Nestlé.
We unlock the power of food
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today and for generations to come.
Nestlé Finance International Ltd.
Annual Financial Report
Management Report and
Financial Statements
1 January – 31 December 2023
(With Report of the Réviseur d’Entreprises Agréé thereon)
Registered Address:
5, Place de la Gare
L-1616, Luxembourg
Grand Duchy of Luxembourg
RCS. No B136737
Subscribed capital: EUR 440 000
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 20232
3 Management Report
6 Report of the Réviseur d’Entreprises Agréé
13 Financial Statements for the year ended 31 December 2023
14 Balance sheet
15 Income statement
16 Statement of comprehensive income and loss
17 Statement of changes in equity
18 Cash flow statement
19 Notes
19 1. Accounting policies
25 2. Operating income, expense and taxes
27 3. Derivative assets and liabilities
28 4. Financial instruments
32 5. Other assets and liabilities
32 6. Share capital, share premium and other reserves
33 7. Capital management
34 8. Debt securities
35 9. Transactions with related parties
37 10. Guarantees
37 11. Risk and uncertainties
42 12. Directors
42 13. Staff
42 14. Events after the balance sheet date
43 Responsibility Statement
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023 3
Nestlé Finance International Ltd. (“NFI” or the “Company”)
presents its annual financial report for the financial year
ended 31 December 2023. 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 and nutrition products,
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 activity of NFI is the financing of Nestlé S.A.
and its affiliates 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.
(A) Review of the development and performance of the
business during the financial year
As at 31 December 2023, a total equivalent of EUR 19 072
million of loans and advances granted to Nestlé Group
companies was outstanding, compared to EUR 19 012
million as at 31 December 2022. 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, cash
and cash equivalents (consists of cash balances and
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 2023.
Total assets were EUR 19 443 million and EUR 19 040
million as at December 2023 and 2022, respectively. The
increase results mainly from an increase in cash and cash
equivalents (by EUR 333 million), from an increase in loans
and advances granted to Nestlé Group companies (by
EUR 60 million), from an increase in derivative assets (by
EUR 3 million), and an increase in deferred tax assets (by
EUR 6 million).
Total liabilities were EUR 19 401 million and EUR 18 980
million as at December 2023 and 2022, respectively. Debt
securities outstanding at 31 December 2023 (EUR 18 999
million) increased by EUR 371 million as compared to 31
December 2022 (EUR 18 628 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 2023 (EUR 263 million) increased by EUR 263
million as compared to 31 December 2022 (EUR 0 million).
Following a net profit in 2022 of EUR 30 million in 2022
due to a favorable development of borrowing rates in the
debt market, NFI recognizes a net loss of EUR 18 million in
2023.
Net loss before tax for the financial year ended 31
December 2023 was EUR 24 million, compared to a net gain
before tax of EUR 55.6 million for the financial year ended 31
December 2022. The movement was due to an increase in
third party interest expense (by EUR 223 million) resulting
from an increase in debt securities issued with higher
interest rate. This result was partially offset by an increase in
intercompany interest income (by EUR 28 million) resulting
from the loans and advances granted to Nestlé S.A. and its
affiliates, a decrease in net fee and commission expense (by
EUR 189 million) arising from the termination of foreign
exchange transfer agreement between NFI and Nestlé S.A.,
a decrease in other operating income (by EUR 63 million)
resulting from foreign exchange loss on non-EUR
denominated instruments partially offset by a decrease in
financial expense (by EUR 11 million).
NFI’s net operating cash inflow (“Net cash used in
operating activities”) was EUR 175 million for the financial
year ended 31 December 2023 compared to net operating
cash outflow of EUR 2 322 million for the financial year
ended 31 December 2022.
To limit the risk of the foreign exchange currencies and
the risk of counterparties, NFI transferred the major part of
the loans granted to Nestlé Group entities to a unique Nestlé
Group entity in 2022. The remaining part of the loans have
been transferred in early 2023. As a reciprocal arrangement,
NFI grants loans denominated in Euro to this unique entity
(Note 9).
Future financial performance will largely depend on the
net interest margin earned on loans and investments
granted based on existing and possible further issues of
bonds, commercial papers and loans and advances received
from Nestlé Group companies and results from derivative
transactions. The rapid and significant growth in rates has
Management Report
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 20234
had a negative impact on this year’s result. Despite the
current net loss, management remains confident about NFI’s
future financial outlook once the rates stabilize. They believe
that the current loss is temporarily due to the unfavorable
development in borrowing rates in the debt market.
