Nestlé saw its net sales increase by 2.3% in the first half of the year thanks to the performance of its infant formula business and strong growth in China.
The world’s largest food and beverage company recorded sales of CHF 43.92 billion ($44.22 billion) as it aims to appease activist investor Third Point. Net profit increased 19% to CHF 5.8 billion ($5.85 billion).
Revenue in Nestlé’s Americas division – its largest by sales – dropped by 3.4%, which it said was largely due the divestment of its US confectionery unit, which Ferrero bought in January for $2.8 billion. The company also cited a truckers’ strike in Brazil – an incident also raised in Unilever’s second-quarter figures – which disrupted operations and reduced zone growth by 80 basis points.
The firm’s sales in Asia, Oceania and sub-Saharan Africa rose 2.9% with accelerated growth in China, particularly in coffee. Attention was drawn to the “strong contribution” of Vietnam, where the company has expanded its Nescafé Dolce Gusto facility in Dong Nai.
In Europe, Middle East and North Africa, coffee and nutrition were the main contributors to growth, with total net sales up 6.9%. Confectionery saw improved growth, boosted by the launch of KitKat ruby and MilkyBar Wowsomes.
Nestlé has been under increased pressure after activist investor Third Point said earlier this month that the Swiss company has a “muddled strategic approach”. Third Point, which is headed by Daniel Loeb and bought a 1.25% stake in Nestlé last year, called for the company to divest as much as 15% of sales either through sales, spin-offs, or other methods to better align the portfolio around key categories.
Nestlé CEO Mark Schneider
Nestlé responded by highlighting the “swift and decisive” action it is taking to deliver results, citing investments in brands such as Freshly, Sweet Earth, Blue Bottle Coffee, Chameleon Cold-Brew and Terrafertil.
In May, Nestlé also announced it would pay $7.15 billion in cash for exclusive rights to sell Starbucks’ line of packaged coffees and teas around the world, an agreement which is expected to close in August.
Nestlé CEO Mark Schneider said: “Our first-half results confirmed that our strategic initiatives and rigorous execution are clearly paying off. Nestlé has maintained the encouraging organic revenue growth momentum we saw at the beginning of the year. In particular, the United States and China markets showed a meaningful improvement. We were also pleased by the enhanced organic growth in our core infant nutrition category.
“Our margin development is fully consistent with our 2020 target. We are creating value by pursuing growth and profitability in a balanced manner. In line with this approach, we have accelerated our product innovation efforts to drive future growth and initiated significant cost reduction efforts, in particular in Zone EMENA (Europe, Middle East and North Africa) and at our corporate centre.
“As we look towards the second half of 2018, we expect further improvement in our organic revenue growth. Margin improvement is expected to accelerate with further benefits from our efficiency programmes and more favourable commodity pricing.”
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