Sales of CHF 41.0 billion, 7.5% organic growth, 4.8% real internal growth
Trading operating profit of CHF 6.2 billion, margin of 15.1%; +20 basis points, +40 basis points in constant currencies
Consumer facing marketing spend up 6.2% in constant currencies
Underlying earnings per share up 5.2% in constant currencies
Strong Swiss franc: major impact on consolidation, little effect on operational performance
Full-year outlook: organic growth at top end of 5% to 6% range, combined with a margin increase in constant currencies
Paul Bulcke, Nestlé CEO: “Nestlé continued to make good progress in a period characterised by political and economic instability, natural disasters, rising raw material prices and, yes, a strong Swiss franc. This has made for an extremely tough, volatile and competitive environment. But by leveraging our competitive advantages, investing behind our growth drivers and excelling in operational efficiency and effectiveness, we managed to drive growth not only in emerging markets but also in developed countries, especially in Europe. Furthermore we improved our trading operating margin while increasing investment in our brands. For the full year, we expect organic growth at the top end of the 5% to 6% range, combined with a margin increase in constant currencies.”

Vevey, 10 August 2011 – The Group reported organic growth of 7.5% and a trading operating profit margin of 15.1%, up 20 basis points reported, up 40 basis points in constant currencies, from that achieved by the continuing operations in the first half of 2010.

We continued to deliver growth both in emerging and developed markets, with organic growth of 5.7% in the Americas, 5.8% in Europe and 13.3% in Asia, Oceania and Africa. This performance reflects strong alignment and investment in our strategic growth priorities and brands to support our fast-flowing innovation pipeline. We also continued to step up our investment in R&D, factories and capabilities to support our growth in both emerging and developed markets.

First-half results
As announced in February 2011, Nestlé has made certain changes in presentation for Revenue and Operating Profit, as from January 2011, which have no impact on net profit and earnings per share. The 2010 figures have been restated for all the changes as a comparable basis. Following the disposal of Alcon in August 2010, the 2010 comparatives are reported on a continuing basis, which excludes Alcon, except for net profit and earnings per share figures, which include the contribution from Alcon. This is reflected in the analysis below.

In the first half of 2011, the Nestlé Group’s organic growth was 7.5%, including real internal growth of 4.8%. Pricing increased in the second quarter to 3.8% compared to 1.5% in the first quarter, resulting in 2.7% pricing for the half year. There was a decrease in Group sales of 12.9% to CHF 41 billion, due to an impact of 13.8% from foreign exchange and of 6.6% from divestitures, net of acquisitions.
The Group’s trading operating profit margin increased by 20 basis points and by 40 basis points in constant currencies.
The cost of goods sold was higher by 180 basis points. The increase in input costs was partially offset by Nestlé Continuous Excellence savings, innovation, growth, sales mix and pricing.
Distribution costs increased by 10 basis points, as sales mix and savings compensated much of the higher oil-related costs compared to the first half of 2010.
Total marketing costs, including the cost of the sales and marketing organisations, were down by 20 basis points. More specifically, the consumer facing marketing spend increased by 6.2% in constant currencies. This was on top of a 14% increase in the first half of 2010.
Administrative costs were down by 150 basis points. This demonstrates a rigorous approach to efficiency and shows the benefit of rolling out Nestlé Continuous Excellence, enabled by GLOBE, to areas beyond operations, and continues the trend we experienced last year.
Nestlé Continuous Excellence savings are in line with our target of at least CHF 1.5 billion for the full year.
The net other trading income and expenses improved by 40 basis points, resulting mainly from lower restructuring costs in the half year.
The underlying earnings per share (EPS) rose 5.2% in constant currencies. The reported EPS were CHF 1.46 compared with CHF 1.60 last year. Net profit was CHF 4.7 billion.
The Group’s operating cash flow was CHF 1.7 billion. This number is impacted by the sale of Alcon, foreign exchange and higher commodity costs.

Financial flexibility
We recognise significant opportunities to advance our strategic growth agenda both organically and through bolt-on acquisitions. In 2011, we have already committed to significant levels of capital expenditure weighted to the high-growth emerging markets and we have announced several strategic bolt-on acquisitions in different parts of the world. In view of these significant financial commitments, and taking into consideration the difficult economic environment which has prevailed for some time now, we will continue to maintain an appropriate level of financial flexibility to pursue with confidence our strategic growth agenda. Consequently, after completing CHF 35 billion in share buybacks since 2007, the Board of Directors has made a decision not to launch a new programme at this time.

Outlook
As we look forward to the second half of 2011, we expect continued challenging conditions including political and economic instability, volatile raw material prices and subdued consumer confidence in the developed world. But our momentum is strong, our efficiency drive continues and we expect our pricing to have a fuller impact in the second half of the year. We are therefore confident of achieving organic growth at the top end of the 5% to 6% range, combined with a margin increase in constant currencies.