Management will continue to closely monitor market
developments and take appropriate measures to mitigate
risks associated with interest rate fluctuations. Management
is confident that NFI is well-positioned to address these
challenges and regain a positive financial situation in the
future.
(B) Risks and Uncertainties
NFI is exposed to certain risks and uncertainties: credit risk,
market risk, 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 2023, in particular in Note 11. NFI is
engaged in hedging activities to limit its exposure to risk.
(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.
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
shares issued and they 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 issues bonds which are admitted for trading on the
London Stock Exchange’s regulated market and the
Luxembourg Stock Exchange. 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.
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023 5
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 22, 2024, there are no subsequent events which
either warrant a modification of the value of its assets and
liabilities or any additional disclosure.
Future developments
It is expected that NFI’s business activities will remain
unchanged in 2024. 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 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 2023, the total current assets amount
to EUR 2 789 million and the total current liabilities amount
to EUR 2 852 million. NFI will be able to face the current debt
with the current asset available and the different debt
program in place. NFI has access to short and medium term
capital market as well as to Nestlé Group liquidity support in
place for Nestlé S.A. if there ever be an emergency. For the
next year, 84% (72% 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.
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
Independent auditor’s report
To the Shareholder of
Nestlé Finance International Ltd. S.A.
5, Place de la Gare
L-1616 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”),
which comprise the statement of financial position as at 31 December 2023, 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 material accounting policy information.
In our opinion, the accompanying financial statements give a true and fair view of the financial position of
the Company as at 31 December 2023, and of its financial performance and cash flows for the year then
ended in accordance with IFRS Accounting Standards 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 (“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 as adopted for
Luxembourg by the CSSF 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.
Ernst & Young
Société anonyme
35E, Avenue John F. Kennedy
L-1855 Luxembourg
Tel: +352 42 124 1
www.ey.com/luxembourg
B.P. 780
L-2017 Luxembourg
R.C.S. Luxembourg B 47 771
TVA LU 16063074
6
7Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
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 2023, the current portion of loans and advances granted to Nestlé entities
amounted to EUR 2 448 422 whilst the non-current portion amounted to EUR 16 623 668 both
totalling EUR 19 072 090 and representing 98.1% 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
2023 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.
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 on impairment and the evaluation of the recoverability of loans receivables
and advances 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 to the carrying value of the Loans
reported in the financial statements and to the related parties’ financial information obtained
from Nestlé Group companies.
- We assessed the methods and assumptions applied by Management in their ECL analysis.
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
- We performed an overall assessment of the ECL provision to evaluate its reasonableness
considering the Company’s portfolio, risk profile, credit risk management policies and the
macroeconomic environment.
- 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 and of those charged with governance for the
financial statements
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”).
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.
8
9Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
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.
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
• 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.
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 21st March 2023 and the duration of our uninterrupted engagement, including
previous renewals and reappointments, is 4 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
2023 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 2023, identified as
“nestle-finance-international-ltd-fullyear-financial-report-2023.xHTML”, have been prepared, in all
material respects, in compliance with the requirements laid down in the ESEF Regulation.
10
11Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
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
Société anonyme
Cabinet de révision agréé
Olivier Lemaire Petar Dionissiev
Luxembourg, 22 March 2024
13Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
Financial Statements 2023
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 202314
Balance sheet
as at 31 December 2023
In thousands of Euro
Notes 2023 2022
Assets
Current assets
Cash and cash equivalents 4 335 461 2 406
Derivative assets 3/4 4 077 1 215
Loans to Nestlé Group companies 4 2 448 422 6 442 480
Current tax assets — 34
Other assets 4/5 1 378 752
Total current assets 2 789 338 6 446 887
Non-current assets
Loans to Nestlé Group companies 4 16 623 668 12 569 090
Deferred tax assets 5 29 845 24 011
Total non-current assets 16 653 513 12 593 101
Total assets 19 442 851 19 039 988
Liabilities
Current liabilities
Derivative liabilities 3/4 18 518 83 160
Loans from Nestlé Group companies 4 262 690 —
Debt securities issued 4/8 2 451 080 4 082 839
Other liabilities 4/5 120 236 269 646
Total current liabilities 2 852 524 4 435 645
Non-current liabilities
Debt securities issued 4/8 16 548 628 14 544 963
Total non-current liabilities 16 548 628 14 544 963
Total liabilities 19 401 152 18 980 608
Equity
Share capital 6 440 440
Share premium and other premiums 6 102 000 102 000
Hedging reserve 6 281 (69)
Legal reserve 6 44 44
Other reserve 6 4 955 4 955
Accumulated losses (66 021) (47 990)
Total equity attributable to shareholders of the company 41 699 59 380
Total liabilities and equity 19 442 851 19 039 988
The accompanying notes form an integral part of the financial statements.
15Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
Income statement
for the year ended 31 December 2023
In thousands of Euro
Notes 2023 2022
Interest income 346 796 318 838
Interest expense (356 830) (133 764)
Net interest income / (loss) 2 (10 034) 185 074
Net fee and commission income / (expense) from Nestlé Group companies 2 (19 446) (208 916)
Financial income / (expense) 2 180 10 335
Other operating income / (expense) 2 8 027 71 129
Operating profit / (loss) (21 273) 57 622
Administration expense (2 501) (1 977)
Profit / (loss) before tax (23 774) 55 645
Taxes 2 5 743 (25 150)
Profit / (loss) for the year attributable to shareholders of the company (18 031) 30 495
The accompanying notes form an integral part of the financial statements.
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 202316
Statement of comprehensive income and loss
for the year ended 31 December 2023
In thousands of Euro
2023 2022
Profit / (loss) for the year recognised in the income statement (18 031) 30 495
Adjustments on cost of hedge reserve
Recognised in hedging reserve, net of taxes 350 (532)
Items that are or may be reclassified subsequently to the income statement 350 (532)
Other comprehensive income / (loss) for the year 350 (532)
Comprehensive income / (loss) for the year attributable to shareholders of the company (17 681) 29 963
The accompanying notes form an integral part of the financial statements.
17Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
Statement of changes in equity
for the year ended 31 December 2023
In thousands of Euro
Notes
Share capital
Share premium and
other premiums
Hedging reserve
Available-for-sale
reserve
Legal reserve
Other reserve
Accumulated losses
Total equity attribut-
able to shareholders
of the company
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 period — — (532) — — — 30 495 29 963
Equity as at 31 December 2022 440 102 000 (69) — 44 4 955 (47 990) 59 380
Gains and losses
Loss for the year — — — — — — (18 031) (18 031)
Adjustments on cost of hedge reserve 6 — — 350 — — — — 350
Total comprehensive income for the period — — 350 — — — (18 031) (17 681)
Equity as at 31 December 2023 440 102 000 281 — 44 4 955 (66 021) 41 699
The accompanying notes form an integral part of the financial statements.
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 202318
Cash flow statement
for the year ended 31 December 2023
In thousands of Euro
Notes 2023 2022
Operating activities
Profit / (loss) before taxation for the year (23 774) 55 645
Adjustments for non-cash transactions
Foreign exchange (gain) / loss for loans, debt securities and derivatives 58 301 153 548
Fair value of debt securities 15 384 (25 667)
Interest income 2 (346 796) (318 838)
Interest expense 2 356 830 133 764
Cash flow before changes in operating assets and liabilities 59 945 (1 548)
Change in other assets excluding prepaid and accrued income 5 (626) 157
Change in other liabilities excluding accrual and deferred income 5 (203 234) (170 065)
Inflow / (outflow) in short term investments — 1 084 000
Cash flow generated from operations (143 914) 912 544
Net loans and advances to Nestlé Group companies excluding intra group interest receivable 9 (137 111) (1 226 627)
Net loans and advances from Nestlé Group companies excluding intra group interest payable 9 262 690 (2 267 105)
Interest received net of withholding tax 316 128 303 867
Interest paid (122 871) (45 469)
Income tax received / (paid) (37) 141
Operating cash flow 174 885 (2 322 649)
Financing activities
Change in derivative assets including those recognised directly in equity (2 862) 23 255
Change in derivative liabilities 4 (64 642) 80 003
Bonds issued 8 3 143 213 3 468 039
Commercial paper issued 8 47 376 921 59 188 365
Bonds repaid 8 (963 727) (850 000)
Commercial paper repaid 8 (49 332 068) (59 691 523)
Financing cash flow 156 835 2 218 139
Effects of the exchange rate changes on cash 1 336 935
Net decrease in cash and cash equivalents 333 055 (103 575)
Net cash and cash equivalents at beginning of the year 2 406 105 981
Net cash and cash equivalents at the end of the year 335 461 2 406
Net cash and cash equivalents as per balance sheet 4 335 461 2 406
The accompanying notes form an integral part of the financial statements.
19Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
1. Accounting policies
Basis of preparation
These financial statements for the periods presented through December 31, 2023 have
been prepared in accordance with IFRS Accounting Standards issued by the International
Accounting Standards Board (IASB) and with the IFRIC Interpretations issued by the IFRS
Interpretations Committee 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
value.
The balance sheet has been prepared in order of liquidity.
NFI prepared its financial statements on the basis of the going concern convention. NFI
has access to ample liquidity, including short and medium term capital markets, enjoying
the benefit of issuance with Nestlé S.A.’s 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 22
March 2024 and are subject to approval by the Annual General Meeting on 24 April 2024.
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. Actual
result may differ from these estimates. 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 that involve a higher degree of judgment or uncertainty are explained
further in the relevant notes, primarily regarding the determination of fair value of financial
instruments (Note 1 on fair value, 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 loans granted to Nestlé S.A. and its affiliates.
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 and changes which can result in different levels of allowances.
However, NFI’s expected credit losses calculations is derived from different output models
with a number of underlying assumptions regarding the choice of variable inputs and
interdependencies. Elements of the ECL model 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.
Notes
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
1. Accounting policies
20
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. Therefore, there is one
reporting segment 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.
Deferred taxes are based on 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 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 rate are recognised in the
income statement unless related to items directly recognised against equity or other
comprehensive. Deferred tax liabilities are recognised on all taxable 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.
21Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
1. Accounting policies
Financial instruments
Financial assets
Financial assets are initially recognised at fair value plus directly attributable transaction
costs. However, when a financial asset measured at fair value through profit and loss is
recognised, the transaction costs are expensed immediately. Subsequent remeasurement
of financial assets is determined by their category, which is revisited at each reporting
date.
The settlement date is used for initial recognition and 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 profit and loss.
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.
Loans to parent and affiliates 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 amortized cost using the
effective interest rate method and are subject to impairment.
Financial instruments at fair value through profit and loss
Derivative instruments are classified as financial instruments at fair value through profit
and loss. 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. NFI applies hedge accounting to hedging relationships that meet the qualifying
criteria.
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.
Short term investments which consist of investments in money market fund are
classified at fair value through profit and loss. 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 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.
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
1. Accounting policies
22
Financial liabilities at amortised cost are classified as current and non-current
depending on 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 assumptions 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.
Loans are granted by NFI solely to Nestlé S.A. and its affiliates. Loss given default
(“LGD”) has been assumed to be 30% (2022: 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.
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: Credit risk has increased significantly since initial recognition. Based on the
financial figures of the Group reporting NFI will be informed 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: Financial asset is impaired. NFI will be inform by Nestlé Group that a borrower is
in bankruptcy and NFI will perform to an impairment.
23Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
1. Accounting policies
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.
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 21 March 2023, 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 2023.
Nestlé S.A. consolidation
NFI is included in the consolidated financial statements of Nestlé S.A. being 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.
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
1. Accounting policies
24
Changes in accounting standards
Several amendments apply for the first time in 2023 including among others,
International Tax Reform – Pillar Two Model Rules (Amendments to IAS 12), 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). These
amendments had no material impact on NFI’s Financial Statements.
Changes in accounting standards that may affect NFI after 31 December 2023
There were 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.
25Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
2. Operating income, expense and taxes
Net interest income
In thousands of Euro
2023 2022
Interest income from
Cash and cash equivalents 1 770 203
Loans and advances to Nestlé Group companies 345 026 318 635
Interest income 346 796 318 838
Interest expense from
Loans and advances from Nestlé Group companies (17 671) (473)
Debt securities issued (339 159) (133 291)
Interest expense (356 830) (133 764)
Net interest income / (expense) (10 034) 185 074
Financial income / (expense)
In thousands of Euro
2023 2022
Expected credit loss on financial assets (increase) / decrease 180 10 335
Financial income / (expense) 180 10 335
Other operating income
In thousands of Euro
2023 2022
Net foreign exchange gain / (expense) (58 301) (153 548)
Net gain / (expense) on hedging instruments 68 092 247 088
Net gain / (expense) on trading instruments 1 336 (22 911)
Net gain / (expense) in fair value through income statement (3 100) 500
Other operating income / (expense) 8 027 71 129
The variation of the net foreign exchange gain is mainly due to the fluctuation of the
currencies USD, GBP, RUB and MXN against EUR. The exposition change during the year
see Note 11.
