Nestlé has lowered its forecast for the company’s growth in sales on an organic basis amid the volatility of trading against the backdrop of Covid-19.
For the six months through June, the KitKit maker this morning (30 July) reported organic sales grew 2.8% to CHF41.2bn (US$45.1bn).
Nestlé said “real internal growth” – a company metric that strips out M&A and pricing – was 2.6%, and pricing up 0.2%.
On a reported basis, sales fell 9.5%.
Nestlé had previously guided to a “continued increase in organic sales growth” for 2020 having posted a 3.5% increase last year. But today, while it provided a more specific outlook, it now expects organic sales growth to slow to between 2% and 3%. The underlying trading operating profit margin (UTOP) is “expected to improve”.
“This guidance is based on our current knowledge of Covid-19 developments and assumes no material deterioration versus present conditions,” Nestlé said.
It added: “After a stronger-than-expected start to the year, organic growth moderated in the second quarter to 1.3%, reflecting the severe impact of movement restrictions on out-of-home businesses and some consumer destocking.”
Further ahead, the maker of Buitoni Italian sauces is sticking with an outlook for an “acceleration in 2021/2022 towards sustainable mid single-digit growth. The underlying trading operating profit margin is expected to see continued improvement.”
Chief executive Mark Schneider said in today’s statement: “Nestlé has remained resilient in a rapidly changing environment, delivering solid organic growth and improved margins in the first half. With consumer behaviour evolving faster than ever, we are adapting to this new reality by strengthening our innovation, leveraging our digital capabilities and executing with speed.”
Elsewhere, the UTOP margin climbed 30 basis points to 17.4%, and the trading operating profit (TOP) margin rose 140 basis points to 16.9%.
“Margin expansion was supported by portfolio management and stronger operating performance. Reduced in-store activation during lockdowns and lower structural costs more than offset Covid-19 related costs and commodity inflation,” Nestlé said.
By region, the Americas led the gains in organic growth with a print of 5.3%, with sales in Nestlé’s division that houses Europe, the Middle East and north Africa rising 2.4%. Nestlé’s unit covering Asia, Oceania and the rest of Africa (AOA) saw sales decline 2.2%, and the rest of the world was up 6.1%.
Nestlé said it saw “sustained momentum in the Americas and positive sales development in zone EMENA”. While sales for the AOA division declined in the first half, it said growth turned positive in the second quarter.
Organic growth was 4.1% in developed markets, based “real internal growth”, and emerging markets grew 1.1%.