Nestlé posts good growth despite China sales dip

18-Aug-2016 - Last updated on 19-Aug-2016 at 07:45 GMT

Nestlé reported good growth throughout the company

Nestlé reported a significant growth slowdown in China in its half-year trading update, despite announcing good growth throughout the rest of the company.

The manufacturer of KitKat and Nescafé reported a net profit of CHF 4.1bn (£3.3bn) between January and July 2016, a CHF 400M (£319M) drop on the same period last year. Nestlé said the reduced profit was due to a one-off, non-cash adjustment to deferred taxes.

Nestlé reported total sales of CHF 43.2bn (£34bn), up 3.5% on last year.

The company blamed the Chinese growth slowdown on its Yinlu brand of prepared foods and drinks, which it bought in 2011.

Nestlé ceo Paul Buckle said: “While we continued to address challenges in China, we enjoyed good performances across the US, Europe, Southeast Asia and Latin America, and expect this to continue in the second half.

‘Market share gains’

“The first half of 2016 was in line with our expectation, with growth almost entirely driven by volume and product mix, yielding further market share gains.”

Nestlé’s North and South American businesses reported sales of CHF 12.1bn (£9.7bn), up 5.1% on the previous year. The manufacturer’s Nescafé Dolce Gusto coffee range performed particularly well in Latin America, Nescafé said.

Sales in Europe, the Middle East and North Africa totalled CHF 8.1bn (£6.5bn). Nescafé drove the sales, with particular highs in France, Spain, Portugal and Benelux.

Nestlé also highlighted the growth of its Nestlé Waters sector, with reported sales of CHF 3.9bn (£3.1bn) on its own. The sector, which includes brands San Pellegrino and Perrier, registered double-digit growth in emerging markets.

In line

The company said its outlook for the full year remained in line with expectations, with improvements in margins and underlying earnings per share.

Buckle said: “We grew our gross margin and trading operating profit through further premiumisation, continuous cost discipline and input cost tailwinds. This allowed us to significantly enhance our free cash flow.

“In these times of rapid change, we keep our focus on profitable growth by further investing in innovation, R&D, brand support and digital to engage with our consumers, meeting their changing needs.”

Nestlé had recently turned its attention to tackling the retail crisis, as it teamed up with other food and drink manufacturers for the new Retail Grocery Advisory Board. The group aims to find improvements to supply chain efficiency.