Nestlé (NESN) H2 2020 (Media) earnings summary

Executive summary

• Organic sales growth reached 3.6%, with RIG of 3.2%; underlying trading operating profit margin rose to 17.7%, extending a third consecutive year of improvement.

• Pandemic response prioritized employee safety, business continuity and community support while portfolio transformation continued.

Financial highlights

• Sales fell 8.9% to CHF 84.3bn from CHF 92.6bn; foreign exchange reduced sales by 7.9% and divestitures by 4.6%.

• RIG contributed 3.2% and pricing 0.4% to organic sales growth.

• Underlying trading operating profit was CHF 14.9bn, down 8.3%; margin was 17.7%, up 10 bps reported and 20 bps in constant currency.

• Free cash flow was CHF 10.2bn, or 12.1% of sales, down from CHF 11.9bn and 12.9% in 2019.

• Net profit decreased 3.0% to CHF 12.2bn; underlying EPS rose 3.5% in constant currency to CHF 4.21, while reported EPS was CHF 4.30.

Outlook and guidance

• 2021 organic sales growth expected to increase toward a mid-single-digit rate; moderate improvement in underlying trading operating profit margin was expected.

• Underlying EPS in constant currency and capital efficiency expected to increase in 2021.

• Mid-term outlook: sustained mid-single-digit organic sales growth, continued moderate margin improvement, prudent capital allocation and improved capital efficiency.

• Free cash flow expected to remain at ~12% of sales.