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Swiss food giant Nestlé (NESN) has reported it is on course to hit full year growth targets after reporting organic growth of 2.8% in the first half.

The world’s largest food group reported real income growth of 2.5% - a figure it claims remained a the high end of the food and beverage industry – while pricing contributed 0.3%, reflecting a “challenging” environment in Europe and lower inflation in some emerging markets.

Nestlé said all categories reported positive growth in the period, led by coffee, petcare, and Nestlé Health Science. Infant nutrition sales growth accelerated, with a broad-based improvement across all geographies, helped by recent product launches.

Total sales increased by 2.3% to CHF43.9bn, with acquisitions and divestments having a net neutral impact on top-line growth as the acquisition of Atrium Innovations and other deals was offset by divestments, mainly U.S. confectio

Foreign exchange had a negative impact of 0.5%.

Underlying trading operating profit increased by 3.5% to CHF 7.1bn, with underlying trading operating profit margin increasing by 20 basis points in constant currency, and by 20 basis points on a reported basis to 16.1%.

Margin expansion was supported by operational efficiencies and ongoing restructuring initiatives. These cost savings were partially offset by higher commodity and packaging costs of CHF90m and an increase in distribution costs.

The underlying trading operating profit margin is expected to improve further in the second half of the year, driven by further benefits from efficiency programs and more favorable commodity prices.

Restructuring expenditure and net other trading items increased by CHF323 million to CHF672 million. As a consequence, trading operating profit decreased by 1.3% to CHF6.4bn and the trading operating profit margin decreased by 50 basis points on a reported basis to 14.6%.

Nestlé continued to reshape its portfolio in the period, announcing in May and agreement to acquire the rights to market Starbucks consumer and foodservice products globally, outside of Starbucks coffee shop, which will close at the end of August 2018.

It added that the process of exploring strategic options for its Gerber Life Insurance business is on track with completion expected in 2018.

Organic growth was 1.0%, driven entirely by RIG with flat pricing. Net divestments reduced sales by 1.0%, largely related to the divestment of the U.S. confectionery business. Foreign exchange had a negative impact on sales of 3.6%. Reported sales in Zone AMS decreased by 3.6% to CHF 14.2 billion.

In the Americas growth increased to 2.5%, with real income growth at 3.1% following an acceleration in the second quarter more than offseting negative pricing.

EMENA saw positive growth across most geographies and categories, with organic sales up 2.5% driven by 3.1% real income growth and a 0.6% pricing headwind. Petcare, coffee and nutrition were the main contributors. Petcare maintained strong momentum, based on the success of Felix in Russia. Coffee also saw good growth with stronger RIG, supported by the relaunch of Nescafé Gold.

Asia, Oceania and sub-Saharan Africa grew 4.4% organically and Nestlé Waters was up 1%, driven by a pricing increase of 1.7%.

The group confirmed its full year guidance, with organic sales growth expected to grow by 3%. Underlying trading operating profit margin will continue to improve in line with its 2020 target and restructuring costs are expected at around CHF 700m for the year.

Mark Schneider, Nestlé CEO said: “Our first half results confirmed that our strategic initiatives and rigorous execution are clearly paying off. Nestlé has maintained the encouraging organic revenue growth momentum we saw at the beginning of the year. In particular, the United States and China markets showed a meaningful improvement. We were also pleased by the enhanced organic growth in our core infant nutrition category.

Our margin development is fully consistent with our 2020 target. We are creating value by pursuing growth and profitability in a balanced manner. In line with this approach, we have accelerated our product innovation efforts to drive future growth and initiated significant cost reduction efforts, in particular in Zone EMENA and at our Corporate Center.

As we look towards the second half of 2018, we expect further improvement in our organic revenue growth. Margin improvement is expected to accelerate with further benefits from our efficiency programs and more favorable commodity pricing.”

Morning update

The world’s largest brewer AB InBev (ABI) has reported second quarter revenue growth of 4.7% largely driven by pricing as volumes grew by just 0.8% in the quarter.

Total revenues grew by 4.7% in the quarter to US$14.2bn, with revenue per hectolitre (hl) growth of 4.0%. On a constant geographic basis, revenue per hl grew by 4.5% driven by revenue management initiatives as well as continued strong premium brand performances.

Total volumes grew 0.8%, while own beer volumes grew by 0.9% and non-beer volumes were up by 0.5%.

