Nestlé reports 9-Month Sales Rise on All-Category Growth

Nestlé reports 9-Month Sales Rise on All-Category Growth

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  • Organic growth of 2.8%, with 2.3% real internal growth (RIG) and pricing of 0.5%, in line with our expectations.
  • Total reported sales increased by 2.0% to CHF 66.4 billion (9M-2017: CHF 65.1 billion). Net acquisitions had a positive impact of 0.1% and foreign exchange reduced sales by 0.9%.
  • Further progress was made in positioning the portfolio towards attractive high-growth categories. Nestlé acquired the global perpetual license of Starbucks consumer packaged goods and foodservice products. The company also reached an agreement for the sale of Gerber Life Insurance Co. and has started to explore strategic options for Nestlé Skin Health.
  • Full-year guidance for 2018 confirmed, with organic sales growth expected to be around 3%; underlying trading operating profit margin improvement in line with our 2020 target. Restructuring costs 1 are expected to be around CHF 700 million. Underlying earnings per share in constant currency and capital efficiency are expected to increase.
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Mark Schneider, Nestlé CEO: “We are encouraged by the progress on our path of accelerated value creation. The nine-month sales show solid growth across most geographies and product categories. We are starting to see improved momentum in North America and in our infant nutrition category globally. Our business in China continued to grow at a mid-single-digit pace. Our growth was supported by disciplined execution and faster innovation. We have reached significant milestones in portfolio management and are particularly pleased with the early closing of the Starbucks transaction. We have also made good progress on our various cost reduction programs. Our growth and efficiency initiatives put us on track to meet our full-year 2018 guidance and 2020 targets.”

Total GroupZone AMSZone EMENAZone AOANestlé WatersOther Businesses
Sales 9M-2018 (CHF m)66’42421’91813’73115’7996’1278’849
Sales 9M-2017 (CHFm)*65’12422’56913’24115’3316’0937’890
RIG2.3%0.8%2.3%3.7%-0.2%5.7%
Pricing0.5%0.6%-0.7%0.7%2.3%0.3%
Organic growth2.8%1.4%1.6%4.4%2.1%6.0%
Net M&A0.1%-1.1%-0.1%0.0%-0.8%5.4%
Foreign exchange-0.9%-3.2%2.2%-1.3%-0.7%0.7%
Reported sales growth2.0%-2.9%3.7%3.1%0.6%12.1%

* Effective as from January 1, 2018, Nestlé Nutrition is reported in the Zones as a regionally managed business, with the Gerber Life Insurance business reported in Other Businesses. 2017 sales comparables have been restated mainly to reflect this change of management responsibility and the new accounting standards for revenue measurement following the implementation of IFRS 15.

Group sales

Organic growth was 2.8%, reaching 2.9% in the third quarter despite high comparables. RIG was 2.3% and continued to be at the high end of the food and beverage industry. Pricing increased by 0.5% with improvements in the Americas. In the third quarter, organic growth continued to improve in North America and for infant nutrition globally. Growth in China remained at a mid-single-digit pace. Zone EMENA saw slower growth, largely due to high comparables. All categories had positive growth led by coffee, Purina petcare, infant nutrition and Nestlé Health Science.

Net acquisitions increased sales by 0.1% as the acquisition of Atrium Innovations, the Starbucks license and other transactions were offset by divestments, mainly the U.S. confectionery business. Foreign exchange had a negative impact of 0.9%, largely due to the devaluation of several emerging market currencies against the Swiss Franc. Total reported sales increased by 2.0% to CHF 66.4 billion.

Zone Americas (AMS)

  • 1.4% organic growth: 0.8% RIG; 0.6% pricing.
  • North America saw positive organic growth, with both RIG and pricing contributing.
  • Latin America reported positive organic growth, with a sequential improvement in both RIG and pricing.
Sales 9M-2018Sales 9M-2017RIGPricingOrganic growthNet M&AForeign exchangeReported growth
Zone AMSCHF 21.9 bnCHF 22.6 bn0.8%0.6%1.4%-1.1%-3.2%-2.9%

Organic growth was 1.4%, with RIG of 0.8% and pricing of 0.6%. Net acquisitions reduced sales by 1.1%, largely related to the divestment of the U.S. confectionery business. Foreign exchange had a further negative impact on sales of 3.2%. Reported sales in Zone AMS decreased by 2.9% to CHF21.9 billion.

