Strong first-half organic growth and EBIT margin improvement, Full-year outlook reconfirmed
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* Group:
Sales of CHF 55.3 billion, 6.1% organic growth, 4.6% real internal growth
EBIT of CHF 8.4 billion, +13.6%; EBIT margin 15.1%, +80 bps(1), +70 bps in
constant currencies
Earnings per share up 13.5% to CHF 1.60
* Food and Beverages:
Sales of CHF 51.0 billion, 5.7% organic growth, 4.2% real internal growth
EBIT of CHF 6.7 billion, +10.6%; EBIT margin 13.0%, +60 bps reported and in
constant currencies
Consumer-facing marketing spend up over 14% in constant currencies
Paul Bulcke, Nestlé CEO: "The Group's very successful first-half performance is
due to the excellent execution of our proven strategies in all parts of the
world, covering the full range from premium brands to value-priced offerings,
combined with the ongoing successful implementation of Nestlé Continuous
Excellence. We have increased investment in our brands, people and capabilities
and have prepared the company for a more challenging second half, which allows
me to reconfirm our earlier full-year guidance for Food and Beverages: organic
growth of around 5% combined with an increase in EBIT margin in constant
currencies."
Vevey, 11 August 2010 - The Group achieved organic growth of 6.1% and an EBIT
margin improvement to 15.1%, an increase of 80 basis points(1). The Group's Food
and Beverages business achieved 5.7% organic growth, built on a solid foundation
of growth both in emerging markets as well as in Western Europe and North
America. This growth represents an acceleration over the corresponding period in
2009, particularly in Europe as well as in Asia, Oceania and Africa. This top
line performance was combined with a 60 basis points EBIT margin improvement in
Food and Beverages.
Organic growth for all Food and Beverages operations was 5.3% in the Americas,
3.6% in Europe and 10.4% in Asia, Oceania and Africa. The Group's emerging
markets continued to achieve over 10% organic growth. BRIC countries' combined
performance was even stronger.
Key growth drivers included deeper distribution in emerging markets in support
of a further roll-out of our value-priced, popularly-positioned products, and
the continued success of premium products in both developed and developing
markets. Recent innovations across all categories, combined with increased
investment in consumer-facing marketing, were key to strengthening the Group's
market positions.
The leverage effects from our growth and scale as well as the ongoing efficiency
drive under Nestlé Continuous Excellence contributed to the improvement in our
EBIT margin, even after increased investment in the business to improve our
performance in a sustainable way.
First-Half Results
The first-half results reflect our focus on delivering total performance in all
categories and operations.
· In the first half of 2010, the Nestlé Group's organic growth was
6.1%, including real internal growth of 4.6%. Foreign exchange impacted sales by
-1.5%, whilst acquisitions, net of divestitures, added 1.3%. Overall, Group
sales increased by 5.9% to CHF 55.3 billion.
· Food and Beverages' organic growth was 5.7%, with real internal growth
of 4.2%. The foreign exchange impact was -1.5% and acquisitions, net of
divestitures, added 1.4%. Overall, Food and Beverages' sales increased by 5.6%
to CHF 51.0 billion.
· The Group's EBIT margin increased by 80 basis points like-for-like, or
70 basis points like-for-like in constant currencies, and by 100 basis points
reported, to 15.1%. For Food and Beverages, the improvement was 60 basis points
to 13.0%, reported and in constant currencies. We achieved this higher EBIT
margin whilst, at the same time, increasing our Food and Beverages
consumer-facing marketing spend by over 14% in constant currencies.
· The cost of goods sold was lower by 160 basis points like-for-like
(180 basis points reported). Savings from Nestlé Continuous Excellence were in
line with our CHF 1.5 billion full-year target, and more than compensated input
cost pressures. The delivery of the planned savings for the full year will
contribute to the Group meeting its full-year EBIT margin targets in a more
challenging input cost environment during the second half.
· Distribution costs fell by 40 basis points, despite higher oil-related
costs than in the first half of 2009, as a result of distribution synergies
across operations in all three Zones, as well as Nestlé Waters' continued
efforts to optimise its distribution structures.
· Administrative costs were down by 20 basis points, reflecting the
roll-out of Nestlé Continuous Excellence to areas beyond operations.
· Earnings per share rose by 13.5% from CHF 1.41 to CHF 1.60.
· Net profit was CHF 5.5 billion, up 7.5%.
· The Group's operating cash flow was CHF 5.8 billion as a result of the
normalisation of our working capital levels.
Business Review
Zone Americas
Sales of CHF 16.3 billion, 6.1% organic growth, 3.1% real internal growth; EBIT
margin 15.1%, -10 basis points.
