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Press Release: Nestle: Nestlé reports half-year results for 2018

26 Jul 2018 5:17 am
 
 
   Nestlé S.A. / Nestlé reports half-year results for 2018 . 
Processed and transmitted by Nasdaq Corporate Solutions. The issuer is 
solely responsible for the content of this announcement. 
 
   This press release is also available in Français (pdf): 
https://www.nestle.com/asset-library/Documents/Library/Events/2018-half-year-results/press-release-fr.pdf 
and Deutsch (pdf): 
https://www.nestle.com/asset-library/Documents/Library/Events/2018-half-year-results/press-release-de.pdf 
 
 
   Follow today's event live 
 
   14:00 CET Investor call audio webcast 
http://edge.media-server.com/m/go/Nestle-2018-Half-year-results 
 
   Full details in Events 
https://www.nestle.com/media/mediaeventscalendar/allevents/2018-half-year-results 
 
 
   Report published today 
 
   2018 Half-Yearly Report (pdf): 
https://www.nestle.com/asset-library/Documents/Library/Documents/Half_Yearly_Reports/2018-half-yearly-report-en.pdf 
 
 
   Other language versions available in Publications 
https://www.nestle.com/investors/publications 
 
   ............. 
 
   Vevey, July 26, 2018 
 
   Nestlé reports half-year results for 2018 
 
 
   -- Continued progress with the Nestlé value creation model and on track 
      to meet our full-year guidance, supported by increased momentum in the 
      United States and China, as well as in infant nutrition. 
 
   -- Organic growth of 2.8%, with 2.5% real internal growth (RIG) and pricing 
      of 0.3%. 
 
   -- Total sales increased by 2.3% to CHF 43.9 billion (6M-2017: CHF 42.9 
      billion). Acquisitions and divestments netted to zero. Foreign exchange 
      reduced sales by 0.5%. 
 
   -- Underlying trading operating profit margin was 16.1%, an increase of 20 
      basis points in constant currency and on a reported basis. 
 
   -- Trading operating profit margin was 14.6%, a decrease of 50 basis points 
      on a reported basis due to higher restructuring costs and net other 
      trading items. 
 
   -- Earnings per share increased by 21.4% to CHF 1.92 on a reported basis. 
      Underlying earnings per share increased by 9.2% in constant currency and 
      by 10.4% to CHF 1.86 on a reported basis. 
 
   -- Free cash flow increased by 52%, from CHF 1.9 billion to CHF 2.9 billion. 
 
   -- 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 costs1 are 
      expected at around CHF 700 million. Underlying earnings per share in 
      constant currency and capital efficiency are expected to increase. 
 
 
   Mark Schneider, Nestlé CEO said:"Our first half results confirmed 
that our strategic initiatives and rigorous execution are clearly paying 
off. Nestlé has maintained the encouraging organic revenue growth 
momentum we saw at the beginning of the year. In particular, the United 
States and China markets showed a meaningful improvement. We were also 
pleased by the enhanced organic growth in our core infant nutrition 
category. 
 
   Our margin development is fully consistent with our 2020 target. We are 
creating value by pursuing growth and profitability in a balanced 
manner. In line with this approach, we have accelerated our product 
innovation efforts to drive future growth and initiated significant cost 
reduction efforts, in particular in Zone EMENA and at our Corporate 
Center. 
 
   As we look towards the second half of 2018, we expect further 
improvement in our organic revenue growth. Margin improvement is 
expected to accelerate with further benefits from our efficiency 
programs and more favorable commodity pricing." 
 
   Group Results 
 
 
 
 
               Total                Zone               Nestlé    Other 
               Group    Zone AMS    EMENA    Zone AOA    Waters     Businesses 
Sales 
6M-2018 
(CHF m)       43'920     14'153     9'303     10'634      3'967       5'863 
Sales 
6M-2017 
(CHF m)*      42'926     14'689     8'741     10'273      3'988       5'235 
Real 
 internal 
 growth 
 (RIG)            2.5%      1.0%       3.1%      3.7%        -0.7%        5.4% 
Pricing           0.3%      0.0%      -0.6%      0.7%         1.7%        0.3% 
Organic 
 growth           2.8%      1.0%       2.5%      4.4%         1.0%        5.7% 
Net M&A           0.0%     -1.0%      -0.2%     -0.1%        -0.8%        4.9% 
Foreign 
 exchange        -0.5%     -3.6%       4.1%     -0.8%        -0.7%        1.4% 
Reported 
 sales 
 growth           2.3%     -3.6%       6.4%      3.5%        -0.5%       12.0% 
6M-2018 
 Underlying 
 TOP 
 Margin          16.1%     18.9%      18.9%     22.9%        10.0%       16.4% 
6M-2017 
 Underlying 
 TOP 
 Margin          15.9%     18.6%      18.2%     23.1%        12.7%       14.8% 
 
 
 
   (*) 2017 figures have been restated to reflect: 
 
 
   -- the implementation of IFRS 15 - Revenue from contract with customers, 
      IFRS 16 - Leases and IFRIC 23 - Uncertainty over income tax treatments as 
      well as other accounting policies and presentation changes; and 
 
 
   -- the change in organization of infant nutrition business. Effective 
      January 1, 2018 Nestlé Nutrition is reported in the Zones as a 
      regionally managed business, with Gerber Life Insurance business reported 
      in Other Businesses. 
 
