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Nestlé share loses: Nestlé margin better than expected - but high costs are a burden

$NESN (-0,43 %)


Nestlé continued to grow in the first half of 2025 - but high costs are putting some pressure on profitability.


Business in China also weakened. The food giant is sticking to its margin targets for the year as a whole.


Sales for the period from January to June amounted to 44.2 billion Swiss francs - around 1.8 percent less than in the same period last year. This is primarily due to negative currency effects caused by the strong Swiss franc.


Organic growth - i.e. adjusted for currency and portfolio effects - accelerated slightly to 2.9% compared to 2.8% in the first quarter. This growth stems almost exclusively from price increases, for example for Nespresso and Kitkat.


Volume growth (RIG), on the other hand, slumped to 0.2 percent from 0.7 percent in the first quarter. In the second quarter, growth was negative at 0.4 percent. Weak demand in the USA had a negative impact. In North America, Nestlés the most important market with a 35% share of sales, tariffs and uncertainties weighed on consumption.


Operating profit fell by around 7.1 percent to CHF 7.29 billion (previous year: CHF 7.84 billion). The corresponding margin fell from 17.4 percent to 16.5 percent. High raw material prices for coffee and cocoa, increased marketing expenditure and unfavorable currency effects put pressure on margins. Net profit also slumped by 10.3 percent to 5.07 billion Swiss francs.


Nestlé is sticking to its targets for the year as a whole. The figures of the largest food producer partially meet analysts' expectations. It met them in terms of organic growth, but not in terms of volume sold. Nestlé's operating margin exceeded expectations.


Nestlé turns weakening China business and vitamins division upside down

The food giant Nestlé has had enough of the weak growth in China: after growth there really collapsed in the first half of the year, Nestlé wants to restructure the management team. The company is giving itself one year to make improvements.


Growth in Greater China fell by 4.2 percent in the first half of the year. After an increase of 1.7 percent in the first quarter, the situation deteriorated rapidly in the second quarter - which reduced organic Group growth by 0.7 percentage points and volume growth by 0.4 percentage points, as Nestlé announced on Thursday.


Heads are now likely to roll in the management team in China: Nestlé is taking significant steps to improve performance, including changes to senior management, it said. The measures would affect growth for up to a year.


In recent years, Nestlé has grown its business in China by expanding distribution, it added. This model is facing challenges due to weaker consumer demand and the deflationary environment. However, the company remained vague about specific measures in the press release, stating only that it wanted to strengthen its "value proposition". When asked, Nestlé CEO Laurent Freixe said during a conference call with journalists: "We want to penetrate the Chinese market more deeply. We are expanding distribution and want to invest more in the brands." He also expressed confidence in China's long-term potential.


Restructuring in the vitamin business

Nestlé has another construction site in the vitamins business. Laurent Freixe wants to tackle this again, after his predecessor Mark Schneider had already taken it in hand.


Growth in the overarching Nestlé Health Science division had already slowed to 4.2 percent in the first quarter of the year, followed by growth of just 3.4 percent in the first half of the year as a whole. The business with vitamins, minerals and nutritional supplements (VMS) is now to be focused on premium brands such as Garden of Life, Solgar and Pure Encapsulations.


The mainstream brands, on the other hand, will be subject to a strategic review and could therefore be sold. According to CEO Laurent Freixe, this could be reflected in 2026. These include Nature's Bounty, Osteo Bi-Flex, Puritan's Pride and the US private label business.


Despite the setbacks in China and in the vitamins business, Nestlé believes it is on track to turn weakening units around: In the 18 most important underperforming business units, a third of the aggregate growth gap to the market had been closed. These include coffee whitener in the USA, soluble coffee in Europe, frozen pizza in the USA, Milo in Asia and biscuits in Brazil.


Nestlé shares fall sharply after mixed half-year figures

Nestlé shares slump after the presentation of half-year figures. Although the world's largest food company performed better than expected in terms of profitability, it disappointed in terms of the important volume growth (RIG). In addition, growth in China was extremely weak.


Nestlé shares temporarily fell by 3.59 percent to CHF 74.96 on the SIX. Nestlé continues to have a difficult time with investors. After a very weak year, Nestlé shares had a very strong first quarter - but they have since given back a large part of these gains and are up just 4 percent.


Some analysts had seen encouraging signals in the set of figures presented and a positive stock market reaction was still emerging before the close of trading. After all, profitability was significantly better than expected with an operating margin of 16.5%. The corresponding target of at least 16.0% for the year as a whole was also confirmed, which some had doubted in advance.


However, the negative aspects of the figures weighed more heavily on investors' minds in early trading. The robust profitability appears to have been achieved at the expense of volume growth: price increases in particular contributed to growth, while volume development (RIG) slipped into the negative zone in the second quarter. Most investors had expected a positive development here, according to the market. In addition, there were unpleasant surprises in China and at Nestlé Health Science. Nestlé has taken measures to improve in both areas.


In addition, despite confirming the full-year guidance, management is talking about increasing headwinds. Some analysts conclude from this that the margin target, for example, is still on shaky ground.


