Confectionery profits dip 7% for Nestlé after soccer investments

By Oliver Nieburg contact

- Last updated on GMT

Nestlé's confectionery operating margins fall dramatically due to marketing spend on the Confederations Cup and World Cup
Nestlé's confectionery operating margins fall dramatically due to marketing spend on the Confederations Cup and World Cup

Related tags: Profit, United states dollar, Confectionery

Nestlé has recorded a drop in operating profit for its confectionery segment in the first half (H1) of 2013 mainly due to marketing spend around soccer events and intense competition.

The company’s operating margin in confectionery fell 110 basis points to 12.7% during the period due to marketing investments around the Confederations Cup and World Cup, both in Brazil.

Nestlé Confectionery: results roundup

Nestlé CFO Wan Ling Martello said: “There were a number of drivers here, first the highly competitive environment in the sector, generally speaking. Also, we had a very significant increase in marketing spend in Latin America relating to the Confederations Cup as well as the upcoming World Cup.”

The company’s H1 confectionery sales were CHF 4.6bn ($5bn), up 1% compared to the same period last year.

However, operating profit for the segment down 7% on H1 last year to CHF 587m ($638m),

Confectionery is Nestlé’s sixth most profitable business area out of its seven operating segments.

Weak currencies negate cheaper cocoa prices

During the company’s conference call an analyst said that he was surprised that Nestlé confectionery margins had declined so much as cocoa prices had improved during the period.

But Nestlé’s head of Investor relations Roddy Child-Villiers said that in Brazil -which is the company’s biggest chocolate market by volume – it did not benefit from lower cocoa prices because of the weakness of the local currency

“Weaker currencies in Latin America are driving inflation there. So even in categories such as chocolate, where the U.S. dollar cocoa price has fallen, we have responded with pricing,”​ he said.

See HERE​ for Nestlé's H1 performance across all operating areas.

Related topics: Manufacturers, Chocolate, Nestle

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