Vevey, Switzerland,Aug 18, 2016—Paul Bulcke, Nestlé CEO: “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.
While we continued to address challenges in China, we enjoyed good performances across theUS, 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.”
Group results
Sales
- In the first half of 2016 Nestlé’s organic growth was 3.5%, composed of 2.8% real internal growth and 0.7% pricing. Pricing has reached a historically low level owing to deflationary environments across a number of developed markets and low commodity prices.
- Total sales of CHF 43.2 billion, with a foreign exchange impact of -2.0%. The net result of acquisitions and divestitures reduced sales growth by -0.8%.
- Organic growth was broad-based across geographies and categories.
o 4.7% in the Americas (AMS)
o 2.5% in Europe, Middle East and North Africa (EMENA)
o 2.3% in Asia, Oceania and sub-Saharan Africa (AOA)
- Real internal growth was solid and balanced.
o 2.8% in AMS
o 2.8% in EMENA
o 2.9% in AOA
- Continued strength in developed markets with organic growth of 1.9%, in spite of deflationary pressures, and in emerging markets with 5.4%.
Zone AMS
Sales of CHF 12.1 billion, 5.1% organic growth, 2.5% real internal growth; 17.8% trading operating profit margin, -20 basis points
- The Zone maintained good growth momentum, with broad-based market share gains.
- Good growth in North America was underpinned by strong real internal growth, whilst deflationary pressures weighed on pricing.
o The successful growth of the frozen meals business continued, supported by innovations and marketing investment, particularly for Lean Cuisine and Stouffer’s.
o Coffee-mate maintained its good growth trajectory, driven by new packaging and flavour extensions.
o Petcare delivered solid growth, with very strong contributions from ONE, Pro Plan andBeyond in dry dog. First results of the Beneful re-launch were promising, with the product now back in positive territory.
- In Latin America we saw good performances in many markets despite the volatile environment, with positive real internal growth and pricing.
o In Brazil our business grew mid single digit, outperforming the market in a recessionary context. The key drivers were ambient dairy and Nescafé Dolce Gusto. We began to implement selective price increases towards the end of the period.
o Mexico’s strong performance continued across the entire portfolio. Nescafé Dolce Gusto, Nescafé soluble coffee and ambient dairy remained the growth drivers.
o Petcare’s positive momentum continued, with double-digit growth in most markets.
- The Zone’s trading operating profit margin contracted slightly as the impact of currency depreciation in Latin America was not yet fully off-set by price increases. Ongoing operational efficiency savings were largely re-invested behind an increase in consumer facing marketing spend across the Zone.
Nestlé Waters
Sales of CHF 3.9 billion, 4.2% organic growth, 4.7% real internal growth; 12.4% trading operating profit margin, +90 basis points
- Nestlé Waters’ performance was driven by double-digit growth in emerging markets and high single-digit growth in our premium sparkling brands S.Pellegrino and Perrier. Developed markets continued to grow despite the deflationary environment.
o Growth was solid in the US, driven by our international premium brands and Poland Spring. However, the regional brands were negatively impacted by the tornado which severely damaged a plant in Texas at the end of April.
o The growth momentum in Europe was impacted by poor weather conditions in comparison with a very hot summer last year, particularly in France and Italy. Spain, the UKand Poland performed well.
o Zone AOA showed a good performance, with double-digit growth in Thailand, Egypt and Vietnam. Competitive intensity in China remained high.
o Latin America delivered good growth, with Mexico the highlight.
- The increase in trading operating profit margin was driven by improved product mix through premiumisation. We achieved cost efficiencies across manufacturing, procurement and distribution, as well as some benefit from lower input costs.
Other businesses
Nespresso continued its good growth, with a solid performance in Europe and good momentum in AMS and AOA. The success of the VertuoLine system and increased marketing investment in North America drove positive results. Global growth was supported by the ongoing geographic expansion, including 16 new boutique openings, and limited edition Grands Crus coffees. Full report.
