimates including:
- Completeness and accuracy of data used to calculate ECL.
- Allocation of assets to stage 1 (performing), 2 (non-performing), or 3 (default) using criteria in
accordance with the accounting standard.
- Accuracy and adequacy of the financial statement disclosures.
- 8 -
A member firm of Ernst & Young Global Limited
Given the significance of Loans granted to Nestlé entities as well as the importance of the judgments
involved regarding the assessment of the impairment of these financial assets, the evaluation of the
recoverability of loans receivables granted to Nestlé Companies is a key audit matter.
Our answer
Our audit procedures over impairment and the evaluation of the recoverability of loans receivables granted
to Nestlé Group entities (the “Loans”) included, among others:
- We inspected legal documentation related to the Loans.
- We agreed the input data used in the ECL computation by comparing the carrying value of the
Loans reported in the financial statements to the related parties’ financial information obtained from
Nestlé Group companies.
- We assessed the methods and assumptions applied by Management in the ECL analysis.
- We evaluated the allocation of the Loans to stage 1, 2 or 3 in accordance with IFRS 9 by testing a
sample of the Loans to ensure that they were allocated to the appropriate stage.
- We performed an overall assessment of the ECL provision to assess its reasonableness considering
the Company’s portfolio, risk profile, credit risk management policies and the macroeconomic
environment linked to Covid-19 and Ukraine/Russia war.
- We evaluated the adequacy of the Company’s disclosures in respect of the Loans as disclosed in
Notes 4 and 11 of the financial statements.
Other information
The Board of Directors is responsible for the other information. The other information comprises the
information included in the management report and the corporate governance statement but does not
include the financial statements and our report of “réviseur d’entreprises agréé” thereon.
Our opinion on the 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 financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the 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 this fact. We have nothing to report in this regard.
Responsibilities of the Board of Directors
The Board of Directors is responsible for the preparation and fair presentation of the financial statements in
accordance with IFRS as adopted by the European Union, and for such internal control as the Board of
Directors determines is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
The Board of Directors is also responsible for presenting the financial statements in compliance with the
requirements set out in the Delegated Regulation 2019/815 on European Single Electronic Format, as
amended (“ESEF Regulation”).
- 9 -
A member firm of Ernst & Young Global Limited
In preparing the financial statements, the Board of Directors is responsible for assessing the Company’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 Company
or to cease operations, or has no realistic alternative but to do so.
Responsibilities of the “réviseur d’entreprises agréé” for the audit of the financial statements
The objectives of our audit are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue a report of the
“réviseur d’entreprises agréé” that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with EU Regulation N° 537/2014, the Law of
23 July 2016 and with the ISAs as adopted for Luxembourg by the CSSF 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 financial statements.
As part of an audit in accordance with EU Regulation N° 537/2014, the Law of 23 July 2016 and with ISAs
as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Board of Directors.
• Conclude on the appropriateness of Board of Directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our report of the “réviseur
d’entreprises agréé” to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
date of our report of the “réviseur d’entreprises agréé”. However, future events or conditions may cause
the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
• Assess whether the financial statements have been prepared, in all material respects, in compliance with
the requirements laid down in the ESEF Regulation.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
- 10 -
A member firm of Ernst & Young Global Limited
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate to them all relationships and other matters
that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were
of most significance in the audit of the financial statements of the current period and are therefore the key
audit matters. We describe these matters in our report unless law or regulation precludes public disclosure
about the matter.
Report on other legal and regulatory requirements
We have been appointed as “réviseur d’entreprises agréé” by the General Meeting of the Shareholders on
28 April 2021 and the duration of our uninterrupted engagement, including previous renewals and
reappointments, is 3 years.
The management report is consistent with the financial statements and has been prepared in accordance
with applicable legal requirements.
The corporate governance statement, included in the management report, is the responsibility of the Board
of Directors. The information required by article 68ter paragraph (1) letters c) and d) of the law of 19
December 2002 on the commercial and companies register and on the accounting records and annual
accounts of undertakings, as amended, is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements.
We have checked the compliance of the financial statements of the Company as at 31 December 2022 with
relevant statutory requirements set out in the ESEF Regulation that are applicable to the financial
statements. For the Company, it relates to:
· Financial statements prepared in valid xHTML format.
In our opinion, the financial statements of the Company as at 31 December 2022, identified as “nestle-
finance-international-ltd-fullyear-financial-report-2022.xHTML”, have been prepared, in all material respects,
in compliance with the requirements laid down in the ESEF Regulation.
We confirm that the audit opinion is consistent with the additional report to the audit committee or equivalent.
We confirm that the prohibited non-audit services referred to in EU Regulation No 537/2014 were not
provided and that we remained independent of the Company in conducting the audit.
Ernst & Young Ernst & Young
Société anonyme Société anonyme
Cabinet de révision agréé Cabinet de révision agréé
Olivier Lemaire Petar Dionissiev
Luxembourg, 21 March 2023
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 11 -
3. Financial Statements for the year ended 31 December 2022
Nestlé Finance International Ltd. (“NFI”)
(Société Anonyme)
Financial Statements
(Audited)
1 January – 31 December 2022
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 12 -
Balance sheet as at 31 December 2022
The accompanying notes form an integral part of the financial statements
Current tax assets
Other liabilities
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 13 -
Income statement for the year ended 31 December 2022
The accompanying notes form an integral part of the financial statements
In thousands of Euro Notes Year 2022 Year 2021
Interest income 318 838 166 528
Interest expense -133 764 -87 559
Net interest income (2) 185 074 78 969
Net fee and commission expense from Nestlé Group companies (2) -208 916 -377 978
Financial income / (expense) (2) 10 335 -3 609
Other operating income (2) 71 129 291 695
Operating profit / (loss) 57 622 -10 923
Administration expense -1 977 -1 373
Profit / (Loss) before tax 55 645 -12 296
Taxes (2) -25 150 -5 629
Profit / (Loss) for the year attributable to shareholders of the company 30 495 -17 925
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 14 -
Statement of comprehensive (loss) / income for the year ended 31 December 2022
Statement of changes in equity for the year ended 31 December 2022
The accompanying notes form an integral part of the financial statements
In thousands of Euro
Notes
Share capital
Share premium and
other premiums
Hedging reserve
Legal reserve
Other reserve
Accumulated losses
Total equity
attributable to
shareholders of the
company
Equity as at 31 December 2020 440 102 000 52 44 4 955 -60 560 46 931
Gains and losses
Loss for the year - - - - - -17 925 -17 925
Adjustments on cost of hedge reserve (6) - - 411 - - - 411
Total comprehensive income for the year - - 411 - - -17 925 -17 514
Equity as at 31 December 2021 440 102 000 463 44 4 955 -78 485 29 417
Gains and losses
Gain for the year - - - - - 30 495 30 495
Adjustments on cost of hedge reserve (6) - - -532 - - - -532
Total comprehensive income for the year - - -532 - - 30 495 29 963
Equity as at 31 December 2022 440 102 000 -69 44 4 955 -47 990 59 380
In thousands of Euro Year 2022 Year 2021
Profit / (Loss) for the year recognised in the income statement 30 495 -17 925
Adjustments on cost of hedge reserve
Recognised in hedging reserve, net of taxes -532 411
Items that are or may be reclassified subsequently to the income statement -532 411
Other Comprehensive (Loss) / income for the year -532 411
Total comprehensive income / (Loss) for the year 29 963 -17 514
attributable to shareholders of the company 29 963 -17 514
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 15 -
Cash flows statement for the year ended 31 December 2022
*Net cash and cash equivalents include bank overdrafts that are repayable on demand and form an integral part of the Company’s
cash management.
