Press Release: Nestle: Nestlé reports half-year -2-

Cash generated from operations increased to CHF 8.1 billion from CHF 7.1 billion. The step up was mainly due to a positive contribution from working capital movements. Free cash flow increased to CHF 4.0 billion from CHF 3.4 billion. Excluding the CHF 0.6 billion proceeds from the disposal of the Prometheus Biosciences stake in the first half of 2023, the increase in free cash flow was CHF 1.2 billion.

Share Buyback Program

In the first half, the Group repurchased CHF 2.4 billion of Nestlé shares as part of the three-year CHF 20 billion share buyback program, which began in January 2022.

Net Debt

Net debt increased to CHF 59.5 billion as at June 30, 2024, compared to CHF 49.6 billion as at December 31, 2023. The increase largely reflected the dividend payment of CHF 7.8 billion and share buybacks of CHF 2.5 billion.

Portfolio Management

On March 1, 2024, the Group completed the acquisition of a majority stake in Grupo CRM, a premium chocolate boutique chain in Brazil.

Zone North America

-- -0.1% organic growth: -1.5% RIG; 1.4% pricing.

-- The underlying trading operating profit margin increased by 20 basis

points to 21.8%.

Sales Sales Organic UTOP UTOP Margin Margin

6M-2024 6M-2023 RIG Pricing growth 6M-2024 6M-2023 6M-2024 6M-2023

Zone

North CHF 12.2 CHF 12.6 CHF 2.7 CHF 2.7

America bn bn - 1.5% 1.4% - 0.1% bn bn 21.8% 21.6%

Organic growth was -0.1%. RIG was -1.5%, turning positive in the second quarter at 2.8% reflecting increased growth investments with strong growth in e-commerce and specialty channels. The improvement was supported by larger than usual orders from some retailers ahead of key July promotional campaigns. Pricing was 1.4%. Foreign exchange had a negative impact of -2.5%. Reported sales in Zone North America decreased by -2.5% to CHF 12.2 billion. The Zone drove market share gains in pet food and coffee, with losses in frozen pizza and coffee creamers.

By product category, Purina PetCare was the largest growth contributor with mid single-digit growth, led by Purina Pro Plan, Fancy Feast and Dog Chow. The business expanded its range of functional offerings across segments with launches, including Pro Plan Vital Systems for cats and Pro Plan Veterinary Diets Elemental for dogs. Water and flavored water offerings delivered mid single-digit growth, driven by sustained momentum for S.Pellegrino and the launch of Maison Perrier. Sales of confectionery grew at a mid single-digit rate, led by Tollhouse in the U.S. and KitKat in Canada. Growth for the beverages category, including Starbucks at-home products, Coffee mate and Nescafé, was close to flat, as continued growth momentum for Starbucks and Nescafé was offset by Coffee mate. In the second quarter, sales of Coffee mate turned slightly positive. Infant Nutrition saw a sales decrease, with robust growth for Nido growing up milks more than offset by a category slowdown, which impacted Gerber baby food. Growth in frozen food was negative as the category remains under pressure, reflecting soft consumer demand and continued price competition. The business delivered improved trends in the second quarter for all segments through sharpened price points and affordable innovations such as DiGiorno Classic Crust.

The Zone's underlying trading operating profit margin increased by 20 basis points, following gross profit margin improvement and lower distribution costs. Advertising and marketing investments increased to support future growth.

Zone Europe

-- 4.5% organic growth: 1.3% RIG; 3.1% pricing.

-- The underlying trading operating profit margin increased by 110 basis

points to 17.7%.

Sales Sales Organic UTOP UTOP Margin Margin

6M-2024 6M-2023 RIG Pricing growth 6M-2024 6M-2023 6M-2024 6M-2023

Zone CHF 9.3 CHF 9.5 CHF 1.6 CHF 1.6

Europe bn bn 1.3% 3.1% 4.5% bn bn 17.7% 16.6%

Organic growth of 4.5% was broad-based across geographies and almost all categories. RIG was 1.3%, increasing to 2.9% in the second quarter. Pricing was 3.1%. Foreign exchange reduced sales by -3.7% and net divestitures impacted sales by -2.7%. Reported sales in Zone Europe decreased by -1.9% to CHF 9.3 billion. The Zone achieved market share gains in pet food and ambient culinary, with continued but slowing market share losses in water.

