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NESTLÉ S.A.

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Nestle S A : TRANSCRIPT 428KB

07/29/2022 | 03:21pm EDT

NESTLÉ S.A.

2022 HALF-YEAR RESULTS INVESTOR CALL TRANSCRIPT

28th July, 2022, 14:00 CEST

Speakers:

Mark Schneider, Chief Executive Officer, Nestlé S.A. François-Xavier Roger, Chief Financial Officer, Nestlé S.A. Luca Borlini, Head of Investor Relations, Nestlé S.A.

This transcript may have been edited for clarity, and the spoken version is the valid record. This document is subject to the same terms and conditions.

https://www.Nestlé.com/info/tc

Nestlé 2022 Half-Year Results

Thursday 28th July 2022

Luca Borlini, Nestlé S.A, Head of Investor Relations:

Slide: Title slide

Good afternoon, and good morning to everyone. Welcome to the Nestlé First Half 2022 Results Webcast. I am Luca Borlini, Head of Nestlé Investor Relations.

Today, I'm joined by our Chief Executive Officer, Mark Schneider, and our Chief Financial Officer, François Roger. As usual Mark will begin with key messages and discuss the full year 2022 guidance. François will follow with a review of the first half 2022 sales and profit figures. We will then open the lines for your questions.

Slide: Disclaimer

Before we begin, please take note of our disclaimer. Now I hand over to Mark.

Mark Schneider, Nestlé S.A. Chief Executive Officer:

Slide: Title Slide

Thank you, Luca, and a warm welcome to our conference call participants today. As always, we appreciate your interest in our company.

Slide: Key Messages

I'm pleased to report that our growth momentum increased during the second quarter, and that we reached 8.1% organic sales growth in the first half, pricing continued to increase, reflecting higher inflation levels for our commodities, energy and labor.

As before we made a point of acting responsibly in our price increases. Real internal growth remained resilient. And I'm glad to confirm that all three components of organic growth, volume, mix and price were positive in the first half. Continued supply chain issues and tough comparables from the second quarter last year, brought our real internal growth slightly down from first quarter levels. Demand elasticity is still quite limited and moderate in light of the pricing action we had to take.

If you like building stacks to measure growth consistency over time, our two-year compound annual organic sales growth rate for H1 was 8.1% and the three-year CAGR was 6.3%. No small feat. This has been a year of extraordinary supply chain challenges and input cost inflation. The situation was difficult before, but the war in Ukraine brought this to a whole new and unforeseen level, in particular for the food industry.

The development of our underlying trading operating profit margin, both at group and at Zone or business level, clearly shows that the food industry is not the cause of soaring food prices.

2

Nestlé 2022 Half-Year Results

Thursday 28th July 2022

It is much rather impacted by geopolitical and macroeconomic circumstances that are outside of our control. That said, we do everything to address these challenges in a responsible manner. Always keeping consumers in mind.

François will show you later in his presentation that we worked hard from all angles to mitigate the unavoidable impact on our underlying trading operating profit margin. I believe we handled the situation well under the circumstances and found a reasonable balance between maintaining growth and protecting the bottom line.

Our high single-digit underlying EPS development in the first half bears this out. That balanced approach between growth and profitability will also be our guiding light when it comes to the second half of the year.

In a fast-moving environment like this operating management certainly takes center stage. Having said that, I'm all the more proud that we also saw continued progress with our strategic goals.

Regarding portfolio management, we progressed with the acquisition of a majority stake in Orgain, and the recently announced transactions to buy Puravida in Brazil and The Better Health Company in New Zealand. These transactions help Nestlé Health Science to round out its global presence in the Consumer health and Vitamins, minerals and supplements space.

Portfolio Management for us goes beyond M&A. It includes the effective management of our existing portfolio, in particular through meaningful and relevant innovation, and the prompt fixing of any underperformers. In this context, I'm proud to report that we have stabilized our Infant nutrition business in China. Growth in the first half turned positive and we're starting to see improving market share trends.

Outside of portfolio management we also continue to make progress on other key strategic initiatives including our sustainability and affordability projects.

