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Panic buying in March has helped Nestlé to a stronger-than-expected start to the year as consumers turned to trusted brands during the coronavirus outbreak.

The Swiss giant’s petcare, dairy, coffee and vegetarian and plant-based brands all registered strong growth in the first half.

Organic growth reached 2.8% and margins expanded as reduced promotions and lower costs more than offset Covid-19 related charges and commodity inflation.

Purina PetCare was the star performer for Nestlé in the half, with newly acquired Lily’s Kitchen also performing well, as did coffee brands Nescafe and Starbucks. Digital sales also boomed – with growth of 48.9% – to account for 12.4% of total group sales.

However, Nestlé said growth slowed in the second quarter as shoppers worked through the extra food stockpiled. Sales of its water and confectionery brands also declined as a result of a drop in on-the-go snacking and impulse buying.

While retail sales significantly accelerated, out-of-home channels posted negative growth, with significant sales declines for Nestlé Professional and Nespresso boutiques.

CEO Mark Schneider said: “Nestlé has remained resilient in a rapidly changing environment, delivering solid organic growth and improved margins in the first half.

“These results demonstrate the agility of our business and the strength of our diversified portfolio across geographies, product categories and channels. With consumer behaviour evolving faster than ever, we are adapting to this new reality by strengthening our innovation, leveraging our digital capabilities and executing with speed.”

Overall, first-half revenues fell by 9.5% to CHF 41.2bn (£34.8bn) after the sale of the skin health and US ice cream businesses, as well as adverse currency fluctuations on the back of a stronger Swiss franc.

Nestlé recorded a 5.3% increase in organic sales across the Americas and a 2.4% rise in its Europe, Middle East and North Africa zone, but a double-digit decline in China saw a 2.2% drop in organic growth in the Asia, Oceania and sub-Saharan Africa zone.

Organic growth was 4.1% in developed markets and 1.1% in emerging markets.

Underlying trading operating profit margin increased 30 basis points to 17.4%, but profits decreased by 7.9% to CHF 7.2bn (£6.1bn) after restructuring expenses and other costs.

In the first half, Covid-19 related costs were CHF 290m (£245m), including expenses for bonuses paid to frontline workers, employee safety measures, donations and other staff and customer allowances. In addition, the group absorbed costs of CHF 120m (£101m) related to staff and facilities closed down due to lockdown measures.

Nestlé said the exact financial impact of Covid-19 for the full year remained difficult to quantify and would depend on the duration and economic consequences of the crisis, as well as the speed of recovery in the out-of-home channel.

The group added, however, it expected organic sales growth for the year of between 2% and 3%.

“Covid-19 continues to impact people around the world,” Schneider said. “We stand with all those affected and are committed to helping where we can. I would like to thank every member of the Nestlé team for their dedication and hard work in the face of incredible challenges.

“Our priorities remain the same: keeping our people safe, assuring continued supply of essential food and beverages to consumers and caring for our communities and business partners through financial and in-kind support.”

Nestlé has opened down 0.5% to CHF110.16 on the news.

Morning update

Revenues slumped 17.7% to $10.3bn (£7.9bn) at brewing giant AB InBev as the shutdown of the world’s bars and restaurants led to double-digit volume declines in the second quarter.

Combined sales of the Budweiser, Stella Artois and Corona brands fell 16.6% globally and by 12.6% outside of their respective home markets as a result of the Covid-19 pandemic – with a 14.1% and 14.9% decline for the first half respectively.

Total volumes fell by 17.1% in the three months to the end of June, with own beer volumes down by 17.2% and non-beer volumes down by 15.5%.

The dramatic slump led to a 34.4% fall in EBITDA at the group to $3.4bn (£2.6bn).

However, business started to recover in June, with volumes growing by 0.7%, compared with a 32.4% slump in April and a 21.4% fall in May. ABI said it demonstrated the resilience of the global beer category.

“The first half of this year has tested all of us in many ways,” the group added in the second quarter statement.

“We are inspired by the resilience of our people, our business and the global beer category. Our company is well-positioned for a strong recovery. We have a diverse geographic footprint with exposure to high-growth regions.

“A clear commercial strategy gives us the tools to lead and grow the global beer category and scale best practices across markets. Our portfolio of the world’s most valuable beer brands enables us to reach more consumers on more occasions. Our profitability is industry-leading, allowing us to weather even extreme volatility.

”Investments in capabilities such as B2B sales, e-commerce and digital marketing put us in an advantaged position to capture growth from these accelerating trends. Most importantly, we have a culture of ownership and a long-term mindset. Our people are rising to the challenge each day, demonstrating ingenuity, passion and strength to keep us moving forward. We are privileged to lead the global beer category, a category that has existed for centuries through many crises and will continue to thrive long after the current crisis is behind us.”

French consumer giant Danone has posted net sales of €12.2bn in the first half of its financial year, down by -1.1% on a like-for-like basis and -3.6% on a reported basis

It said solid momentum in first quarter was derailed by the second quarter hit by global lockdown with sales down 5.7% on a LFL basis

It said the second quarter saw the reversal of pantry loading behaviors observed in the first quarter and the full impact of out-of-home closure in the quarter.

The group saw polarized performance across categories and channels, with resilience in Essential Dairy and Plant-based and Specialized Nutrition growing at 3% LFL in first half, but Waters seeing a 19% plunge in like for like sales.

Europe and North America posted stable sales (up 0.5%) in the first semester, but down by -3.5% in the second quarter after a strong start of the year.

