Nestlé beats H1 sales growth target, but sees profits slip

By Nathan Gray

- Last updated on GMT

Nestlé beats H1 sales growth target, but sees profits slip

Related tags Organic growth Chf Sales growth Business terms Switzerland North africa functional beverage beverage

Better-than-expected first-half sales growth has allowed the world’s biggest food company, Nestlé, to confirm its 2015 outlook despite poor exchange rates leading to decreased profits.

The Nescafe, Maggi and KitKat brand owner said organic sales, which exclude acquisitions, divestments and currency moves, rose 4.5% in the six months to June – beating analysts' expectations of and reaffirming Nestlé’s expected annual sales growth of 5%.

However, the Swiss food giant reported decreased overall revenues and profit on the back of ‘sizable’ negative effects of foreign exchange swings; Revenue slid 0.3% to CHF 42.84 in the first half, while net profit declined 2.5% to CHF 4.52 billion (€4.17bn) from CHF 4.63 billion (€4.27bn) a year earlier, defying projections for a 2.4% jump to CHF 4.74 billion (€4.37bn).

Nestlé said the strong Swiss franc had reduced revenue for the period by 5.8%.

“The first half results were in line with our expectations, broad-based across categories and geographies, solid even in difficult circumstances, and consistent with our strong performance over time,”​ said Nestlé chief executive Paul Bulcke.

Nestlé’s nutrition division saw total sales fall by 1% to CHF 5.28bn (€4.87bn) - while organic growth in the division was 3.9% with and operating profit of CHF 1.2bn (€1.1bn). Meanwhile Nestlé Waters sales increased 2.7% to CHF 3.77bn (€3.47) – with 5.3% organic growth and a CHF 435 million (€400m) operating profit.

From a regional perspective the Vevey-based company said organic growth was 6.6% in the Americas (AMS), 3.4% in Europe, Middle East and North Africa (EMENA) and 2.2% in Asia, Oceania and sub-Saharan Africa (AOA). Nestlé added that sales growth in emerging markets slid to 7.3% from 9.7% in the first half of 2014, but developed markets saw a sales rise of 2.2%.

Earnings per share declined to CHF 1.43 (€1.32) from last year's CHF 1.45 (€1.34). Underlying earnings per share, however, rose 7.3% in constant currencies, said Nestlé.

“Overall, positives outweigh negatives and this will give added confidence that Nestle can get closer to 5 percent organic growth for the year,”​ Warren Ackerman, an analyst at Societe Generale, wrote in a note - while Jeff Stent, analyst at Exane BNP Paribas commented that from a bottom-line perspective “results are basically in-line.”

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