The accompanying notes form an integral part of the financial statements
In thousands of Euro Notes
Year 2022 Year 2021
Cash flows from operating activities:
Profit / (Loss) before taxation for the year 55 645 -12 296
Adjustments for:
Foreign exchange gain / (loss) for loans, debt securities and derivatives 153 548 -100 082
Fair value of debt securities -25 667 -21 416
Interest income (2) -318 838 -166 528
Interest expense (2) 133 764 87 559
Change in other assets excluding prepaid and accrued income (5) 157 205 267
Change in other liabilities excluding accrual and deferred income (5) -170 065 372 816
Inflow in short term investments 1 084 000 342 256
Net loans and advances to Nestlé Group companies excluding intra group interest receivable (9) -1 226 627 -5 498 820
Net loans and advances from Nestlé Group companies excluding intra group interest payable (9) -2 267 105 458 592
Interest received net of withholding tax 303 867 151 118
Interest paid -45 469 -76 538
Income taxes paid 141 2 256
Net cash used in operating activities -2 322 649 -4 255 816
Financing activities
Change in derivative assets including those recognised directly in equity 23 255 20 457
Change in derivative liabilities (4) 80 003 -7 021
Bonds issued (8)
3 468 039 3 126 586
Commercial paper issued (8) 59 188 365 46 146 720
Bonds repaid (8) -850 000 -1 000 000
Commercial paper repaid (8) -59 691 523 -44 026 774
Net cash from financing activities
2 218 139 4 259 968
Effects of the exchange rate changes on cash 935 -23 679
Net decrease in cash and cash equivalents -103 575 -19 527
Net cash and cash equivalents at beginning of year (4) 105 981 125 508
Net cash and cash equivalents at end of year * (4) 2 406 105 981
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 16 -
Notes
1. Accounting policies
Basis of preparation
These financial statements for the year ended 31 December 2022 have been prepared in accordance with
International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board
(IASB) and with the interpretations issued by the International Financial Reporting Interpretations Committee
(IFRIC) as adopted by the European Union as well as with the laws and regulations in force in the Grand
Duchy of Luxembourg.
The financial statements have been prepared on a historical cost basis, except for derivatives financial
instruments and short term investments that are recorded at fair values.
The balance sheet has been prepared in order of liquidity.
After incurred 2 years of consecutive losses in 2021 and 2020 amounting to EUR 17 925 thousands and
EUR 46 237 thousands respectively, NFI is in a positive result in 2022 for EUR 30 495 thousands. In 2022,
the current liabilities of the company amounted to EUR 4 435 645 thousands and it current assets amounted
to EUR 6 446 887 thousands which has led to a positive working capital of EUR 2 011 242 thousands. NFI
prepared its financial statements on the basis of the going concern convention, NFI has ample market
access including short term and medium-term debt capital markets, enjoying the benefit of issuance with a
Nestlé S.A. AA rated guarantee. NFI can access the Nestlé Group liquidity support in place for Nestlé S.A.
amounting to EUR 25 billion equivalent if there ever be an emergency.
The financial statements were authorised for issuance by the Board of Directors on 21 March 2023 and are
subject to approval by the Annual General Meeting on 25 April 2023.
NFI's financial year starts on the first day of January and ends on the last day in December.
Key accounting judgments, estimates and assumptions
The preparation of the financial statements requires NFI’s management to exercise judgment and to make
estimates and assumptions that affect the application of policies, reported amounts of revenues, expenses,
assets and liabilities and disclosures. 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. The implications for NFI and the
global economy following the outbreak of the war in Ukraine in late February 2022, its 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 financial statements.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both current and future periods.
Those areas affected are mainly the determination of fair value of financial instruments (see Note 1 on Fair
values, Note 1 on Interest rate benchmark rate reform, Note 3 on Derivative assets and liabilities, Note 4 on
Financial instruments and Note 8 on Debt securities), and the determination of the expected credit losses
(ECL) on the loan granted (Refer to Note 1 paragraph impairment for further details).
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 17 -
The measurement of impairment losses under IFRS 9 across all categories of financial assets in scope
requires judgements and estimates These estimates are driven by a number of factors, changes in which
can result in different levels of allowances. However, the NFI’s expected credit losses calculations are
outputs of models with a number of underlying assumptions regarding the choice of variable inputs and their
interdependencies. Elements of the ECL models are considered accounting judgements. Refer to Note 1
paragraph impairment for further details.
Foreign currencies
The functional currency of NFI is the currency of its primary economic environment which is the Euro, which
is also the presentation currency.
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 (loss) / income
as qualifying cash flow hedges.
Segmental information
The financing activities of NFI are managed as one single business. Thus, there is no segmental information
in the financial statements.
Valuation methods, presentations and definitions
Operating income
Net interest income includes the income earned on loans with Nestlé Group companies, income from short
term deposits and financial expense on borrowings from third parties. Net interest income also includes
other financial income and expense from interest rate hedging instruments that are recognised in the income
statement.
Interest income or expense is recognised using the effective interest rate method. The ‘effective interest
rate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected life
of the financial instrument to the gross carrying amount of the financial asset or the amortised cost of the
financial liability.
Net fee and commission expenses are composed of the guarantee fee that is payable to Nestlé S.A. and
other fees and expenses to or from Nestlé Group companies.
Other operating income includes results on foreign currency, other income or expenses from Nestlé Group
companies and income or expenses on financial instruments carried at fair value through income statement.
Taxes
NFI is subject to Luxembourg tax laws and regulations.
Taxes include current taxes and deferred taxes on profit as well as actual or potential withholding taxes on
current and expected transfers of income from Nestlé Group companies and tax adjustments relating to
prior financial years. Income tax is recognised in the income statement, except to the extent that it relates
to items directly taken to equity, in which case it is recognised against equity. The amount of current tax
payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects
uncertainty related to income taxes, if any.