Vevey (awp)


OWN POSITION

Hold own shares fixed, short puts at 70 and 67 (Sept and Dec). Would very much like to take them over at such prices. Possibly prescribe further shorts at lower strikes. $NESN (-0,43 %) Is indispensable.

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26 Commentaires

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You really need patience as a Nestlé shareholder...
You need a long investment horizon here. But anything else would be completely inappropriate for Nestlé.
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@DividendenAlpaka I see it differently, see comment
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müllaktie
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@Memo0606 Why? 😂 Outperformed the S&P 40% YTD in April (+20% vs -20%).

All a question of timing, preferences and diversification. But justify your opinion 👍
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@Memo0606 just like your post
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Müllunternehmen
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@Da_Fischi Why? 😂 Outperformed the S&P 40% YTD in April (+20% vs -20%).

All a question of timing, preferences and diversification. But justify your opinion 👍
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@GeldGenie It's more about issues such as corruption, expropriation (water privatization), human rights violations (child labor & forced labor), baby food scandal, healthwashing, environmental damage caused by plastic waste, illegal deforestation, ...
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@Da_Fischi just like your post
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@bullish999 🤦‍♂️
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@Da_Fischi Of course, many of the issues you mention are legitimate, but some of them are refuted or more complex (e.g. Nestlé's role in water). Much lies in gray areas, often driven by weak states.

And where do you draw the line? You also have environmental damage in tech (hunger for electricity), the military, tobacco or even in the health sector (expensive therapies, ethical issues, poverty). Gold, for example? Take a look at mines like in Burkina Faso - not a trace of fairness.

So do you consistently only hold cash? Or are you judging from an unfounded position?
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@GeldGenie As far as I know, none of these issues have been refuted so far, but have been dismissed due to lack of evidence, a big difference.

On the subject of sound, you can use google/KI/Youtube yourself to evaluate information. The references in the following article are - I think - a good start: https://en.wikipedia.org/wiki/Controversies_of_Nestl%C3%A9

Your changes of subject and insinuations are not helpful. It was clear that this kind of argumentation would follow, but there is a difference between the problems of "normal" companies and the scandals of Nestlé, one of the most criminal companies in the world. For my part, I try to avoid such companies as much as possible, no matter how much profit is lost in the process.
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@Da_Fischi Of course lawsuits were won 😅 And due to a lack of evidence: Innocent.

Google: Heavily dependent on "your" keywords.
Youtube: Algorithm - you don't get alternative views there.
AI - depending, if you then refer to Wikipedia I doubt a lot of things ^^ Scientificity and such. 😅

I'm not insinuating anything, I'm asking questions. But you interpreted it as an insinuation.

$NESN has 165k suppliers, works with ~700k farms directly. There are defensively 2.6 million people in the supply chain. The risk of conditional fallibility simply cannot be ruled out. Or show me a company with this relevance that can. 🤷‍♂️
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@Da_Fischi Incidentally, the controversies surrounding the water business are also the main reason why Nestle spun off the water division from the company in '24 to '25. Nestle has enormous minority stakes in companies that are not Nestle's, and generously collects the boycotters' money through other channels, e.g. via Y-Food or L'Oreal. Unlike arms companies, however, Nestle does not "need" a crisis to be profitable for once. But then you have to realize that it is Nestle, among others, that profits from humanitarian crises. I also find the argument "A is not so bad, because B is even worse" absolutely subterranean. The oncologist doesn't grin cheekily in your face when he diagnoses liver cancer, along the lines of "It could have been the pancreas". -That doesn't help the problem much.
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@DynasticGrind 👍

And water also accounts for "only" 4% of sales. 😅

According to its own statement, NESN is looking for a JV partner, not a buyer.
@GeldGenie I know they didn't talk about a sale. Ultimately, the important thing is that in future Nestle will no longer be primarily associated with the water business, which has repeatedly damaged its public image in the past. The fact that other companies have not been under as much scrutiny as Nestle (e.g. Mondelez, Mars or Hershey) is partly due to the scandals in this context.
Voir toutes les 2 autres réponses
I got in today at 80 euros
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@Neverloosemoney it's like always... when the overvalued tech stocks correct, the defensive stocks, such as Nestle, gain weight again... I feel good about it, because the techs are currently overvalued
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Madness Nestlé was the recommendation in the 2025-2020, Television, stock market letters, etc. were there already finfluencers? Here you can see once again how a large company, dividend pearl, global corporation independent of exchange rates and tariffs, can slide so far. Too bad and fortunately no longer invested.
Elephants 🐘 are getting old but are no longer rising but falling.
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There will now be a nice double bottom and then it will slowly go up again. I have already collected a few shares in Zurich over the last 2 years, and now you can also buy them again on German stock exchanges, which means that the share is now eligible for savings plans at Consorsbank, among others, and I have set up a savings plan today.
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@Tobiwankenobi500 I won't get involved in the discussion again. 😂 Feel free to join the others. There were no more arguments. 😂 Under Fischi's comment ^^
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@GeldGenie Have classified the further discussion as pointless, that's a difference to: "there were no more arguments". 🙄
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@Da_Fischi You can also justify it that way 😉
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