ABI said good growth in own beer volumes was achieved in Mexico and China, partially offset by the US as well as South Africa, which cycled a particularly demanding comparable.

Combined revenues of its three key global brands, Budweiser, Stella Artois and Corona, accelerated their growth this quarter, up by 10.1% globally and by 16.7% outside of their home markets.

For the first half revenue grew by 4.7% with revenue per hl growth of 4.5%.

Total volumes were up 0.3% in the half year period with own beer volumes up 0.7% and non-beer volumes down 3.4%. . Combined revenues of global brands were up 9.1% in the first half and by 14.6% outside of their home markets.

EBITDA grew by 7.0% in the quarter with margin expansion of 85 bps to 39.7% as a result of topline growth and aided by synergies and cost savings, partially offset by increased sales and marketing investments associated with the 2018 FIFA World Cup Russia.

In the first half EBITDA grew by 6.8% and EBITDA margin expanded by 78 bps to 39.0%.

Normalized profit attributable to equity holders of AB InBev was US$2.16bn in the quarter compared to US$1.87bn in the same period in 2017.

It added that its integration with SABMiller is “progressing well, with synergies and cost savings of US$199m captured in the quarter.

It is also simplifying its geographic structure to shift from nine to six management zones and has announced this morning a raft of management role changes to reflect to reorganisation.

Global spirits group Diageo (DGE) has posted its 2018 preliminary results for the year ended 30 June, showing a modest 0.9% rise in reported net sales to £12.2bn.

However, it posted organic sales growth of 5%, driven by organic volume growth of 2.5% and 2.5% of positive price/mix.

This organic growth was largely offset by the negative impact of exchange rates.

Operating profits were up 3.7% to £3.7bn with organic operating profit up 7.6% amid an improvement in organic operating margins by 78 basis points as higher marketing investment was more than offset by efficiencies from its productivity programme

On 26 July the Board approved a share buyback programme to return up to £2bn to shareholders during the year ending 30 June 2019

Diageo will pay a final dividend increase of 5% bringing the full year dividend to 65.3 pence per share

Ivan Menezes, Chief Executive, commenting on the results said: “Diageo has delivered another year of strong, consistent performance. Organic volume and net sales growth is broad based across regions and categories. We have expanded organic operating margin while increasing investment behind our brands ahead of organic net sales growth.

“These results reflect the high performance culture we have created in Diageo, the ongoing rigorous execution of our strategy, our focus on the consumer and our ability to move swiftly on trends and insights.

“The changes we have made in the business and the shifts in culture we continue to drive, ensure we are well placed to capture opportunities and deliver sustained growth. Our financial performance expectations are unchanged and we expect to continue to invest in the business to deliver our mid-term guidance of consistent mid-single digit organic net sales growth and 175bps of organic operating margin expansion for the three years ending 30 June 2019.”

British American Tobacco (BATS) has reported a 56% rise in first half sales to £11.6bn, driven by its acquisition of Reynolds American.

However, organic cigarette and tobacco heating products (THP) volume fell 2.2% to 348bn in the period, though this outperformed the industry which is estimated to be down 3-4% in the first half of 2018.

Cigarettes and tobacco heating product market share in key markets increased by 40 bps driven by strategic cigarette and THP volume growth of 11.7%.

Adjusted revenue, at constant rates, increased by 1.9%, driven by a stronger price mix, including 4% price/mix growth on cigarettes and THP, which is expected to strengthen in the second half of the year.

Adjusted revenue would have grown by 2.6% on a representative, constant currency basis, excluding an estimated £89 million of revenue recognised by Reynolds American in the first six months of 2017.

Adjusted profit from operations grew 2.4% at constant rates as the adjusted revenue growth was partly offset by increased investment in NPD.

Headline profit from operations was up 72.4% to £4.4bn, while operating margin increased 340 bps to 38.1%.

Chief executive Nicandro Durante commented: “Our strategy is to continue to grow our combustible business while investing in the exciting potentially reduced risk categories of THP, vapour and oral. As the Group expands its portfolio in these categories, we will continue to drive sustainable growth.

“In the first six months of 2018, the Group continued to perform well. The performance of Reynolds American Inc. (RAI) since acquisition is encouraging and the Group’s diverse NGP portfolio has grown strongly. The foreign exchange impact on the Group’s results was a headwind of 8% for the first six months of the year and is estimated to be 5-6% for the full year, based upon the current foreign exchange rates.