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 18 -
Deferred taxes are based on the temporary differences that arise when taxation authorities recognise and
measure assets and liabilities with rules that differ from those of the financial statements. They also arises
on temporary differences stemming from tax losses carried forward.
Deferred taxes are calculated under the liability method at the rates of tax expected to prevail when the
temporary differences reverse subject to such rates are recognised in the income statement unless related
to items directly recognised against equity or other comprehensive (loss) / income and reflects uncertainty
related to income taxes, if any. Deferred tax liabilities are recognised on all temporary differences excluding
non-deductible goodwill. Deferred tax assets are recognised on all deductible temporary differences
provided that it is probable that future taxable income will be available.
Financial instruments
Financial assets
Financial assets are initially recognised at fair value plus directly attributable transaction costs. However,
when a financial asset at fair value to income statement is recognised, the transaction costs are expensed
immediately.
Subsequent re-measurement of financial assets is determined by their categorisation which is revisited at
each reporting date.
The settlement date is used for both initial recognition and subsequent derecognition of the financial assets
as these transactions are generally under contracts whose terms require delivery within the time frame
established by the regulation or convention in the market place (regular-way purchase or sale).
Financial assets are derecognised (in full or in part) when substantially all NFI’s rights to cash flow from the
respective assets have expired or have been transferred and NFI has transferred substantially all the risks
and rewards of ownership.
NFI classifies its financial assets into the following categories: at amortised cost and at fair value through
income statement.
Financial assets at amortised cost
This category includes the following classes of financial assets: intra Nestlé Group loans, trade and other
receivables, cash and cash equivalents. Cash and cash equivalents include cash at bank and other short-
term highly liquid investments with maturities of three months or less from the acquisition date.
These financial assets provide solely the payment of interest and principal and are held with the sole
objective to collect the contractual cash flow up to maturity.
Subsequent to initial measurement, these assets are carried at amortised cost using the effective interest
rate method and are subject to impairment.
Financial instruments at fair value through income statement
Derivative instruments are classified as financial instruments at fair value through income statement.
Subsequent to initial measurement, these items are carried at fair value and all their gains and losses,
realised and unrealised, are recognised in the income statement unless they are part of a hedging
relationship.
NFI’s derivatives mainly consist of currency forwards and interest rate swaps. Derivatives are mainly used
to manage exposures to foreign exchange and interest rates.
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 19 -
Short term investments which consist of investments in money market fund are classified at fair value
through income statement. These investments are mainly related to liquidity management. The net gain or
loss is recorded in interest income or expense.
Financial liabilities at amortised cost
Financial liabilities are initially recognised at the fair value net of transaction costs incurred.
Subsequent to initial measurement, financial liabilities are measured at amortised cost.
The difference between the initial carrying amount of the financial liabilities and their redemption value is
recognised in the income statement over the contractual terms using the effective interest rate method. This
category includes the following classes of financial liabilities: loans and advances from Nestlé Group
companies, trade and other payables, commercial paper, bonds and other non-derivative financial liabilities.
Financial liabilities at amortised cost are classified as current and non-current depending whether these are
due within 12 months after the balance sheet date or beyond.
Financial liabilities are derecognised (in full or in part) when either NFI is discharged from its obligation, they
expire, are cancelled, or replaced by a new liability with substantially modified terms.
Hedge accounting
NFI designates and documents the use of certain derivatives as hedging instruments against changes in
fair values of recognised assets and liabilities (fair value 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. NFI 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.
Fair value hedges
NFI uses fair value hedges to mitigate foreign currency and interest rate risks of its recognised assets and
liabilities, being financial debt.
Changes in fair values of hedging instruments designated as fair value hedges and the adjustments for the
risks being hedged in the carrying amounts of the underlying transactions are recognised in the income
statement.
Impairment
The credit risk management as well as the methodology, inputs and assumption for measuring the expected
credit losses (ECL)
The measurement of the expected credit loss of a financial instrument should reflect: An unbiased and
probability‑weighted amount that is determined by evaluating a range of possible outcomes; the time value
of money; and reasonable and supportable information that is available without undue cost or effort at the
reporting date about past events, current conditions and forecasts of future economic conditions.
Exposure, loans are granted by NFI solely to Nestlé affiliates. Probability of default, based on a range
possible outcomes, obtained using the Annual Global Corporate Default Study from an international
recognised rating agency, based on a credit rating allocated to each counterparty using the Group’s Transfer
Pricing model (yearly updated). And Loss given default (“LGD”) – The LGD has been assumed to be 30%
(2021:30%), the industry standard for Global Corporates. Impairment losses related to Loans and advances
to Nestlé Group companies are presented separately as Financial expense in the income statement.
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 20 -
The default occurs when a borrower fails to pay back a debt according to the initial arrangement. In the case
of most consumer loans, this means that successive payments have been missed over the course of weeks
or months.
NFI groups its loans into stage 1, stage 2 and stage 3 as defined below:
Stage 1: credit risk has not increased significantly since initial recognition. This stage is used for the normal
calculation of the ECL with the methodology in place
Stage 2: where credit risk has increased significantly since initial recognition. Based on the financial figures
of the Group reporting NFI will be inform by Nestlé Group that a risk is higher and NFI will perform a
calculation based on the risk of default at the maturity date.
Stage 3: the financial asset is impaired. NFI will be inform by Nestlé Group that a borrower is in bankruptcy
and NFI will perform to an impairment.
Fair values
NFI determines the fair values of its financial instruments in the following hierarchy, based on the inputs
used in their valuation:
i) Level 1 - the fair value of financial instruments quoted in active markets is based on their quoted closing
price at the balance sheet date.
ii) Level 2 - the fair value of financial instruments that are not traded in an active market is determined by
using valuation techniques using observable market data. Such valuation techniques include discounted
cash flow, standard valuation models based on market parameters, dealer quotes for similar
instruments and use of comparable arm’s length transactions. For example, the fair value of forward
exchange contracts, currency swaps, and interest rate swaps are determined by discounting estimated
future cash flow.
iii) 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, NFI carries such
instruments at cost less impairment, if applicable.
Interest rate benchmark rate reform
For the long term derivatives that are priced on a EURIBOR, MORSPRIME, PRIBOR, TIIE, TELBOR,
WIBOR floating rate, there is no impact generated by the IBOR reform phase 2, given that at the reporting
date there is no cessation date.
Following the transfer in 2022 (see Note 9) of the major part of the intragroup loans (with IBOR interest
rate) to a unique affiliated company, NFI is not impacted by the IBOR reform.
.For comparative, the table below disclose prior year exposures to IBOR:
Prepayments and accrued income
Prepayments and accrued income comprise payments made in advance relating to the following financial
year and income relating to the current financial year, which will not be received until after the balance sheet
date.
