Nestlé Sales Grow 5.3% in First-Half “Balanced Performance”

08 Aug 2013 --- Nestlé has reported that sales increased by 5.3% to CHF 45.2 billion in the first half of 2013. Organic growth was 4.1%, composed of 2.7% real internal growth and 1.4% pricing. Acquisitions, net of divestitures, added 2.1% to sales, whilst foreign exchange had an impact of -0.9%.

The Group's trading operating profit was CHF 6.8 billion, up 6.8%. The trading operating profit margin was 15.1%, up 20 basis points. The cost of goods sold fell by 110 basis points, reflecting generally lower input costs, as well as our ongoing efforts to streamline our structures and operations. “We substantially increased our brand support, with total marketing spend up by 60 basis points. Consumer facing spend rose 15% in constant currencies. Net profit was up 3.7% to CHF 5.1 billion and earnings per share were up 3.4% reported to CHF 1.60. Underlying earnings per share in constant currencies were up 7.2%. Our operating cash flow was strong at CHF 5 billion.”
 
Paul Bulcke, Nestlé CEO: "In the first half we delivered a balanced performance, both top and bottom line, in an environment of lower growth and lower input costs. Organic growth was somewhat muted, reflecting lower pricing by our markets, as we leveraged softer input costs to meet the expectations of today's more value conscious consumers. This, combined with substantially increased investment behind our brands, delivered stronger volume growth momentum, whilst at the same time we were able to improve the operating margin. We expect this growth momentum to continue in the second half, allowing us for the full year to deliver, in line with our commitments, around 5% organic growth with an improvement in margins and underlying earnings per share in constant currencies."

Nestlé reported that the trading environment continued to be subdued with low consumer confidence in developed countries and lower growth in emerging markets. Organic growth for the Group was 5.0% in the Americas, 0.6% in Europe, and 6.3% in Asia, Oceania and Africa. “Globally, our businesses in developed markets grew 1.0%, whilst emerging markets grew 8.2%. Our pricing reflected our desire to meet the expectations of today's more value conscious consumers. As such, all three geographies accelerated their real internal growth in the second quarter.”

Real internal growth was 2.1% in the Americas, 1.5% in Europe and 5.0% in Asia, Oceania and Africa. “We continue to invest for the future, with a new petcare factory in Poland, coffee factories in China, Vietnam, Spain and Germany, dairy factories in China and the Dominican Republic, a ready-to-drink beverages facility in Malaysia and a water factory in the UK.”

“We further enhanced our global capabilities for innovation, in line with our Nutrition, Health and Wellness strategy. In Europe we opened a new beverage systems technology centre, in the US a new R&D centre focused on chilled and frozen food, and in Asia new R&D facilities for powdered and liquid beverages. We continued to build Nestlé Health Science's capabilities to research, develop, manufacture and market personalised healthcare through nutrition with partnerships and acquisitions. We opened new laboratories in Switzerland which will further enhance our research into food safety.”
 
In Zone Americas, sales of CHF 13.6 billion, 5.0% organic growth, 1.5% real internal growth; 17.8% trading operating profit margin, +30 basis points were reported. Both North America and Latin America contributed to the Zone's growth. Growth in the North was driven more by real internal growth, whilst growth in Latin America was more weighted to price, reflecting continued inflation in the region. In North America, the category trends remained broadly unchanged from the first quarter. Frozen food saw growth in Stouffer's frozen entrees and share gains for DiGiorno pizza, but continued to experience contraction in the nutritional segment where Lean Cuisine is positioned. Nescafé and Coffee-Mate, confectionery and in petcare Purina, especially cat food and snacks, continued to perform well. Growth in ice cream was driven by super-premium. Recent innovations have been well received, including Häagen Dazs Gelato and DiGiorno Pizzeria.
 
In Latin America, Brazil continued to deliver a high level of organic growth, with Nescau and biscuits the highlights. The Kit Kat launch there continued to build strong momentum. Mexico's dairy business performed well. There was also strong growth in Chile and Ecuador, and petcare delivered double-digit growth across the region.
 
The Zone's trading operating profit margin was 17.8%. Pricing in Latin America compensated for costs there, whilst lower input costs contributed in North America. For the Zone as a whole, the savings initiatives helped reduce costs, and enabled increased brand investment.
 
In Zone Europe, there were sales of CHF 7.5 billion, 0.5% organic growth, 1.8% real internal growth; 14.9% trading operating profit margin, -10 basis points. “In Europe consumers are extremely sensitive to price and we have been responsive. We also increased the investment behind our brands, supporting innovation which enabled us to gain market share.” In Western Europe Nescafé Dolce Gusto also continued to grow rapidly. The growth in soluble coffee was led by share gains by Nescafé Gold Blend as well as Nescafé smart packs. Confectionery had a good first half. Ice cream and frozen food sales were weak, but there was acceleration in Buitoni and in Wagner pizzas, whilst Maggi picked up in Germany. In petcare Purina continued to grow, especially in the premium segment, with brands such as Proplan, ONE Dry and Gourmet. Amongst markets, Germany and Great Britain were the highlights, with good levels of organic growth. Eastern and Central Europe saw very strong growth in Russia and good progress in the Czech / Slovak region. “In other markets we saw intensified competition as consumer spend contracted. In general Kit Kat grew double-digit and Nescafé Gold and ice cream were key contributors, as was petcare.” The Zone's trading operating profit margin was 14.9%. Input costs contributed to an improved cost structure, but marketing investment was stepped up during the period.
 
For Zone Asia, Oceania and Africa, there were sales of CHF 9.4 billion, 5.0% organic growth, 4.0% real internal growth; 19.1% trading operating profit margin, +20 basis points. Some emerging markets experienced lower growth but the Zone was able to deliver improved broad-based real internal growth. China, Indonesia, Malaysia and much of Africa continued to grow well, and there was a pick-up in recent months in the South Asia and the Central West Africa regions and in the Middle East. Kit Kat and Nescafé Dolce Gusto led the growth in developed markets, with good performances also from Nescafé Barista in Japan and Milo in Australia. Momentum picked up in the large ambient dairy and culinary categories, in Milo and petcare. Confectionery grew strongly with some seasonality. Ice cream performed well. The Zone's trading operating profit margin was 19.1%. Lower input cost pressures were beneficial, and the Zone increased its brand support.