At the Barclays 19th Annual Global Consumer Conference, Nestlé Chief Financial Officer Anna Manz said the company's growth reset is gaining pace. Real internal growth, or RIG, improved from 1.2% in the first quarter of 2024 to 1.8% in the second quarter, with sequential tracking around 1.5%. Manz described RIG as a specialist subject and a huge priority, saying growth drives margin, cash and overall performance. Nestlé's long-term ambition is a steady-state RIG above 2% and consistently more than 4% organic growth.
Category performance was mixed but improving. Coffee and pet categories posted RIG above 2% in the second quarter, with high single-digit volume growth for Nespresso and Nescafé. Confectionery, food and snacks were running near the 2% level. About 30% of the business sits in subcategories that grew more than 7% in the first half, and management is targeting an expansion toward 40% to 50% over time. Wet cat food grew about 7%, while the broader cat category grew 2% to 3%. In China, category value declined 2% to 3%, although the market accounts for about 5% of sales. Six to seven markets in the 2% to 4% sales range are contributing consistently, including Brazil, Mexico, Central and West Africa, the Philippines and Malaysia.
North America, which accounts for 35% of Nestlé's revenue, produced essentially flat RIG in the second quarter. Management characterized the performance as not acceptable, citing weak category growth in frozen food, execution gaps in Gerber and creamers, and temporary retailer inventory phasing. On the U.S. consumer, Manz said the consumer is weak in North America but has not deteriorated and remains consistent.
Portfolio simplification and transaction work remain a constraint. Active transaction work tied to the Waters and VMS closures is tied up in about 6% of sales, which Manz described as frankly about the limit before distracting the core business.
Cost discipline and margin protection were central to the update. First-half 2024 cost savings reached CHF 600 million against a full-year target of CHF 2 billion. Manz said underlying trading operating profit, or UTOP, margins are expected to stay above 17% through the cycle, describing the level as a floor rather than a ceiling. Second-half 2024 UTOP margins are expected to be broadly similar to the first half. Media investment has been reduced from 400 brands to 120, and non-working media has fallen from the high 20% range to below 20%.
Market data in the article showed Nestlé shares at 24.50 CAD, up 0.82, or 3.46%, with a market capitalization of $249.5 billion. Trailing-twelve-month revenue was $109.9 billion, gross profit margin was 45.7%, and the price-to-earnings ratio was 28.13. The dividend yield was 2.56%, with the company having raised its dividend for 30 consecutive years and a history of M&A transactions over the past 10 years. InvestingPro's financial health score was 2.41 out of 5, labeled fair, with a profitability score of 3.83 and a growth prospects score of 1.58.
