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Nestlé reports three-month sales for 2019

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Vevey, Switzerland,
Apr 18, 2019

 

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  • Organic growth of 3.4%, with continued strong real internal growth (RIG) of 2.2%. Pricing increased to 1.2%, with significant improvement in Brazil and the United States.
  • Total reported sales increased by 4.3% to CHF 22.2 billion (3M-2018: CHF 21.3 billion). Net acquisitions had a positive impact of 1.2% and foreign exchange reduced sales by 0.3%.
  • Portfolio management fully on track. The strategic reviews of Nestlé Skin Health and Herta charcuterie (cold cuts and meat-based products) are expected to be completed by mid- and late 2019, respectively.
  • Full-year guidance for 2019 confirmed, with continued improvement in organic sales growth and underlying trading operating profit margin towards our 2020 targets. Underlying earnings per share in constant currency and capital efficiency are expected to increase.

Mark Schneider, Nestlé CEO:

"We are pleased with Nestlé’s solid organic sales growth in the first quarter, building on our full-year 2018 momentum. Our increased speed, innovation for a changing world and execution focus are clearly paying off. We confirm our outlook for the year."

"In the quarter, we announced the launch of a new range of 24 premium coffee products under the Starbucks brand. The Nestlé and Starbucks teams did an outstanding job and developed these products in just 6 months."

He added: "The notion of business as a force for good resonates very strongly inside Nestlé. Starting with this report, we will highlight each quarter how Nestlé creates shared value. We will begin by showing how Nespresso delivers on its commitment to quality and sustainability."


  Total Group Zone AMS Zone EMENA Zone AOA Nestlé Waters Other Businesses
Sales 3M-2019 (CHF m) 22'183 7'510 4'703 5'389 1'773 2'808
Sales 3M-2018 (CHF m) 21'264 6'761 4'737 5'286 1'732 2'748
RIG 2.2% 0.9% 3.1% 2.3% -2.3% 6.5%
Pricing 1.2% 2.5% -1.0% 1.0% 4.3% 0.3%
Organic growth 3.4% 3.4% 2.1% 3.3% 2.0% 6.8%
Net M&A 1.2% 6.0% 0.0% -0.2% -0.5% -4.3%
Foreign exchange -0.3% 1.7% -2.8% -1.2% 0.9% -0.4%
Reported sales growth 4.3% 11.1% -0.7% 1.9% 2.4% 2.1%


Group sales

Organic growth reached 3.4% in the first quarter. RIG of 2.2% was resilient. Pricing improved to 1.2%, mainly reflecting increases in Brazil and the United States. Organic growth was 3.2% excluding businesses under strategic review. The growth acceleration was largely supported by Brazil, our fourth largest market. The United States and China, Nestlé’s two leading markets, maintained good momentum. All product categories saw positive growth. The largest growth contributions came from Purina petcare, dairy and infant nutrition. Organic growth for the Group was 1.2% in developed markets and 6.3% in emerging markets.

Net acquisitions increased sales by 1.2%. The acquisition of the Starbucks license, Atrium Innovations and other transactions more than offset divestments, mainly Gerber Life Insurance and U.S. confectionery. Foreign exchange had a negative impact of 0.3%. Total reported sales increased by 4.3% to CHF 22.2 billion.


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

  • 2.1% organic growth: 3.1% RIG; -1.0% pricing.
  • Western Europe posted strong RIG. Organic growth was impacted by negative pricing.
  • Central and Eastern Europe reported mid single-digit organic growth, with strong RIG and positive pricing.
  • Middle East and North Africa saw mid single-digit organic growth, with strong RIG and positive pricing.

  Sales 3M-2019 Sales 3M-2018 RIG Pricing Organic growth Net M&A Foreign exchange Reported growth
Zone EMENA CHF 4.7 bn CHF 4.7 bn 3.1% -1.0% 2.1% 0.0% -2.8% -0.7%

Organic growth was 2.1%, with strong RIG of 3.1%. Pricing declined by 1.0%, as deflationary trends in Western Europe persisted. Net acquisitions had no impact on sales. Foreign exchange negatively impacted sales by 2.8%. Reported sales in Zone EMENA declined by 0.7% to CHF 4.7 billion.

Zone EMENA reported strong RIG despite a low-growth environment in Western Europe. The Purina petcare and infant nutrition categories were the main contributors to growth across the Zone, especially in Central and Eastern Europe, and the Middle East and North Africa. Coffee saw flat RIG with negative pricing resulting from lower green coffee prices. Confectionery posted a good quarter, with double-digit growth for KitKat and strong demand for the recently launched Yes! snack bar. Frozen pizza brands Wagner and Buitoni moved to positive growth, while vegetarian products posted high single-digit growth.


Nestlé Waters

  • 2.0% organic growth: -2.3% RIG; 4.3% pricing.
  • North America reported positive organic growth as strong pricing was partially offset by negative RIG.
  • Europe saw slightly negative organic growth. Positive pricing was fully offset by negative RIG.
  • Emerging markets posted high single-digit organic growth, with strong pricing and positive RIG.

  Sales 3M-2019 Sales 3M-2018 RIG Pricing Organic growth Net M&A Foreign exchange Reported growth
Nestlé Waters CHF 1.8 bn CHF 1.7 bn -2.3% 4.3% 2.0% -0.5% 0.9% 2.4%

Organic growth was 2.0%. Pricing increased by 4.3%, RIG declined by 2.3%. Net acquisitions reduced sales by 0.5%. Foreign exchange increased sales by 0.9%. Reported sales in Nestlé Waters increased by 2.4% to CHF 1.8 billion.

