Press Release: Nestle: Nestlé reports half-year -3-

Zone Latin America recorded sustained strong growth across all geographies and product categories, supported by pricing, strong operational execution and continued momentum of out-of-home channels. The Zone saw market share gains in pet food, Infant Nutrition and culinary.

Brazil posted strong double-digit growth, with strong momentum for Garoto and KitKat as well as NAN and Mucilon infant cereals. Mexico reported double-digit growth, with strong sales developments for dairy, coffee and Infant Nutrition. The Plata region saw double-digit growth, led by coffee and water.

By product category, confectionery was the largest growth contributor, reflecting strong demand for KitKat and key local brands as well as new product launches. Dairy posted double-digit growth, supported by fortified milks and dairy culinary solutions. Infant Nutrition saw double-digit growth, based on solid momentum for NAN and Nido growing-up milks. Coffee reported broad-based double-digit growth, supported by Nescafé soluble coffee. Sales for Nestlé Professional grew at a strong double-digit rate, with continued strength for branded coffee solutions. Purina PetCare saw mid single-digit growth, following a high base of comparison in 2022.

The Zone's underlying trading operating profit margin decreased by 130 basis points. One-off items in the prior year and cost inflation more than offset pricing and cost efficiencies.

Zone Greater China

-- 4.7% organic growth: 1.3% RIG; 3.4% pricing.

-- The underlying trading operating profit margin increased by 160 basis

points to 16.6%.

Sales Sales Organic UTOP UTOP Margin Margin

6M-2023 6M-2022 RIG Pricing growth 6M-2023 6M-2022 6M-2023 6M-2022

Zone

Greater CHF 2.5 CHF 2.7 CHF 0.4 CHF 0.4

China bn bn 1.3% 3.4% 4.7% bn bn 16.6% 15.0%

Organic growth was 4.7%, with pricing of 3.4%. RIG was 1.3%. Foreign exchange had a negative impact of 9.5%. Reported sales in Zone Greater China decreased by 4.8% to CHF 2.5 billion.

Growth in Zone Greater China was supported by e-commerce momentum, recovery of out-of-home channels and pricing. The Zone saw market share gains in pet food and confectionery.

By product category, Nestlé Professional was the largest growth contributor, supported by innovation and distribution expansion. Infant Nutrition saw mid single-digit growth, led by NAN specialty offerings and illuma. Confectionery recorded high single-digit growth, led by Hsu Fu Chi and Shark wafer. Culinary posted mid single-digit growth, with increased demand for Totole in out-of-home channels. Coffee reported low single-digit growth, supported by soluble coffee and Starbucks products. Ready-to-drink coffee saw positive growth, with a strong recovery in the second quarter. Nutritional milk products for adults recorded double-digit growth, supported by new product launches. Purina PetCare reported double-digit growth, driven by Purina Pro Plan and Fancy Feast. In the second quarter, Purina PetCare opened new production lines in Tianjin.

The Zone's underlying trading operating profit margin increased by 160 basis points. Favorable mix and disciplined cost control more than offset cost inflation.

Nestlé Health Science

-- 3.5% organic growth: - 1.9% RIG; 5.3% pricing.

-- The underlying trading operating profit margin decreased by 70 basis

points to 13.0%.

Sales Sales Organic UTOP UTOP Margin Margin

6M-2023 6M-2022 RIG Pricing growth 6M-2023 6M-2022 6M-2023 6M-2022

Nestlé

Health CHF 3.3 CHF 3.2 CHF 0.4 CHF 0.4

Science bn bn - 1.9% 5.3% 3.5% bn bn 13.0% 13.7%

Organic growth was 3.5%, with pricing of 5.3%. RIG was - 1.9%, following extraordinary growth over the last three years during the pandemic. Net acquisitions increased sales by 6.0%, largely related to the acquisition of Orgain. Foreign exchange negatively impacted sales by 4.8%. Reported sales in Nestlé Health Science increased by 4.7% to CHF 3.3 billion.

Growth in Nestlé Health Science was driven by pricing, e-commerce momentum and geographic expansion. The business continued to gain market share.

Consumer Care saw a sales decrease, with a return to positive growth in the second quarter:

-- Active nutrition reported low single-digit growth, with positive sales

developments for healthy-aging products, Vital Proteins and Orgain.

