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Half-Year 2015: Organic growth of 4.5%, full-year outlook confirmed

Nestlé S.A. / Half-Year 2015: Organic growth of 4.5%, full-year outlook
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2015 Half-yearly Report (pdf)

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Vevey, 13 August 2015

Half-Year 2015:
Organic growth of 4.5%, full-year outlook confirmed

* Sales of CHF 42.8 billion, 4.5% organic growth, 1.7% real internal growth
* Trading operating profit margin 15.0%, up 20 basis points in constant
* Underlying earnings per share up 7.3% in constant currencies
* 2015 outlook: we aim to achieve organic growth of around 5% with
improvements in margins and underlying earnings per share in constant
currencies, and capital efficiency

Paul Bulcke, Nestlé CEO: "The first half results were in line with our
expectations, broad-based across categories and geographies, solid even in
difficult circumstances, and consistent with our strong performance over
time. They reflect the relevance and strength of our Nutrition, Health and
Wellness strategy and our discipline in execution. Our investments in the new
growth platforms Nestlé Health Science and Nestlé Skin Health are delivering
and complement the good momentum in our food and beverages businesses. This
allows us to confirm the outlook for the full year."

Group results

In the first half of 2015 organic growth was 4.5%, composed of 1.7% real
internal growth and 2.8% pricing. Total sales of CHF 42.8 billion were
impacted by foreign exchange (-5.8%). Acquisitions, net of divestitures,
contributed 1% to sales.

* Growth wasbroad-based across categories and geographies.
* Organic growth in thedeveloped markets accelerated to 2.2% while in
theemerging markets we achieved strong organic growth of 7.3%.
* Organic growth was 6.6% in the Americas (AMS), 3.4% in Europe, Middle East
and North Africa (EMENA) and 2.2% in Asia, Oceania and sub-Saharan Africa
(AOA).Real internal growth was 1.7% in AMS, 2.4% in EMENA and 0.6% in AOA.
* The continuous efforts to drive cost efficiencies, and the consolidation of
Nestlé Skin Health, led to a 160 basis points drop in thecost of goods sold
. The effect from input costs was neutral.
* Cost reductions were partly reinvested in increasedconsumer facing
marketing support. The trading operating profit margin rose by 20 basis
points in constant currencies.Trading operating profit was CHF 6.4 billion
with a margin of 15.0%.
* Net profit was CHF 4.5 billion andreported earnings per share were CHF
1.43.Underlying earnings per share rose 7.3% in constant currencies.
* The group'soperating cash flow was CHF 3.9 billion reflecting the
appreciation of the Swiss Franc, lower dividend income from L'Oréal due to
our reduced shareholding and the timing of tax payments.

Zone AMS

Sales of CHF 12.0 billion, 5.2% organic growth, 0.1% real internal growth;
18.0% trading operating profit margin, +10 basis points

* The Zone delivered good organic growth, driven by improvements in our
business in North America and positive momentum in Latin America.Nescafé
Dolce Gusto , creamers and petcare continued to be significant growth

* InNorth America we relaunched our frozen meals brands with the newLean
Cuisine Market Place andStouffers Fit Kitchen ranges. The first signs are
promising and indicate that we are meeting the fast-changing expectations
of consumers. New additions to theSnack Bites range helped deliver solid
growth forHot Pockets , and we saw some improvement in frozen pizza. In ice
cream, new products delivered solid growth forHaägen Dazs in super premium
andOutshine for snacks.Coffee-mate grew well, supported by innovations
likeNatural Bliss andCoffee-mate 2GO . Petcare showed good growth, in spite
of the negative impact from theBeneful case. Among the drivers wereFancy
Feast cat food, thePro Plan platform for dog food, and cat litter.

* We continued to grow our business inLatin America in what is still a
volatile environment. Investment behind our growth platforms drove
performance in Brazil.Nescafé Dolce Gusto andKitKat both delivered strong
double-digit growth, as did soluble coffee.Nescau achieved good growth for
cocoa and malt beverages whilePassatempo andNesfit did well for biscuits.
Mexico grew during the first half, led byNescafé andCoffee-mate . Petcare
continued to be a growth driver for Latin America and will benefit from new
production capacity in Argentina and Mexico.

* The Zone'strading operating profit margin benefited from operational
efficiencies and positive pricing.


Sales of CHF 7.9 billion, 3.8% organic growth, 2.0% real internal growth;
16.2% trading operating profit margin, +80 basis points

* After a strong start to the year the different geographies of the Zone
continued to grow in spite of the volatile and challenging environment. The
solid growth was broad-based withNescafé Dolce Gusto , soluble coffee,
petcare and frozen pizza among the highlights. Organic growth was also
driven by price increases for coffee and some inflationary pressures in
Russia, Ukraine and Turkey, compensating for the deflationary environment
in Western Europe.