In North America growth was supported by 2018 price increases to reflect significant cost inflation in packaging and distribution. Our premium brands S.Pellegrino, Perrier, and Acqua Panna posted strong growth, with particularly strong demand for the newly launched S.Pellegrino Essenza. Poland Spring and Zephyrhills made good contributions to growth. The ReadyRefresh direct-to-consumer business grew at a mid single-digit rate. Our mainstream brand Nestlé Pure Life posted negative growth.

Emerging markets accelerated to high single-digit growth. Europe saw slightly negative sales development, impacted by the United Kingdom and Germany.

Overall, the international premium brands posted high single-digit growth, supported by a strong pipeline of innovations.


Other Businesses

  • 6.8% organic growth: 6.5% RIG; 0.3% pricing.
  • Nespresso reported mid single-digit organic growth, with very strong momentum in the Americas.
  • Nestlé Health Science saw mid single-digit organic growth, all from RIG.
  • Nestlé Skin Health posted double-digit organic growth, with strong RIG and slightly negative pricing.

  Sales 3M-2019 Sales 3M-2018 RIG Pricing Organic growth Net M&A Foreign exchange Reported growth
Other Businesses CHF 2.8 bn CHF 2.7 bn 6.5% 0.3% 6.8% -4.3% -0.4% 2.1%

Organic growth of 6.8% was driven by strong RIG of 6.5% and pricing of 0.3%. Net acquisitions reduced sales by 4.3%, mainly due to the disposal of Gerber Life Insurance, which more than offset the consolidation of Atrium Innovations in Nestlé Health Science. Foreign exchange negatively impacted sales by 0.4%. Reported sales in Other Businesses increased by 2.1% to CHF 2.8 billion.

Nespresso maintained mid single-digit organic growth. North America and emerging markets saw double-digit growth, while sales in Europe were flat. Growth continued to be supported by the Vertuo system. Nestlé Health Science grew at a mid single-digit rate, with double-digit growth in medical nutrition and geographic expansion in emerging markets. Innovation provided additional growth momentum, with strong demand for Compleat Organic Blends, the only organic, real food tube-feeding formula. Nestlé Skin Health posted double-digit growth.


Our business as a force for good

Creating Shared Value is fundamental to how we do business at Nestlé. We believe that our company will be successful in the long term by creating value for both our shareholders and for society.

This is well illustrated by Nespresso. Creating shared value is at the heart of Nespresso’s consumer proposition. Nespresso’s success is based on delivering an extraordinary coffee experience, which is the result of its commitment to quality and sustainability all the way from the coffee farm to the recycling of capsules.

Overall sustainability of portioned coffee. Nespresso is one of the most sustainable ways of enjoying high quality R&G coffee. The precision-consumption system uses only the exact amount of water, energy and coffee needed to brew one cup, reducing wasted resources.

Coffee and farming communities. The Nespresso AAA sustainable quality program was established in 2003 and involves significant investment. 460 Nespresso agronomists work closely with 100,000 coffee farmers to increase quality and yields and drive environmentally and socially responsible farming practices. Greater productivity of high-quality coffees benefits farmer incomes and contributes to sustainable livelihoods. Master Origin, a range of the world’s finest coffee crafts from six different countries (Mexico, Colombia, Indonesia, Ethiopia, India, Nicaragua) is a great example of this collaboration with purpose.

Aluminum and recycling. Aluminum was chosen as the capsule material because it perfectly preserves the aromas and flavors of the highest quality Nespresso coffees. It guarantees in-cup quality for consumers and is 100% recyclable. Since 1991, Nespresso has been investing in recycling infrastructure to cover 53 countries and provide 92% of Nespresso consumers with recycling options. Both the aluminum and the coffee grounds are recovered and re-used.

Nespresso’s unique and holistic approach creates the highest-quality coffee experience for consumers and benefits our environment as well as coffee farming communities around the world.


Outlook

Full-year guidance for 2019 confirmed, with continued improvement in organic sales growth and underlying trading operating profit margin towards our 2020 targets. Underlying earnings per share in constant currency and capital efficiency are expected to increase.


Annex


Three-month sales overview by operating segment


  Total Group Zone AMS Zone EMENA Zone AOA Nestlé Waters Other Businesses
Sales 3M-2019 (CHF m) 22'183 7'510 4'703 5'389 1'773 2'808
Sales 3M-2018 (CHF m) 21'264 6'761 4'737 5'286 1'732 2'748
RIG 2.2% 0.9% 3.1% 2.3% -2.3% 6.5%
Pricing 1.2% 2.5% -1.0% 1.0% 4.3% 0.3%
Organic growth 3.4% 3.4% 2.1% 3.3% 2.0% 6.8%
Net M&A 1.2% 6.0% 0.0% -0.2% -0.5% -4.3%
Foreign exchange -0.3% 1.7% -2.8% -1.2% 0.9% -0.4%
Reported sales growth 4.3% 11.1% -0.7% 1.9% 2.4% 2.1%


Three-month sales overview by product


  Total Group Powdered & liquid beverages Water Milk products & ice cream Nutrition & Health Science Prepared dishes & cooking aids Confection-ery Petcare
Sales 3M-2019 (CHF m) 22'183 5'538 1'679 3'124 3'833 2'928 1'858 3'223
Sales 3M-2018 (CHF m) 21'264 5'013 1'631 2'991 3'766 2'841 2'003 3'019
RIG 2.2% 0.8% -2.1% 2.1% 5.7% 2.6% 1.1% 2.9%
Pricing 1.2% 0.5% 4.5% 2.1% 0.5% -0.3% 0.9% 2.6%
Organic growth 3.4% 1.3% 2.4% 4.2% 6.2% 2.3% 2.0% 5.5%

Contacts:

Media: Christoph Meier Tel.: +41 21 924 2200
Investors: Luca Borlini Tel.: +41 21 924 3820

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