-- Vitamins, minerals and supplements posted a sales decrease, following

three years of strong growth during the pandemic. The business returned

to positive growth in the second quarter, led by Garden of Life and Pure

Encapsulations.

Medical Nutrition recorded double-digit growth, with strong momentum across all segments. Growth was led by acute and adult medical care products as well as pediatric and allergy products.

By geography, North America saw low single-digit growth. Europe reported mid single-digit growth. Other regions combined posted high single-digit growth.

The underlying trading operating profit margin of Nestlé Health Science decreased by 70 basis points. Cost inflation more than offset pricing and acquisition synergies.

Nespresso

-- 4.5% organic growth: 0.8% RIG; 3.7% pricing.

-- The underlying trading operating profit margin decreased by 260 basis

points to 21.7%.

Sales Sales Organic UTOP UTOP Margin Margin

6M-2023 6M-2022 RIG Pricing growth 6M-2023 6M-2022 6M-2023 6M-2022

CHF 3.1 CHF 3.2 CHF 0.7 CHF 0.8

Nespresso bn bn 0.8% 3.7% 4.5% bn bn 21.7% 24.3%

Organic growth was 4.5%, with pricing of 3.7%. RIG was 0.8%. Foreign exchange negatively impacted sales by 5.6%. Reported sales in Nespresso decreased by 1.9% to CHF 3.1 billion.

The key growth contributor was the Vertuo system, which continued to see broad-based momentum. Growth in out-of-home channels was also strong, with further adoption for the Momento system, particularly in the office segment. Innovation continued to resonate with consumers, including the roll-out of Vertuo Pop, a new compact machine, as well as the launch of home compostable coffee capsules in France in June.

By geography, North America posted double-digit growth, with continued market share gains. Europe reported slightly positive growth. Other regions combined saw low single-digit growth.

The underlying trading operating profit margin of Nespresso decreased by 260 basis points. Significant coffee cost inflation and the appreciation of the Swiss Franc more than offset pricing actions. The business continued to invest in the rollout of the Vertuo system as well as in media advertising.

Business as a force for good: Eliminating deforestation from Nestlé's palm oil supply chains

The European Union recently passed legislation that will ban the import of commodities linked to deforestation, including palm oil. Nestlé has worked for over a decade to address deforestation in its palm oil supply chains and in all other major supply chains. This strong foundation means the company is well placed to address the new law.

Traceability is key to preventing deforestation. As such, Nestlé sources from suppliers that can trace their palm oil all the way back to the plantation on which it was grown. Together with external partners, Nestlé assessed the company's palm oil supply chains to be 95.6% deforestation-free at the end of 2022. Nestlé is vigilant in its efforts to maintain this level of performance. It works with experts and industry bodies to continually improve environmental and social practices, take action when risks or issues are identified, and invest in technology to stay ahead.

One such technology is Starling, a satellite-based system, which Nestlé uses to monitor its palm oil supply chains. Starling helps the company identify deforestation risks and cases around the mills from which it sources as well as deforestation patterns. This supports Nestlé in prioritizing actions on the ground, where they are most needed.

In the Aceh and Riau provinces of Indonesia, for example, Nestlé collaborates with partners to drive sustainable production, forest conservation as well as good social and labor practices. It works with the government on integrated land use planning and supports a "No Deforestation, No Peatland, No Exploitation" policy. Based on new information from satellite monitoring, the company recently expanded the scope of this work to include the East Kalimantan province.

Nestlé also strives to include smallholder farmers in its supply chains, given that they represent 40% of the world's palm oil supply. It recently helped launch a Smallholders Hub in Aceh that trains farmers on good agricultural practices and helps them increase their yields from existing farmland. This reduces the risk of encroachment into protected areas. Similar programs are being rolled out in other landscapes.

Nestlé is now going beyond deforestation to conserve and restore natural ecosystems, while also promoting sustainable livelihoods and respecting human rights. It was recognized for its work in this year's Forest 500 report, coming in third for its efforts in tackling deforestation among companies exposed to the issue.

Palm oil is highly versatile. It requires four to ten times less land to produce the same amount of oil as other plants. Replacing it is not the answer -- neither for the environment, nor for the millions of farmers whose livelihoods depend on it. That is why Nestlé goes ever further to make palm oil production truly sustainable, for both forests and communities.

Outlook

(MORE TO FOLLOW) Dow Jones Newswires

July 27, 2023 01:15 ET (05:15 GMT)