Nestle battles declining China demand
Nestlé’s Half‑Year Highlights – A Snapshot of Gains and Challenges
Nestlé, the Swiss global food producer, reported a 10.3 % decline in first‑half net profit, totaling 5.1 billion Swiss francs ($6.4 billion). Sales dropped only 1.8 % to 44.2 billion francs, largely because the company passed higher cocoa and coffee prices to consumers while contending with a strong Swiss currency.
Financial Performance – What the Numbers Tell Us
- Net profit fell 10.3 % to 5.1 billion francs.
- Sales dipped 1.8 % to 44.2 billion francs.
- Quarterly organic growth was 2.9 % – a measure that strips out currency effects.
- Underlying trading operating profit margin reached 16.5 % in the first half.
Strategic Measures – Steps to Strengthen the Business
- CEO Laurent Freixe announced decisive actions to reinforce greater China operations.
- China’s organic growth impact was 0.7 percentage points in Q2, reflecting sluggish domestic consumption amid a deflationary price environment.
- Nestlé launched product‑offering enhancements and cost‑cutting initiatives to boost operating performance.
Market Outlook – Anticipated Impact on Growth
- China is expected to continue weighing on growth as Nestlé invests to turn around performance.
- Despite increased headwinds, the company maintained its 2025 guidance, aiming for an underlying trading operating profit margin of at least 16 % this year.
- Positive organic growth in Q2 is projected to carry forward for the remainder of the year.
Shareholder Impact – Investor Response to the Results
- Nestlé’s shares fell 3.5 % in a flat Swiss market, missing analyst consensus on sales while net profit exceeded expectations slightly.
- The company’s share price slumped nearly a quarter last year, raising concerns among pension funds heavily invested in the company.
- Investors are watching the company’s performance as it navigates soft consumer spending for food and household goods.
