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About the CoverDuring COVID-19 crisis, we worked tirelessly to ensure thatmuch-needed food and beverage products were available for ourconsumers across Pakistan. At Nestlé, we care deeply for peopleand for the communities in which we operate, and we believe wehave an essential role to play.
CONTENTS030412131416171819202123242526313234OUR PURPOSE AND AMBITIONDIRECTORS’ REPORT TO THE SHAREHOLDERSANNEXURE TO DIRECTORS’ REPORT ONCORPORATE GOVERNANCEREVIEW REPORT BY THE CHAIRMANCOMPANY PERFORMANCE 2020STATEMENT OF WEALTH CREATION AND ITSDISTRIBUTIONKEY FINANCIAL DATA (SIX YEARS AT A GLANCE)PATTERN OF SHAREHOLDINGCLASSIFICATION OF SHARESBY CATEGORIESKEY SHAREHOLDING AND SHARES TRADEDSTATEMENT OF COMPLIANCE WITH THE CODEOF CORPORATE GOVERNANCEINDEPENDENT AUDITOR’SREVIEW REPORTBOARD OF DIRECTORSCOMPANY DIRECTORYNOTICE OF ANNUAL GENERALMEETINGABOUT NESTLÉ PAKISTAN363842444648495062666869707172121SUPPLY CHAINTECHNICALAGRICULTURE SERVICESSALESCONSUMER COMMUNICATION& MARKETING SERVICESNUTRITION, HEALTH AND WELLNESSFINANCE & CONTROL AND INFORMATIONTECHNOLOGYOUR BRANDSINDEPENDENT AUDITOR’S REPORT TO THEMEMBERS OF COMPANYSTATEMENT OF FINANCIAL POSITIONSTATEMENT OF PROFIT OR LOSSSTATEMENT OF COMPREHENSIVE INCOMESTATEMENT OF CHANGES IN EQUITYSTATEMENT OF CASH FLOWSNOTES TO THE FINANCIAL STATEMENTSFORM OF PROXYMANAGEMENT COMMITTEEHUMAN RESOURCESManaging adversityTHROUGH RESILIENCEMANAGEMENT REPORT202001
OUR PURPOSEUnlocking the power of food to enhance quality of life for everyone, today and for generations tocome.OUR AMBITIONGlobally, we have defined three overarching ambitions for 2030 which guide our work and supportthe achievement of the United Nations Sustainable Development Goals:HelpHelp to improvechildren live healthier liveslivelihoods in communities directlyconnected to our business activities50 million30 millionStrive forZeroenvironmental impact inour operations03
DIRECTORS’REPORTTo the ShareholdersThe Directors of Nestlé PakistanLimited (the “Company”) arepleased to submit the AnnualReport along with the auditedfinancial statements of theCompany for the year endedDecember 31, 2020.
Financial PerformanceThe year 2020 witnessed the COVID-19 pandemic which had a profound impact across the globe as well as in Pakistan. Thecountry was under lockdown on and off for most part of the year which resulted in massive disruption in the economic activitiesand a contraction in GDP by 0.4% in the portion of the fiscal year ended June 2020. In order to address the adverse impact ofthe pandemic, the Government rolled out a fiscal stimulus package under which the policy rate was lowered during the year andmultiple measures were implemented by the central bank to support businesses with their liquidity needs.Despite unprecedented situation caused by the pandemic, the Company recorded a revenue growth of 2.4% through undisruptedsupply and availability of products, innovation and renovation initiatives, numeric distribution expansion and investments behind thebrands. Improvement in our profitability has been achieved through various cost savings initiatives, optimization projects and pricingmanagement.The Company remains committed to its purpose of unlocking the power of food to enhance quality of life for everyone, today andfor generations to come. The major new product launches during 2020 included: NESTLÉ MILKPAK Butter (Salted & Unsalted),NESTLÉ FRUITA VITALS Qandhari Anaar, NESCAFE RTD Chilled Mocha, NESTLÉ CERELAC Recover, NESTLÉ CERELAC Nature’sselection, NESTLÉ LACTOGEN Essentials, NESTLÉ NAN 2 & 3 (HMO), DOCELLO Dessert Mixes, NESTLÉ EVERYDAY Karak Chai3-in-1, NESTLÉ NESCAFE Ice and NESTLÉ PURE LIFE (5G Active).PKR MillionSales20202019Change118,781115,962 2.4%Gross Profit margin29.3%28.8% 50 bpsOperating Profit margin13.5%13.0% 50 bpsNet Profit after tax8,8857,354 20.8 %7.5%6.3% 114 bps195.9162.2 20.8%Net Profit after tax (%)Earnings per shareDividendsIn view of the financial performance of the Company, the Board of Directors has recommended to paying a final cash dividend ofRs. 61 per share, in addition to the interim cash dividend already paid of Rs. 133 per share, which brings the total dividend for theyear to Rs. 194 per share for 2020 compared to Rs. 152 per share in 2019.Managing adversityTHROUGH RESILIENCEMANAGEMENT REPORT202005
