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

26 Jul 2018 5:17 am
RIG improved materially in the United States and Canada versus last 
year. There was solid growth in Purina petcare, Coffee-mate creamers and 
coffee, particularly in e-commerce. Hot Pockets and pizza, particularly 
DiGiorno, also made positive contributions. 
 
   Latin America delivered positive organic growth, but slowed compared to 
the prior year. In Brazil a nationwide strike by truckers in May 
disrupted operations and distribution and reduced Zone growth by around 
80 basis points in the second quarter. Mexico maintained mid 
single-digit organic growth, with strong support by Nescafé. There 
was also good momentum in other parts of Latin America. 
 
   The Zone's underlying trading operating profit margin improved by 30 
basis points, as ongoing restructuring projects reduced structural 
costs. Operational efficiency savings more than offset cost increases 
from commodity and freight inflation, as well as foreign exchange. 
 
   Zone Europe, Middle-East and North Africa (EMENA) 
 
 
   -- 2.5% organic growth: 3.1% RIG, -0.6% pricing. 
 
   -- Western Europe returned to positive organic growth in the second quarter. 
      RIG accelerated, offsetting negative pricing. 
 
   -- Central and Eastern Europe posted mid single-digit growth, with strong 
      RIG. Pricing was negative. 
 
   -- Middle East and North Africa saw mid single-digit organic growth, both 
      RIG and pricing were positive. 
 
   -- The underlying trading operating profit margin grew by 70 basis points to 
      18.9%. 
 
 
 
 
 
        Sales     Sales                    Organic   UTOP     UTOP    Margin   Margin 
        6M-2018   6M-2017   RIG   Pricing  growth   6M-2018  6M-2017  6M-2018  6M-2017 
Zone    CHF 9.3   CHF 8.7                           CHF 1.8  CHF 1.6 
 EMENA   bn        bn       3.1%    -0.6%     2.5%       bn       bn    18.9%    18.2% 
 
 
 
   Organic growth increased to 2.5%. RIG was strong at 3.1% following an 
acceleration in the second quarter. This more than offset negative 
pricing. Net divestments reduced sales by 0.2%. Foreign exchange had a 
positive impact of 4.1%. Reported sales increased by 6.4% to CHF 9.3 
billion. 
 
   Zone EMENA saw positive growth across most geographies and categories. 
Petcare, coffee and nutrition were the main contributors. Petcare 
maintained strong momentum, based on the success of Felix in Russia. 
Coffee also saw good growth with stronger RIG, supported by the relaunch 
of Nescafé Gold. Nutrition and dairy performed well in Central and 
Eastern Europe, and the Middle East and North Africa. Confectionery saw 
improved growth, particularly in the United Kingdom. New product 
launches included KitKat Ruby and MilkyBar Wowsomes, a new chocolate bar 
with 30% less sugar based on Nestlé's breakthrough natural 
structured sugar. 
 
   The Zone's underlying trading operating profit margin increased by 70 
basis points, supported by operational efficiencies, structural cost 
savings and lower commodity costs. Strong RIG also led to better 
capacity utilization and operating leverage. 
 
   Zone Asia, Oceania and sub-Saharan Africa (AOA) 
 
 
   -- 4.4% organic growth: 3.7% RIG; 0.7% pricing. 
 
   -- China saw mid single-digit growth, improving versus last year. RIG and 
      pricing were both positive. 
 
   -- South-East Asia posted mid single-digit growth with a balanced 
      contribution from RIG and pricing. 
 
   -- South Asia saw mid single-digit organic growth, with good RIG and flat 
      pricing. 
 
   -- Sub-Saharan Africa posted high single-digit growth, with solid RIG and 
      positive pricing. 
 
   -- Japan and Oceania markets were flat, with robust RIG offset by negative 
      pricing. 
 
   -- The underlying trading operating profit margin decreased by 20 basis 
      points to 22.9%. 
 
 
 
 
 
       Sales     Sales                    Organic   UTOP     UTOP    Margin   Margin 
       6M-2018   6M-2017   RIG   Pricing  growth   6M-2018  6M-2017  6M-2018  6M-2017 
Zone   CHF 10.6  CHF 10.3                          CHF 2.4  CHF 2.4 
 AOA    bn        bn       3.7%     0.7%     4.4%       bn       bn    22.9%    23.1% 
 
 
 
   Organic growth was 4.4%, with RIG of 3.7% and pricing of 0.7%. Net 
divestments and foreign exchange reduced sales by 0.1% and 0.8%, 
respectively. Reported sales increased by 3.5% to CHF 10.6 billion. 
 
   Zone AOA delivered mid single-digit growth, with positive contributions 
from most geographies and categories. First-half organic growth in China 
accelerated, with strong momentum in coffee, culinary, and in 
e-commerce. South-East Asia delivered solid results with strong 
contributions from Vietnam and Indonesia, especially Milo. Mid 
single-digit growth in South Asia was supported by innovation and 
renovation, particularly for Maggi, KitKat and Nescafé. Sub-Saharan 
Africa saw high single-digit growth, even as inflation-driven pricing 
slowed versus last year. Japan and Oceania were flat, with positive RIG 
offset by negative pricing in a deflationary environment. Nutrition saw 
improved sales momentum in most markets. 
 