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North America had positive organic growth in the nine-month period. Pricing increased in the third quarter, reflecting inflation in commodity and freight costs. We saw continued solid growth in Purinapetcare, Coffee-mate creamers and coffee, particularly in e-commerce. Ice cream grew at a mid-single-digit pace in the third quarter, supported by Häagen-Dazs and Outshine.

Latin America saw positive organic growth and accelerated to a mid-single-digit pace in the third quarter. Despite the challenging trading environment, Brazil returned to positive growth in the third quarter. Mexico saw mid-single-digit organic growth, with contributions from most categories, in particular, Nescafé. There was continued strong momentum for Purina Petcare, confectionery andprofessionalsl across the region.

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Zone Europe, Middle-East and North Africa (EMENA)

  • 1.6% organic growth: 2.3% RIG; -0.7% pricing.
  • Western Europe saw slightly negative organic growth as positive RIG was offset by negative pricing.
  • Central and Eastern Europe posted mid-single-digit organic growth, based on strong RIG and flat pricing.
  • The Middle East and North Africa maintained mid-single-digit organic growth, with positive RIG and pricing.
Sales 9M-2018Sales 9M-2017RIGPricingOrganic growthNet M&AForeign exchangeReported growth
Zone EMENACHF 13.7 bnCHF 13.2 bn2.3%-0.7%1.6%-0.1%2.2%3.7%

Organic growth was 1.6%, with solid RIG of 2.3%. Pricing declined by 0.7% as deflationary trends in Western Europe persisted. Net acquisitions reduced sales by 0.1%. Foreign exchange increased sales by 2.2%. Reported sales in Zone EMENA rose by 3.7% to CHF 13.7 billion.

Zone EMENA posted resilient RIG in the context of a low-growth environment, particularly in Western Europe. Nescafé growth was positive in a competitive market and in spite of difficult comparables. The Purina petcare, infant nutrition and professional businesses were the main contributors to growth across the Zone. Premium products had strong momentum in these categories, especially Gourmetcat food and NAN infant formula with Human Milk Oligosaccharides (HMOs). Confectionery posted positive growth with a strong performance from KitKat.

Zone Asia, Oceania and sub-Saharan Africa (AOA)

  • 4.4% organic growth: 3.7% RIG; 0.7% pricing.
  • China reported mid-single-digit organic growth, significantly above the prior year, supported by RIG.
  • South East Asia saw mid-single-digit organic growth, with positive RIG and pricing.
  • South Asia had mid-single-digit organic growth, with strong RIG and positive pricing.
  • Sub-Saharan Africa reported mid-single-digit organic growth, with solid RIG and positive pricing.
  • Japan and Oceania posted slightly positive organic growth as robust RIG was partially offset by negative pricing.
Sales 9M-2018Sales 9M-2017RIGPricingOrganic growthNet M&AForeign exchangeReported growth
Zone AOACHF 15.8 bnCHF 15.3 bn3.7%0.7%4.4%0.0%-1.3%3.1%

Organic growth was 4.4%, with RIG of 3.7% and pricing of 0.7%. There was no impact on sales from acquisitions and divestments. Foreign exchange reduced sales by 1.3%. Reported sales in Zone AOA increased by 3.1% to CHF 15.8 billion.

Zone AOA delivered consistent mid-single-digit organic growth, supported by all geographies and categories. China saw mid-single-digit growth, driven by innovations in infant nutrition, coffee and culinary. South-East Asia saw solid growth, led by Vietnam and Indonesia with Milo and Bear Brand. The South Asian region also delivered mid-single-digit growth, with strong momentum in Maggi, Nescafé and KitKat. Growth in sub-Saharan Africa was based on strong contributions from Maggi and Milo in the Central and West Africa region. Japan and Oceania had positive growth despite difficult trading environments, helped by the launches of Nescafé Gold and KitKat Gold in Australia. Overall for the Zone, infant nutrition and Purina petcare accelerated in the third quarter, posting high single-digit growth.

Nestlé Waters

  • 2.1% organic growth: -0.2% RIG; 2.3% pricing.
  • North America saw positive organic growth, with flat RIG and increased pricing.
  • Europe returned to positive organic growth, supported by strong RIG in the third quarter.
  • Emerging markets posted low single-digit organic growth, driven entirely by pricing.
Sales 9M-2018Sales 9M-2017RIGPricingOrganic growthNet M&AForeign exchangeReported growth
Nestlé WatersCHF 6.1 bnCHF 6.1 bn-0.2%2.3%2.1%-0.8%-0.7%0.6%

Organic growth was 2.1%, reaching 4.1% in the third quarter. Pricing increased by 2.3% and RIG declined by 0.2%. Net acquisitions and foreign exchange reduced sales by 0.8% and 0.7%, respectively. Reported sales in Nestlé Waters increased by 0.6% to CHF 6.1 billion.

