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Investor Presentaiton

Nestlé 2023 Half-Year Results Thursday 27th July 2023 Margin increases in Milk products and Ice cream as well as Food were supported by pricing, portfolio optimization and structural cost reduction. Confectionery saw a margin increase of 70 basis points based on growth leverage, pricing and structural cost reduction. Within Nutrition and Health science, Infant Nutrition saw a margin increase of 70 basis points as a result of growth leverage, structural cost reduction and lower distribution costs. Slide: Pricing, growth leverage and efficiencies mostly offset inflation Next is underlying trading operating profit, which increased by 2.9% to CHF 7.9 billion. The underlying trading operating profit margin reached 17.1%, an increase of 20 basis points on a reported basis and 30 basis points in constant currency. Gross margin decreased by 40 basis points to 45.6% as a result of continued input cost inflation that I will detail on my next slide. Distribution costs as a percentage of sales decreased by 50 basis points to 8.6% of sales, mainly as a result of lower freight and energy costs. Marketing and administration expenses as a percentage of sales were unchanged versus the prior year. Slide: Starting to restore gross margin Going into more details on gross margin. Our gross margin decreased by 40 basis points year-on-year to 45.6%. when including distribution costs as some other companies do, our gross margin increased by 10 basis points. Pricing, cost efficiencies and portfolio optimization only partly offset the impact of cost inflation, which is still significant, despite being lower than in the prior year. While costs have decreased versus the peak for some items, many price levels for commodities and labor are still trending materially above their 2022 average, and some items have seen increases. For example, Robusta coffee spot prices are nearly 30% above their 2022 average and almost 50% above their last 10-year average. Similarly, sugar and cocoa are 25% above their 2022 peak and more than 35% higher than their 2022 average. We are starting to restore gross margin and when compared to the second half of 2022, we can see a material improvement of 110 basis points. We expect our gross margin to be up materially in the second half versus the corresponding period in 2022. Slide: Stepping up investments in advertising and marketing 11
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