In thousands of Euro
Nominal of the loans
USD 61 473 3 months USD LIBOR 2021-2024
- 54 372
Total
- 54 372
Base interest rate
Year of
issue/maturity
31 December 2022
31 December 2021
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 21 -
Accruals and deferred income
Accruals and deferred income comprise expenses relating to the current financial year, which will not be
paid until after the balance sheet date and income received in advance, relating to the following financial
year.
Dividend payments
In accordance with Luxembourg law and NFI’s Articles of Incorporation, dividend payments are treated as
an appropriation of profit in the financial year in which they are ratified at the Annual General Meeting and
subsequently paid. At the meeting of the Board of Directors of NFI held on 17 November 2022, the Board
did not propose any dividend payment to NFI’s shareholder.
Events occurring 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 these financial statements by NFI’s Board of Directors. Other non-adjusting events are
disclosed in the Notes to the financial statements of NFI for the year ended 31 December 2022.
Nestlé S.A. consolidation
NFI is included in the consolidated financial statements of Nestlé S.A.. Nestlé S.A. is the company that is
both the smallest and the largest body of undertakings that NFI forms part of. Copies of Nestlé S.A.’s
consolidated financial statements are available at the registered office of Nestlé S.A., Avenue Nestlé 55
1800 Vevey, Switzerland.
Changes in accounting standards
A number of accounting standards, among other Fees in the “10 per cent” Test for Derecognition of Financial
Liabilities (Amendment to IFRS 9), have been amended on miscellaneous points with effect from 1 January
2022.
None of these changes had a material effect on NFI’s financial statements.
Changes in accounting standards that may affect NFI after 31 December 2022
There are no other standards effective that are not yet effective and that would be expected to have
material impact for NFI in the current or future reporting periods.
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 22 -
2. Operating income and taxes
Net interest income:
Net fee and commission:
Financial income / (expense):
Other operating income:
The variation of the Net foreign exchange expense is mainly due to the fluctuation of the currencies USD,
GBP, RUB and MXN. The exposition change during the year see Note 11.
Taxes:
In thousands of Euro Year 2022 Year 2021
Net foreign exchange gain 70 629 291 689
Net gain in fair value through income statement 500 6
Other operating income 71 129 291 695
In thousands of Euro Year 2022 Year 2021
Expected credit loss on financial assets increase / (decrease) 10 335 -3 609
Financial income / (expense) 10 335 -3 609
In thousands of Euro Year 2022 Year 2021
Fee and commission expense to Nestlé Group companies -208 916
-377 978
Net fee and commission expense -208 916 -377 978
In thousands of Euro Year 2022 Year 2021
Interest income from:
Cash and cash equivalents
203 -
Loans and advances to Nestlé Group companies 318 635 166 528
Interest income 318 838 166 528
Interest expense from:
Cash and cash equivalents
- -199
Loans and advances from Nestlé Group companies -473 -754
Debt securities issued -133 291 -86 606
Interest expense -133 764 -87 559
Net interest income 185 074 78 969
In thousands of Euro Year 2022 Year 2021
Net wealth tax
-35 -133
Withholding tax on interest received
-14 971 -11 407
Deferred tax (decrease) / increase (see calculation below)
-10 144 5 911
Total tax (expense) / gain -25 150 -5 629
In thousands of Euro Year 2022 Year 2021
Profit / (Loss) for the year
30 495 -17 925
Total tax income / (expense)
-25 150 -5 629
Profit / (Loss) before tax 55 645 -12 296
Withholding tax on interest received
-14 971 -11 407
Profit / (Loss) before corporate income tax and after withholding tax 40 674 -23 703
Tax using NFI's domestic tax rate 24,94% (2020: 24,94%)
-10 144 5 911
Net wealth tax
-35 -133
Withholding tax on interest received
-14 971 -11 407
Total tax expense -25 150 -5 629
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 23 -
Fees charged by Ernst & Young S.A. (“EY”) and other member firms of the EY network during the year
ended December 31 were as follows
3. Derivative assets and liabilities
By type
* Represent amounts that would be offset in case of default, insolvency or bankruptcy of the counterparties
The majority of hedge relationships are established to ensure a hedge ratio of 1:1.
Impact on the income statement (net interest income) of fair value hedges
The majority of fair value hedges are related to financing activities and are presented in net interest income.
Ineffective portion of gains/(losses) mainly related to the cost of hedge of fair value hedges is not significant.
In thousands of Euro Year 2022 Year 2021
On hedged items -232 447 -139 162
On hedging instruments 231 134 140 349
In thousands of Euro Year 2022 Year 2021
Legal annual audit fees -46 -40
Fees charged by EY network -46 -40
In thousands of Euro
31 December 2022 31 December 2021 31 December 2022 31 December 2021 31 December 2022 31 December 2021
Fair value hedges
Currency forwards and swaps on debt securities issued
1 627 053 2 118 880 1 215 8 760 69 962 3 157
Interest rate and currency swaps on debt securities issued
828 243 852 906 - 16 242 13 198 -
Undesignated
Currency forwards and swaps
- - - - - -
Total
2 455 296 2 971 786 1 215 25 002 83 160 3 157
Conditional offsets *
Derivative assets and liabilities -604 -1 293 -604 -1 293
Balances after conditional offsets 611 23 709 82 556 1 864
Contractual or notional amounts
Fair value assets
Fair value liabilities
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 24 -
4. Financial instruments
Financial assets and liabilities
By class
(a) Refer to Note 5.
By category
(a) Carrying amount of these instruments is a reasonable approximation of their fair value based on observable market data.
(b) Financial debt includes Bonds (see Note 8), Commercial paper and bank overdrafts
In thousands of Euro
Classes
At amortised cost (a)
At fair value to income
statment
Total categories
At amortised cost (a)
At fair value to income
statment
Total categories
Cash at bank and in hand (a)
2 406 - 2 406 1 418 - 1 418
Time deposit (a)
- - - 104 563 - 104 563
Short term investments
- - - - 1 084 000 1 084 000
Loans and receivables (a)
19 012 322 - 19 012 322 17 762 212 - 17 762 212
Liquid assets and non-current
financial assets
19 014 728 - 19 014 728 17 868 193 1 084 000 18 952 193
Derivative assets
- 1 215 1 215 - 25 002 25 002
Total financial assets
19 014 728 1 215 19 015 943 17 868 193 1 109 002 18 977 195
Loans and payables (a)
269 646 - 269 646 2 685 313 - 2 685 313
Financial debt (b)
18 627 802 - 18 627 802 16 293 673 - 16 293 673
Derivative liabilities
- 83 160 83 160 - 3 157 3 157
Total financial liabilities
18 897 448 83 160 18 980 608 18 978 986 3 157 18 982 143
Net financial position
117 280 - 81 945 35 335 - 1 110 793 1 105 845 -4 948
of which at fair value
- -81 945 -81 945 - 1 105 845 1 105 845
31 December 2022
31 December 2021
In thousands of Euro 31 December 2022 31 December 2021
Cash and cash equivalents
2 406 105 981
Short term investments
- 1 084 000
Derivative assets 1 215 25 002
Loans and advances to Nestlé Group companies 19 011 570 17 761 303
Other financial assets (a)
752 909
Total financial assets
19 015 943 18 977 195
Derivative liabilities
83 160 3 157
Loans and advances from Nestlé Group companies
- 2 267 105
Debt securities issued
18 627 802 16 293 673
Other financial liabilities (a)
269 646 418 208
Total financial liabilities
18 980 608 18 982 143
Net financial position
35 335 -4 948
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 25 -
Fair value hierarchy of financial instruments
There have been no significant transfers between the different hierarchy levels in 2022.
