FDBusiness.com

Nestle has produced a solid financial performance in the first half and is predicting organic sales growth at the top end of the 5% to 6% range and a margin increase in constant currencies for the full year. The global food and beverage group reported interim sales of SFr41.0b (Eur38b) as it achieved 7.5% organic growth and 4.8% real internal growth.

Nestle posted a trading operating profit of SFr6.2b for the period, as it improved its margin to 15.1%, a rise of 20 bps on a reported basis and up 40 bps in constant currencies from that achieved by the continuing operations in the first half of 2010. Consumer facing marketing spend was increased by 6.2% in constant currencies. Although the strong Swiss franc had a major impact on consolidation, it had little effect on operational performance.

“Nestle continued to make good progress in a period characterised by political and economic instability, natural disasters, rising raw material prices and, yes, a strong Swiss franc. This has made for an extremely tough, volatile and competitive environment. But by leveraging our competitive advantages, investing behind our growth drivers and excelling in operational efficiency and effectiveness, we managed to drive growth not only in emerging markets but also in developed countries, especially in Europe,” comments Paul Bulcke, chief executive of Nestle (pictured). “Furthermore we improved our trading operating margin while increasing investment in our brands.”

In its Zone Europe region, Nestle achieved 4.1% organic growth and 2.7% real internal growth to increase sales to SFr7.5b. It also improved the trading operating profit margin by 200 bps to 16.4%, benefiting from the robust underlying performance, encompassing volume growth, pricing and savings, as well as lower restructuring and pension costs.

In general, there was a strong, broad-based performance across the Zone’s markets and categories in what remains a challenging environment, resulting in market share gains in the great majority of them. Ice cream was strong, with some good innovation in impulse-driven products; Maggi culinary products, the Herta chilled range and Buitoni and Wagner frozen pizzas all contributed well, while Nescafe and pet care were accretive to the Zone’s growth.

In Western Europe there were strong performances inFrance,Italy, Benelux, the Nordic region andSwitzerland, whileGreeceand the Iberian region managed to achieve positive growth despite severe economic conditions. Key innovations such as Maggi Juicy Roasting, Nescafe Dolce Gusto and Felix were strong contributors to the performance of their categories.

In Eastern Europe there was double-digit growth in Ukraine and the Adriatic region. However, Russia’s growth continued to be subdued, particularly in the confectionery category.