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

By product category, coffee, Purina PetCare and culinary products all

grew at a double-digit rate. Coffee was supported by strong momentum for

Nescafé and Starbucks products. In PetCare, Felix, Purina ONE and

Tails.com were the key growth platforms. Lily's Kitchen, the newly

acquired premium pet food business, also performed strongly. Culinary

saw elevated demand across all segments, particularly Maggi and Garden

Gourmet's plant-based products. Infant nutrition decelerated to low

single-digit growth, reflecting consumer destocking. Growth in

confectionery turned slightly negative, following reduced demand for

impulse and gifting products. Water gained market share but recorded

negative growth due to a substantial sales drop in the out-of-home

channel. Nestlé Professional saw a double-digit sales decline, in

line with channel dynamics.

The Zone's underlying trading operating profit margin increased by 40

basis points. Reduced in-store activation during lockdowns and lower

commodity spend outweighed COVID-19 related costs.

Zone Asia, Oceania and sub-Saharan Africa (AOA)

-- -2.2% organic growth: -2.7% RIG; 0.5% pricing.

-- China posted a double-digit decline in organic growth, mainly due to

negative RIG. Pricing was negative.

-- South-East Asia saw mid single-digit organic growth, with a balanced

contribution from RIG and pricing.

-- South Asia reported mid single-digit organic growth, mainly based on

pricing. RIG was slightly positive.

-- Sub-Saharan Africa recorded double-digit organic growth, led by strong

RIG.

-- Japan and Oceania had negative organic growth, with negative RIG and

pricing.

-- The underlying trading operating profit margin decreased by 20 basis

points to 22.7%.

Sales Sales Organic UTOP UTOP Margin Margin

6M-2020 6M-2019 RIG Pricing growth 6M-2020 6M-2019 6M-2020 6M-2019

Zone CHF 10.1 CHF 11.0 CHF 2.3 CHF 2.5

AOA bn bn - 2.7% 0.5% - 2.2% bn bn 22.7% 22.9%

Organic growth was -2.2%, with RIG of -2.7% and pricing of 0.5%.

Divestitures and acquisitions had no impact on sales. Foreign exchange

reduced sales by 6.3%. Reported sales in Zone AOA decreased by 8.5% to

CHF 10.1 billion.

Zone AOA reported negative organic growth, as a double-digit decline in

China outweighed mid single-digit growth in the other regions. The Zone

returned to positive growth in the second quarter, helped by improved

trading conditions in China.

After a difficult start to the year, sales in China recovered and growth

was almost flat in the second quarter. The improvement was broad-based

across product categories. Coffee, dairy, ice cream, culinary and

confectionery all returned to positive growth. The contraction in Wyeth

infant formula sales moderated. In June, Wyeth launched the locally

manufactured Belsol infant formula brand, strengthening its offering in

the super premium segment and in lower-tier cities. Infant cereals and

Purina PetCare continued to grow at strong double-digit rates.

E-commerce sales gained momentum, driven by Nescafé and Starbucks

products.

South-East Asia saw mid single-digit growth. Sales in the Philippines

grew at a double-digit rate, with elevated consumer demand for Bear

Brand, Milo and Maggi. Indonesia delivered high single-digit growth, led

by Bear Brand and Dancow. South Asia reported mid single-digit growth.

India performed well, supported by NAN, Everyday and Nescafé. Maggi

saw solid growth, despite temporary supply chain constraints in the

second quarter. Sub-Saharan Africa grew at a double-digit rate, led by

strong sales development in South Africa. Japan and Oceania decelerated

and saw negative growth, as increased sales across product categories in

Oceania were more than offset by a decline in Japan.

By product category, the largest growth contribution came from Purina

PetCare, Milo powder and dairy. In coffee, there was continued strong

demand for Starbucks products. Outside of China, infant nutrition saw

good sales momentum. Nestlé Professional, confectionery,

ready-to-drink products and water all posted negative growth due to

their exposure to the out-of-home channel.

The Zone's underlying trading operating profit margin decreased by 20

basis points. Commodity inflation and COVID-19 related costs outweighed

reduced in-store activation during lockdowns.

Other Businesses

-- 6.1% organic growth: 5.5% RIG; 0.6% pricing.

