The world's largest food group which makes brands such as Nescafe, Perrier, Maggi and Carnation warned that 2012 would be just as difficult as previous years due to continued economic uncertainties and volatility.
It was a challenging year, and we do not expect 2012 to be any easier, Chief Executive Paul Bulcke said in a statement.
Underlying sales growth for 2011 was 7.5 percent, beating an consensus forecast for 7.1 percent and rising from 7.3 percent in the first nine months, as it forecast underlying growth returning to its long term range of 5-6 percent.
Nestle also made its standard forecast for improved margin and underlying earnings per share in constant currencies for 2012 after reporting a 0.2 percentage point fall in its underlying operating margin in 2011 to 15.8 percent.
Overall we believe the market will react well to the strong sales results and positive outlook on 2012, despite the margin miss. However, we remain cautious on sales momentum entering 2012, Bernstein analyst Andrew Wood said in a note.
Nestle shares, which have lagged rivals to rise barely 1 percent this year, rose 1.5 percent to 55.25 francs by 1030 GMT, compared to a European food and drinks sector <.SX3P> up just 0.4 percent.
The group reported that absolute 2011 sales fell 4.8 percent -- slightly better than expected -- to 83.6 billion Swiss francs ($90.5 billion), as the rise in the safe-haven currency more than cancelled out underlying growth.
NEW PRODUCTS IN TOUGH MARKETS
It managed 3.7 percent underlying sales growth in the tough markets of Portugal, Italy, Greece and Spain and recorded a big surge in margins in Europe as it pushed new products like Dolce Gusto coffee and Maggi spice-filled roasting bags.
The key to our progress in Europe is innovations, Chief Financial Officer Jim Singh told an analyst conference call.
Analyst Polly Barclay at JP Morgan said, Nestle should trade at a premium to the sector given its relative resilience in Europe. Its shares currently trade in line with the sector.
Nestle is also growing fast in emerging markets, which Singh said should account for half of sales by 2020 from 41 percent last year.
French food rival Danone
Anglo-Dutch consumer goods group Unilever
Singh declined to comment on Nestle's interest in buying Pfizer's
He said cash-rich Nestle saw no need for now to reinstate its share buyback program, cancelled back in August, which helped stoke talk the group was more interested in acquisitions.
We look at all possible transactions to see the fit. I am not going to tell you we do not look at larger deals, Singh told a news conference, but added the company's strategy remained focused on bolt-on acquisitions.
Nestle is seen as a front-runner for Wyeth alongside French rival Danone
Speculation also surrounds Nestle's 31 percent stake in L'Oreal
Nestle's Bulcke said the board change did not affect a shareholder pact due to expire in 2014, under which each side has a right of first refusal on the other's stake, while neither can raise its stake during Bettencourt's lifetime or for six months following her death.
Nestle raised its 2011 dividend 5.4 percent to 1.95 francs a share. ($1 = 0.9236 Swiss francs)
(Editing by David Cowell and David Jones)