“Despite the recent slowdown in the THP category in some markets, including Japan and South Korea, we remain confident of exceeding £1 billion of reported revenue in NGP in 2018 as we expect a range of new launches to re-energise growth in THP in the second half of the year. We anticipate another good year of adjusted earnings growth at constant rates of exchange”.

PayPoint(PAY) has issued a first quarter trading update, detailing that group net revenue reduced by £0.7m from £28.4 million to £27.7m in the period reflecting the closure of Simple Payment Service (SPS) by the Department for Works and Pensions and the second-year impact of reduced Yodel parcel fees and the implementation of IFRS 15 accounting measures.

These factors had a combined impact of £1.4 million on net revenue in the first quarter.

However, transactions increased to 155.6 million, an increase of 3.6% from 150.3 million achieved in Q1 last year. The strong increase of 8.4 million (43.9%) transactions in Romania was partially offset by the expected lower transaction volume in the UK of 3.1 million (2.4%).

In the UK and Ireland like-for-like retail services net revenue was up 3.3% driven by service fees which increased 46.1% to £2.3m.

Card payment transactions grew by 13.8% to 27.4 million

Chief exec Dominic Taylor commented: “I am pleased with PayPoint’s performance in the first quarter with further progress made in executing our strategic priorities.

“In parcels we have now added eBay as a partner to our Collect+ network which we anticipate will drive higher parcel volumes, helping to drive further footfall and commissions for our retailers. We also continue to make good progress in embedding PayPoint at the heart of convenience retail, with PayPoint One now in 9,260 sites, of which 292 are taking our EPoS Pro solution.

“In the UK, we have implemented several improvements to enhance our retailers’ experience when working with us, including a new interactive voice response technology.

However, he also added that the group experienced a “technical incident” on Saturday 21 July 2018 that impacted, at peak, approximately one-third of its retail terminal estate. “During this period, customers were able to undertake services at alternative local sites during the day as we were able to continue to provide coverage across our network to 98% of households.

“We fully restored services during the course of the day and are confident that it was a one-off, isolated incident and we are sorry for any inconvenience that the outage caused to our retailers and their customers during the affected time.”

On the markets this morning, the FTSE 100 has edged up 0.1% to 7,666pts.

British American Tobacco has jumped 5.1% to 4,173.5p on this morning’s news, Diageo is down 0.6% to 2,830.5p and Paypoint is up 1% to 950p.

ABInBev has sunk 5.23% to €86.18 so far this morning, while Nestle is up 1.9% to CHF81.42.

Other risers include McColl’s (MCLS), up 2.2% to 173.7p, Hilton Food Group (HFG), up 1.7% to 972p and Imperial Brands (IMB), up 1.4% to 2,875.5p.

Fallers include Nichols (NICL), down 4.4% to 1,430p, Compass Group (CPG), down 2% to 1,610p and Ocado (OCDO), down 1.1%to 1,134p.

Yesterday in the City

The FTSE 100 slid back 0.7% - over 50pts – to 7,658.3pts yesterday ahead of the trade meeting between US President Donald Trump and EU President Jean-Claude Juncker.

It was a tough day for the brewers, despite Marston’s (MARS) reporting yesterday its summer sales had been boosted by the warm weather and the World Cup.

Marstons was down 3.4% to 94.6p, Green King (GNK) fell back 2.2% to 518.2p and Mitchells & Butlers (MAB) lost 1% to 254p.

Other fallers included McColl’s (MCLS), down 3.4% to 170p as its tough week continues after Monday’s downbeat trading statement, Devro (DVO), down 2.7% to 192.2p, Majestic WINE (WINE), down 1.3% to 454p, McBride (MCB), down 1.1% to 141.2p and SSP Group (SSPG), down 1% to 678.1p.

There were some notable risers though, led by B&M European Value Retail (BME), which was up 3.5% to 425.4p.

PZ Cussons (PZC) rose 2.8% to 222p after its trading update on Tuesday, while Britvic (BVIC) also rose 2.5% to 834.5p after its shares were hammered on Tuesday after its own trading update on the impact of the CO2 shortage on its recent trading.

Other risers included Greencore (GNC), up 1.9% to 178.5p and Ocado (OCDO), up another 1% to 1,146p.