North America, the region where the company has the largest footprint, continued to see solid momentum in Q2 while sales in Europe declined, mirroring the reversal of pantry loading that occurred in the month of March and lower sales normally consumed away from home in Waters.

In Rest of the World, while trends in CIS and China were broadly in line with the previous quarter, revenues declined severely in other key regions as the impact of the COVID-19 pandemic become felt notably in Latin America, Indonesia and Africa.

Recurring operating margin contracted to 14.0% from 14.7% in the prior year as Danone’s continued focus on efficiency allowed it to partly offset the effect from COVID-19 while sustaining brand investment.

Commenting on “one of the toughest quarters in Danone’s history”, CEO Emmanuel Faber sad: “Our second quarter began as the scale of the COVID-19 pandemic started to take hold globally, with roughly half of the world’s population living under lockdown.

“While it remains difficult to predict exactly how consumer habits and macroeconomic conditions will evolve for the balance of this year, in particular given the uncertainty around the easing of lockdown measures, we’re confident that Q2 was the most challenging quarter of the year and the back half of the year will show a sequential improvement in growth.

“As we adapt to the new COVID world, our compass remains to deliver superior sustainable profitable growth and to lead the way in creating and sharing sustainable value in a world where concerns about society, health and the planet are core to our business.”

Catering giant Compass Group posted a 44% plunge in third quarter revenues amid global coronavirus lockdowns and the shuttering of offices and businesses.

It said that during a quarter when lockdown measures were at their most severe in our major markets, the steps taken to contain the spread of the virus impacted its sectors in different ways.

Performance in Healthcare and Defence, Offshore & Remote showed good performance. However, Education and Business & Industry sectors were mostly closed in April and May, and started to cautiously reopen in June, while Sports & Leisure remained fully shut.

By the end of June, about 60% of its business was open, compared to 55% by the end of May.

Group organic revenue declined by 44% in the third quarter and by 14% for the nine months to 30 June 2020.

Its operating margin improved within the quarter, and the drop through improved further to 20% in June. As a result, the Group’s operating margin was down 6.3% in the third quarter and up by 3.9% for the nine months to 30 June 2020

Compass said the pace in which its volumes recover is still unclear, especially given a possible increase in local lockdowns. It said it is encouraged by the relative improvement in performance in June, as well as the early signs of an acceleration in first time outsourcing opportunities.

“In the meantime, we continue to work with our clients to help them reopen safely. We are proactively managing the business, reducing our costs, rebuilding our margins and investing to strengthen our competitive advantages,” it stated.

CEO Dominic Blakemore commented: “Trading has been challenging, but we continue to manage the business to protect the interests of all our stakeholders, including our people and the communities in which we operate.

“We are working with our clients to help them reopen and bring their teams back safely. We are also seeing encouraging signs of an acceleration in first-time outsourcing opportunities. Our focus on operational execution, our scale, and our strengthened balance sheet will enable us to succeed in this new environment and further consolidate our position as the industry leader in food services.”

French grocery player Groupe Casino saw a 10.4% jump in like for like sales in the second quarter due to strong demand in its core markets.

In the second quarter of 2020, consolidated net sales came to €7,846m, down 7.5% in total largely due to a 13.1% negative currency effect and a 2.9% drop in fuel sales.

On a same-store basis, consolidated net sales rose by +10.4%, driven by strong demand in France and Latin America, in an environment shaped by the unprecedented health crisis.

In France, total sales were impacted by a downturn in fuel sales (-€157m or -4.1pts) and by the impact of the Rocade plan on hypermarkets and supermarkets. Same-store growth for the quarter came to 6%, led by double-digit growth in urban and convenience formats (Franprix, supermarkets and convenience stores) and triple-digit growth in food E-commerce.

Monoprix posted a sharp increase in food sales (up 7.6% on a same-store basis) and enjoyed renewed momentum in non-food sales from mid-May.

In Latin America, sales rose by 12.5% on a same-store basis and by 17.3% on an organic basis.

Consolidated net sales amounted to €16,140m in the first half of 2020, representing a fall of 4.2% in total and an increase of 9.4% on an organic basis and by 8.4% on a same-store basis.

Consolidated EBITDA for the first half of the year up 4% and EBITDA margin in France up 9bps despite the additional costs of the pandemic, thanks to strengthened cost-saving plans.

On the markets this morning, the FTSE 100 has opened down 0.8% to 6,085.1pts.

Fallers include CCEP, down 3.8% to €33.95, Greggs, down 3.7% to 1,276.6p and McBride, down 2.9% to 58.3p.

Early climbers include Bakkavor, up 5.9% to 69.9p, Naked Wines, up 1.8% to 433.5p and Finsbury Food Group, up 1.7% to 61p.

Yesterday in the City

The FTSE 100 ended the day flat at 6,131.5pts.

Premier Foods rose a further 4.7% back to 90p on the big of strong first quarter sales driven by a spike in demand for its UK branded grocery products.

Devro jumped 11.9% to 160.2p on the released of its first half results.

Other risers included Glanbia, up 3.2% to €10.84, Pets at Home, up 3% to 251.4p, Majestic Wine, up 2.4% to 426p and Associated British Foods, up 2.3% to 1,873.5p.

The day’s fallers included Greggs, down a further 3.1% to 1,326p after posting a first half loss on Tuesday, Bakkavor, down 2.9% to 66p, Imperial Brands, down 1.8% to 1,385.5p and Domino’s Pizza Group, down 1.7% to 319.6p.