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Nestle Global’s revenue declined 7.2% to CHF42.6bn in H2CY11; results are
not strictly comparable as CY10 numbers include contribution from Alcon
business. However, excluding Alcon, revenue decline was restricted to 4.7%.
For H2CY11, organic growth stood at 7.5% (H1CY11: 7.5%). The company’s
trading operating margin improved 20bps YoY for H2CY11 to 14.8% (up
90bps YoY in constant currency on continuing businesses) despite severe
cost pressure and intensified competition aided by price hike (CY11 price
hike of 3.6%). Emerging markets sustained robust performance, posting
13.3% growth YoY against 4.3% YoY growth in developed markets. To drive
growth, the company is looking to exploit the Chinese market, for which it
has established two new partnerships.
Good growth across zones
In CY11, America posted 6.2% organic growth led by double digit in LatAm with Mexican
market being a key highlight; margin declined 30bps YoY. European business grew 4%
organically, clocking sales of CHF15.2bn; margin improved230bps YoY driven by growth in
Western Europe, price hikes and efficiencies. Led by strong performance in emerging
markets, the Asia, Oceanic and Africa business (AOA) posted 11.9% organic growth with
sales of CHF15.3bn; operating margin improved 90bps YoY to 18.9% primarily due to
innovation, renovation and investments in distribution, manufacturing and procurement.
Emerging markets fuel growth
Focus of the company on emerging markets is evident with Nestle investing 50% of total
capex (CHF4.8bn) in these markets which contribute 41% of sales (post Chinese
partnership). The company intends to attain 50% of its sale from emerging markets by
2020. It has been scaling up in categories where it has good market share and higher
returns and at the same time building capabilities for new categories, further enhancing
returns in the future. 13.3% organic growth in emerging markets in CY11 (Nestle India
sales growth: 19.8%) stands out in comparison with the company’s 7.5% blended growth.
Outlook: Challenging
CY12 is likely to be a tough year due to economic uncertainties and the company expects
to deliver organic growth of 5-6% in CY12. However, we believe due to the diversified
nature of its products, the strong global distribution network and continued investments
in high growth emerging markets, the company will be able to navigate rather efficiently
through the difficult economic times. We believe, the company can expand their product
portfolio in India by introducing its Pizza brand DiGiorno, skinny cow range of snacks and
peelable ice cream (with Haagen-Dazs already introduced).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Nestle Global’s revenue declined 7.2% to CHF42.6bn in H2CY11; results are
not strictly comparable as CY10 numbers include contribution from Alcon
business. However, excluding Alcon, revenue decline was restricted to 4.7%.
For H2CY11, organic growth stood at 7.5% (H1CY11: 7.5%). The company’s
trading operating margin improved 20bps YoY for H2CY11 to 14.8% (up
90bps YoY in constant currency on continuing businesses) despite severe
cost pressure and intensified competition aided by price hike (CY11 price
hike of 3.6%). Emerging markets sustained robust performance, posting
13.3% growth YoY against 4.3% YoY growth in developed markets. To drive
growth, the company is looking to exploit the Chinese market, for which it
has established two new partnerships.
Good growth across zones
In CY11, America posted 6.2% organic growth led by double digit in LatAm with Mexican
market being a key highlight; margin declined 30bps YoY. European business grew 4%
organically, clocking sales of CHF15.2bn; margin improved230bps YoY driven by growth in
Western Europe, price hikes and efficiencies. Led by strong performance in emerging
markets, the Asia, Oceanic and Africa business (AOA) posted 11.9% organic growth with
sales of CHF15.3bn; operating margin improved 90bps YoY to 18.9% primarily due to
innovation, renovation and investments in distribution, manufacturing and procurement.
Emerging markets fuel growth
Focus of the company on emerging markets is evident with Nestle investing 50% of total
capex (CHF4.8bn) in these markets which contribute 41% of sales (post Chinese
partnership). The company intends to attain 50% of its sale from emerging markets by
2020. It has been scaling up in categories where it has good market share and higher
returns and at the same time building capabilities for new categories, further enhancing
returns in the future. 13.3% organic growth in emerging markets in CY11 (Nestle India
sales growth: 19.8%) stands out in comparison with the company’s 7.5% blended growth.
Outlook: Challenging
CY12 is likely to be a tough year due to economic uncertainties and the company expects
to deliver organic growth of 5-6% in CY12. However, we believe due to the diversified
nature of its products, the strong global distribution network and continued investments
in high growth emerging markets, the company will be able to navigate rather efficiently
through the difficult economic times. We believe, the company can expand their product
portfolio in India by introducing its Pizza brand DiGiorno, skinny cow range of snacks and
peelable ice cream (with Haagen-Dazs already introduced).
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