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Nestlé has posted third quarter organic growth of 4.9%, driven by strong demand for petfood as well as at-home coffee consumption and dairy.
The strong third quarter growth has raised Nestlé’s nine month organic growth to 3.5%, consisting of 3.3% volume growth and 0.2% price.
By product category, the largest contributor to growth was Purina PetCare and its science-based and premium brands Purina Pro Plan, Purina ONE and Felix.
Dairy grew at a high single-digit rate, based on increased demand for fortified milks and home-baking products.
Coffee posted mid single-digit growth, fuelled by strong consumer demand for Starbucks products, Nespresso and Nescafé.
Prepared dishes and cooking aids reached mid single-digit growth, while vegetarian and plant-based food products delivered strong double-digit growth, supported by new product launches and continued distribution expansion.
E-commerce sales in particular grew by 47.6%, reaching 12.3% of total group sales, with coffee, Purina PetCare and Nutrition & Health Science the main online growth contributors.
Nestlé posted organic growth of 3.9% in developed market, based based on sustained momentum in the Americas and continued robust sales development in EMENA.
Growth in emerging markets improved to 2.8%, supported by both volume growth and pricing.
On a headline basis, total reported sales decreased by 9.4% to CHF 61.9bn as divestitures decreased sales by 5.5%, related to the divestment of Nestlé Skin Health and the U.S. ice cream business, and foreign exchange reduced sales by 7.4%.
Mark Schneider, Nestlé CEO, commented: “Nestlé has remained resilient in a difficult and volatile environment. Our people have acted in a responsible and prompt manner to mitigate the impact of the global pandemic and have adapted quickly to evolving consumer needs. Strong organic growth was broad based and supported by sustained momentum in the Americas, Purina PetCare and Nestlé Health Science, as well as the acceleration of our coffee business in the third quarter.
“We continue to develop our portfolio with speed and discipline. As an example, we are transforming Nestlé Health Science into a nutrition and health powerhouse through a combination of strong organic growth and targeted acquisitions. The recent additions of Zenpep, Vital Proteins and Aimmune Therapeutics are further steps in the expansion of our nutritional health offerings.”
The group’s shares were up 0.7% to CHF108.14 in early trading.
Morning update
Beer, cider and wine producer and distributer C&C Group fell to a first half operating loss amid a 55% plunge in revenues as the lockdown and shuttering of pubs hit trading.
In the six months to 31 August, net revenue declined 55.4% to €386.7m, which resulting in an operating loss of €11.7m.
It posted revenue growth of 15.6% in off-trade compared to prior year, but on-trade sales were severely affected by the coronavirus lockdown.
Net revenue for the GB division decreased 37.4% to €103.9m in the period driven by the closure of the on-trade and volume moving into the lower margin off-trade channel. As a result, operating profit has reduced by €18.2m to €6.2m.
Ireland was down 24.6% year-on-year driven by volume decline in the on-trade, which has resulted in an operating profit of €1.6m down from €25.7m last year.
Its distribution arm Matthew Clark and Bibendum saw net revenue plunge 68% principally driven by reduced volume from the impact of COVID-19 on the on-trade restrictions, resulting in an operating loss of €19.5m.
The group also took £6.8m of exceptional charges during the period to reflect financing costs relating to COVID-19 covenant waivers, operational costs incurred relating to uplifting stock from customers and our share of Admiral Taverns’ exceptional COVID-19 provisions.
However, C&C said it profitability in July and August, albeit the near term outlook for the on-trade sector remains challenging and uncertain, with the key Christmas trading period likely to be impacted by continuing restrictions across the hospitality industry.
Interim executive chairman Stewart Gilliland commented: “Driven by strong demand in the off-trade and the gradual reopening of the on-trade in our core markets, the business returned to profit generation in July through to September.
“The outbreak of COVID-19 coincided with our financial year end and has meant that the entire six month performance being reported today, was impacted. Although we expect the pace of recovery will continue to vary, as the largest independent alcohol distributor across the UK and Ireland, our business is structurally integral to the markets we serve.
“Our near term focus is securing our position and enhancing the performance of the business, while positioning C&C to deliver for customers and shareholders over the long term.”
Elsewhere, PayPoint has announced that it has signed an agreement to sell its Romanian business, PayPoint Services and PayZone (PayPoint Romania) to Innova Capital.
The cash consideration is expected to be circa £47m based on current exchange rates on a debt free cash free basis, subject to a net working capital adjustment on completion.
PayPoint said the sale is consistent its focus on its key strategic priorities and the delivery of enhanced growth and value in its core UK markets, which is where the net proceeds will be invested.
PayPoint has been operating in Romania since 2007, where it has partnered with local retailers through circa 19,000 sites to enable people to make cash bill payments, money transfers, road tax payments and mobile phone top-ups.
In the financial year ended 31 March 2020, PayPoint Romania delivered gross revenue of £69.7m, adjusted EBITDA (before non-recurring revenues and costs) of £7.3m and a profit before tax of £6.8m.
The sale is expected to take place on 31 March 2021 subject to regulatory and competition approvals.
CEO Nick Wiles commented: “The Romanian business has been part of the Group for 13 years and I would like to thank the Romanian management team and employees for their contribution to PayPoint over this time.
“We have decided to sell the Romanian business to focus on our core U.K. markets and the delivery of our strategic priorities for future growth in these markets. We believe that Innova is the right owner to take the business forward and we wish PayPoint Romania and Innova well for the future.”
On the markets this morning, the FTSE 100 is down 0.8% to 5,844.3pts so far today.
Risers include Stock Spirits, up 3.7% to 235.5p, Nichols, up 2.4% to 1,101p and Bakkavor, up 2.2% to 63.3p.
Fallers include Hotel Chocolat, down 2.7% to 350.2p, FeverTree, down 2.2% to 2,163.5p and Coca-Cola HBC, down 2% to 1,931p.
Yesterday in the City
The FTSE 100 ended the day edging up 0.1% to 5,889.2pts.
Britvic jumped 6.4% to 978.5p after it announced has reached an agreement with PepsiCo for a new and exclusive 20-year franchise bottling deal.
Other risers included a number of food to go operators, with companies on the up including Greencore, up 5.1% to 98p, Devro, up 4.7% to 165p, WH Smith, up 4.1% to 984.5p, SSP Group up 3.2% to 186.2p and FeverTree, up 2.9% to 2,213p.
The day’s fallers included PayPoint, down 3.4% to 517p, Applegreen, down 3.3% to 295p, Coca-Cola European Partners, down 2.9% to €32.45, McBride, down 2% to 60.4p and Just Eat Takeaway.com, down 1.7% to 9,750p.
Reckitt Benckiser ended the day down 0.2% to 7,192 after reporting its third quarter sales numbers yesterday.
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