Nestlé (NESN) H1 2024 (Q&A) earnings summary

Executive summary

• Achieved strong real internal growth (RIG) recovery in H1 2024, with organic sales growth of 2.1% and RIG turning positive at 0.1%, strengthening to 2.2% in Q2, driven by market share gains, volume growth, and premiumization across all zones.

• E-commerce and Billionaire Brands delivered robust growth and share gains, with e-commerce sales up 10.6% to 18.2% of total sales; out-of-home channels grew 3.8%.

• Net profit was flat at CHF 5.6 billion, with a net profit margin of 12.5%, up 30 basis points year-over-year.

• Promotional intensity was high, especially in North America and Nestlé Health Science, to regain shelf presence and drive volume.

• Full-year 2024 organic growth guidance revised to at least 3%, with mid single-digit underlying EPS growth expected in constant currency.

Financial highlights

• Gross margin improved significantly in H1 2024, rising 160 bps to 47.2% due to favorable input costs, but is expected to be lower in H2 as coffee and cocoa costs rise.

• Total reported sales decreased by 2.7% to CHF 45.0 billion, impacted by negative foreign exchange and net divestitures.

• Underlying trading operating profit margin improved to 17.4% (+30 bps); net profit margin at 12.5% (+30 bps).

• Free cash flow increased to CHF 4.0 billion, and basic earnings per share rose 1.8% to CHF 2.16.

• RIG turned positive, with a notable swing in North America from -5.8% in Q1 to 2.8% in Q2, partly due to promotional phasing.

Outlook and guidance

• Organic sales growth for 2024 expected to be at least 3%, with continued positive RIG and operational leverage as the business normalizes.

• Underlying EPS in constant currency projected to increase at a mid single-digit rate.

• Margin guidance for 2024 remains unchanged, with confidence in achieving UTOP margin targets through volume, mix, and cost management.

• Mid-single-digit growth target for 2025 remains a medium-term goal, with specific guidance to be provided in February.