There were no financial instruments within the category Level 3 (valuation techniques based on
unobservable input). All financial instruments are within Level 2 category, except for short term investments
which are Level 1 (prices quoted in active markets).
Contractual maturities of financial liabilities and derivatives
The tables below shows the liabilities at 31 December 2022 and 31 December 2021 by their remaining
contractual maturities; The amounts disclosed in the maturity tables are undiscounted cash flows.
* Future cash flow arising from interest on these short terms loans for Loans and advances from Nestlé
Group companies are immaterial.
In thousands of Euro 31 December 2022
31 December 2021
Short term investments
- 1 084 000
Prices quotes in active markets (Level 1)
- 1 084 000
Derivative assets 1 215 25 002
Derivative liabilities -83 160 -3 157
Valuation techniques based on observable market data (Level 2) -81 945 21 845
Valuation techniques based on unobservable input (Level 3)
- -
Total financial instruments at fair value -81 945 1 105 845
In thousands of Euro
three months
or less
fourth to
twelfth month
in the second
year
in the third to
fifth year
beyond the
fifth year
Contractual
amount *
Carrying
amount
Other liabilities 269 646 - - - - 269 646 269 646
Loans and advances from Nestlé Group companies - - - - - - -
Commercial paper 3 152 175 - - - - 3 152 175 3 145 698
Bonds 37 397 1 047 066 1 290 875 4 605 750 9 967 500 16 948 588 15 482 105
Debt securities issued 3 189 572 1 047 066 1 290 875 4 605 750 9 967 500 20 100 763 18 627 803
Bank overdrafts, tax and other liabilities - - - - - - -
Gross amount receivable from currency derivatives 1 627 053 - - - - 1 627 053 1 621 144
Gross amount payable from currency derivatives -1 690 566 - - - - -1 690 566 -1 689 891
Non currency derivative -13 501 - - - - -13 501 -13 198
Net derivatives -77 014 - - - - -77 014 -81 945
2022
Contractual amount*
In thousands of Euro
three months
or less
fourth to
twelfth month
in the second
year
in the third to
fifth year
beyond the
fifth year
Contractual
amount *
Carrying
amount
Other liabilities 418 208 - - - - 418 208 418 208
Loans and advances from Nestlé Group companies 2 267 105 - - - - 2 267 105 2 267 105
Commercial paper 3 397 272 - - - - 3 397 272 3 391 272
Bonds 3 973 942 378 1 060 408 4 100 250 7 648 250 13 755 259 12 902 401
Debt securities issued 3 401 245 942 378 1 060 408 4 100 250 7 648 250 17 152 531 16 293 673
Bank overdrafts, tax and other liabilities - - - - - - -
Gross amount receivable from currency derivatives 2 118 880 - - - - 2 118 880 2 118 714
Gross amount payable from currency derivatives -2 112 406 - - - - -2 112 406 -2 113 111
Non currency derivative - 10 050 6 305 - - 16 355 16 242
Net derivatives 6 474 10 050 6 305 - - 22 829 21 845
Contractual amount*
2021
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 26 -
5. Other assets and liabilities
6. Share capital, share premium and other reserves:
Share capital is set at EUR 440 000 represented by 220 000 shares with a nominal value of EUR 2 each
and is authorised, issued and fully paid.
As at 31 December 2022 and as at 31 December 2021, the share premium is EUR 102 million.
Under Luxembourg law, NFI is allowed to deduct part of the net wealth tax from the corporate income tax
of the same year, provided that a reserve is created corresponding to five times the net wealth tax deducted
and that this reserve is maintained for a period of five tax years following the year of deduction.
As at 31 December 2022 the net wealth tax reserve is EUR 4 288 thousand (2021: EUR 4 288 thousand)
of which EUR 2 295 thousand (2021: EUR 1 084 thousand) is distributable to the shareholder.
The movements in other reserve for the period ended 31 December 2022 were as follows:
Under Luxembourg law, NFI is required to appropriate annually at least 5% of its statutory net profit to a
non-distributable legal reserve until the aggregate reserve reaches 10% of the subscribed capital. The
reserve is fully constituted for EUR 44 thousand.
As at 31 December 2022, the hedging cost reserve is EUR -69 thousand (2021: EUR 463 thousand)
associated with the fair value hedges.
In thousands of Euro 31 December 2022 31 December 2021
Opening Balance 4 955 4 955
Substraction / Addition
- -
Closing Balance 4 955 4 955
31 December 2022 31 December 2021
Number of shares of nominal value EUR 2 each 220 000 220 000
In thousands of Euro 440 440
Deferred tax assets
In thousands of Euro 31 December 2022 31 December 2021
Opening Balance 34 155 28 244
Increase / Decrease (note 1) -10 144 5 911
Closing Balance 24 011 34 155
In thousands of Euro 31 December 2022 31 December 2021
Other financial assets:
Intra Nestlé Group other receivables 55
35
Other receivables 697 903
Prepaid and accrued income - -29
Total other assets 752 909
Other financial liabilities:
Intra Nestlé Group other payables 204 600 374 547
Other payables 1 866 1 984
Accruals and deferred income 63 180 41 677
Total other liabilities 269 646 418 208
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 27 -
7. Capital management:
NFI monitors the capital using the equity at risk methodology. Equity at risk refers to the fraction of equity
which the lender will need to use in order to cover for potential losses incurred should the borrower default
on its obligations to repay the debt, to meet obligations against its own lenders and to avoid insolvency. For
purpose of determining the amount of equity which the lender has at risk, the expected loss (EL)
methodology attempts to estimate the loss exposure of the particular lender by assessment of the risk profile
of his debt receivables, and by applying the outcome to the overall amount of debt granted. In order to cover
fully for the potential losses, the lender should have an equity buffer equal to at least the amount of its overall
exposure.
