Nestlé reports three-month sales for 2020, provides COVID-19 update

Nestlé reports three-month sales for 2020, provides COVID-19 update
Nestlé reports three-month sales for 2020, provides COVID-19 update

The COVID-19 crisis is having an extraordinary and far-reaching impact on all our lives. Since the earliest stages of the pandemic, we have been working closely with local authorities and business partners to respond to the challenge. We have three key priorities: safeguarding the health and wellbeing of our people, ensuring business continuity to meet consumer needs and supporting communities all over the world with local relief efforts.

In these difficult times, many of our business partners are facing serious challenges, which create enormous uncertainty for their employees and families. We will continue to be a dependable business partner and make every possible effort to adapt to the evolving situation.

For our out-of-home and food service customers, who have been severely affected, we are offering prompt and pragmatic assistance to weather the crisis and help them restart their businesses. For example, under our “Always open for You” initiative, we are extending payment terms, suspending rental fees for coffee machines and offering free products. The total value of this initiative is expected to be around CHF 500 million.

Another example is our dairy supply chain. We are directly working with more than 200 000 dairy farmers globally. Dairy is highly perishable, and many farmers are now facing significant demand disruptions. We are fully meeting our commitments to buy agreed volumes in order to help sustain their livelihoods.

Since the beginning of this pandemic, we have engaged in numerous projects around the world as a reliable employer and business partner as well as a trusted neighbor and citizen in the 187 countries where we operate. Our commitment is certain and unwavering.

During the first quarter, our company remained resilient:

  • Organic growth reached 4.3%, with real internal growth (RIG) of 4.7% and pricing of -0.4%. Growth was supported by strong momentum in the Americas and Zone EMENA. Zone AOA saw a sharp sales decline.
  • Total reported sales decreased by 6.2% to CHF 20.8 billion (3M-2019: CHF 22.2 billion). Acquisitions net of divestitures reduced sales by 4.7%, foreign exchange reduced sales by 5.8%.
  • Portfolio management is on track. The divestment of the U.S. ice cream business for USD 4 billion to Froneri was completed on January 31, 2020. The sale of a 60% stake in the Herta charcuterie (cold cuts and meat-based products) business to Casa Tarradellas is expected to close in the first half of 2020.
  • Nestlé has decided to explore strategic options, including a potential sale, for its Yinlu peanut milk and canned rice porridge businesses in China. Nestlé will retain and develop its existing Nescafé ready-to-drink coffee business.
  • As it is still too early to assess the full impact of COVID-19, we maintain our original full-year 2020 guidance for the time being. We expect continued improvement in organic sales growth and underlying trading operating profit margin. Underlying earnings per share in constant currency and capital efficiency are expected to increase.

Mark Schneider, Nestlé CEO, commented: 

“The COVID-19 crisis continues to impact all our lives in powerful and sometimes tragic ways. Our thoughts are with all those who have been affected and we extend our deepest sympathies to those who have lost loved ones.

Nestlé has a special responsibility at this time. Our food and beverage products help keep people healthy, provide comfort and support recovery.

Our people, in particular our frontline workers, have shown extraordinary commitment in keeping our business running and meeting consumer needs. We will continue to work hard to provide food and beverages to people across the world, every day.

Our company remained resilient in the first quarter, reflecting our diversified product portfolio and our strong local presence in 187 countries. However, this crisis is far from over and we will face many uncertainties in the coming quarters. We will continue to adapt quickly to changing consumer needs and to challenges in our global supply chains. As a reliable employer and business partner we are meeting our commitments. As a good citizen and trusted neighbor, we continue to offer our help, in particular to the most vulnerable in society. Over the last 154 years, Nestlé has successfully overcome many challenges. We are confident that – together with all those who are fighting against the pandemic and its consequences – we will also overcome this one.”

Group Results

  Total Group Zone EMENA Other Businesses
Sales 3M-2020 (CHF m) 20 812 5 313 2 178
Sales 3M-2019 (CHF m)* 22 183 5 290 2 808
RIG 4.7% 8.2% 8.0%
Pricing -0.4% -1.1% 0.5%
Organic growth 4.3% 7.1% 8.5%
Net M&A -4.7% -0.5% -25.4%
Foreign exchange -5.8% -6.2% -5.5%
Reported sales growth -6.2% 0.4% -22.4%

 

* 2019 figures restated following the decision to integrate the Nestlé Waters business into the Group’s three geographical Zones, effective January 1, 2020.