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
2. Operating income, expense and taxes
26
Taxes
In thousands of Euro
2023 2022
Profit / (loss) for the year (18 031) 30 495
Tax income / (expense) 5 743 (25 150)
Profit / (loss) before tax (23 774) 55 645
Withholding tax on interest received (4) (14 971)
Profit / (loss) before income tax and after withholding tax (23 778) 40 674
Tax income / (expense)
Tax using NFI's domestic tax rate 24,94% (2022: 24,94%) 5 929 (10 144)
Net wealth tax (182) (35)
Withholding tax on interest received (4) (14 971)
Total tax income / (expense) 5 743 (25 150)
Fees charged by Ernst & Young S.A. (“EY”) and other member firms of the EY network
during the year ended December 31 2023 were as follows:
In thousands of Euro
2023 2022
Legal annual audit fees (83) (46)
Fees charged by EY network (83) (46)
27Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
3. Derivative assets and liabilities
By type
In thousands of Euro
2023 2022 2023 2022 2023 2022
Contractual or notional
amounts Fair value assets Fair value liabilties
Fair value hedges
Currency forwards and swaps on
debt securities issued 971 126 1 627 053 4 077 1 215 18 518 69 962
Interest rate and currency swaps on
debt securities issued — 828 243 — — — 13 198
Total 971 126 2 455 296 4 077 1 215 18 518 83 160
Conditional offsets *
Derivative assets and liabilities (4 077) (604) (4 077) (604)
Balances after conditional offsets — 611 14 441 82 556
* 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.
In thousands of Euro
2023 2022
On hedged items (80 368) (232 447)
On hedging instruments 76 728 231 134
Ineffective portion of gains/(losses) mainly related to the cost of hedge of fair value hedges
is not significant.
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 202328
4. Financial instruments
Financial assets and liabilities
By class
In thousands of Euro
2023 2022
Financial assets
Cash and cash equivalents 335 461 2 406
Derivative assets 4 077 1 215
Loans and advances to Nestlé Group companies 19 072 090 19 011 570
Other financial assets
(a)
1 378 752
Total financial assets 19 413 006 19 015 943
Financial liabilities
Derivative liabilities 18 518 83 160
Loans and advances from Nestlé Group companies 262 690 —
Debt securities issued 18 999 708 18 627 802
Other financial liabilities
(a)
120 236 269 646
Total financial liabilities 19 401 152 18 980 608
Net financial position 11 853 35 335
(a) Refer to Note 5.
29Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
4. Financial instruments
By category
In thousands of Euro
2023 2022
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)
1 758 — 1 758 2 406 — 2 406
Time deposit
(a)
333 703 — 333 703 — — —
Short term investments — — — — — —
Loans and receivables
(a)
19 073 468 — 19 073 468 19 012 322 — 19 012 322
Liquid assets and non-current financial assets 19 408 928 — 19 408 928 19 014 728 — 19 014 728
Derivative assets — 4 077 4 077 — 1 215 1 215
Total financial assets 19 408 928 4 077 19 413 006 19 014 728 1 215 19 015 943
Loans and payables
(a)
382 926 — 382 926 269 646 — 269 646
Financial debt
(b)
18 999 708 — 18 999 708 18 627 802 — 18 627 802
Current and non-current financial liabilities 19 382 634 — 19 382 634 18 897 448 — 18 897 448
Derivative liabilities — 18 518 18 518 — 83 160 83 160
Total financial liabilities 19 382 634 18 518 19 401 152 18 897 448 83 160 18 980 608
Net financial positions 26 294 (14 441) 11 853 117 280 (81 945) 35 335
of which at fair value (14 441) (14 441) (81 945) (81 945)
(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 papers and bank overdrafts
Fair value hierarchy of financial instruments
In thousands of Euro
2023 2022
Derivative assets 4 077 1 215
Derivative liabilities (18 518) (83 160)
Valuation techniques based on observable market data (Level 2) (14 441) (81 945)
Total financial instruments at fair value (14 441) (81 945)
There have been no significant transfers between the different hierarchy levels in 2023.
There were no financial instruments within the category Level 1 (prices quoted in active
markets) and Level 3 (valuation techniques based on unobservable input). All financial
instruments are within Level 2 category.
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
4. Financial instruments
30
The fair values categorized in Level 2 above were determined as follows: derivatives are
valued based on discounted contractual cash flows using risk adjusted discount rates and
relying on observable market data for interest rates and foreign exchange rates.
Contractual maturities of financial liabilities and derivatives
The tables below shows the liabilities at 31 December 2023 and 31 December 2022 by
their remaining contractual maturities. The amounts disclosed in the maturity tables are
undiscounted cash flows.
