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Nestlé Reports 2.1% Organic Growth and Highlights Strong Second Quarter Performance in H1 2024

World 25.07.2024
Source: The DairyNews
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Nestlé has reported its half-year results for 2024, showcasing organic growth of 2.1%, with a positive real internal growth (RIG) of 0.1% for the first half and 2.2% for the second quarter. The total reported sales reached CHF 45.0 billion, a decline of 2.7%, influenced by foreign exchange impacts and net divestitures.
Nestlé Reports 2.1% Organic Growth and Highlights Strong Second Quarter Performance in H1 2024

The underlying trading operating profit (UTOP) margin increased by 30 basis points to 17.4% on a reported basis and 40 basis points in constant currency. The trading operating profit (TOP) margin rose by 50 basis points to 16.4%.

Underlying earnings per share increased by 3.3% in constant currency but decreased by 1.0% on a reported basis to CHF 2.40. The earnings per share grew by 1.8% to CHF 2.16 on a reported basis. Free cash flow rose by CHF 0.6 billion to CHF 4.0 billion. Nestlé has updated its full-year 2024 outlook, expecting organic sales growth of at least 3% and an increase in underlying earnings per share in constant currency at a mid single-digit rate, while maintaining its UTOP margin guidance with a moderate increase expected.

Mark Schneider, Nestlé CEO, stated, “Positive real internal growth is back. We delivered improved volume and mix growth across the Group in the second quarter. Looking ahead to the remainder of the year, we will continue to drive RIG by launching innovations that address consumer trends and growing our large iconic brands. At the same time, we have seen pricing come down faster than expected. Therefore, we consider it prudent to adjust our guidance for the year, with organic sales growth now expected to be at least 3%.”


Organic growth was broad-based, driven by Europe and emerging markets. Developed markets saw 1.0% organic growth led by pricing, while emerging markets experienced 3.7% organic growth. By product category, coffee contributed significantly with mid single-digit growth, supported by Nescafé, Nespresso, and Starbucks. PetCare also saw mid single-digit growth, driven by premium brands. Confectionery grew at a high single-digit rate, led by KitKat, and water achieved mid single-digit growth with brands like S.Pellegrino. Infant Nutrition grew at a low single-digit rate, while Nestlé Health Science returned to positive growth in the second quarter. Dairy posted near-flat growth, with gains in culinary solutions offsetting declines in coffee creamers and ambient dairy. Culinary products, particularly Maggi, showed robust growth, while frozen food in North America faced pressure.

Organic growth in retail sales was 2.0%, with e-commerce sales growing by 10.6%, accounting for 18.2% of total Group sales. Out-of-home channels saw 3.8% organic growth. Net divestitures impacted sales by -0.4%, and foreign exchange had a -4.4% effect, resulting in a -2.7% decrease in total reported sales to CHF 45.0 billion.

Underlying trading operating profit decreased by -0.8% to CHF 7.8 billion, with the margin improving to 17.4%. Gross profit margin increased by 160 basis points to 47.2%, driven by pricing, lower input costs, and portfolio optimization. Distribution costs decreased slightly, while marketing and administration expenses increased, reflecting higher advertising and marketing investments. R&D expenses rose by 10 basis points. Net other trading items decreased, leading to a trading operating profit increase of 0.6% to CHF 7.4 billion, with the margin improving to 16.4%.

Net financial expenses rose from CHF 697 million to CHF 744 million, with the average cost of net debt remaining at 2.6%. The Group reported a tax rate increase to 25.0%, with the underlying tax rate at 22.1%. Net profit remained flat at CHF 5.6 billion, with a margin increase to 12.5%. Earnings per share grew by 1.8% to CHF 2.16 on a reported basis and by 3.3% to CHF 2.51 in constant currency. The share buyback program contributed 1.0% to the increase.

Cash generated from operations increased to CHF 8.1 billion, and free cash flow rose to CHF 4.0 billion. The Group repurchased CHF 2.4 billion of shares as part of its share buyback program, leading to an increase in net debt to CHF 59.5 billion as of June 30, 2024. On March 1, 2024, Nestlé completed the acquisition of a majority stake in Grupo CRM.

Nestlé's income accelerator program, launched to support cocoa-farming families, has shown significant progress. The program has increased cocoa yields by 32% and household incomes by 38%, according to a report by the KIT Institute. The program rewards farmers for enrolling children in school, implementing good agricultural practices, and diversifying income. It aims to close the living income gap and reduce child labor risks. Nestlé introduced KitKat bars made with cocoa from income accelerator farms to raise awareness about sustainable cocoa and build consumer trust.

The full-year 2024 outlook expects at least 3% organic sales growth, mid single-digit growth in underlying earnings per share in constant currency, and a moderate increase in the UTOP margin.




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