Group Sales

Organic growth reached 4.3%, with RIG of 4.7%. Pricing temporarily decreased by 0.4%, mainly reflecting timing of promotions in North America.

Organic growth was supported by strong momentum in the Americas and Zone EMENA. Zone AOA posted negative growth, mainly due to a double-digit sales decline in China. Organic growth was 7.4% in developed markets, based entirely on RIG. Growth in emerging markets was 0.5%.

By product category, the largest growth contributor was Purina PetCare and its premium brands Purina Pro Plan and Purina ONE. Prepared dishes and cooking aids grew at a high single-digit rate, with improved growth across all brands. Coffee saw good momentum, fueled by the demand for Starbucks products, Nespresso and Nescafé. Nestlé Health Science posted double-digit growth, reflecting elevated demand for consumer and medical nutrition products.

Acquisitions net of divestitures decreased sales by 4.7%, largely related to the divestment of Nestlé Skin Health and the U.S. ice cream business. Foreign exchange reduced sales by 5.8%, reflecting appreciation of the Swiss franc versus most currencies. Total reported sales decreased by 6.2% to CHF 20.8 billion.

Business impact of the COVID-19 crisis

Nestlé has responded quickly and taken necessary measures to minimize the impacts of this global crisis. To date, the Group has been able to effectively serve its retail partners and consumers despite some local disruptions in the supply chain and temporary staffing shortages. Nestlé’s frontline workers have been instrumental in overcoming these challenges.

The effect of COVID-19 varied materially by geography, product category and sales channel, depending on the timing of the outbreak, the scope of restrictions and consumer behavior:

  • Geographies: A majority of markets, particularly in North America and Europe, saw significantly increased growth in March, partially supported by consumer stockpiling. China posted a sharp sales decline, due to movement restrictions in place for almost the full quarter, limited consumer stockpiling and relatively higher exposure to out-of-home channels.
  • Product categories: Essential products saw increased demand. Prepared dishes and cooking aids, Purina PetCare, coffee and Nestlé Health Science products reported increased growth. Confectionery and ice cream posted a sales decline, reflecting reduced gifting and impulse buying.
  • Sales channels: All markets saw a significant shift from out-of-home to in-home consumption. Out-of-home channels posted negative growth, with significant sales declines for Nestlé Professional, water and Nespresso boutiques. E-commerce sales grew by 29.4%, exceeding 10% of total Group sales for the first time.

 

 

The financial impact of COVID-19 remains difficult to quantify and will depend on the duration and the economic consequences of this crisis. Nestlé continues to adapt quickly to supply chain challenges and changing consumer behavior. The Group remains resilient given its diversified portfolio of products and presence across the globe.

  

Zone Europe, Middle-East and North Africa (EMENA)

  • 7.1% organic growth: 8.2% RIG; -1.1% pricing.
  • Western Europe saw mid single-digit organic growth. Strong RIG was partially offset by negative pricing.
  • Central and Eastern Europe had high single-digit organic growth, with strong RIG. Pricing was negative.
  • Middle East and North Africa posted high single-digit organic growth, based on strong RIG and slightly positive pricing.

 

  Sales 3M-2020 Sales 3M-2019 RIG Pricing Organic growth Net M&A Foreign exchange Reported growth
Zone EMENA CHF 5.3 bn CHF 5.3 bn 8.2% -1.1% 7.1% -0.5% -6.2% 0.4%

 

Organic growth was 7.1%, with increased RIG of 8.2%. Pricing decreased by 1.1%, as deflationary trends continued to affect the food and retail sectors across most European markets. Acquisitions net of divestitures reduced sales by 0.5%. Foreign exchange negatively impacted sales by 6.2%. Reported sales in Zone EMENA increased by 0.4% to CHF 5.3 billion.

Zone EMENA reported high single-digit organic growth, with broad-based market share gains across most product categories and geographies. Germany, Russia and Spain saw particularly strong growth.

