Nestles waters business achieved positive growth in Europe and North America

Nestle's waters business achieved positive growth in Europe and North America

Nestle’s waters business has become more efficient, according to analysts, as the division recorded a sales climb of 2.5% in the first half.

The company this morning (11 August) said that its waters business achieved positive growth in the first six months of this year in Europe, and in North America where its Pure Life brand continued to perform well.

Independent drinks industry analyst James Amoroso told just-drinks that the division's performance was boosted by “better weather, a better economy and less impact from ignorant ‘anti-plastic’ lobbying”.

“2008-2009 was a perfect storm of negative external factors,” Amoroso said. “But the water business has become more efficient, especially in its distribution, which is positive for margins, now and in the future.”

While sales for the division totalled CHF4.7bn (US$4.46bn), EBIT margin increased by ten basis points to 8.4% reflecting the faster growth of emerging markets, as well as a strong performance from international brands.

Raw material costs however, were higher this year than in the first half of 2009.

“Raw materials prices … will be a factor in H2 too,” Amoroso said. “But they only become a negative factor if the product that contains them is unable to be priced higher. Nestlé has been renovating and innovating over the long term so that it can withstand these types of pressure. H1 results show that Nestlé has been able to withstand these pressures whilst growing both sales and profits.”

In Europe, Nestle said it achieved positive growth in a number of markets, including France and the UK, as well as in emerging markets.

“Nestle Waters has seen an acceleration of growth in the second quarter,” Roddy Child-Villiers, head of investor relations for Nestle said. “We experienced 2.5% organic growth, this was shown by good performances in European and emerging markets.

"There is double-digit growth in the UK and good performances in Germany, Spain and Switzerland. Organic growth in emerging markets is near 20% and this performance is consistent across Asia, the Middle East and Latin America,” he told analysts at the firm’s earnings conference this morning.