Nestlé in line with expectation

22 Aug 2016

Nestlé has reported sales of CHF 43.2 billion with 3.5% organic growth and 2.8% real internal growth for 1H16. Trading operating profit margin was 15.3%, up 30 basis points; and underlying earnings per share were up 5.7%.

Nestlé in line with expectation

Nestlé has reported sales of CHF 43.2 billion with 3.5% organic growth and 2.8% real internal growth for 1H16. Trading operating profit margin was 15.3%, up 30 basis points; and underlying earnings per share were up 5.7% in constant currencies. The company confirmed its full year outlook.

“The first half of 2016 was in line with our expectation with growth almost entirely driven by volume and product mix, yielding further market share gains,” said Paul Bulcke, Nestlé CEO. “While we continued to address challenges in China, we enjoyed good performances across the US, Europe, South East Asia and Latin America and expect this to continue in the second half. We also expect pricing, which reached historically low levels in the first half, to recover somewhat in the coming months.

We grew our gross margin and trading operating profit through further premiumisation, continuous cost discipline and input cost tailwinds. This allowed us to significantly enhance our free cash flow.

In these times of rapid change, we keep our focus on profitable growth by further investing in innovation, R&D, brand support and digital to engage with our consumers, meeting their changing needs.

Overall our first half performance allows us to reconfirm our outlook for the full year.”

Nestlé Nutrition saw sales of CHF 5.2 billion, representing 1.3% organic growth, and 1.1% real internal growth. Trading operating profit margin was ; 23.2%, up 20 basis points. The company said that Nutrition was challenged in both the US and China, offsetting strong momentum in other geographies, particularly Latin America and South East Asia. Pricing, said Nestlé, remains very limited in the category as a result of low dairy commodity prices and competitive intensity, notably in China.

In China, category growth overall slowed, mainly affecting the premium and mainstream brands NAN and S-26 GOLD. At the same time, Nestlé said it continued to outperform in the faster growing super premium segment, primarily through illuma. The recently launched S-26 Ultima also saw positive progress.

In the United States, the exit from some regional WIC contracts, the transition to new packaging formats and some temporary supply constraints in pouches impacted growth.

Latin America saw very good growth in both Brazil and Mexico, with both cereals and infant formula doing well. Innovations drove strong performances in South East Asia – particularly in the Philippines and Indonesia.

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