Therefore, to estimate the appropriate amount of NFI's equity which is at risk as a result of its financial
intermediation activity, the following equation shall be used:
Equity at risk = EL * Exposure at default
Therefore, the amount of equity NFI is assumed to have at risk as a result of its financial intermediation
activity amounts to EUR 62 738 thousand (i.e. 0.33% over EUR 19 011 570 thousand) (2021: EUR 58 578
thousand i.e. 0.33% over EUR 17 750 966 thousand). EUR 62 738 thousand represents the minimum
amount of equity which NFI must keep for accounting purposes in order to be able to bear the risks flowing
from its financial activity.
As of 31 December 2022, the actual share capital and share premium amounts to EUR 102 440 and is
therefore above the minimum amount defined above.
8. Debt securities:
Bonds
The outstanding amounts of bonds at 31 December 2022 and 31 December 2021 were as follows:
In thousands of Euro
Face value Nominal Effective
EUR 850.000 1,75 percent 1.75% 1.89% 2012-2022
-
849 159
EUR 500.000 0,75 percent 0.75% 0.92% 2015-2023 (b) 493 955 501 980
EUR 500.000 0,38 percent 0.38% 0.54% 2017-2024 499 129 498 302
EUR 750.000 1,25 percent 1.25% 1.31% 2017-2029 746 674 746 212
EUR 750.000 1,75 percent 1.75% 1.82% 2017-2037 742 624 742 195
GBP 400.000 2,25 percent 2.25% 2.34% 2012-2023 (a) 443 186 484 211
EUR 1.000.000 1,13 percent 1.13% 1.27% 2020-2026 995 425
994 053
EUR 1.000.000 1,50 percent 1.50% 1.63% 2020-2030 991 238
990 108
EUR 850.000 0,13 percent 0.13% 0.25% 2020-2027 844 699
843 617
EUR 650.000 0 percent 0.00% 0.05% 2020-2024 649 405
649 096
EUR 1.000.000 0,38 percent 0.38% 0.56% 2020-2032 983 400
981 677
EUR 500.000 0 percent 0.00% -0.26% 2020-2025 503 797
505 095
EUR 500.000 0 percent 0.00% 0.16% 2020-2033 492 005
491 219
EUR 500.000 0,38 percent 0.38% 0.40% 2020-2040 498 219
498 123
EUR 1.250.000 0,00 percent 0.00% 0.00% 2021-2026 1 250 142
1 250 191
EUR 750.000 0,25 percent 0.25% 0.32% 2021-2029 746 763
746 267
EUR 500.000 0,63 percent 0.63% 0.69% 2021-2034 496 493
496 191
EUR 650.000 0,88 percent 0.88% 1.01% 2021-2041 635 422
634 706
EUR 600.000 0,88 percent 0.88% 0.95% 2022-2027 598 030
-
EUR 600.000 1.25 percent 1.25% 1.33% 2022-2031 596 302
-
EUR 800.000 1.50 percent 1.50% 1.63% 2022-2035 788 559
-
EUR 500.000 3.00 percent 3.00% 3.13% 2022-2028 496 763
-
EUR 500.000 3.25 percent 3.25% 3.38% 2022-2031 495 463
-
EUR 500.000 3.38 percent 3.38% 3.49% 2022-2034 494 411
-
Total 15 482 104 12 902 402
of which due in twelve months
937 141 849 159
of which due in the second year
1 148 534 986 191
of which due between three to five years
4 192 093 3 896 737
of which due after five years
9 204 336 7 170 315
31 December 2021
Interest rates
Year of
issue/maturity
Comments
31 December 2022
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 28 -
(a) Subject to an interest rate swap
(b) Out of which EUR 375 million is subject to an interest rate swap (2021: EUR 375 million)
These bonds are admitted to trading on the London Stock Exchange’s regulated market and the
Luxembourg Stock Exchange.
As of 31 December 2022, the fair value of EUR 13 421 million (31 December 2021: EUR 13 192 million).
This fair value is categorized as level 2, measured on the basis of quoted prices.
Some bonds are hedged by interest rate derivatives. The fair value of these derivatives is included within
derivative liabilities for EUR 13 197 thousand (2021: derivative assets EUR 16 242 thousand).
Issue and repayment of bonds:
Several series of bonds were issued in 2022 for EUR 3 500 000 thousand gross minus of the loan origination
cost of EUR 31 961 thousand (2021: EUR 3 150 000 thousand gross minus of the loan origination cost of
EUR 23 414 thousand).
One series of bonds was repaid at maturity during the financial year ended 31 December 2022 for EUR
850 000 thousand (2021: EUR 1 000 000 thousand).
Commercial Paper
The outstanding amounts of commercial paper at 31 December 2022 were as follows:
The interest rates of the commercial papers are between -0.87% and 4.30% (2021: -0.87% and 0.12%)
Carrying amount of these instruments is a reasonable approximation of their fair value based on observable
market data.
During the year 2022 NFI issued for EUR 59 188 365 thousand (2021: EUR 46 146 720 thousand) and
repaid for EUR 59 691 523 thousand (2021: EUR 44 026 774 thousand) of commercial paper.
9. Transactions with related parties
Financing of the Nestlé Group companies
The principal business activity of NFI is the financing of companies directly or indirectly controlled by
Nestlé S.A. This financing represents the majority of the transactions with related parties in quantity and in
amounts. There is no experience of loss for credit default resulting from this activity, NFI assesses the
impairment risk in Note 1. The majority of the loans are granted for a period of 3 years and have no
guarantee. In 2022, interest rates on these loans are mainly ranged from Euribor or other interest rate
benchmark available for 1 month to 6 months with a margin from 10 to 1218bps (2021: 10 to 1218bps). The
ratings from an international recognised rating agency of these related companies range from C to AA-.
The transactions with Nestlé Group companies are based on arm’s length prices. All outstanding balances
with these related parties are to be settled in cash.
NFI has transferred during 2022 the major part of the long term loans granted to Nestlé Group entities to a
unique Nestlé Group entity. The remaining part of the loans will be transferred during 2023. In exchange,
NFI lend loans, denominated in EUR, to this unique entity.
In thousands of Euro 31 December 2022 31 December 2021
Commercial paper 3 145 698 3 391 271
of which due within twelve months 3 145 698 3 391 271
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 29 -
The balances of transactions with related parties at the financial year ended 31 December 2022 are given
below:
Grant, receipt and repayments of loans for the financial year ended 31 December 2022 were as follows:
The transactions included in the above tables and in note 2 and note 6 are transactions made between the
parent company, Nestlé S.A., and NFI. These are detailed in the table below:
The ECL calculate is related to the loan granted to Nestlé Group companies (see Note 11) for EUR 10
335 thousand (2021: EUR- 3 609 thousand).
