Nestlé S.A. : First Half 2013: improving RIG momentum drives profitable growth
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Nestlé S.A. : First Half 2013: improving RIG momentum drives profitable growth
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results
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Reports published today
2013 Half-Yearly Report (pdf)
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.......................................
First Half 2013: improving RIG momentum drives profitable growth
* Sales up 5.3% to CHF 45.2 billion, 4.1% organic growth
* Real internal growth up to 2.7% for the first half: all three geographies
contributed
* Trading operating profit +6.8% to CHF 6.8 billion, margin +20 basis points
to 15.1%
* Marketing spend +60 basis points; consumer facing spend +15% in constant
currencies
* Earnings per share +3.4%; +7.2% underlying in constant currencies
* Operating cash flow of CHF 5 billion
* 2013 outlook: around 5% organic growth with an improvement in margins and
underlying earnings per share in constant currencies.
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."
First Half 2013 Group Results
Vevey, 8 August 2013 - Sales increased by 5.3% to CHF 45.2 billion. 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.
Business Review
* 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.
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.
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.
Zone Europe
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.
Zone Asia, Oceania and Africa
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.
Nestlé Waters
Sales of CHF 3.7 billion, 2.2% organic growth, 1.8% real internal growth; 10.0%
trading operating profit margin, unchanged.
Nestlé Waters' growth improved over the period. The North American and European
businesses' promotional actions delivered an up-lift in real internal growth.
Emerging markets continued to deliver robust growth with many double-digit.
Nestlé Pure Life and the premium brands, S.Pellegrino and Perrier, continued to
perform well together with local brands.
The Nestlé Waters trading operating profit margin was flat compared to the first
half of 2012 despite lower real internal growth and pricing than the previous
year. This was due to the beneficial mix in the sales, both by geography and by
brand, and the focus on cost management.
Nestlé Nutrition
Sales of CHF 5.0 billion, 6.5% organic growth, 4.3% real internal growth; 20.0%
trading operating profit margin, -60 basis points.
Infant Nutrition had a good first half, growing in all three zones. It achieved
double-digit growth in Asia, Oceania and Africa, and near double-digit in the
Americas. Formula and cereals were the key growth drivers, due to their presence
in emerging markets where they grew double-digit. The US was also a highlight
for formula with innovation in both the premium and value segments driving
double-digit growth. Meals and drinks also contributed positively due to its
good performance in the US pouch segment. Wyeth Nutrition had a strong first
half, in line with expectations both on sales growth and profitability, with
Asia the highlight.
Weight Management continued to under-perform and the measures taken, including
restructuring and a renewed focus on the online business, have yet to show
results.
The Nestlé Nutrition trading operating profit margin was 20.0%. It was impacted
by integration costs of Wyeth Nutrition, as expected, and by Weight Management.
Other activities
Sales of CHF 6.0 billion, 5.0% organic growth, 3.9% real internal growth; 19.2%
trading operating profit margin, +60 basis points.
Nestlé Professional had a slow but positive first half, impacted by reduced
consumption in Europe and a slowdown in China, one of its larger markets. It
continued to grow in North America and to see double-digit growth in Latin
America. The beverage solutions business delivered good growth, compensating for
price competition in the traditional ingredients business.
The Nespresso 2013 coffee launch programme led to a sharp acceleration in growth
for the business during the second quarter. The range of Grand Cru coffees was
expanded to 19 varieties. The launch of the Trieste and Napoli limited editions
in March added impetus to growth. Innovations like these, together with
geographic expansion and boutique openings, are enabling Nespresso to drive
category growth in an intense competitive environment.
Nestlé Health Science enjoyed good growth in the period, with all three zones
contributing. With the recent acquisition of Pamlab among others, and a
promising start for the Nutrition Science Partners joint venture, we continued
to build the foundations for future growth. A range of innovations has been
launched, including Boost Nutrition Bars in the USA, Nutren Senior in Brazil,
Resource 2.5 Compact in various European markets, Isocal semisolid support in
Japan, and Prometheus Anser ADA diagnostics tests in the USA.
