Dogs really are man’s best friends. Or so it would seem, judging by Nestlé’s half-year numbers. A strong showing from the group’s ‘Purina Petcare’ business helped to lift overall revenues up by 2.8 per cent on an organic basis – slightly higher than consensus estimates of 2.3 per cent. That improvement came despite consumers “destocking” after “pantry building” in March, ahead of widespread limitations on movement.
In line with the pattern of those lockdowns, most of Nestlé’s markets saw slower growth in the second quarter. The consumer goods giant’s ‘out of home’ channel was almost entirely shuttered during the respective three months, with water and confectionery particularly affected. But at the same time, demand for prepared meals and frozen food escalated as people stayed put within the confines of their own four walls. Vegetarian and plant-based food products became increasingly popular – with sales rising by 40 per cent, as Nestlé’s ‘Garden Gourmet’ brand made continued progress in Europe. The ‘Sweet Earth’ label also grew strongly in the US.
The Americas – Nestlé’s largest geography by sales – reported organic growth of 5.1 per cent for the period under review, with a mid-single-digit increase in both North and Latin America. However, at the other end of the scale, China saw a double-digit decline. That said, the latter country was hit by confinement policies ahead of the rest of the world, meaning that growth here improved to flat towards the end of the trading period as restrictions eased. This could, perhaps, constitute an encouraging indication of what is to come for other regions served by Nestlé.
On a reported basis, first-half sales slid by almost a tenth to CHF41.2bn (£34.6bn) – reflecting adverse foreign-exchange movements, as well as the divestments of Nestlé’s skin health and US ice-cream businesses. In a sign of further portfolio management, group is currently considering plans to sell most of its water business in North America. Operating profits contracted by 1.2 per cent to CHF7bn, albeit on a margin of 16.9 per cent – up by 1.4 percentage points – as lower in-store and structural expenses more than offset Covid-19 costs.
