Nestle booked lower reported earnings for the first half, despite higher sales and operating margins, as currency exchange dented the bottom line.
Net profit attributable to shareholders dipped to CHF4.52bn (US$4.63bn), versus CHF4.63bn in the year-ago period. Stripping out currency exchange, however, underlying earnings rose 7.3%.
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Speaking during a conference call, CFO François-Xavier Roger played down the impact the strength of the Swiss franc is expected to have in the remainder of the year. "We have some pressure from the Swiss franc but we have recovered some of it already… It is moving in the right direction for us." he said.
Nestle reported first-half sales of CHF42.8bn. Organic growth stood at 4.5% and the company confirmed its full-year outlook for organic sales growth of "around 5%". Real internal growth, which strips out pricing, stood at 1.7% in the half.
Bank Vontobel analyst Jean-Philippe Bertschy said Nestle's ability to raise prices reflected the strength of the group's brands. "Volume growth remained subdued, impacted by the overall challenging market environment in several markets as well as the impact from Maggi noodles in India. Thanks to its strong brands, Nestle was however able to increase prices significantly," he wrote in an investor note.
Nestle said sales growth was "broad based" with 2.2% higher sales in developed markets and 7.3% growth in emerging markets. Nestle accelerated its top-line expansion in emerging markets – up from 6.7% in the first quarter – in spite of continued challenges in China and the Maggi noodles recall in India.
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By GlobalDataSales were supported by an increased investment in consumer facing marketing. The company revealed that efforts to "drive cost efficiencies" as well as the consolidation of Nestle Skin Health led to a 160 basis points drop in the cost of goods sold. "Cost reductions were partly reinvested in increased consumer facing marketing support," Nestle revealed.
The trading operating profit margin rose by 20 basis points in constant currencies. Trading operating profit was CHF6.4bn with a margin of 15%.
