Press Release: Nestle: Nestlé reports half-year results for 2024

[Ad hoc announcement pursuant to Art. 53 LR]

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Vevey, July 25, 2024

Nestlé reports half-year results for 2024

-- Organic growth of 2.1%, with positive real internal growth (RIG) of 0.1%

for the first half and 2.2% for the second quarter improving in all Zones

and categories. Pricing of 2.0%.

-- Total reported sales of CHF 45.0 billion (-2.7%), with an impact from

foreign exchange of -4.4% and net divestitures of -0.4%.

-- Underlying trading operating profit (UTOP) margin increased 30 basis

points to 17.4% on a reported basis and up 40 basis points in constant

currency.

-- Trading operating profit (TOP) margin increased 50 basis points to 16.4%

on a reported basis.

-- Underlying earnings per share up 3.3% in constant currency (-1.0% on a

reported basis to CHF 2.40). Earnings per share increased 1.8% to CHF

2.16 on a reported basis.

-- Free cash flow up CHF 0.6 billion to CHF 4.0 billion.

-- Full-year 2024 outlook updated: we expect organic sales growth of at

least 3%. Underlying earnings per share in constant currency is expected

to increase at a mid single-digit rate. Underlying trading operating

profit margin guidance unchanged with a moderate increase expected.

Mark Schneider, Nestlé CEO, commented: "Positive real internal growth is back. We delivered improved volume and mix growth across the Group in the second quarter. Nestlé Health Science is recovering as planned and is set for a strong second half. 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%."

Zone Zone Zone Nestlé

Total North Zone Zone Latin Greater Health Other

Group America Europe AOA America China Science Nespresso Businesses

Sales

6M-2024

(CHF m) 45 045 12 234 9 283 8 441 6 166 2 440 3 239 3 096 146

Sales

6M-2023

(CHF m) 46 293 12 553 9 467 9 060 6 082 2 548 3 318 3 128 137

Real

internal

growth

(RIG) 0.1% - 1.5% 1.3% 0.0% 0.1% 2.9% - 0.2% 1.1% 8.4%

Pricing 2.0% 1.4% 3.1% 3.5% 2.5% - 1.3% 0.4% 0.7% 1.4%

Organic

growth 2.1% - 0.1% 4.5% 3.5% 2.7% 1.6% 0.1% 1.8% 9.7%

Net M&A - 0.4% 0.0% - 2.7% 0.0% - 0.1% 0.2% 0.4% 0.1% 0.0%

Foreign

exchange - 4.4% - 2.5% - 3.7% - 10.3% - 1.1% - 6.1% - 3.0% - 2.9% - 3.9%

Reported

sales

growth - 2.7% - 2.5% - 1.9% - 6.8% 1.4% - 4.2% - 2.4% - 1.0% 6.0%

6M-2024

Underlying

TOP

Margin 17.4% 21.8% 17.7% 23.8% 19.8% 15.8% 13.4% 21.5% - 2.9%

6M-2023

Underlying

TOP

Margin 17.1% 21.6% 16.6% 22.8% 19.8% 16.6% 13.0% 21.7% - 12.5%

Group sales

Organic growth was 2.1%. RIG was 0.1%, strengthening in the second quarter to 2.2%, with broad-based improvement across geographies and categories. Pricing was 2.0%, decelerating to 0.6% in the second quarter, largely reflecting a high base of comparison in 2023 and increased growth investments. By geography, organic growth was driven by Europe and emerging markets. In developed markets, organic growth was 1.0%, led by pricing with negative RIG. In emerging markets, organic growth was 3.7%, driven by pricing and close to flat RIG.

By product category:

-- Coffee was the largest organic growth contributor with mid single-digit

growth, supported by our three leading global coffee brands Nescafé,

Nespresso and Starbucks.

-- PetCare delivered mid single-digit growth, driven by continued momentum

for science-based premium brands, Purina Pro Plan, Fancy Feast and Purina

ONE.

-- Sales in confectionery grew at a high single-digit rate, led by KitKat

and key local brands.

-- Water delivered mid single-digit growth, underpinned by continued

momentum for S.Pellegrino and a rebound in Perrier.

-- Infant Nutrition sales grew at a low single-digit rate, based on

continued momentum for NAN, Lactogen and human milk oligosaccharides

(HMOs) products.

-- Growth in Nestlé Health Science turned positive, with sales

improvements across most segments in the second quarter. The integration

plan is fully on track.

-- Dairy posted close to flat growth, as dairy culinary solutions delivered

robust growth, offsetting a sales decline in coffee creamers and ambient

dairy.

-- In culinary, Maggi delivered robust growth, which was offset by frozen

food in North America.

By channel, organic growth in retail sales was 2.0%. E-commerce sales grew by 10.6%, reaching 18.2% of total Group sales. Organic growth of out-of-home channels was 3.8%.

Net divestitures impacted sales by -0.4%, largely related to the creation of a joint venture with PAI Partners for Nestlé's frozen pizza business in Europe. The impact on sales from foreign exchange was negative at -4.4%. Total reported sales decreased by -2.7% to CHF 45.0 billion.

Underlying Trading Operating Profit

Underlying trading operating profit decreased by -0.8% to CHF 7.8 billion. The underlying trading operating profit margin increased to 17.4%, an improvement of 30 basis points on a reported basis and 40 basis points in constant currency.

Gross profit margin increased by 160 basis points to 47.2%, driven by pricing, lower input costs and portfolio optimization.

Distribution costs as a percentage of sales decreased by 10 basis points to 8.5%, mainly as a result of lower freight and energy costs.

Marketing and administration as a percentage of sales increased by 130 basis points to 19.9%. Advertising and marketing expenses were 8.1% of sales, an increase of 100 basis points compared to the first half of 2023. This step up is aimed at driving future RIG-led growth. In constant currency, advertising and marketing expenses increased by 14.4% compared to the prior year. Administration expenses increased by 30 basis points, largely reflecting the appreciation of the Swiss Franc and one-off items.

R&D expenses increased by 10 basis points following increased investments to support product innovation.

Net other trading items decreased from CHF 553 million to CHF 443 million, mainly due to lower restructuring costs. As a result, trading operating profit increased by 0.6% to CHF 7.4 billion. The trading operating profit margin increased to 16.4%, an improvement of 50 basis points on a reported basis and 60 basis points in constant currency.

Net Financial Expenses and Income Tax

Net financial expenses increased from CHF 697 million to CHF 744 million, following a higher level of average net debt. The average cost of net debt was 2.6%, unchanged versus in the first half of 2023.

The Group reported tax rate increased by 170 basis points to 25.0%. The underlying tax rate increased by 150 basis points to 22.1%, mainly due to increased tax rates in some geographies related to the implementation of OECD Pillar Two.

Net Profit and Earnings Per Share

Net profit was flat at CHF 5.6 billion. Net profit margin increased by 30 basis points to 12.5% on a reported basis and by 40 basis points in constant currency. As a result, earnings per share increased by 1.8% to CHF 2.16 on a reported basis.

In constant currency, underlying earnings per share increased by 3.3% to CHF 2.51. The increase was mainly the result of positive organic growth and improved underlying trading operating profit margin. On a reported basis, underlying earnings per share decreased by -1.0% to CHF 2.40, largely due to the impact of exchange rates. Nestlé's share buyback program contributed 1.0% to the underlying earnings per share increase, net of finance costs.

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