Nestlé (NESN) H2 2019 (Media) earnings summary

Executive summary

• FY19 organic growth reached 3.5%, with reported sales up 1.2% to CHF 92.6bn.

• Underlying trading operating profit margin rose 60 bps to 17.6%, reaching the 2020 target range one year early; free cash flow was CHF 11.9bn.

• Growth was led by the United States and Purina PetCare; portfolio transformation and innovation supported progress.

Financial highlights

• Organic growth comprised RIG of 2.9% and pricing of 0.6%; net M&A reduced sales by 0.8% and FX by 1.5%.

• Underlying trading operating profit rose 4.8% to CHF 16.3bn; reported trading operating profit fell 0.8% to CHF 13.7bn.

• Underlying EPS rose 11.1% in constant currency and 9.8% reported to CHF 4.41; reported EPS increased 28.0% to CHF 4.30.

• Net profit increased 24.4% to CHF 12.6bn, benefiting from the Skin Health sale.

Outlook and guidance

• 2020 organic growth is expected to improve, with further acceleration in 2021–22 toward sustainable mid-single-digit growth; the 4%-6% goal was delayed by about a year.

• Underlying trading operating profit margin is expected to improve; the 17.5%-18.5% target range was achieved in 2019, one year early.

• Underlying EPS in constant currency and capital efficiency are expected to increase; restructuring costs are forecast at ~CHF 500m.

• Free cash flow is expected to remain ~12% of sales; coronavirus impact was too early to quantify.