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    NESN   CH0038863350

NESTL╔ S.A.

(NESN)
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Press Release: Nestle: NestlÚ reports half-year -2-

07/29/2021 | 01:15am EDT

Underlying earnings per share increased by 10.5% in constant currency and increased by 8.3% on a reported basis to CHF 2.17. The increase was mainly the result of improved operating performance. Nestlé's share buyback program contributed 1.4% to the underlying earnings per share increase, net of finance costs. Earnings per share increased by 3.2% to CHF 2.12 on a reported basis.

Cash Flow

Cash generated from operations was essentially unchanged at CHF 5.8 billion. Free cash flow decreased from CHF 3.3 billion to CHF 2.8 billion mainly due to a temporary increase in capital expenditure to meet strong volume demand, particularly for Purina PetCare and coffee.

Share Buyback Program

In the first half, the Group repurchased CHF 3.1 billion of Nestlé shares as part of the three-year CHF 20 billion share buyback program, which began in January 2020.

Net Debt

Net debt increased to CHF 38.5 billion as at June 30, 2021, compared to CHF 31.3 billion at December 31, 2020. The increase reflected the dividend payment of CHF 7.7 billion and share buybacks of CHF 3.1 billion, which more than offset free cash flow generation and a net cash inflow from divestitures and acquisitions.

Portfolio Management

Nestlé is transforming its global water business, sharpening its focus on international premium and mineral water brands and healthy hydration products. On March 5, 2021, Nestlé completed the acquisition of Essentia Water, a premium functional water brand in the U.S. On March 31, 2021, Nestlé completed the sale of its regional spring water brands, purified water business and beverage delivery service in the U.S. and Canada for USD 4.3 billion.

Nestlé Health Science continues to focus on building a nutrition and health powerhouse. On April 30, 2021, Nestlé entered into an agreement to acquire core brands of The Bountiful Company for USD 5.75 billion. The Bountiful Company is the number one pure-play leader in the highly attractive and growing global nutrition and supplement category. The transaction is expected to close in August. On July 1, 2021, Nestlé completed the acquisition of Nuun, a leading company in the fast-growing functional hydration market. On July 1, 2021, Nestlé Health Science entered into an agreement with Seres Therapeutics to jointly commercialize SER-109, an investigational oral microbiome therapeutic in the U.S. and Canada. If approved, SER-109 would become the first-ever FDA-approved microbiome therapeutic.

Building on the successful global coffee alliance, Nestlé continues to expand the reach of Starbucks branded coffee and tea products outside Starbucks retail stores. On July 26, 2021, Nestlé and Starbucks announced a new collaboration to bring Starbucks ready-to-drink coffee beverages to select markets across South-East Asia, Oceania and Latin America.

Zone Americas (AMS)

   -- 7.6% organic growth: 5.3% RIG; 2.3% pricing. 
 
   -- North America saw mid single-digit organic growth, with positive RIG and 
      pricing. 
 
   -- Latin America reached double-digit organic growth, with strong RIG and 
      pricing. 
 
   -- The underlying trading operating profit margin increased by 40 basis 
      points to 19.3%. 
 
       Sales     Sales                    Organic   UTOP     UTOP    Margin   Margin 
       6M-2021   6M-2020   RIG   Pricing  growth   6M-2021  6M-2020  6M-2021  6M-2020 
Zone   CHF 16.2  CHF 16.7                          CHF 3.1  CHF 3.2 
 AMS      bn        bn     5.3%     2.3%     7.6%       bn       bn    19.3%    18.9% 
 

Organic growth was 7.6%, with strong RIG of 5.3% supported by volume and mix. Pricing increased significantly to 2.3%. Net divestitures reduced sales by 4.3%, as the divestments of the Nestlé Waters North America brands and U.S. ice cream business more than offset the acquisitions of Freshly and Essentia Water. Foreign exchange had a negative impact of 6.3%, reflecting broad-based currency depreciations against the Swiss franc. Reported sales in Zone AMS decreased by 3.1% to CHF 16.2 billion.

Zone AMS reported high single-digit organic growth, with a high base of comparison in 2020. Growth was supported by continued innovation, strong momentum in e-commerce and recovery in out-of-home channels. The Zone saw broad-based market share gains, led by coffee, pet food, dairy and Infant Nutrition.

North America posted mid single-digit growth. The largest growth contributor was Purina PetCare, with sustained momentum in e-commerce. Its science-based and premium brands Purina Pro Plan, Purina ONE and Fancy Feast all grew at a double-digit rate. Beverages, including Starbucks at-home products, Coffee mate and Nescafé, saw high single-digit growth. Frozen and chilled food recorded mid single-digit growth. Strong sales developments for Stouffer's, Lean Cuisine and Freshly were partially offset by a sales decrease in pizza. Home-baking products, including Toll House and Carnation, saw a sales decline following exceptionally high demand in 2020. Sales in ice cream and confectionery in Canada grew at a double-digit rate, driven by Häagen-Dazs and KitKat. Water posted positive growth, with strong demand for international premium brands S.Pellegrino and Perrier, as well as Essentia. Nestlé Professional returned to positive growth.