In thousands of Euro 2023
Contractual amount
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 120 236 — — — — 120 236 120 236
Loans from Nestlé Group companies 262 690 — — — — 262 690 262 690
Commercial paper 1 071 980 238 037 — — — 1 310 017 1 301 405
Bonds 571 195 827 190 760 488 5 772 902 12 218 568 20 150 343 17 698 303
Debt securities issued 1 643 175 1 065 227 760 488 5 772 902 12 218 568 21 460 360 18 999 708
Gross amount receivable from currency
derivatives 733 089 238 037 — — — 971 126 962 868
Gross amount payable from currency derivatives (738 919) (238 545) — — — (977 464) (977 309)
Non currency derivative — — — — — — —
Net derivatives (5 830) (508) — — — (6 338) (14 441)
31Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
4. Financial instruments
In thousands of Euro 2022
Contractual amount
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
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
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)
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
32
5. Other assets and liabilities
In thousands of Euro
2023 2022
Other financial assets
Intra Nestlé Group other receivables 78 55
Other receivables 1 300 697
Total other assets 1 378 752
Other financial liabilities
Intra Nestlé Group other payables 1 469 204 600
Other payables 1 440 1 866
Accruals and deferred income 117 327 63 180
Total other liabilities 120 236 269 646
Deferred tax assets
In thousands of Euro
2023 2022
Opening balance 24 011 34 155
Increase / (decrease) 5 834 (10 144)
Closing balance 29 845 24 011
6. Share capital, share premium and other reserves
2023 2022
Number of shares of nominal value EUR 2 each 220 000 220 000
In thousands of Euro 440 440
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 2023 and as at 31 December 2022, 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.
33Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
6. Share capital, share premium and other reserves
As at 31 December 2023, the net wealth tax reserve is EUR 4 955 thousand (2022: EUR 4
955 thousand) of which EUR 2 962 thousand (2022: EUR 2 295 thousand) is distributable
to the shareholder. The movements in other reserve for the period ended 31 December
2023 were as follows:
In thousands of Euro
2023 2022
Opening balance 4 955 4 955
Substraction / addition — —
Closing balance 4 955 4 955
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 2023, the hedging cost reserve net of tax is EUR 281 thousand
(2022: EUR -69 thousand) associated with the fair value hedges.
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 23 062 thousand i.e. 0.12% by EUR 19 072 090
thousand (2022: EUR 62 738 thousand i.e. 0.33% by EUR 19 011 570 thousand).
EUR 23 062 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 2023, the actual share capital, share premium and accumulated
losses amount to EUR 36 419 thousand and is therefore above the minimum amount
defined above.
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
34
8. Debt securities
Bonds
The outstanding amounts of bonds at 31 December 2023 and 31 December 2022 were as
follows:
In thousands of Euro
2023 2022
Face value
Interest rates
Years of issue/maturity CommentsNominal Effective
EUR 500.000 0.75% 0.92% 2015–2023 (b) - 493 955
EUR 500.000 0.38% 0.00% 2017–2024 499 961 499 129
EUR 750.000 1.25% 1.32% 2017–2029 747 142 746 674
EUR 750.000 1.75% 1.83% 2017–2037 743 061 742 624
GBP 400.000 2.25% 2.34% 2012–2023 (a) - 443 186
EUR 1.000.000 1.13% 1.27% 2020–2026 996 811 995 425
EUR 1.000.000 1.50% 1.63% 2020–2030 992 384 991 238
EUR 850.000 0.13% 0.25% 2020–2027 845 783 844 699
EUR 650.000 0.00% 0.00% 2020–2024 649 714 649 405
EUR 1.000.000 0.38% 0.56% 2020–2032 985 130 983 400
EUR 500.000 0.00% (0.26%) 2020–2025 502 498 503 797
EUR 500.000 0.00% 0.16% 2020–2033 492 790 492 005
EUR 500.000 38.00% 0.40% 2020–2040 498 315 498 219
EUR 1.250.000 0.00% 0.00% 2021–2026 1 250 093 1 250 142
EUR 750.000 0.25% 0.32% 2021–2029 747 260 746 763
EUR 500.000 0.63% 0.69% 2021–2034 496 797 496 493
EUR 650.000 0.88% 1.01% 2021–2041 636 143 635 422
EUR 600.000 0.88% 0.95% 2022–2027 598 486 598 030
EUR 600.000 1.25% 1.33% 2022–2031 596 729 596 302
EUR 800.000 1.50% 1.63% 2022–2035 789 409 788 559
EUR 500.000 3.00% 3.13% 2022–2028 497 344 496 763
EUR 500.000 3.25% 3.38% 2022–2031 495 963 495 463
EUR 500.000 3.38% 3.49% 2022–2034 494 800 494 411
EUR 850.000 3.50% 3.66% 2023–2027 845 151 -
EUR 850.000 3.75% 3.85% 2023–2033 843 337 -
EUR 500.000 3.50% 3.56% 2023–2030 498 332 -
EUR 500.000 3.75% 3.84% 2023–2035 495 910 -
GBP 400.000 5.13% 5.16% 2023–2038 458 960 -
Total 17 698 304 15 482 104
of which due in twelve months 1 149 676 937 141
of which due in the second year 502 498 1 148 534
of which due between three to five years 4 536 324 4 192 093
of which due after five years 11 509 806 9 204 336
(a) Subject to an interest rate swap
(b) Out of which EUR 375 million was subject to an interest rate swap in 2022
These bonds are admitted to trading on the London Stock Exchange’s regulated market
and the Luxembourg Stock Exchange.
35Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
8. Debt securities
As of 31 December 2023, the fair value of bonds amounts to EUR 16 572 219 thousand
(31 December 2022 EUR 13 420 912 thousand). This fair value is categorized as level 2,
measured on the basis of quoted prices.
As of 31 December 2023, NFI has no open position hedged by interest rate derivative,
refer to Note 8 and outstanding amounts of bonds at 31 December 2023. In 2022, some
bonds were hedged by interest rate derivatives. The fair value of these derivatives was
included within derivative liabilities for EUR 13 197 thousand.
Issue and repayment of bonds
Several series of bonds were issued in 2023 for EUR 3 160 747 thousand gross minus of
the loan origination cost of EUR 17 534 thousand (2022: EUR 3 500 000 thousand gross
minus of the loan origination cost of EUR 31 961 thousand).
One series of bonds was repaid at maturity during the financial year ended 31
December 2023 for EUR 963 727 thousand (2022: EUR 850 000 thousand).
Commercial Paper
The outstanding amounts of commercial paper at 31 December 2023 were as follows:
In thousands of Euro
2023 2022
Commercial paper due within three months 1 068 164 3 145 698
Commercial paper due within nine months 233 240 —
The interest rates of the commercial papers are between 1.05% and 5.46% (2022: -0.87%
and 4.30%).
Carrying amount of these instruments is a reasonable approximation of their fair value
based on observable market data.
During the year 2023 NFI issued for EUR 47 376 921 thousand (2022: EUR 59 188 365
thousand) and repaid for EUR 49 332 068 thousand (2022: EUR 59 691 523 thousand) of
commercial paper.
9. Transactions with related parties
Financing of the Nestlé Group companies
The principal activity of NFI is the financing of Nestlé S.A. and its affiliates. NFI assesses
the impairment risk in Note 1.
The transactions with Nestlé Group companies are based on arm’s length prices.
NFI 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 have been
transferred in 2023. In exchange, NFI grants loans denominated in EUR to this unique
entity.
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
9. Transactions with related parties
36
The balances of transactions with related parties at the financial year ended 31 December
2023 are given below:
In thousands of Euro
2023 2022
Assets
Loans and advances to Nestlé Group companies excluding accrued interest 19 014 163 18 984 311
Accrued interest on loans to Nestlé Group companies 57 926 27 259
Total assets 19 072 090 19 011 570
Liabilities
Derivatives liabilities to Nestlé Group companies — 12 865
Loans and advances from Nestlé Group companies excluding accrued interest 262 690 —
Others payables to Nestlé Group companies 1 469 204 600
Total liabilities 264 159 217 465
Net assets 18 807 931 18 794 105
In thousands of Euro
2023 2022
Interest income on loans and advances to Nestlé Group companies 345 026 318 635
Interest expense on loans and advances from Nestlé Group companies (17 671) (473)
Grant, receipt and repayments of loans for the financial year ended 31 December 2023
were as follows:
In thousands of Euro
2023 2022
Loans granted to Nestlé Group companies excluding accrued interest 56 452 399 40 377 192
Repayment of loans by Nestlé Group companies excluding accrued interest (56 315 287) (39 150 565)
Net loans and advances granted / (repaid) by Nestlé Group companies 137 111 1 226 627
Loans received from Nestlé Group companies excluding accrued interest 262 690 13 742 363
Repayment of loans to Nestlé Group companies excluding accrued interest — (16 009 468)
Net loans and advances received / (repaid) to Nestlé Group companies 262 690 (2 267 105)
37Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
9. Transactions with related parties
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:
In thousands of Euro
2023 2022
Payables to Nestlé S.A. 1 469 204 413
In thousands of Euro
2023 2022
Other financial expenses to Nestlé S.A. (19 446) (208 702)
The ECL calculation is related to the loan granted to Nestlé Group companies (see Note 11)
for EUR 915 thousand (2022: EUR 1 095 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
(2022: EUR 25 billion), EUR 2 billion Billets de Trésorerie French Commercial Paper
Programme and Euro Medium Term Note (EMTN) Debt Issuance Programme
(2022: EUR 2 billion).