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In the United States, price increases were implemented in June to reflect significant inflation in packaging and distribution costs. The recently launched sparkling range under our regional spring water brands continued to see encouraging consumer demand, particularly for Poland Spring, Ice Mountain and Ozarka. Europe returned to positive growth, helped by innovations such as Perrier & Juice and Levissima+. The international premium brands, S.Pellegrino and Perrier, continued to deliver high single-digit growth globally.

Other Businesses

  • 6.0% organic growth: 5.7% RIG; 0.3% pricing.
  • Nespresso reported mid-single-digit organic growth, with strong momentum in the Americas and Asia.
  • Nestlé Health Science saw mid-single-digit organic growth, with strong RIG.
  • Nestlé Skin Health posted high single-digit organic growth, with strong RIG and flat pricing.
Sales 9M-2018Sales 9M-2017RIGPricingOrganic growthNet M&AForeign exchangeReported growth
Other BusinessesCHF 8.9 bnCHF 7.9 bn5.7%0.3%6.0%5.4%0.7%12.1%

Organic growth of 6.0% was driven by strong RIG of 5.7% and pricing of 0.3%. Net acquisitions increased sales by 5.4%, mainly due to the consolidation of Atrium Innovations in Nestlé Health Science. Foreign exchange increased sales by 0.7%. Reported sales in Other Businesses increased by 12.1% to CHF 8.9 billion.

Nespresso maintained a mid-single-digit organic growth rate with strong growth in the Americas and Asia. Europe was resilient in a competitive environment. Growth was supported by the launch of the Vertuo system in six new markets in the third quarter. Vertuo, a versatile coffee system with three capsule sizes, is now available in fourteen markets. Nestlé Health Science continued to deliver mid-single-digit growth supported by medical nutrition and consumer care products. The distribution of Atrium Innovation’s brands in mass retail provided additional growth momentum. Nestlé Skin Health posted high single-digit growth.

Outlook

Full-year guidance for 2018 confirmed, with organic sales growth expected to be around 3%; underlying trading operating profit margin improvement in line with our 2020 target. Restructuring costs 1 are expected to be around CHF 700 million. Underlying earnings per share in constant currency and capital efficiency are expected to increase.

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1 Not including impairment of fixed assets, litigation and onerous contracts

Annexe

Three-month sales overview by operating segment

Total GroupZone AMSZone EMENAZone AOANestlé WatersOther Businesses
Sales 9M-2018 (CHF m)66’42421’91813’73115’7996’1278’849
Sales 9M-2017 (CHFm)*65’12422’56913’24115’3316’0937’890
RIG2.3%0.8%2.3%3.7%-0.2%5.7%
Pricing0.5%0.6%-0.7%0.7%2.3%0.3%
Organic growth2.8%1.4%1.6%4.4%2.1%6.0%
Net M&A0.1%-1.1%-0.1%0.0%-0.8%5.4%
Foreign exchange-0.9%-3.2%2.2%-1.3%-0.7%0.7%
Reported sales growth2.0%-2.9%3.7%3.1%0.6%12.1%

* Effective as from January 1, 2018, Nestlé Nutrition is reported in the Zones as a regionally managed business, with the Gerber Life Insurance business reported in Other Businesses. 2017 sales comparables have been restated mainly to reflect this change of management responsibility and the new accounting standards for revenue measurement following the implementation of IFRS 15.

Nine-month sales overview by product

Total GroupPowdered & liquid beveragesWaterMilk products & ice creamNutrition & Health SciencePrepared dishes & cooking aidsConfectioneryPetcare
Sales 9M-2018 (CHFm)66’42415’3885’7659’75811’9058’7165’5429’350
Sales 9M-2017 (CHFm)*65’12414’7325’7009’88011’1898’6015’9749’048
RIG2.3%2.3%0.0%0.8%4.8%1.0%3.0%3.2%
Pricing0.5%0.6%2.4%0.8%-0.4%0.1%-1.0%0.8%
Organic growth2.8%2.9%2.4%1.6%4.4%1.1%2.0%4.0%

* Effective as from January 1, 2018, Nestlé Nutrition is reported in the Zones as a regionally managed business, with the Gerber Life Insurance business reported in Other Businesses. 2017 sales comparables have been restated mainly to reflect this change of management responsibility and the new accounting standards for revenue measurement following the implementation of IFRS 15.

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