* In North America, the Purina PetCare business continued to perform well,
accelerating in the first half. Beneful grew double-digit, whilst ONE and
Dog Chow achieved mid to high single-digit growth. In confectionery, the
Wonka extension into chocolate continued to drive growth, as did Nescafé
Clásico in soluble coffee. The frozen prepared meals category as a whole
continued to suffer from weak consumer demand. While Stouffers' and Hot
Pockets improved, Lean Cuisine continued to decline in a very challenging
competitive environment. A new Lean Cuisine range was launched in June and
we expect improvement by the end of the year. The frozen pizza business,
acquired in March, performed particularly well, especially the DiGiorno
brand, which achieved about 14% organic growth. In ice cream, we saw good
growth from Häagen Dazs and Skinny Cow.
* In Latin America, growth accelerated during the second quarter of 2010 to
achieve double-digit organic growth in the first half. The biggest
categories in the region, dairy and chocolate, both performed well. Dairy
saw good growth across most of the region, particularly in Brazil and the
Austral-America region, as well as in the Dairy Partners of America joint
venture with Fonterra. Chocolate had a strong start to the year and a
successful Easter season in Brazil and Mexico, as well as in smaller
markets. The Maggi culinary business and Nescafé also both made good
progress in their key markets.
* Compared to the first half of 2009, the EBIT margin was down 10 basis points
to 15.1% of sales. This was mainly due to weak demand for frozen food in
North America. There was a positive contribution to the margin from a good
delivery of savings and strong growth in the Zone. We continued to increase
our brand investment.
Zone Europe
Sales of CHF 10.7 billion, 2.2% organic growth, 1.3% real internal growth; EBIT
margin 11.9%, +10 basis points.
* In Western Europe, we achieved positive real internal growth in all key
markets. Our broad-based performance was achieved through a focus on
increasing distribution, improving customer service and accelerating
innovation and renovation. In Southern Europe, we achieved positive growth
in Italy and the Iberian region and, in Eastern Europe, Poland and the
Ukraine were strong performers. In Russia, we experienced good performances
in many categories although ice cream and confectionery remained soft.
* The ice cream market had a slow start to the season in Western Europe, but
otherwise there was a positive evolution across the Zone's portfolio.
Soluble coffee delivered good growth, with Nescafé Dolce Gusto continuing to
build momentum and take share in its segment of the market. The culinary
chilled and frozen food segments both performed well, particularly Herta in
chilled food, and Buitoni and Wagner pizzas in frozen food. Ambient
culinary, predominantly Maggi, gained share in its biggest market, Germany,
and its Juicy Chicken range continued to build share across Europe. In
chocolate, KitKat performed well across the Zone. PetCare continued its good
momentum in the Zone, with mid single-digit organic growth, and good
performances in Russia, Spain, and France amongst others, as well as strong
performances from premium brands such as Gourmet, Friskies, ONE and ProPlan.
* The EBIT margin increased by 10 basis points to 11.9%. This reflects a good
delivery of savings from Nestlé Continuous Excellence, as well as lower raw
material costs than in the first half of 2009. This was achieved despite
increased advertising and promotional investment.
Zone Asia, Oceania and Africa
Sales of CHF 8.6 billion, 9.0% organic growth, 7.6% real internal growth; EBIT
margin 16.9%, +20 basis points.
* The emerging markets in Zone Asia, Oceania and Africa achieved double-digit
growth, with strong performances across the Zone. Highlights were the South
Asia region, including India, the Indochina region, including Vietnam and
Thailand, the Central/West Africa region, Indonesia and China. Growth in
Oceania and Japan was flat.
* There were strong performances by most categories. Nido and the other milk
brands were back on a good growth trajectory after a tough year in 2009.
Ambient culinary, Maggi, also grew double-digit, due to a continued
extension of its distribution, as well as successful innovation such as
powdered bouillon cubes. Both powdered and ready-to-drink beverages made
good progress, under brands such as Milo, Nestea and Nescafé. Soluble coffee
had strong momentum in emerging markets and performed well in Japan,
particularly due to the roll-out of the Nescafé Barista coffee system there.
Chocolate continued to enjoy double-digit growth in emerging markets, driven
partly by the successful implementation of its popularly positioned products
model, including Nestlé éclairs in India, which are the lowest priced
products in Nestlé's portfolio.
* The EBIT margin increased by 20 basis points to 16.9%, reflecting the growth
leverage in the more profitable categories. This was enabled by increased
investment in brands and distribution.
Nestlé Waters
Sales of CHF 4.7 billion, 2.5% organic growth, 3.0% real internal growth; EBIT
margin 8.4%, +10 basis points.
* The water market in the developed world returned to growth after a couple of
years in which consumption fell. In the emerging world, robust growth
continued, and we achieved near 20% organic growth. The Group's market
share performance was good around the world.
* We achieved positive real internal growth in both North America and Europe.
