Switzerland-based Nestlé, a leading food and beverage company, has reported a that its net profit increased by 19 per cent to CHF5.8 billion ($5.84 billion) during the first half of 2018.

The company also revealed that earnings per share increased by 21.4 per cent to CHF1.92 ($1.93). The underlying earnings per share increased by 9.2 per cent in constant currency and by 10.4 per cent on a reported basis to CHF1.86 ($1.87), said a statement from Nestlé.

The increase was mainly the result of income from the disposal of businesses, lower taxes and improved operating performance, it said.
 
Nestlé’s share buyback programme contributed 1.5 per cent to the underlying earnings per share increase, net of finance costs, it added.

The company’s total sales increased by 2.3 per cent to CHF43.9 billion ($44.20 billion) during the first half of this year, compared to CHF42.9 billion ($43.19 billion) during the same period in 2017.

The underlying trading operating profit margin was 16.1 per cent, an increase of 20 basis points in constant currency and on a reported basis.  

The company’s trading operating profit margin was 14.6 per cent, a decrease of 50 basis points on a reported basis due to higher restructuring costs and net other trading items.

Nestlé’s full-year guidance for 2018 confirmed, with organic sales growth expectation narrowed to around 3 per cent; underlying trading operating profit margin improvement in line with our 2020 target. The restructuring costs are expected at around CHF700 million ($704.6 million). Underlying earnings per share in constant currency and capital efficiency are expected to increase.  
 
Mark Schneider, chief executive officer, Nestlé, said: “Our first half results confirmed that our strategic initiatives and rigorous execution are clearly paying off.”

“We have maintained the encouraging organic revenue growth momentum we saw at the beginning of the year. In particular, the US and China markets showed a meaningful improvement. We were also pleased by the enhanced organic growth in our core infant nutrition category,” he said.
 
“Our margin development is fully consistent with our 2020 target. We are creating value by pursuing growth and profitability in a balanced manner.  In line with this approach, we have accelerated our product innovation efforts to drive future growth and initiated significant cost reduction efforts, in particular in Zone Europe, Middle East and North Africa (EMENA) and at our Corporate Center,” he added.   
 
Schneider continued: “As we look towards the second half of 2018, we expect further improvement in our organic revenue growth. Margin improvement is expected to accelerate with further benefits from our efficiency programs and more favourable commodity pricing.”
 
The company’s underlying trading operating profit increased by 3.5 per cent to CHF 7.1 billion ($7.147 billion). The underlying trading operating profit margin increased by 20 basis points in constant currency, and by 20 basis points on a reported basis to 16.1 per cent.
 

The free cash flow increased by 52 per cent, from CHF1.9 billion ($1.91 billion) to CHF 2.9 billion ($2.92 billion). This was mainly driven by an improvement in working capital, lower taxes and increased operating profit.

Nestlé has made further progress to actively evolve the portfolio towards high-growth, high-margin categories and brands.
 
On May 7, an agreement was announced granting Nestlé the perpetual rights to market Starbucks consumer and foodservice products globally, outside of Starbucks coffee shops. As part of this transaction, Starbucks will receive an up-front cash payment of $7.15 billion for a business which generated annual sales of $2 billion. The agreement is now expected to close at the end of August 2018, it said.
 
The process of exploring strategic options for the Gerber Life Insurance business is on track with completion expected in 2018.
 
Also, the Middle East and North Africa (Mena) saw mid single-digit organic growth, both RIG and pricing were positive, it stated. – TradeArabia News Service