   The Zone's underlying trading operating profit margin remained strong 
and highly accretive to the group. The decrease of 20 basis points was 
due to the phasing of certain cost items. 
 
   Nestlé Waters 
 
 
   -- 1.0% organic growth: -0.7% RIG; 1.7% pricing. 
 
   -- North America saw positive growth. Pricing increased and RIG improved in 
      the second quarter, driven by the launch of the sparkling range. 
 
   -- Europe had slightly negative growth, reflecting weak RIG and slightly 
      positive pricing. 
 
   -- Emerging markets were flat, impacted by negative organic sales 
      development in China and Brazil. 
 
   -- The underlying trading operating profit margin decreased by 270 basis 
      points to 10.0% following higher commodity and distribution costs. 
 
 
 
 
 
              Sales     Sales                     Organic   UTOP     UTOP    Margin   Margin 
              6M-2018   6M-2017    RIG   Pricing  growth   6M-2018  6M-2017  6M-2018  6M-2017 
Nestlé   CHF 4.0   CHF 4.0                            CHF 0.4  CHF 0.5 
 Waters        bn        bn       -0.7%     1.7%     1.0%       bn       bn    10.0%    12.7% 
 
 
 
   Organic growth for the first half was 1.0% following a sequential 
improvement in the second quarter, driven largely by North America. RIG 
declined by 0.7%, mainly due to Europe and some emerging markets. 
Pricing increased to 1.7%. Net divestments and foreign exchange reduced 
reported sales by 0.8% and 0.7%, respectively. Reported sales in 
Nestlé Waters decreased by 0.5% to CHF 4.0 billion. 
 
   In the United States, price increases were implemented in June to 
reflect significant inflation in packaging and distribution costs. The 
launch of the sparkling range under our regional spring water brands 
(Poland Spring, Deer Park, Zephyrhills, Ozarka, Ice Mountain and 
Arrowhead) made a positive contribution to our growth. Europe saw 
slightly negative organic growth, reflecting difficult comparables. 
Emerging markets were flat, impacted by negative sales development in 
China and the pending divestment of the business in Brazil. The 
international premium brands, S.Pellegrino and Perrier, continued to 
deliver good growth. 
 
   The underlying trading operating profit margin decreased by 270 basis 
points as higher costs related to PET packaging and distribution were 
not yet compensated by price increases. 
 
   Other Businesses 
 
 
   -- 5.7% organic growth: 5.4% RIG; 0.3% pricing. 
 
   -- Nespresso maintained mid single-digit organic growth, with strong 
      momentum in North America and Asia. 
 
   -- Nestlé Health Science delivered mid single-digit organic growth, 
      with strong RIG. 
 
   -- Nestlé Skin Health saw mid single-digit growth, with positive RIG 
      but negative pricing. 
 
   -- The underlying trading operating profit margin increased by 160 basis 
      points to 16.4%. 
 
 
 
 
 
             Sales     Sales                    Organic   UTOP     UTOP    Margin   Margin 
             6M-2018   6M-2017   RIG   Pricing  growth   6M-2018  6M-2017  6M-2018  6M-2017 
Other        CHF 5.9   CHF 5.2                           CHF 1.0  CHF 0.8 
 Businesses   bn        bn       5.4%     0.3%     5.7%       bn       bn    16.4%    14.8% 
 
 
 
   Organic growth of 5.7% was based on strong RIG of 5.4% and pricing of 
0.3%. Net acquisitions increased reported sales by 4.9%, mainly due to 
the consolidation of Atrium Innovations into Nestlé Health Science 
from March 2018. Foreign exchange also had a positive 1.4% impact. 
Reported sales in Other Businesses increased by 12.0% to CHF 5.9 
billion. 
 
   Nespresso maintained mid single-digit growth. The Americas and Asia saw 
strong growth and Western Europe was resilient in a context of 
increasing competitive pressure. Growth was supported by the continued 
progress of the Vertuo system roll-out and boutique expansion. 
Nestlé Health Science saw mid single-digit growth, with good growth 
in Medical Nutrition. The acquisition of Atrium Innovations provided 
additional momentum in the second quarter, with strong demand for its 
non-GMO, organic and natural product offerings. Nestlé Skin Health 
had mid single-digit growth but pricing was negative. 
 
   The underlying trading operating profit margin increased by 160 basis 
points. This was mainly driven by an improvement in Nestlé Skin 
Health and Nespresso. 
 
   Outlook 
 
   Full-year guidance for 2018 confirmed, with organic sales growth 
expectation narrowed to around 3%; underlying trading operating profit 
margin improvement in line with our 2020 target. Restructuring costs(1) 
are expected at around CHF 700 million. Underlying earnings per share in 
constant currency and capital efficiency are expected to increase. 
 
 
 
   (1) Not including impairment of fixed assets, litigation and onerous 
contracts 
 
   Annex 
 
   (*) 2017 figures have been restated to reflect: 
 
 
   -- the implementation of IFRS 15 - Revenue from contract with customers, 

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