DIRECTORS’ REPORTTo the ShareholdersInvestment ProjectsWith a market driven approach and commitment to satisfyingthe needs of our consumers, in 2020 Nestlé Pakistan madeinvestments of PKR 3.2 billion including expansion projects.Highlights are hereunder:1,708 Rs. in Million633 Rs. in MillionSheikhupura FactoryKabirwala Factory63 Rs. in Million312 Rs. in MillionWater PlantsDistribution and Salese)The system of internal control is sound in design and hasbeen effectively implemented and monitored;f)There are no significant doubts about the Company’sability to continue as a going concern;g)There has been no material departure from the bestpractices of corporate governance, as detailed in thelisting regulations;h)The value of investments of employee’s funds are asfollows (PKR millions):Audited2020Audited2019441 Rs. in MillionProvident Fund3,9403,680OthersGratuity Fund1,8451,796Pension Fund3,7473,351Investments, of approximately PKR 3.4 billion, are planned for2021, primarily focused on operational reliability and capacityincreases in order to meet consumer demands.Corporate & Financial ReportingFrameworkNestlé Pakistan is committed to maintaining high standardsof corporate governance without any exception. The Directorsare pleased to state that the Company is compliant with theprovisions of the Code of Corporate Governance as required bySECP and formed as part of stock exchange listing regulations.Statement of Compliance with Code of Corporate Governanceis as under.The Directors confirm that:a)The financial statements prepared by the management ofthe Company presents fairly its state of affairs, the resultsof its operations, cash flow and changes in equity;b)Proper books of accounts of the Company have beenmaintained;c)Appropriate accounting policies have been consistentlyapplied in preparation of financial statements andaccounting estimates are based on reasonable andprudent judgment;d)International Financial Reporting Standards, as applicablein Pakistan and the requirements of Companies Act,2017 have been followed in preparation of the financialstatements; and any departure thereof has beenadequately disclosed and explained;06i)Statements regarding the following are annexed ordisclosed in the notes to the accounts:(i)Key financial data for the last six years(ii)Pattern of shareholdings(iii) Trading in shares of the Company by its Directors,CEO, CFO and Company Secretary(iv) Number of Board meetings held during the year andattendance by each directorRemuneration Policy of NonExecutive DirectorsThe fee of the Non-Executive and Independent Directors forattending the Board and Committee meetings of the Companyis determined by the Board from time to time.External AuditorsMessrs. Ernst & Young Ford Rhodes, Chartered Accountantshave completed their assignment for the year 2020 and retireat the conclusion of the 43rd Annual General Meeting. Beingeligible, they have offered themselves for re-appointment.Holding Company andPrincipal ActivityNestlé S.A., a Company incorporated in Switzerland (theholding company), holds 26,778,229 ordinary sharesrepresenting a 59.05% equity interest in the Company. Theprincipal activity of the Company is manufacturing, processing
and sale of food products including imported products. Nochange has occurred during the financial year relating to thenature of the business of the Company.Human Resources Management& Employee RelationsBusinesses around the globe struggled with the globalpandemic in 2020 and people had to adapt to new waysof working due to restrictions in movement. In response tothe pandemic lockdowns and new working realities, the HRprocesses shifted to digital and virtual spaces, with greaterfocus on talent acquisition, employee engagement, employeehealth & wellness and learning & capability building.We also continued our focus on transforming our peopleprocesses in order to provide better services to our employeesand sustain an edge over competition. Key focus areas for2020 included connecting desk-free employees to technology,leadership development, capability building, utilization of onlinelearning platforms, employee relations and occupational healthfor building high performance teams to achieve organizationalgoals while diversity and commitment to compliance continuedto remain at the heart of our agenda.We continued working on giving learning and developmentopportunities to youth in the country in collaboration withUniversities/Technical Institutes. Few of the highlights are:9134Universities were targeted forCampus Drives and Job FairsInternships were offered (mostlyvirtual due to Covid)28Apprentices weretaken onboard18Management Traineeswere inducted39Campus Ambassadorswere onboardedNestlé Pakistan gives great significance to the health of itspeople at work in line with its commitment under NestléCorporate Business Principles. In 2020, the focus shiftedfrom providing primary / preventive health care to providingawareness regarding COVID-19 and implementation of relatedSOPs, reducing exposure and implementing health strategiesManaging adversityTHROUGH RESILIENCEMANAGEMENT REPORT2020across all Nestlé sites. In 2020, Nestlé Pakistan’s routinefunctioning was redefined in accordance with COVID-19protocols while ensuring zero production loss. In addition tothe awareness on COVID-19 preventive measures, healthawareness sessions were also conducted on various topics.The main theme of employee relations is maintaining healthyrelations by engaging with employees across sites. Weremained focused on employee relations through continuousvirtual employee engagement sessions, with the purpose ofstrengthening our relationship with the employees. 