In North America, Nestlé Pure Life continued to perform well, and there was
an improvement in growth from regional waters such as Poland Spring. In
Europe, we achieved positive growth in a number of markets, including France
and Great Britain, despite the poor start to summer. The international
brands, especially S. Pellegrino and Perrier, also had a strong start to the
year globally.
* The EBIT margin increased by 10 basis points to 8.4%. This reflects the
faster growth of emerging markets, as well as the strong performance of the
international brands. Raw material costs were higher than in the first half
of 2009, but this was compensated by savings from Nestlé Continuous
Excellence, including in structural costs, and the cost benefits of
light-weighting bottles.
Nestlé Nutrition
Sales of CHF 5.3 billion, 6.2% organic growth, 5.2% real internal growth; EBIT
margin 19.0% +160 basis points.
* Infant nutrition had a good start to the year, with positive growth in all
zones and double-digit in many emerging markets, including Russia, China,
the Middle East and Africa. The three segments, infant formula, baby food
and infant cereals, all contributed with cereals being particularly strong.
Key to the performance was continued R&D-led innovation, such as infant
cereals with probiotics and infant formula that contributes to alleviating
colic.
* Healthcare nutrition also gathered momentum over 2009, particularly in
emerging markets but also in developed markets such as France and Spain,
with the focus on core strategic platforms, including paediatrics and
critical care. Our Jenny Craig weight management business saw good growth in
its US home delivery business, but visit levels at its centres remained a
drag to performance. It is early days for the French and British roll-outs
but first indications are positive.
* The EBIT margin increased by 160 basis points to 19%. This performance was
achieved by a combination of higher growth than in the first half of 2009,
structural reorganisations completed last year, savings from Nestlé
Continuous Excellence, product rationalisation in certain divisions, and the
achievement of synergies from acquisitions. This improvement was achieved
whilst increasing brand support.
Other Food and Beverages
Sales of CHF 5.4 billion, 10.3% organic growth, 8.9% real internal growth; EBIT
margin 18.6%, +250 basis points.
* Nestlé Professional continued to build on the positive momentum seen already
in the first quarter of 2010, with emerging markets driving the growth. The
strategic repositioning of the beverages division as a solutions provider is
already showing signs of its potential to drive greater value in our
relationships with our customers. The food business also picked up momentum,
with China, Latin America and Europe performing well.
* Nespresso had another strong period, with over 25% organic growth and sales
above CHF 3 billion on an annualised basis. The business continued to enjoy
double-digit growth in its more established markets, such as Switzerland and
France despite a changing competitive environment, and broadened its
footprint in many other parts of the world. The boutique development is
gathering pace, with about thirty to be opened in 2010: from Shanghai to New
York, from Miami to Cape Town. At the same time, the investment in capacity
continues, with an extension in Avenches that will bring the total
investment at the site to CHF 400 million, doubling its capsule capacity by
2012.
* Cereal Partners Worldwide grew its global market share, with a strong
performance in many emerging markets, as well as in developed markets such
as Australia and France. Beverage Partners Worldwide also achieved positive
growth in the period.
* The segment's EBIT margin increased by 250 basis points to 18.6%, with the
main constituents all contributing. Nespresso had a particularly strong
performance, and Nestlé Professional continued to benefit from its drive to
improve its cost base and reduce under-performing business lines.
Pharma
Sales of CHF 4.3 billion, 11.1% organic growth, 9.2% real internal growth; EBIT
margin 39.9%, +530 basis points, +210 basis points like-for-like.
* There was a strong performance by all the constituents. Alcon's
like-for-like EBIT margin improvement excludes the positive impact of no
longer being allowed to depreciate the Alcon assets held for sale in 2010 by
IFRS 5.
Corporate highlights of the first half of 2010
* We announced the sale of our remaining holding in Alcon for around USD 28
billion and we expect to complete the transaction in the third quarter of
2010.
* We completed the acquisition of the Kraft pizza business and, shortly after
the period under review, acquired Vitaflo, a global provider of clinical
nutrition products based in the UK. We also acquired the leader in instant
noodles and dehydrated seasonings in the Ukraine under the Mivina brand.
* We established a joint venture with Dashan, the leader in bottled water in
China's Yunnan province.
* New facilities were inaugurated in various emerging markets: a Research and
Development centre for biscuits and cereal-based snacks in Santiago de
Chile; a facility devoted to manufacturing powdered milk and confectionery
products in Dubai; and a water bottling factory in Poland. Furthermore, we
expanded our milk processing facilities in Indonesia.
* We announced several emerging market investments: USD 390 million in Mexico
and CHF 150 million in the Equatorial African Region, both over a period of
three years. Furthermore, we will invest CHF 60 million in the construction
of a new culinary factory in Russia and CHF 98 million in the construction
of a new dairy factory in the Philippines.
