Nestlé’s strong start to year slows, cuts underlying sales growth forecast to 2-3%

Reporting on its half-year results for 2020​, the KitKat maker said organic sales growth, which excludes the effect of currency swings and acquisitions, was down 1.3% in the three months to June, from 4.3% in the first quarter.

Its trading operating margin is expected to improve after progressing to 17.4% in the first half.

Organic growth reached 2.8%, with RIG of 2.6%. Pricing contributed 0.2% and was positive in all three Zones in the second quarter.

Destocking

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, it said in a statement.

In the first half, Nestlé saw sustained momentum in the Americas and positive sales development in Zone EMENA. Zone AOA saw a sales decrease, with growth turning positive in the second quarter. Organic growth was 4.1% in developed markets.

Mark Schneider, Nestlé CEO, said: “Nestlé has remained resilient in a rapidly changing environment, delivering solid organic growth and improved margins in the first half. These results demonstrate the agility of our business and the strength of our diversified portfolio across geographies, product categories and channels. 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.​

“COVID-19 continues to impact people around the world. We stand with all those affected and are committed to helping where we can. I would like to thank every member of the Nestlé team for their dedication and hard work in the face of incredible challenges​."

Crisis

Although Nestlé’s business supplying restaurants and cafes has suffered, packaged and ambient food companies have weathered the crisis better than other industries as consumers bought coffee, pasta, confectionery and infant formula in bulk during COVID-related lockdowns.

“Our priorities remain the same; keeping our people safe, assuring continued supply of essential food and beverages to consumers and caring for our communities and business partners through financial and in-kind support​,” said Schneider.