2020 wasan important year for employee relations as negotiations wereconcluded and an agreement with the Union has been signedfor 2020 and 2021 in an amicable way. Employee opinionsurvey “Nestlé & I” was successfully conducted in 2020 with100% employee participation.In order to engage, motivate and inspire young femaleprofessionals and equip them with the skills and tools theyneed for successful and dynamic careers, we continued our“Karo Aitemaad” program, which helped us in equipping21 females. Nestlé Pakistan is committed to giving fairemployment chances to differently abled people and help themin increasing their employability in the job market through ourprogram “Hai Tum Pe Yakeen”. A batch of 16 differently abledwas hired on one-year contracts, and 9 of them have alreadysuccessfully moved to permanent and other contractual rolesat Nestlé. A majority of the other differently abled batch is alsounder consideration for relevant permanent positions basedon their performance. Two sessions of a corporate onboardingprogram for new joiners “Spirit of Nestlé” were conductedvirtually where exposure to the entire value chain was given tothe new hires and a virtual visit of our Sheikhupura factory plantwas conducted.Responding to the new ways of learning, digital and virtualLearning and Capability building tools and content were madeavailable by global and local training teams. While our face toface trainings were put on hold, most of our training programswere converted to virtual sessions to help develop functionaland leadership capabilities. These programs are designedfor capability building of employees by deploying tools andconcepts in various situations enabling a positive impact onbusiness leading up to a total of 32,724 Management Traininghours. Due to the pandemic, a greater focus was placed onfostering the e-learning culture than ever before. Market DigitalLearning calendar - “iLearn Byte-Sized Learning” was designedto share key e-learnings and our employees completed 35,703e-learning sessions on various topics. In line with our CSVcommitment, 100% of our employees completed “HumanRights in Nestlé” training. In addition to this, 100% of ourPeople Managers completed “Diversity and Inclusion”, “Sexual07
DIRECTORS’ REPORTTo the ShareholdersHarassment Prevention” and “Compliance: A LeadershipResponsibility” e-learnings. “Global Connect & Learn” programwas launched to connect employees with subject matterexperts from around the globe for their capability development.12 Masters and 15 Learners from Pakistan joined the globalplatform.Creating Shared Value (CSV)and Community WorkNestlé Pakistan believes in Creating Shared Value (CSV) forthe communities and the health of our company is intrinsicallylinked to the health and resilience of the society we operate in.It is our belief that for a Company to be able to create value forits shareholders, it must also create value for society.At Nestlé, social responsibility does not end with a fewphilanthropic activities. Instead, CSV is embedded in ourbusiness model; where direct engagement and supportto communities is extended across the value chain. Thisadds value to the business and supports socioeconomicdevelopment for the communities. Our inspiration is governedby the Nestlé Corporate Business Principles. A signatory tothe UN Global Compact for Ethical Business, the Companyis committed to the stakeholders and the communitiesfor mutual growth and sustainability. From offering qualityproducts to consumers and providing a fair and diverse workenvironment for our employees; from our partners and rawmaterial providers to implementing responsible sourcingmodels into our relationships; from supporting underprivilegedcommunities to working with small farmers; from enhancingsustainability and environmental friendliness of our operationsto embedding ethical and transparent business practices, CSVis entrenched in the entire value chain of Nestlé.Our global focus areas are firmly embedded
32 management committee 34 human resources 36 supply chain 38 technical 42 agriculture services 44 sales 46 consumer communication & marketing services 48 nutrition, health and wellness 49 finance & control and information technology 50 our brands 62 independent auditor’s report to the members of company 66 statement of financial position 68 statement of profit or loss 69 statement of .
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