Nestle reports 3.5% rise in sales with strong growth in US and Brazil

SWITZERLAND – Nestle’s half year results show 3.5% increase in sales from CHF 43.9 billion to US$45.5 billion (US$45.7 billion), led by strong growth in the United States and Brazil.

Earnings per share decreased by 12.3% to CHF 1.68 compared to the previous year when Nestle agreed to dispose of its US confectionery business to Ferrero.

Nestle has confirmed full-year guidance for 2019, expecting organic sales growth at around 3.5% and operating profit margin at or above 17.5%.

Organic growth was 3.4% excluding businesses under strategic review, with a deceleration in the second quarter due to a deflationary environment in Europe and lower pricing in Brazil.

Growth in emerging markets was 5.3% while organic growth was 2.4% in developed markets, with a significant acceleration in the second quarter.

Purina PetCare, coffee and infant nutrition were the largest contributors to growth as coffee registered mid-single-digit growth in the second quarter with improved Nespresso and Nescafé momentum across all zones.

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“We are encouraged by our first half results and have made further progress toward our 2020 financial goals,” said Mark Schneider, Nestlé CEO.

“Disciplined execution and fast innovation contributed to improved organic growth and profitability.

“Our growth was broad-based with our largest market, the United States, performing particularly well.

“Across our categories increased investment behind our brands and in innovation is clearly paying off, as reflected in our strong momentum in PetCare and the return to mid-single-digit growth in coffee.”

Underlying trading operating profit increased by 10.1% to CHF 7.8 billion, reflecting contribution from Nestlé Skin Health, a business whose sale is expected to complete in the second half of 2019 in a transaction valued at CHF 10.2 billion.

In Americas, organic growth increased to 3.9% with Latin America posting mid-single-digit growth.

Mexico saw mid-single-digit growth, with strong demand for Nescafé and confectionery.

In Europe, Middle East and North Africa (EMENA), organic growth was 2.4%, boosted by Purina PetCare and infant nutrition categories.

Coffee was negative as confectionery saw improved momentum with double-digit growth for KitKat.

Vegetarian-based food products posted strong double-digit growth in Western Europe even as Nestle accelerated the category with the launch of Garden Gourmet Incredible Burger in nine markets in the second quarter.

Sub-Saharan Africa reported mid single-digit organic growth while China saw good growth in culinary and ice cream.

Indonesia and Vietnam were led by Bear Brand, ready-to-drink Nescafé and ready-to-drink Milo.

Nestle Waters was supported by strong growth in North America as a result of 2018 price increases and good performance in premium brands S.Pellegrino, Perrier, and Acqua Panna.

New products included Poland Spring ORIGIN, a premium bottled spring water using 100% recycled packaging.

Nestlé Pure Life posted negative growth in the context of price competition in the affordable segment.

Starbucks benefit

Nestle said that net acquisitions increased sales by 1.1% with strong contribution from global licence for Starbucks.

Following last year’s US$7.15 billion deal for Starbucks coffees and teas, Nestle has launched the products in 14 markets and due to strong demand, further markets will follow in the second half of the year.

The acquisitions including a global nutritional health products company, Atrium Innovations more than offset divestments, mainly Gerber Life Insurance.

“Our Starbucks launch has been a great success so far and we plan on further geographic expansion and product innovation to make the most of this unique opportunity,” said Mark Schneider.

“Active portfolio management will continue to sharpen our strategic focus and position the company in attractive high-growth businesses.

“Our value creation model is clearly delivering the expected results and will support sustained profitable growth.”

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