2013 Outlook
We expect the improving real internal growth momentum of the first half to
continue, allowing us for the full year to deliver, around 5% organic growth
with an improvement in margins and underlying earnings per share in constant
currencies, as well as an improvement in our capital efficiency.
Contacts
Media: Robin Tickle Tel.: +41 21 924 22 00
Investors: Roddy Child-Villiers Tel.: +41 21 924 36 22
Annex
Half-year sales and Trading operating profit margins overview
+---------------------+---------------+------------+---------------------------+
| | | | Trading operating profit |
| | | | margins |
| +---------------+------------+------------+--------------+
| |Jan.-June 2013 | Jan.-June | Jan.-June | Change vs |
| | Sales | 2013 | 2013 |Jan.-June 2012|
| |in CHF millions| Organic | (%) | (*) |
| | | Growth | | |
| | | (%) | | |
| | | | | |
| | | | | |
+---------------------+---------------+------------+------------+--------------+
|By operating segment |
+---------------------+---------------+------------+------------+--------------+
| | | | | |
| | | | | |
|· Zone Americas | 13'615 | +5.0 | 17.8 | +30 bps |
+---------------------+---------------+------------+------------+--------------+
|· Zone Europe | 7'504 | +0.5 | 14.9 | -10 bps |
+---------------------+---------------+------------+------------+--------------+
|· Zone Asia, Oceania,| 9'394 | +5.0 | 19.1 | +20 bps |
|Africa | | | | |
+---------------------+---------------+------------+------------+--------------+
|Nestlé Waters | 3'668 | +2.2 | 10.0 | 0 bps |
+---------------------+---------------+------------+------------+--------------+
|Nestlé Nutrition | 5'005 | +6.5 | 20.0 | -60 bps |
+---------------------+---------------+------------+------------+--------------+
|Other | 5'982 | +5.0 | 19.2 | +60 bps |
+---------------------+---------------+-+----------+-+----------+--------------+
|Total Group | 45'168 | +4.1 | 15.1 | +20 bps |
+---------------------+-----------------+------------+----------+--------------+
|By product |
+---------------------+-----------------+------------+----------+--------------+
|Powdered and liquid| 10'134 | +4.7 | 24.0 | +100 bps |
|beverages | | | | |
+---------------------+-----------------+------------+----------+--------------+
|Water | 3'438 | +2.0 | 10.7 | +10 bps |
+---------------------+-----------------+------------+----------+--------------+
|Milk products and ice| 8'609 | +4.5 | 15.9 | +80 bps |
|cream | | | | |
+---------------------+-----------------+------------+----------+--------------+
|Nutrition &| 5'983 | +6.0 | 18.6 | -60 bps |
|HealthCare | | | | |
+---------------------+-----------------+------------+----------+--------------+
|Prepared dishes and| 6'853 | -0.2 | 13.5 | +30 bps |
|cooking aids | | | | |
+---------------------+-----------------+------------+----------+--------------+
|Confectionery | 4'611 | +4.7 | 12.7 | -110 bps |
+---------------------+-----------------+------------+----------+--------------+
|PetCare | 5'540 | +7.1 | 19.0 | -120 bps |
+---------------------+-----------------+------------+----------+--------------+
|Total Group | 45'168 | +4.1 | 15.1 | +20 bps |
+---------------------+---------------+-+----------+-+----------+--------------+
| | | | | |
(*) 2012 restated for IAS 19 Revised (Employee Benefits) and IFRS 11 (Joint
Ventures). Moreover, beverages other than water sold by Nestlé Waters (mainly
RTD teas and juices) have been reclassified as powdered and liquid beverages.
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Datum: 08.08.2013 - 07:18 Uhr
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