-- Nespresso reported mid single-digit organic growth, with positive RIG and

pricing.

-- Nestlé Health Science saw double-digit organic growth, entirely

driven by RIG.

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

points to 22.2%.

Sales Sales Organic UTOP UTOP Margin Margin

6M-2020 6M-2019 RIG Pricing growth 6M-2020 6M-2019 6M-2020 6M-2019

Other CHF 4.4 CHF 5.8 CHF 1.0 CHF 1.1

Businesses bn bn 5.5% 0.6% 6.1% bn bn 22.2% 19.6%

Organic growth of 6.1% was based on strong RIG of 5.5% and pricing of

0.6%. Divestitures reduced sales by 24.9%, largely related to the

divestment of Nestlé Skin Health. Foreign exchange negatively

impacted sales by 6.0%. Reported sales in Other Businesses decreased by

24.8% to CHF 4.4 billion.

Nespresso grew at a mid single-digit rate, supported by significant

sales acceleration for e-commerce and the Vertuo system. North America

saw strong double-digit growth, with continued market share gains. AOA

grew at a double-digit rate, with positive contributions from most

markets. Sales in Europe decreased, reflecting significantly reduced

demand in the out-of-home channel and boutique closures. Globally, at

the end of June, 86% of boutiques had reopened. In July, Nespresso

announced a CHF 160 million investment in the expansion of its Romont

production center in Switzerland to meet growing consumer demand

worldwide.

Nestlé Health Science posted double-digit growth, boosted by strong

momentum for consumer and medical nutrition products. Vitamins, minerals

and supplements that support overall health and the immune system

continued to experience elevated demand. Garden of Life and Pure

Encapsulations saw increased growth, particularly in e-commerce. Persona,

the subscription-based personalized vitamin business, more than tripled

its sales. Medical Nutrition experienced strong sales, particularly in

pediatric food allergy, adult medical care and Vitaflo products for rare

genetic diseases.

The underlying trading operating profit margin of Other Businesses

increased by 260 basis points, with positive contributions from both

Nespresso and Nestlé Health Science.

Business as a force for good: Accelerating our Nestlé Needs YOUth

program

More than one in six young people are out of work due to the COVID-19

pandemic while those who remain employed have seen their working hours

cut, according to the International Labour Organization (ILO).

Particularly in low- and middle-income countries, up to 75% of young

people work in the informal economy with no job security and little to

no social protection.

Nestlé Needs YOUth is our workforce initiative that provides job

and training opportunities for young people across the globe. Amid the

pandemic, we have scaled up online training to ensure continuity of our

internship and apprenticeship programs. We are also working with public

and private institutions in many countries to create new programs to

help young people develop the skills and resiliency they need to be

successful in today's challenging job market. Examples include:

-- In West Africa more than 1 000 young people receive support through the

Youth Agripreneurship Development Program (YADIS), which was initiated by

Nestlé and our regional partners in 2019. When the pandemic started

to spread, YADIS offered extra training and mentorship to help the young

farmers enlarge their fields and increase their crop yields. To further

ensure their long-term success, Nestlé has committed to buy maize

from them for the year.

-- In Mexico, over the course of only three months, Nestlé organized

6 000 individual live coaching sessions on vocational guidance,

employability and innovation. We also developed an entrepreneurship

program to support young innovators through mentoring and strategic

support for their businesses, helping them overcome challenges and find

opportunities to grow.

-- In the UK 170 apprentices benefited from 30 different virtual training

programs offered live or through pre-recorded sessions. Thanks to this

effort, the vast majority of apprentices were able to continue

development in their specific occupation -- from engineering to finance

and data science.

-- In the United States our campus recruiting program hired 138 interns and

trainees of all ages who were integrated remotely. Apprentices across

nine factories are receiving on-the-job training and virtual classroom

instruction.

We are deeply concerned about social, racial and economic inequalities.

We continue to work on fostering an inclusive culture at work and in our

communities, particularly in the United States where the pain of racial

inequity has been brought to the forefront of public awareness. As part

of this work, Nestlé is donating USD 1.5 million to the National

Urban League, UNCF and other organizations dedicated to ending racial

discrimination and providing economic empowerment through education and

job training. From 2021, our company holiday calendar in the United

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July 30, 2020 01:18 ET (05:18 GMT)