Nestlé Report: Beverages And Frozen Food Sales Increase; Nestlé Professional Sales Decline Due To Out-Of-Home Closures And Cutbacks

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

Vevey, Switzerland,Apr 24, 2020 -- 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.”

Editor's note: The following is an excerpt from later in the press release that specifically discusses North American sales.

Zone Americas (AMS)

• 7.4% organic growth: 7.9% RIG; -0.5% pricing.
• North America saw high single-digit organic growth, with strong RIG and negative pricing.
• Latin America reported mid single-digit organic growth, with positive RIG and pricing.

Organic growth increased to 7.4%, supported by higher RIG of 7.9%. Pricing decreased by 0.5%, mainly reflecting timing of promotions in North America. Acquisitions net of divestitures reduced sales by 4.0%, largely related to the divestment of the U.S. ice cream business. Foreign exchange had a negative impact of 6.1%. Reported sales in Zone AMS decreased by 2.7% to CHF 8.3 billion.

North America grew at a high single-digit rate, supported by strong RIG in most product categories. The largest growth contributor was Purina PetCare, which saw sustained momentum in e-commerce and premium brands. Purina Pro Plan, Fancy Feast and veterinary products grew at a double-digit rate. Beverages, including Starbucks products, Nescafé and Coffee mate, grew at a high single-digit rate. Frozen food posted high single-digit growth, with positive contribution from all brands, particularly DiGiorno, Stouffer’s and Hot Pockets. Baking products, including Toll House and Carnation, saw elevated consumer demand. Gerber baby food reported mid single-digit growth, supported by its organic range and healthy snacking. Water posted positive growth, based on strong momentum for S.Pellegrino and a positive sales development for regional brands outside of the out-of-home channel. Nestlé Professional reported a sales decline, as out-of-home channels closed or cut back services in March.

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