* Jenny Craig's weight management programme was launched in France and in the
UK.
* We completed our CHF 25 billion three-year Share Buy-Back Programme and
launched a new CHF 10 billion Share Buy-Back Programme.
Outlook
The Group's organic growth and EBIT margin in the first half, combined with the
positive effect of our continued investment in the business, allows us to
reconfirm our earlier full-year guidance for Food and Beverages: organic growth
of around 5% and an EBIT margin improvement in constant currencies over last
year.
Contacts Media Robin Tickle Tel.: +41 21 924 22 00
Investors Roddy Child-Villiers Tel.: +41 21 924 36 22
Annex
H1 2010 sales and EBIT margin overview
+-------------------+--------------+--------------+----------------------------+
| | | | EBIT margins |
| +--------------+--------------+--------------+-------------+
| |Jan.-June 2010|Jan.-June 2010|Jan.-June 2010| Change vs |
| | Sales |Organic Growth| | Jan.-June |
| | in CHF | (%) | | 2009 |
| | millions | | | |
+-------------------+--------------+--------------+--------------+-------------+
|By operating segment |
+-------------------+--------------+--------------+--------------+-------------+
|Food and Beverages | | | | |
|· Zone Americas | 16 302 | 6.1 | 15.1% | -10 bps |
+-------------------+--------------+--------------+--------------+-------------+
|· Zone Europe | 10 692 | 2.2 | 11.9% | +10 bps |
+-------------------+--------------+--------------+--------------+-------------+
|· Zone Asia, | 8 598 | 9.0 | 16.9% | +20 bps |
|Oceania, Africa | | | | |
+-------------------+--------------+--------------+--------------+-------------+
|Nestlé Waters | 4 731 | 2.5 | 8.4% | +10 bps |
+-------------------+--------------+--------------+--------------+-------------+
|Nestlé Nutrition | 5 251 | 6.2 | 19.0% | +160 bps |
+-------------------+--------------+--------------+--------------+-------------+
|Other Food & | 5 429 | 10.3 | 18.6% | +250 bps |
|Beverages | | | | |
+-------------------+--------------++-------------++-------------+-------------+
|Nestlé Food and | 51 003 | 5.7 | 13.0% | +60 bps |
|Beverages | | | | |
+-------------------+---------------+--------------+-------------+-------------+
|Pharma | 4 341 | 11.1 | 39.9% | +210 bps(1) |
|(incl. Alcon) | | | | |
+-------------------+---------------+--------------+-------------+-------------+
|Total Group | 55 344 | 6.1 | 15.1% | +80 bps(1) |
+-------------------+---------------+--------------+-------------+-------------+
|By Product |
+-------------------+---------------+--------------+-------------+-------------+
|Powdered and liquid| 10 112 | 8.4 | 22.0% | +20 bps |
|beverages | | | | |
+-------------------+---------------+--------------+-------------+-------------+
|Water | 4 735 | 2.5 | 8.4% | +10 bps |
+-------------------+---------------+--------------+-------------+-------------+
|Milk products and | 10 126 | 5.6 | 11.5% | +50 bps |
|ice cream | | | | |
+-------------------+---------------+--------------+-------------+-------------+
|Nutrition( ) | 5 253 | 6.2 | 19.0% | +160 bps |
+-------------------+---------------+--------------+-------------+-------------+
|Prepared dishes and| 8 753 | 3.4 | 11.3% | -90 bps |
|cooking aids( ) | | | | |
+-------------------+---------------+--------------+-------------+-------------+
|Confectionery | 5 497 | 8.4 | 12.0% | +70 bps |
+-------------------+---------------+--------------+-------------+-------------+
|PetCare | 6 527 | 5.1 | 17.6% | +190 bps |
+-------------------+---------------+--------------+-------------+-------------+
|Pharmaceutical | | | | |
|products | 4 341 | 11.1 | 39.9% | +210 bps(1) |
|(incl. Alcon) | | | | |
+-------------------+---------------+--------------+-------------+-------------+
|Total Group | 55 344 | 6.1 | 15.1% | +80 bps(1) |
+-------------------+--------------++-------------++-------------+-------------+
Nestlé Waters, Nestlé Nutrition and Other Food & Beverages (including Nestlé
Professional) are not included in the Zones. The slight difference in the
figures for water and nutrition between the "Sales by operating segment" and
"Sales by product" tables is due to the fact that some water and nutrition
products are also sold by operating segments other than Nestlé Waters and Nestlé
Nutrition
(1 )Like-for-like excluding the positive impact of no longer being allowed to
depreciate the Alcon assets held for sale in 2010 by IFRS 5 (CHF 139 million).
[HUG#1436965]
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Datum: 11.08.2010 - 07:16 Uhr
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