Frozen food and ice cream product sales were generally on target for Nestlé in the USA and Canada during the first half of 2015 (H1), while “innovation and premiumization” continued to drive frozen pizza growth in Western Europe. This news was among highlights discussed by executives of the Vevey, Switzerland-headquartered company during an earnings conference call on August 13.
Noting that steps have been taken to bolster its volume in the North American frozen food market, Francois-Xavier Roger, chief financial officer, commented: “We expect gradual improvement throughout the year and, although growth was still soft in the first half, the trends are improving. We are seeing positive early signs from the launch of the Lean Cuisine Marketplace and Stouffer’s Fit Kitchen lines, which are performing in line with our expectations. They were rolled out in the second quarter of the year, and we will add communication support in the third quarter.”
The Hot Pockets hand-held sandwich brand was fired up with the addition of Snack Bites during H1, while growth in the frozen pizza sector was achieved and new super premium Häagen-Dazs products delivered solid gains in the ice cream segment.
Noting that Nestlé ice cream sales in North America are outpacing the category, Steffen Kindler, head of investor relations, pointed out that the company has benefited from the major recall of a competitor’s ice cream product line.
“Ice cream had a solid performance as we entered the summer season, with Häagen-Dazs, Outshine Fruit Bars and Drumstick growing nicely,” said Roger. He added that a hot summer in Europe has stimulated demand for ice cream and water products in that market as well.
Global sales of 42.8 billion Swiss francs for the multinational consumer goods company during the first half of 2015 translated to 4.5% organic growth and 1.7% real internal growth. Trading profit amounted to 15%, up 20 basis points in constant currencies.
Growth was broad based across categories and geographic regions. The group’s operating cash flow was 3.9 billion Swiss francs, reflecting the appreciation of the franc, lower dividend income from L’Oréal due to reduced shareholding, and the timing of tax payments.
“The first half results were in line with our expectations – solid even in difficult circumstances, and consistent with our strong performance over time,” said Nestlé CEO Paul Bulcke in a prepared statement issued to the press. “They reflect the relevance and strength of our Nutrition, Health and Wellness strategy and our discipline in execution. Our investments in the new growth platforms Nestlé Health Science and Nestlé Skin Health are delivering and complement the good momentum in our food and beverages businesses. This allows us to confirm the outlook for the full year.”
However, on the downside, sales have slowed in several major emerging markets, including China and Brazil. Furthermore, the massive recall of Maggi brand noodles in the India market has had a negative impact on organic growth that will continue into the second half of 2015.
Meanwhile, as Nestlé makes efforts to adapt its portfolio to a lower growth environment in China, the impact of that nation’s recent currency devaluation will likely weigh in significantly during the second half of the year.
