Nestlé Reports Steady First Half Momentum, Full-Year Outlook Confirmed

The Group's trading operating profit (TOP) was CHF 6.6 billion, up 6.3% from CHF 6.2 billion in the first half of 2011. The margin was 15.0%, in line with our expectation that our margin performance would be second-half weighted.

9 Aug 2012 --- In the first half of 2012, the Nestlé Group's organic growth was 6.6%, composed of real internal growth of 2.9% and pricing of 3.7%. The impact of foreign exchange eased to -1.8%. Acquisitions, net of divestitures, contributed 2.7%. Total Group sales increased 7.5% to CHF 44.1 billion.

As expected, input cost pressure resulted in an increase in the cost of goods sold, of 50 bps. This was mitigated by savings from Nestlé Continuous Excellence implemented throughout all our structures and activities, as well as timely pricing.

Distribution costs decreased by 30 bps, mainly due to the cumulative effects in mix and efficiencies.

Marketing and administration costs were down 20 bps. Consumer facing marketing spend is up in constant currencies and is being used more efficiently and effectively, increasing the return on investment in our brands and support for launch activities globally.

The company continued to invest in R&D (unchanged at 1.6% of sales), driving our innovation.

The Group's trading operating profit (TOP) was CHF 6.6 billion, up 6.3% from CHF 6.2 billion in the first half of 2011. The margin was 15.0%, in line with our expectation that our margin performance would be second-half weighted.

Net profit was CHF 5.1 billion, up 8.9% from CHF 4.7 billion.

The underlying earnings per share (EPS) rose 12.4% in constant currencies. The reported EPS was CHF 1.61 up 10.3% from CHF 1.46 in the first half 2011.

The Group's operating cash flow was CHF 5.1 billion, up from CHF 2.1 billion in 2011, due to improvements in operations and working capital.

Paul Bulcke, Nestlé CEO said: "Our first-half performance shows the relevance of our strategic roadmap in today's new reality and demonstrates our swift and disciplined execution behind it, making the right choices at the right time. We continue to drive innovation globally, ranging from popularly positioned products to super premium offerings. We are continually opening new routes-to-market to reach emerging consumers, and using new media to increase both our direct engagement with consumers and our return on brand investment. This approach has delivered profitable growth in both emerging and developed markets. Our first-half top line growth and our trading operating profit margin, together with our focus on capital efficiency, allow us to reconfirm our full-year outlook."

The Nestlé Group continued to grow in all regions of the world: the Americas achieved organic growth of 6.4%, Europe 2.6% and Asia, Oceania and Africa 12.6%. Our business grew 12.9% in emerging markets and 2.6% in developed markets.

In a statement, the company reported: "We expect the tough trading environment, especially in developed markets, to continue in the second half. However, we have started the year in line with our expectations. The actions and initiatives we have in place combined with some expected easing in input cost pressures in the second half allow us to confirm our guidance for the full year: we are well positioned to deliver the Nestlé Model of organic growth of 5% to 6%, improved margin and underlying earnings per share in constant currencies."