 
   Group Sales 
 
   Organic growth of 2.8% in the first half was in line with our 
expectations and within our guidance for 2018. RIG was 2.5% and remained 
at the high end of the food and beverage industry. Pricing contributed 
0.3%, reflecting the challenging environment in Europe and lower 
inflation in some emerging markets. Organic growth in the first half 
improved materially in North America and China. All categories reported 
positive growth, led by coffee, petcare, and Nestlé Health Science. 
Infant nutrition sales growth accelerated, with a broad-based 
improvement across all geographies, helped by recent product launches, 
including HMOs (Human Milk Oligosaccharides) infant formula. 
 
   Acquisitions and divestments had a net neutral impact on reported sales, 
with the acquisition of Atrium Innovations and other deals being offset 
by divestments, mainly U.S. confectionery. Foreign exchange had a 
negative impact of 0.5%. Total sales increased by 2.3% on a reported 
basis to CHF 43.9 billion. 
 
   Underlying Trading Operating Profit 
 
   Underlying trading operating profit increased by 3.5% to CHF 7.1 
billion. The underlying trading operating profit margin increased by 20 
basis points in constant currency, and by 20 basis points on a reported 
basis to 16.1%. 
 
   Margin expansion was supported by operational efficiencies and 
successful execution of ongoing restructuring initiatives. These cost 
savings were partially offset by higher commodity and packaging costs of 
CHF 90 million, amounting to a 20 basis point headwind. Distribution 
costs also increased. 
 
   The underlying trading operating profit margin is expected to improve 
further in the second half of the year, driven by further benefits from 
efficiency programs and more favorable commodity prices. 
 
   Restructuring expenditure and net other trading items increased by CHF 
323 million to CHF 672 million. As a consequence, trading operating 
profit decreased by 1.3% to CHF 6.4 billion and the trading operating 
profit margin decreased by 50 basis points on a reported basis to 14.6%. 
 
   Net Profit and Earnings Per Share 
 
   Net profit increased by 19.0% to CHF 5.8 billion and earnings per share 
increased by 21.4% to CHF 1.92. The increase was mainly the result of 
income from the disposal of businesses, lower taxes and improved 
operating performance. 
 
   Underlying earnings per share increased by 9.2% in constant currency and 
by 10.4% on a reported basis to CHF 1.86. Nestlé's share buyback 
program contributed 1.5% to the underlying earnings per share increase, 
net of finance costs. 
 
   Cash Flow 
 
   Free cash flow increased by 52%, from CHF 1.9 billion to CHF 2.9 
billion. This was mainly driven by an improvement in working capital, 
lower taxes and increased operating profit. 
 
   Portfolio Management 
 
   Nestlé has made further progress to actively evolve the portfolio 
towards high-growth, high-margin categories and brands. 
 
   On May 7, 2018, an agreement was announced granting Nestlé the 
perpetual rights to market Starbucks consumer and foodservice products 
globally, outside of Starbucks coffee shops. As part of this transaction, 
Starbucks will receive an up-front cash payment of USD 7.15 billion for 
a business which generated annual sales of USD 2 billion. The agreement 
is now expected to close at the end of August 2018. 
 
   The process of exploring strategic options for the Gerber Life Insurance 
business is on track with completion expected in 2018. 
 
   Zone Americas (AMS) 
 
 
   -- 1.0% organic growth: 1.0% RIG; 0.0% pricing. 
 
   -- North America saw positive organic growth in the first half, with 
      increased momentum in the United States. Both RIG and pricing were 
      positive. 
 
   -- Latin America reported positive RIG and organic growth. Pricing was 
      negative but increased significantly in the second quarter. 
 
   -- The underlying trading operating profit margin increased by 30 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 14.2  CHF 14.7                          CHF 2.7  CHF 2.7 
 AMS    bn        bn       1.0%     0.0%     1.0%       bn       bn    18.9%    18.6% 
 
 
 
   Organic growth was 1.0%, driven entirely by RIG with flat pricing. Net 
divestments reduced sales by 1.0%, largely related to the divestment of 
the U.S. confectionery business. Foreign exchange had a negative impact 
on sales of 3.6%. Reported sales in Zone AMS decreased by 3.6% to CHF 
14.2 billion. 
 
   North America saw positive organic growth and pricing in the first half. 

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July 26, 2018 01:17 ET (05:17 GMT)
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