NFI itself has not provided any guarantees in favour of third parties.
11. Risks 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 represents 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
companies given the purpose of the Company, with primary exposure in EUR in 2
countries following the transfer of the loans and the associated foreign currency exposure
to a unique Nestlé Group entity. In 2022, the primary exposure was related to loans
granted to Nestlé Group companies denominated in EUR and GBP in 15 countries.
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
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
11. Risks and uncertainties
38
(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.
As at 31 December 2023 and as at 31 December 2022, the cash and cash equivalents
and the short term investments are deal with counterparties above BBB+. Therefore, the
ECL is immaterial.
As at the balance sheet date, NFI has impaired some loans and advances to Nestlé
affiliates based on ECL calculation (Note 1), no other financial assets were impaired.
In thousands of Euro
2023 2022
Grade Nominal ECL calculated Nominal ECL calculated
A- and above 16 597 790 916 15 036 254 1 008
BBB+, BBB and BBB- — — 375 297 12
BB+ and below — — 841 737 76
Not rated — — — —
Total 16 597 790 916 16 253 288 1 096
Banking Credit
As part of 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
39Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
11. Risks and uncertainties
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
2023
EUR USD GBP BRL MXN Others
Cash and cash equivalents 195 694 41 135 98 240 — — 392
Derivative assets — 4 077 — — — —
Loans and advances to Nestlé
Group companies 17 531 586 285 092 507 631 — — 747 783
Current tax assets — — — — — —
Other financial assets 1 378 — — — — —
Total financial assets 17 728 658 330 304 605 871 — — 748 175
Derivative liabilities — 18 153 365 — — —
Loans and advances from
Nestlé Group companies 262 673 17 — — — —
Debt securities issued 17 239 343 1 301 404 458 960 — — —
Current tax liabilities 115 — — — — —
Other financial liabilities 120 236 — — — — —
Total financial liabilities 17 622 368 1 319 574 459 325 — — —
Net financial position 106 290 (989 270) 146 546 — — 748 175
In thousands of Euro
2022
EUR USD GBP BRL MXN Others
Cash and cash equivalents 929 222 646 — — 609
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
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
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
11. Risks and uncertainties
40
EUR per
2023 2022
Year ending rates
1 US Dollar USD 1.107 1.065
1 Pound Sterling GBP 0.868 0.883
1 Brazilian Real BRL 5.357 5.558
1 Mexican Peso MXN 18.758 20.768
1 Russian Ruble RUB 98.937 75.120
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 100% (2022:
95%).
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.
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.
41Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
11. Risks and uncertainties
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:
In thousands of Euro
2023 2022
Foreign currency 2 316 6 990
Interest rate 0 1 685
Foreign currency and interest rate combined 2 315 8 167
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 in capital markets. 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.
NFI has access to ample liquidity, including short term and medium term capital
markets, through the Nestlé Group’s Debt Issuance Program (DIP), Global Commercial
Paper Program of up to a combined aggregate amount of 25 billion equivalent and NEU
CP French Commercial Paper of up to a combined aggregate amount of 2 billion
equivalent, enjoying the benefit of issuance with Nestlé S.A.’s AA- rated guarantee.
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.
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
Nestlé Finance International Ltd. – Annual Financial Report for the year ended 31 December 2023
11. Risks and uncertainties
42
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 six full-time employees during 2023 (three full-
time employees during 2022). All these employees provide treasury and accounting
services.
14. Events after the balance sheet date
As at March 22, 2024, there are 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 2023 43
Raoul Heinen, Director, Martin Huber, Director, Patrick Yot,
Director, Hermann Beythan, Director, Bruno Chazard,
Director confirm that to the best of their knowledge:
(a) the financial statements of NFI for the annual period
ended 31 December 2023, 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.
22 March 2024
Responsibility Statement