Nestle struggles amid weak China market
Image: AFP
Nestle said on Tuesday its net profit fell in the first half of the year as the Swiss food giant behind Nespresso coffee capsules and KitKat chocolate bars struggles to turn around its fortunes amid sluggish consumer spending in China.
The company whose brands also include Purina dog food, Maggi bouillon cubes, Gerber baby food and Nesquik chocolate-flavoured drinks, reported a 10.3% drop in first half profits to 5.1 billion Swiss francs (R113 billion).
Sales, however, only dipped by 1.8 percent to 44.2 billion francs, which was due in large part to passing on higher cocoa and coffee prices to consumers, although faced even greater headwinds from the strong Swiss currency.
"We are also taking decisive measures to strengthen our business in Greater China," said chief executive Laurent Freixe.
The company said China, which has suffered sluggish domestic consumption amid a deflationary price environment, had a 0.7 percentage point impact on organic growth in the second quarter.
Overall, the company reported 2.9% quarterly organic growth, which strips out currency effects and other elements to measure performance.
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Nestle warned China would continue to weigh on growth as it invested to turn around its performance.
Nestle's shares fell 3.5% in a Swiss market that was flat overall, as the sales figures missed the analyst consensus calculated by Swiss financial news agency AWP. Net profit came in slightly higher than expected.
Nestle made a surprise switch of its chief executive last year amid soft spending by consumers for food and household goods.
Nestle's share price slumped by nearly a quarter last year, raising concerns in Switzerland, where pension funds invest heavily in the company.
The company launched a number of measures to boost its product offering and cut costs.
That was reflected in better organic growth in the second quarter compared to the same period last year, and Nestle said that it was expected to continue for the rest of the year.
Nestle said it was maintaining its 2025 guidance "despite factoring in increased headwinds".
It aims for an underlying trading operating profit margin of at least 16% this year, compared to 17.2% in 2024. It came in at 16.5% in the first half of the year.
AFP
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