Press Release: Nestle: Nestlé reports half-year results for 2020

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2020 Half-Year Report (pdf)

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Vevey, July 30, 2020

Nestlé reports half-year results for 2020

-- Organic growth reached 2.8%, with real internal growth (RIG) of 2.6% and

pricing of 0.2%. Growth was supported by sustained momentum in the

Americas, Purina PetCare and Nestlé Health Science.

-- Divestitures and foreign exchange reduced sales by 12.3%. Total reported

sales decreased by 9.5% to CHF 41.2 billion (6M-2019: CHF 45.5 billion).

-- The underlying trading operating profit (UTOP) margin reached 17.4%, up

30 basis points. The trading operating profit (TOP) margin increased by

140 basis points to 16.9%.

-- Earnings per share increased by 22.2% to CHF 2.06 on a reported basis.

Underlying earnings per share increased by 0.5% in constant currency and

decreased by 5.9% on a reported basis to CHF 2.01.

-- Free cash flow decreased by 19.1% to CHF 3.3 billion, largely due to a

delayed dividend payment from an associate company and lower reported

sales.

-- Portfolio management is fully on track. Nestlé is exploring

strategic options, including a potential sale, for parts of the Waters

business in North America and the Yinlu peanut milk and canned rice

porridge businesses in China. Nestlé also completed the sale of a

60% stake in the Herta charcuterie (cold cuts and meat-based products)

business to Casa Tarradellas.

-- 2020 Outlook: We expect full-year organic sales growth between 2% and 3%.

The underlying trading operating profit margin is expected to improve.

Underlying earnings per share in constant currency and capital efficiency

are expected to increase. This guidance is based on our current knowledge

of COVID-19 developments and assumes no material deterioration versus

present conditions.

Mark Schneider, Nestlé CEO, commented:"COVID-19 continues to impact

people around the world. We stand with all those affected and are

committed to helping where we can. I would like to thank every member of

the Nestlé team for their dedication and hard work in the face of

incredible challenges. Our priorities remain the same; keeping our

people safe, assuring continued supply of essential food and beverages

to consumers and caring for our communities and business partners

through financial and in-kind support.

Nestlé has remained resilient in a rapidly changing environment,

delivering solid organic growth and improved margins in the first half.

These results demonstrate the agility of our business and the strength

of our diversified portfolio across geographies, product categories and

channels. With consumer behavior evolving faster than ever, we are

adapting to this new reality by strengthening our innovation, leveraging

our digital capabilities and executing with speed. Our engaged teams and

their commitment to deliver business results while driving progress

against our societal and environmental commitments make us a stronger

company every day."

Group Results

Other

Total Group Zone AMS Zone EMENA Zone AOA Businesses

Sales 6M-2020

(CHF m) 41 152 16 674 10 029 10 062 4 387

Sales 6M-2019

(CHF m)* 45 456 18 059 10 572 10 994 5 831

Real internal

growth (RIG) 2.6% 5.1% 2.8% - 2.7% 5.5%

Pricing 0.2% 0.2% - 0.4% 0.5% 0.6%

Organic growth 2.8% 5.3% 2.4% - 2.2% 6.1%

Net M&A - 5.3% - 5.3% - 0.5% 0.0% - 24.9%

Foreign exchange - 7.0% - 7.7% - 7.0% - 6.3% - 6.0%

Reported sales

growth - 9.5% - 7.7% - 5.1% - 8.5% - 24.8%

6M-2020

Underlying TOP

Margin 17.4% 18.9% 18.3% 22.7% 22.2%

6M-2019

Underlying TOP

Margin* 17.1% 18.3% 17.9% 22.9% 19.6%

(*) 2019 figures restated following the decision to integrate the

Nestlé Waters business into the Group's three geographical Zones,

effective January 1, 2020

Group sales

Organic growth reached 2.8%, with RIG of 2.6%. Pricing contributed 0.2%

and was positive in all three Zones in the second quarter.

After a stronger-than-expected start to the year, organic growth

moderated in the second quarter to 1.3%, reflecting the severe impact of

movement restrictions on out-of-home businesses and some consumer

destocking. In the first half, Nestlé saw sustained momentum in the

Americas and positive sales development in Zone EMENA. Zone AOA saw a

sales decrease, with growth turning positive in the second quarter.

Organic growth was 4.1% in developed markets, based entirely on RIG.

Growth in emerging markets was 1.1%.

By product category, the largest growth contributor was Purina PetCare,

led by its premium brands Purina Pro Plan and Purina ONE. Dairy saw high

single-digit growth, based on strong demand for fortified milks such as

Nido and Bear Brand, as well as Coffee mate. Prepared dishes and cooking

aids grew at a mid single-digit rate, with strong momentum in frozen

foods. Vegetarian and plant-based food products grew by 40%, supported

by further expansion of Garden Gourmet in Europe and increased growth

for Sweet Earth in the United States. Coffee remained resilient, with

low single-digit growth, as a double-digit sales increase for coffee at

home outweighed a sharp decline in the out-of-home channel. Our

Starbucks products continued to grow at a double-digit rate, driven by

further global expansion and the launch of new offerings. Nestlé

Health Science reported double-digit growth, reflecting elevated demand

for products that support health and the immune system. Water and

confectionery saw negative growth, due to their high exposure to the

out-of-home channel and on-the-go consumption.

Divestitures decreased sales by 5.3%, largely related to the divestment

of Nestlé Skin Health and the U.S. ice cream business. Foreign

exchange reduced sales by 7.0%, reflecting the appreciation of the Swiss

franc versus most currencies. Total reported sales decreased by 9.5% to

CHF 41.2 billion.

Business impact of the COVID-19 crisis

The COVID-19 crisis has led to profound changes in operating

environments across markets. The global economy has entered a recession,

supply chains have been tested and consumer behavior has changed at a

rapid pace. Nestlé quickly deployed effective measures to address

this new reality. The company's supply chain has proven resilient, as

manufacturing and distribution facilities continued to operate without

significant disruptions. With shifting consumer habits, Nestlé has

been developing solutions to meet increased demand for at-home

consumption, products that support health and boost the immune system as

well as affordable offerings. The company has also accelerated the

development of its digital capabilities and expanded e-commerce and

online communication.

In the first half, the effects of COVID-19 on organic growth varied

materially by geography, product category and sales channel, depending

on the timing of outbreaks, scope of restrictions and consumer behavior:

-- Geographies: The majority of markets saw slower growth in the second

quarter. This trend reflected the full effect of out-of-home channel

closures and consumer destocking after pantry building in March. North

America remained resilient. China posted a double-digit sales decline,

with growth improving to almost flat in the second quarter as movement

restrictions eased.

-- Product categories: Demand for at-home consumption, trusted brands and

personal health products increased. Purina PetCare, dairy, culinary,

coffee at-home and Nestlé Health Science products reported strong

growth. Water and confectionery posted sales declines, reflecting a high

exposure to the out-of-home channel, on-the-go consumption and impulse

buying. Most categories saw consumer destocking in the second quarter.

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July 30, 2020 01:18 ET (05:18 GMT)