Slide: Improving access to affordable nutrition

This brings me to a key challenge at this time of increasing food insecurity and that is improving access to affordable high-quality nutrition. The combination of the pandemic and the war in Ukraine has wiped out much of the progress over the past decade in this important area.

This is a time when help is needed. And with our long-standing presence in developing countries, we see many opportunities to do good and to do well at the same time.

3

Nestlé 2022 Half-Year Results

Thursday 28th July 2022

As stressed before, we acted responsibly when it comes to the pricing of our products. But we go beyond responsible pricing alone. We lead the way when it comes to micronutrient fortification and in the important task of establishing and scaling up local and more resilient food supply chains, in particular in Sub-Saharan Africa. Our press release provides specific examples of our recent projects.

Slide: 2022 guidance updated

Next, I would like to comment on our updated guidance for the year. As indicated in our Q1 conference call, our start to the year was stronger than expected and we have only accelerated from there.

Based on the strong first half sales performance. We now expect organic sales growth for the full year in the range of 7% to 8%. This points to a strong second half with similar or only slightly lower performance than in H1. Any caution here is due to the geopolitical and macroeconomic concerns, while we are confident of how our products and brands will continue to perform.

Our views on the expected underlying trading operating profit margin have not changed materially from the time of our Q1 call. Being cautious about the global macro environment, we now expect a full year margin around 17% which is the low end of our previously guided range. All other expectations for the year remain unchanged.

While it is way too early today to discuss 2023 expectations and beyond. I would like to assure everyone that we're not expecting a longer term reset when it comes to our underlying trading operating profit margin. We still see the margin pressure is transitory while pricing has to catch up with input cost inflation. As a food company and being committed to responsible pricing, the price adjustment did not work quite as fast as in other consumer goods categories, such as personal and household care.

Before handing it over to Francois, I would like to make a particular point in recognizing and thanking our associates around the world. As we go through the third year in a row under external crisis conditions, your drive, energy and perseverance in coping with the situation and making the best of it is a source of pride and inspiration. It is a pleasure and a privilege to lead such a community. Thank you.

This concludes my prepared remarks. I would now like to hand it over to Francois and look forward to answering your questions later.

François-Xavier Roger, Nestlé SA, Chief Financial Officer:

Slide: Title Slide

4

Nestlé 2022 Half-Year Results

Thursday 28th July 2022

Thank you, Mark, and good morning and good afternoon to you all. Let me start with the highlights for the first half of 2022.

Slide: Half-year sales growth

Organic growth was 8.1%. Pricing increased to 6.5%, reflecting significant and unprecedented cost inflation. RIG was resilient at 1.7%. The slowdown versus the prior year reflects a high base of comparison in 2021 and supply chain constraints.

Net acquisitions increased sales by 1.0%, largely related to the acquisition of the core brands of The Bountiful Company as well as Orgain.

Foreign exchange had a positive impact on sales growth in the first half.

Total reported sales for the first six months were CHF 45.6 billion, a 9.2% increase versus last year. This is the highest level seen for more than fifteen years.

Slide: Strong growth across developed and emerging markets

Turning to the distribution of growth between developed and emerging markets.

Organic growth in developed markets was 6.9%, based on increased pricing and positive RIG.

Growth in emerging markets reached 10.0%, with strong pricing and solid RIG. Growth was supported by continued momentum for affordable offerings, particularly in AOA.

Slide: Sustained momentum in retail and out-of-home channels

Turning next to the breakdown of sales by channel.

Organic growth for retail sales remained robust at 6.7% for the first half.

Within retail, e-commerce sales grew by 8.3%, building on 19.2% growth in the first half of 2021.

Organic growth in out-of-home channels reached 29.6%, with sales now exceeding 2019 levels.

Slide: Using multiple levers to offset cost inflation

We have continued to address inflationary pressures proactively and responsibly.

Pricing has stepped up further and reached 7.7% in the second quarter.

5

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Nestlé SA published this content on 29 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 July 2022 19:20:04 UTC.


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