Latin America reached double-digit growth, with strong contributions from most geographies and product categories. Brazil posted double-digit growth, reflecting strong demand for KitKat, Nescafé and the newly launched Ninho Forti+. Sales in Mexico grew at a double-digit rate, led by coffee and confectionery. Chile also reported double-digit growth, supported by ice cream and confectionery. By product category, confectionery, Purina PetCare and coffee all grew at a strong double-digit rate. Growth in dairy moderated to a high single-digit rate, following exceptionally strong demand in 2020, particularly for home cooking and baking products. Infant Nutrition saw mid single-digit growth, supported by robust demand for new premium and functional products. Nestlé Professional recorded strong double-digit growth, with sales almost recovering to 2019 levels.

The Zone's underlying trading operating profit margin increased by 40 basis points. Operating leverage, structural cost reductions and product mix more than offset input cost inflation and increased consumer-facing marketing expenses.

Zone Europe, Middle East and North Africa (EMENA)

   -- 7.3% organic growth: 6.7% RIG; 0.6% pricing. 
 
   -- Western Europe saw high single-digit organic growth with strong RIG, 
      partially offset by negative pricing. 
 
   -- Central and Eastern Europe reached double-digit organic growth, with 
      strong RIG and positive pricing. 
 
   -- Middle East and North Africa posted mid single-digit organic growth, 
      based on positive RIG and pricing. 
 
   -- The underlying trading operating profit margin increased by 50 basis 
      points to 18.8%. 
 
        Sales     Sales                    Organic   UTOP     UTOP    Margin   Margin 
        6M-2021   6M-2020   RIG   Pricing  growth   6M-2021  6M-2020  6M-2021  6M-2020 
Zone    CHF 10.2  CHF 10.0                          CHF 1.9  CHF 1.8 
 EMENA     bn        bn     6.7%     0.6%     7.3%       bn       bn    18.8%    18.3% 
 

Organic growth reached 7.3%, with strong RIG of 6.7% supported by volume and mix. Pricing turned positive, contributing 0.6%. Net divestitures reduced sales by 4.1%, largely related to the divestment of the Herta charcuterie business. Foreign exchange negatively impacted sales by 1.4%. Reported sales in Zone EMENA increased by 1.8% to CHF 10.2 billion.

Zone EMENA reported high single-digit organic growth, supported by successful innovation and continued strong momentum in e-commerce. Each region posted positive growth, with strong sales developments in Russia, Turkey, the United Kingdom and Italy. The Zone continued to see broad-based market share gains, particularly for pet food, coffee, plant-based food products and water.

By product category, coffee and Purina PetCare posted double-digit growth. Coffee was supported by strong momentum for Nescafé and Starbucks at-home products. Purina PetCare reported continued strong growth for premium brands Felix, Purina Pro Plan and Purina ONE, as well as veterinary products. Tails.com and Lily's Kitchen also saw strong momentum, based on increased consumer adoption. Growth in Nestlé Professional and water turned positive, with strong sales developments in the second quarter as movement restrictions eased. Perrier Energize, a low-calorie natural energy beverage, was successfully launched in France. Sales in confectionery reached a mid single-digit rate, based on improved demand for impulse and gifting products. Building on Nestlé's expertise in chocolate innovation and non-dairy alternatives, a vegan KitKat was launched across several European markets in June. Culinary saw low single-digit growth. Strong demand for Garden Gourmet and Mindful Chef was partially offset by slightly negative growth in Maggi following elevated demand in 2020. Infant Nutrition posted a sales decrease due to lower birth rates in the context of the pandemic, but gained market share.

The Zone's underlying trading operating profit margin increased by 50 basis points. Operating leverage, structural cost reductions and product mix more than offset increased consumer-facing marketing expenses and commodity inflation.

(MORE TO FOLLOW) Dow Jones Newswires

July 29, 2021 01:15 ET (05:15 GMT)

Stocks mentioned in the article
ChangeLast1st jan.
NESTLÉ S.A. -1.37% 113.44 Delayed Quote.8.80%
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Financials
Sales 2021 86 012 M 93 005 M 93 005 M
Net income 2021 12 119 M 13 105 M 13 105 M
Net Debt 2021 35 528 M 38 417 M 38 417 M
P/E ratio 2021 26,2x
Yield 2021 2,52%
Capitalization 312 B 337 B 337 B
EV / Sales 2021 4,04x
EV / Sales 2022 3,90x
Nbr of Employees 273 000
Free-Float 97,6%
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Number of Analysts 28
Last Close Price 113,44 CHF
Average target price 122,48 CHF
Spread / Average Target 7,97%
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Managers and Directors
Ulf Mark Schneider Chief Executive Officer & Director
Franšois-Xavier Michel Marie Roger Chief Financial Officer & Executive Vice President
Paul Bulcke Chairman
Stefan Palzer Chief Technology Officer & Executive VP
Magdi Batato Head-Operations & Executive Vice President
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