10. Guarantees
Nestlé S.A. is the guarantor of NFI in respect of all debt securities issued as described in the note 8 for both
the short and long term. The issuance programmes and guarantees applicable to NFI are: EUR 25 billion
Global Commercial Paper Programme (2021: EUR 25 billion), EUR 2 billion Billets de Trésorerie French
Commercial Paper Programme and Euro Medium Term Note (EMTN) Debt Issuance Programme (2021:
EUR 2 billion).
NFI itself has not provided any guarantees in favour of third parties.
In thousands of Euro 31 December 2022 31 December 2021
Payables to Nestlé S.A.
204 413 374 537
In thousands of Euro Year 2022 Year 2021
Other financial expenses to Nestlé S.A. -208 702 -377 545
In thousands of Euro Year 2022 Year 2021
Loans granted to Nestlé Group companies excluding accrued interest 40 377 192 40 721 417
Repayment of loans by Nestlé Group companies excluding accrued interest -39 150 565 -35 222 597
Net loans and advances repaid by Nestlé Group companies 1 226 627 5 498 820
Loans received from Nestlé Group companies excluding accrued interest 13 742 363 8 042 793
Repayment of loans to Nestlé Group companies excluding accrued interest -16 009 468 -7 584 201
Net loans and advances repaid to Nestlé Group companies -2 267 105 458 592
In thousands of Euro 31 December 2022 31 December 2021
Assets
Derivatives assets to Nestlé Group companies
- 16 242
Loans and advances to Nestlé Group companies excluding accrued interest 18 984 311 17 739 537
Accrued interest on loans to Nestlé Group companies 27 259 21 766
Other receivables from Nestlé Group companies
- 35
Total 19 011 570 17 777 580
Liabilities
Derivatives liabilities to Nestlé Group companies 12 865
-
Loans and advances from Nestlé Group companies excluding accrued interest
- 2 267 105
Others payables to Nestlé Group companies
204 600 374 547
Total 217 465 2 641 652
Net assets 18 794 105 15 135 928
In thousands of Euro Year 2022 Year 2021
Interest income on loans and advances to Nestlé Group companies
318 635 166 528
Interest expense on loans and advances from Nestlé Group companies -473 -754
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 30 -
11. Risk and uncertainties
NFI is exposed to certain risks and uncertainties that could have a material adverse impact on its financial
condition and operating results:
Capital Risk
NFI’s capital management is driven by the level of the loan granted and the level of the risk on the loan
granted. The Board of Directors seeks to maintain a prudent balance between the risk and the capital.
Concentrations of Risk
The majority of NFI’s assets represent receivables from other Nestlé Group companies. This situation is
reflected in the assessment of risk of default and the measurement of the allowance for expected credit
loss. The risks are concentrated to Nestlé affiliated given the purpose of the Company, with primary
exposure in EUR and GBP and about 15 countries at end of 2022 and about 20 countries in 2021.
Credit Risk
Credit risk refers to the risk that an internal or external counterparty will default on its contractual obligations
resulting in financial loss to the company. The amount recognised (Note 3 and 4) in the balance sheet of
NFI for financial assets (Note 9 for the loans and advances to Nestlé affiliates) is the maximum credit risk
in the case that counterparties are unable to fulfil their contractual obligations. In the case of derivative
financial instruments, NFI is also exposed to credit risk, which results from the non-performance of
contractual agreements on the part of the counterparty.
NFI aims to minimise the credit risk of liquid assets, non-current financial assets and derivative assets
through the application of the Nestlé Group 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. NFI avoids the concentration of credit risk on its liquid assets by spreading them over several
institutions and sectors.
Issuances of debt instruments by NFI benefit from a guarantee given by Nestlé S.A. all international
recognised rating agencies which rates the credit of Nestlé S.A. and its affiliates, including NFI, may qualify
or alter such rating at any time. Downgrades or placement on review for possible downgrades could harm
the Nestlé Group’s, including NFI’s, ability to obtain financing or increase its financing costs and could have
a material adverse effect on the price of debt instruments issued by NFI and thereby significantly affect
NFI’s financial position.
As at 31 December 2022 and as at 31 December 2021, the cash and cash equivalents and the short term
investments are deal with counterparties above BBB+. Therefore, the ECL is immaterial.
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 31 -
As at the balance sheet date, NFI has impaired some loans and advances to Nestlé affiliates based on ECL
calculation (Note1), no other financial assets were impaired.
Banking Credit
In its financing activities, NFI deals with many banks and financial institutions and thus is exposed to a risk
of loss in the event of non-performance by the counterparties to financial instruments. While NFI seeks to
limit such risk by dealing with counterparties which have high credit ratings (above BBB+), NFI cannot give
any assurance that counterparties will fulfill their obligations, failure of which could materially affect NFI’s
financial position.
Market risk
NFI is exposed to risk from movements in foreign currency exchange rates, interest rates and market prices
that affect its assets, liabilities and anticipated future transactions.
Currency Fluctuations
NFI is subject to some currency fluctuations, both in terms of its trading activities and the translation of its
financial statements; while NFI uses short-term hedging for trading activities, NFI does not believe that it is
appropriate or practicable to hedge long-term translation exposure. NFI does, however, seek some
mitigation of such translation exposure by relating the currencies of trading cash flow to those of its debt by
using broadly similar interest and currency swap contracts. If NFI experiences significant currency
fluctuations or is unable to use similar interest and currency swap contracts effectively, then NFI’s financial
condition could be adversely affected.
In thousands of Euro
EUR USD
GBP BRL MXN RUB others
Cash and cash equivalents
929 222 646 - - - 609
Short term investments
- - - - - - -
Derivative assets
- 605 610 - - - -
Loans and advances to Nestlé Group companies
16 220 400 597 110 620 773 96 453 564 610 - 912 224
Current tax assets
34 - - - - - -
Other financial assets
752 - - - - - -
Total financial assets
16 222 115 597 937 622 029 96 453 564 610 - 912 833
Derivative liabilities
- 30 806 13 198 - - - 39 156
Loans and advances from Nestlé Group companies
- - - - - - -
Debt securities issued
15 863 719 2 219 005 545 078 - - - -
Other financial liabilities
269 646 - - - - - -
Total financial liabilities
16 133 365 2 249 811 558 276 - - - 39 156
Net financial position
88 750 -1 651 874 63 753 96 453 564 610
-
873 677
31 December 2022
In thousands of Euro
Grade Nominal ECL calculated Nominal ECL calculated
Aa3
14 876 643 1 007 2 638 145 55
A1
120 000 1 1 928 400 289
A3
39 611 0 604 971 109
Baa1
37 945 1 9 500 3
Baa2
- - 4 194 397 1 887
Baa3
337 352 11 5 040 853 3 518
Ba1
475 511 22 1 398 298 1 244
Ba2
- - 758 272 1 036
Ba3
353 210 48 305 000 878
B1
- - 117 866 700
B2
13 016 6 79 717 718
B3
- - 40 958 801
Caa1
- - 2 269 193
16 253 288 1 096 17 118 646 11 431
31 December 2022
31 December 2021
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 32 -
Interest Rate Risk
Interest rate risk refers to potential changes of value in financial assets, liabilities or derivatives in response
to fluctuations in interest rates. NFI holds a substantial volume of interest rate sensitive financial assets,
liabilities and derivatives for operational, financing and investment activities. Changes in interest rates can
have an adverse effect on the financial position and operating results of NFI. In order to mitigate the impact
of interest rate risk, Nestlé S.A. continually assesses the exposure of the Nestlé Group, including NFI, to
this risk. Interest rate risk is managed and hedged through the use of derivative financial instruments, such
as interest rate swaps, interest rate and currency swaps and forward rate agreements. When deemed
appropriate, there might be unhedged positions.
