Nestle beats Q2 organic sales expectations, forms waters joint venture

LONDON: Nestle on Thursday posted slightly better than expected second-quarter organic sales growth and said it expects to raise around 3 billion euros ($3.43 billion) from a joint venture with investment firm Platinum Equity for its waters and premium beverages business.

The world’s biggest packaged food company also said it now expects full-year organic sales to grow 3% to 4%, instead of its previous target of “around 3%”.

Nestle and Platinum Equity would each own 50% of the joint venture, which will be named Peranel, the company said.

Its portfolio will have more than 30 brands sold in 120 countries, including S.Pellegrino, Source Perrier and Acqua Panna as well the global Nestle Pure Life brand and other major local water brands.

The company has been reshaping its portfolio under CEO Philipp Navratil, who has sought to improve growth and profitability by focusing on the company’s core brands.

Reuters reported in May last year that Nestle had hired Rothschild to explore a partnership or sale of a stake in its European water business while retaining part ownership.

Nestle said its second-half underlying trading operating profit margin would be higher than the first half of the year on the back of lower coffee and cocoa costs. It said, however, that it had also seen “some higher transportation and energy costs arising from the Middle East conflict.”

Second-quarter organic sales, which exclude the impact of currency movement and acquisitions, rose 3.7% in the second quarter ended June 30, the maker of Maggi stock cubes, KitKat candy bars and Nescafe coffee said. Analysts had on average expected organic sales growth of 3.6%. Nestle’s 1.9% price increases were ahead of the average analyst estimate of 1.8%.

Real internal growth - or sales volume - expanded 1.8%, meeting expectations.