* Innovation and premiumisation continued to drive the growth inWestern
Europe. Single-serve cat food,Nescafé Dolce Gusto and frozen pizza were the
main contributors. France, Benelux and the Nordics did well in the
deflationary environment. Consumer confidence in Southern Europe was
subdued, with Greece having an impact.

* Growth inEastern Europe was strong, driven by petcare, soluble coffee and
systems, and by chocolate withKitKat . Careful management of pricing in
Russia has protected our competitiveness in an inflationary environment.
Our business in Ukraine continued to deliver growth, despite the difficult
economic situation. There were also solid performances from the Adriatic
region, Bulgaria and Hungary.

* TheMiddle East and North Africa region delivered solid growth with soluble
coffee and confectionery the highlights. Turkey had strong growth and there
were solid performances across the Middle East, compensating for the
challenges in Iraq and Yemen.

* The improvement in the Zone'strading operating profit margin was driven by
product mix and lower input costs that allowed for increased investment in
consumer facing marketing support.

Zone AOA

Sales of CHF 7.1 billion, 0.8% organic growth, -0.8% real internal growth;
18.2% trading operating profit margin, -60 basis points

* There were strong results in the Zone's developed markets and a gradual
improvement in emerging markets, however the underlying improvement in the
Zone's performance was overshadowed by the issue in India.

* In India, our withdrawal ofMaggi noodles resulted in negative organic
growth which will continue into the second half. We are engaging fully with
the authorities as we work to relaunch the product.

* The efforts in China to adapt our product portfolio to the changing
consumer demand and the lower growth environment led to a gradual
improvement across the categories, with ambient dairy, confectionery and
soluble coffee all contributing. Ready-to-drink beverages, includingNescafé
, delivered double-digit growth and ambient culinary made a solid

* In thedeveloped markets Japan continued to perform well thanks to
innovation inKitKat and inNescafé which launched the premiumNescafé Gold
Blend in the ready-to-drink format. Despite the intensely competitive
trading environment in the Oceania region, the business there contributed
to the Zone's positive growth, thanks mainly to confectionery withKitKat .

* Vietnam, Indonesia, South Africa, Pakistan and the Philippines were among
the highlights in the otheremerging markets , delivering good growth.
Sub-Saharan Africa continued to show good growth with Central West Africa
Region regaining momentum after a slower start to the year.

* Thetrading operating profit margin of Zone AOA was affected by the
withdrawal and destruction costs of the returned products in India which
have already had a material impact in the first half of the year.

Nestlé Waters

Sales of CHF 3.8 billion, 5.3% organic growth, 5.6% real internal growth;
11.5% trading operating profit margin, +110 basis points

* Nestlé Waters delivered solid broad-based growth across both emerging and
developed markets, reflecting rising demand for healthy beverages. The
business has a strong presence across the different channels
globally.Nestlé Pure Life again delivered double-digit growth, and there
was good single-digit growth for our premium international brands,Perrier
andS.Pellegrino . The local brands also performed well withPoland Spring in
the US,Levissima in Italy,Erikli in Turkey,Al Manhal in Saudi Arabia
andBuxton in the United Kingdom all making good contributions.

* Thetrading operating profit margin was driven mainly by the solid organic
growth, rigorous cost management and lower input costs, allowing for
increased investment in consumer facing marketing support.

Nestlé Nutrition

Sales of CHF 5.3 billion, 3.9% organic growth, 1.3% real internal growth;
23.0% trading operating profit margin, +140 basis points

* Nestlé Nutrition delivered growth across geographies and brands despite
difficult comparisons, especially in Asia. The well-supported innovation
pipeline continued to deliver new products for theNido ,Nan andCerelac
brands. Wyeth Infant Nutrition delivered good growth, in particular in Asia
where the premium brandsS-26 andIlluma expanded their e-commerce footprint.
The South Asia Region, Mexico and the Philippines performed well for Nestlé
Infant Nutrition. In North America innovation in ourGerber infant cereals
range continued to support growth and there were new product launches in
meals and drinks.
* The strong improvement in thetrading operating profit margin was the result
of our portfolio management and underlying margin improvement along with
strict control of fixed costs and more favourable input costs. This allowed
us to increase investment behind our brands.

Other businesses

Sales of CHF 6.8 billion, 8.1% organic growth, 4...

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