Nestlé (NESN) H1 2024 (Q&A) earnings summary

Executive summary

• Achieved strong real internal growth (RIG) recovery in H1 2024, with RIG turning positive at 0.1% and strengthening to 2.2% in Q2, driven by market share gains, volume growth, and premiumization across all zones and categories.

• Organic sales growth reached 2.1% for H1 2024, with e-commerce sales growing 10.6% and now representing 18.2% of total sales; out-of-home channels grew 3.8%.

• Net profit was flat at CHF 5.6 billion, with a net profit margin of 12.5%, up 30 basis points year-over-year.

• E-commerce and Billionaire Brands delivered robust growth and share gains, with particular momentum in digital channels.

• Nestlé Health Science showed significant improvement, setting up for a strong second half.

Financial highlights

• Gross margin improved year-over-year in H1, rising 160 bps to 47.2% due to favorable input costs, though H2 margin expected to be lower due to rising coffee and cocoa prices.

• Underlying trading operating profit margin improved to 17.4% (+30 bps), with underlying trading operating profit at CHF 7.8 billion.

• Total reported sales decreased by 2.7% to CHF 45.0 billion, impacted by negative foreign exchange (-4.4%) and net divestitures (-0.4%).

• Free cash flow increased to CHF 4.0 billion from CHF 3.4 billion, excluding prior year disposal proceeds.

• RIG in North America swung from -5.8% in Q1 to +2.8% in Q2, with order phasing contributing about 100 basis points to this swing.

Outlook and guidance

• Full-year organic growth guidance revised to at least 3%, down from around 4%, due to lower pricing expectations amid higher promotional intensity.

• Underlying EPS in constant currency projected to increase at a mid single-digit rate.

• Margin guidance remains unchanged, with expected improvement in gross margin for the full year and ongoing structural cost management.

• Positive pricing expected in H2, especially in coffee and cocoa, with continued promotional activity and targeted investments in innovation.

• Confident in achieving mid-single-digit growth in a normalized environment, with more detail to be provided at Capital Market Day in November.