Prepared dishes and cooking aids, coffee, Purina PetCare and infant nutrition reported double-digit growth. Culinary products saw elevated consumer demand across all segments, particularly Maggi and Garden Gourmet vegetarian and plant-based food products. Coffee posted increased growth, supported by Starbucks products and NescaféPurina PetCare reported continued strong momentum, led by FelixPurina ONE and Tails.com. Infant nutrition saw increased consumer demand across most geographies, particularly for products with Human Milk Oligosaccharides (HMOs). Water posted negative growth, impacted by sales declines in the out-of-home channel. Nestlé Professional recorded a double-digit decline in sales.

  

Other Businesses

  • 8.5% organic growth: 8.0% RIG; 0.5% pricing.
  • Nespresso reported mid single-digit organic growth, with positive RIG and pricing.
  • Nestlé Health Science saw double-digit organic growth, entirely driven by RIG.

 

  Sales 3M-2020 Sales 3M-2019 RIG Pricing Organic growth Net M&A Foreign exchange Reported growth
Other Businesses CHF 2.2 bn CHF 2.8 bn 8.0% 0.5% 8.5% -25.4% -5.5% -22.4%

 

Organic growth of 8.5% was supported by RIG of 8.0% and pricing of 0.5%. Acquisitions net of divestitures reduced sales by 25.4%, due to the divestment of Nestlé Skin Health. Foreign exchange had a negative impact of 5.5%. Reported sales in Other Businesses decreased by 22.4% to CHF 2.2 billion.

Nespresso saw mid single-digit organic growth. The Americas and AOA grew at a double-digit rate, with continued market share gains in the United States and Canada. Sales in Europe decreased, reflecting boutique closures and significantly reduced demand in the out-of-home channel, particularly in the latter part of the quarter.

Nestlé Health Science accelerated to a double-digit growth rate, supported by strong momentum for consumer and medical nutrition products. Garden of Life and Pure Encapsulations saw increased growth, based on high demand for quality supplements that support overall health and the immune system.

 

Our business as a force for good during COVID-19: Coming together globally, working locally

Companies around the world are called upon to support the fight against the spread of the virus, to provide urgently needed goods and to safeguard livelihoods. We are joining all our stakeholders to provide a helping hand to the communities around us and to the most vulnerable around the globe.

Our people are fully committed and are working hard to ensure that supply is maintained. As employees rise to these new challenges, we are providing extra support to ensure their health, safety and wellbeing. This includes guaranteeing 12 weeks of regular wages for all hourly and salaried staff affected by temporary stoppages.

Since the very beginning of this crisis, we have led local relief efforts all over the globe. We have provided support to charities, medical institutions and other frontline organizations fighting this pandemic. In addition to local efforts, we are increasing our support to partners to support emergency relief and vulnerable populations. The following are just two of many examples of how our businesses and people are supporting the communities in which they operate.

 

Partnering with IFRC to help strengthen its emergency response. Building on a long-standing global partnership, we announced in March that we were joining forces with the International Federation of Red Cross and Red Crescent Societies (IFRC) to provide urgent help for emergency services and caregivers. We will exceed our initial contribution of CHF 10 million and have already identified projects in almost 40 countries for immediate support on the ground. We will continue to match donations to the IFRC made by our employees.

 

 

Partnering with physicians treating COVID-19 patients. Providing nutrition to patients who are critically ill with COVID-19 is an additional challenge for health care professionals. COVID-19 patients in intensive care often experience acute respiratory failure and need to be tube fed with high-protein and high-energy nutrition. Our Nestlé Health Science team has long-standing expertise in supporting patients with specially developed medical nutrition products. Our experts have been working with physicians to create a simplified algorithm and feeding protocol based on updated international guidelines. This approach, which does not require Nestlé products, is being shared with healthcare providers around the world to help improve patient outcomes and reduce the strain on the healthcare system. In addition, Nestlé Health Science has donated medical nutrition products to support patient recovery and help medical staff keep up their strength in many markets including China and Italy.

 

Outlook

As it is still too early to assess the full impact of COVID-19, we maintain our original full-year 2020 guidance for the time being. We expect continued improvement in organic sales growth and underlying trading operating profit margin. Underlying earnings per share in constant currency and capital efficiency are expected to increase.

To report this post you need to login first.