By product category, the key contributor to growth was Purina PetCare. The business delivered mid single-digit growth, driven by differentiated offerings across premium brands Gourmet, Purina ONE and Felix. Confectionery achieved high single-digit growth fueled by strong momentum for KitKat and key local brands. Coffee delivered mid single-digit growth, led by Nescafé soluble coffee and Starbucks products. Sales in water grew at a mid single-digit rate, driven by the relaunch of Perrier. Nestlé Professional delivered mid single-digit growth, led by beverage solutions. Culinary achieved positive growth, supported by new product launches in Maggi, including its new Asia range and Thomy. Infant Nutrition posted flat growth, following a high base of comparison in 2023.

The Zone's underlying trading operating profit margin increased by 110 basis points, following gross profit margin improvement and portfolio optimization. Advertising and marketing investments increased to support future growth.

Zone Asia, Oceania and Africa (AOA)

-- 3.5% organic growth: flat RIG; 3.5% pricing.

-- The underlying trading operating profit margin increased by 100 basis

points to 23.8%.

Sales Sales Organic UTOP UTOP Margin Margin

6M-2024 6M-2023 RIG Pricing growth 6M-2024 6M-2023 6M-2024 6M-2023

Zone CHF 8.4 CHF 9.1 CHF 2.0 CHF 2.1

AOA bn bn 0.0% 3.5% 3.5% bn bn 23.8% 22.8%

Organic growth was 3.5%. With ongoing consumer hesitation around global brands in some markets, RIG was flat turning slightly positive in the second quarter. Pricing was 3.5%. Foreign exchange reduced sales by -10.3%. Reported sales in Zone AOA decreased by -6.8% to CHF 8.4 billion. By geography, the key growth drivers were Central and West Africa, South Asia and Thailand. The Zone achieved market share gains in confectionery and coffee ready-to-drink, with losses in dairy.

By product category, culinary delivered high single-digit growth, fueled by distribution expansion and strong sales momentum for Maggi. Infant Nutrition reached mid single-digit growth, led by NAN and our affordable nutrition range, Lactogen. Coffee delivered mid single-digit growth, driven by Nescafé and supported by new product launches including the new espresso concentrate for cold coffee. Sales for Nestlé Professional grew at a high single-digit rate across most geographies and categories, underpinned by customer acquisition. Dairy posted positive growth, supported by affordable milks and dairy culinary solutions. Water delivered mid single-digit growth, driven by local brands. Confectionery reported low single-digit growth, with continued momentum for KitKat.

The Zone's underlying trading operating profit margin increased by 100 basis points, following gross profit margin improvement. Advertising and marketing investments increased to support future growth.

Zone Latin America

-- 2.7% organic growth: 0.1% RIG; 2.5% pricing.

-- The underlying trading operating profit margin was unchanged at 19.8%.

Sales Sales Organic UTOP UTOP Margin Margin

6M-2024 6M-2023 RIG Pricing growth 6M-2024 6M-2023 6M-2024 6M-2023

Zone

Latin CHF 6.2 CHF 6.1 CHF 1.2 CHF 1.2

America bn bn 0.1% 2.5% 2.7% bn bn 19.8% 19.8%

Organic growth was 2.7%. RIG was 0.1%, turning positive to 1.1% in the second quarter. Foreign exchange had a negative impact of -1.1%. Pricing was 2.5%. Reported sales in Zone Latin America increased by 1.4% to CHF 6.2 billion. Growth was driven by robust sales momentum in Brazil, Mexico and Central America, which more than offset slower sales growth in other markets. The Zone achieved market share gains in chocolate, portioned coffee and ambient culinary, with losses in soluble coffee and dairy.

By product category, confectionery continued to grow at a high single-digit rate, driven by KitKat and key local brands Garoto and Carlos V. The launch of Choco Trio tablets, under the Nestlé brand, resonated strongly with consumers. Sales for Nestlé Professional grew at a double-digit rate, fueled by continued customer expansion. Coffee posted low single-digit growth, driven by Nescafé. The Zone launched Starbucks and Nescafé ready-to-drink offerings in Brazil. Culinary delivered low single-digit growth, underpinned by Maggi and new product launches. Sales in dairy grew at a low single-digit rate, with strong growth for La Lechera and Carnation. Infant Nutrition posted positive growth, with robust demand for infant cereals. Purina PetCare saw close to flat growth, supported by Felix and Friskies.

The Zone's underlying trading operating profit margin was unchanged versus the prior year. Gross profit margin improvement was offset by increased growth investments, particularly in advertising and marketing.

(MORE TO FOLLOW) Dow Jones Newswires

July 25, 2024 01:00 ET (05:00 GMT)