NFI determines the existence of an economic relationship between the hedging instrument and hedged item
based on the reference interest rates, tenors, repricing dates and maturities and the notional or par amounts.
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 95% (2021: 93%).
Value at Risk (“VaR”)
Description of the method
The VaR is a single measure to assess market risk. The VaR estimates the size of losses given current
positions and possible changes in financial markets. NFI uses simulation to calculate VaR based on the
historic data for a 261 days period.
The VaR calculation is based on a 95% confidence level and, accordingly, does not take into account losses
that might occur beyond this level of confidence. The VaR is calculated on the basis of unhedged exposures
outstanding at the close of business and does not necessarily reflect intra-day exposures.
In thousands of Euro
EUR USD
GBP BRL MXN RUB others
Cash and cash equivalents
86 024 18 722 361 - 1 - 874
Short term investments
1 084 000 - - - - - -
Derivative assets
6 748 8 755 9 499 - - - -
Loans and advances to Nestlé Group companies
11 454 792 465 230 4 236 143 84 907 844 990 299 254 375 987
Current tax assets
210 - - - - - -
Other financial assets
909 - - - - - -
Total financial assets
12 632 683 492 707 4 246 003 84 907 844 991 299 254 376 861
Derivative liabilities
- 3 157 - - - - -
Loans and advances from Nestlé Group companies
1 828 475 - 438 630 - - - -
Debt securities issued
14 449 954 1 359 508 484 211 - - - -
Other financial liabilities
418 208 - - - - - -
Total financial liabilities
16 696 637 1 362 665 922 841 - - - -
Net financial position
-4 063 954 -869 958 3 323 162 84 907 844 991 299 254 376 861
31 December 2021
EUR per
2022 2021
1 US Dollar USD 1.065 1.131
1 Pound Sterling GBP 0.883 0.837
1 Brazilian Real BRL 5.558 6.309
1 Mexican Peso MXN 20.768 23.129
1 Russian Ruble RUB 75.120 84.637
Year ending rates
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 33 -
Objective of the method
NFI uses the described VaR analysis to estimate the potential one-day loss in the fair value of its financial
instruments. NFI cannot predict the actual future movements in market rates, therefore, the below VaR
numbers neither represent actual losses nor consider the effects of favorable movements in underlying
variables. Accordingly, these VaR numbers may only be considered indicative of future movements to the
extent the historic market patterns repeat in the future.
VaR figures
The VaR computation includes NFI’s financial assets and liabilities that are subject to foreign currency and
interest rate risk.
The estimated potential one-day loss from NFI’s foreign currency and interest rate risk sensitive instruments,
as calculated using the above described historic VaR model, is as follows:
Liquidity Risk
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.
NFI raises finance by the issuance of term debt instruments, principally in the capital markets.
NFI has ample market access including short term and medium-term debt capital markets, enjoying the
benefit of issuance with a Nestlé S.A. AA rated guarantee. NFI can access the Nestlé Group liquidity support
in place for Nestlé S.A. amounting to EUR 25 billion equivalent if there ever be an emergency
Therefore, NFI depends on broad access to these capital markets and investors. Changes in demand for
term debt instruments on capital markets could limit the ability of NFI to fund other members of the Nestlé
Group.
NFI depends on the willingness of banks to provide credit lines or loans. Due to structural changes in the
banking business, the willingness of banks to provide credit lines and loans has declined over the past
years. In order to reduce and minimise the dependence on banks, NFI has taken measures to maintain its
access to the capital markets. For the cashflow analysis please refer to Note 4 Financial instruments.
Risk of an increase in cost of capital
NFI’s capital management is driven by the impact on shareholders of the level of total capital employed. It
is NFI’s policy to maintain a sound capital base to support the continued development of its business.
However, increases in the cost of borrowing could negatively affect the operating results of NFI. Increases
in borrowing costs could arise from changes in demand for term debt instruments in the capital markets, the
removal of the unconditional and irrevocable guarantee of Nestlé S.A. and a decreasing willingness of banks
to provide credit lines and loans.
In thousands of Euro Year 2022 Year 2021
Foreign currency 6 990 24 067
Interest rate 1 685 102
Foreign currency and interest rate combined 8 167 24 027
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 34 -
Treasury operations
In the course of its business, the Nestlé Group, including NFI, has substantial assets under management.
Although the Nestlé Group has implemented risk management methods, including approved guidelines and
financial policies to mitigate and control such risks, as a result of holding such assets, it is exposed to default
risk, interest rate risk, foreign exchange risk and credit spreads. Returns on such assets may also be
affected by limited exposure to yield enhancing absolute return funds. In addition, adverse changes in the
credit quality of counterparties or a general deterioration in economic conditions or arising from systemic
risks in the financial systems could affect the value of those assets and thereby materially affect NFI’s
financial position.
12. Directors
The Board of Directors of NFI comprises five Directors. The Directors do not receive any remuneration for
their mandate.
13. Staff
In Luxembourg NFI employed on average three full-time employees during 2022 (three full-time employees
during 2021). All these employees provide treasury and accounting services.
14. Events after the balance sheet date
As at March 21, 2023, there is no subsequent events which either warrant a modification of the value of its
assets and liabilities or any additional disclosure.
Nestlé Finance International Ltd.
Annual Financial Report for the year ended 31 December 2022
- 35 -
4. Responsibility Statement
Raoul Heinen, Director, Martin Huber, Director, Patrick Yot, Director, Hermann Beythan, Director, Bruno
Chazard, Director and Steve Flammang, Chief Accountant confirm that to the best of their knowledge:
(a) the financial statements of NFI for the annual period ended 31 December 2022, which have been
prepared in accordance with IFRS as adopted by the European Union as well as with the laws and
regulations in force in the Grand-Duchy of Luxembourg, give a true and fair view of the assets, liabilities,
financial position and profit or loss of NFI; and
(b) the management report includes a fair review of the development and performance of the business
and the position of NFI, together with a description of the principal risks and uncertainties that it faces.
21 March 2023