Q2 2025 Nestle SA Earnings Call

July 24, 2025

David Hancock: Good morning, and welcome to Nestlé's Half Year 2025 Results Conference Call. I'm David Hancock, Head of Investor Relations, and I'm joined today by Laurent Freixe, CEO, and Anna Manz, CFO. Before we begin, please take careful note of the disclaimer on page 2 of our presentation. For the agenda today, after Laurent shares the key messages, Anna will take us through the results in detail, then Laurent will provide an update on our strategic progress. We will then open up for Q&A. With that, I'll hand over to Laurent.

Good morning, and welcome to nest's, half year 2025 results, conference call. I'm David Hancock Head of investor relations, and I'm joined today by Laura FX CEO and Anna mans CFO.

Before we begin, please take careful notes of the disclaimer on page 2 of our presentation.

Speaker Change: So, for the agenda today, after Laurel shares the key messages, Anna will take us through the results in detail, then lauron will provide an update on our strategic progress.

We will then open up for Q&A.

Laurent Freixe: Thank you, David, and good morning to all. We delivered a good performance in the first half of 2025 in a difficult environment. Thanks to the focus of our teams, we are continuing to execute our strategy and transform our business. Our growth foundations are improving, and we are beginning to see the results. Looking ahead, we have maintained our guidance for 2025 despite increased headwinds, and we remain confident in delivering our medium-term guidance. In the first half, organic growth reached 2.9%. This reflect broad-based sales growth across geographies and categories with a slight improvement in Q2 compared to Q1. We delivered a solid UTOP margin as we increased investment and faced COGS and Forex headwinds. These results demonstrate our ability to manage short-term dynamics while staying focused on long-term value creation.

And with that, I'll hand over to lauron. Thank you David.

We delivered a good performance in the first half of 2025 in a difficult environment.

lauron: Thanks to the focus of our teams. We are continuing to execute our strategy and transform our business.

lauron: Our growth foundations are improving and we are beginning to see the results.

lauron: Looking ahead, we have maintained our guidance for 2025, despite increased headwinds and we remain confident in delivering our medium-term guidance.

lauron: In the first half, organic growth reached 2.9% this reflect broad-based sales growth across geographies and categories with a slight Improvement in Q2 compared to q1.

lauron: we delivered a solid utop margin as we increase the investment and faced Cox and Forex, headwinds

lauron: These results.

lauron: Demonstrate our ability to manage short-term Dynamics, while staying focused on long-term value creation.

Laurent Freixe: I will hand over to Anna to take you through the results in detail.

Anna: I will hand over to Anna to take you through the results in detail.

Anna Manz: Thanks, Laurel, and good morning. Here are the key takeaways. We delivered broad-based organic growth. As expected, pricing accelerated and RIG slowed. UTOP margin was slightly better than our expectations, even though we stepped up growth investments and faced some headwinds from tariffs and FX. In the second half, our margins will be significantly lower due to these headwinds and the delayed impact of higher input costs. For the full year, we're maintaining our guidance on organic growth and UTOP margin. We delivered 2.9% organic sales growth in the first half, with RIG of 0.2% and pricing of 2.7%. Sales were negatively impacted by foreign exchange movements, especially in Q2, when the Swiss franc strengthened by 10% against the dollar and similar amounts against other currencies. Turning to sales growth.

Anna: Thanks Laurel and good morning.

Here are the key takeaways.

Anna: We delivered broad-based organic growth.

Anna: As expected pricing accelerated and rigged slowed.

Utah margin was slightly better than our expectations even though we stepped up growth Investments and face some headwinds from Terrace and FX.

Anna: In the second half, our margins will be significantly lower due to these headwinds and the delayed impact of higher input costs.

for the full year, we're maintaining our guidance on organic growth and Utah, margin

Anna: We delivered 2.9%, organic sales growth in the first half, with rig of 0.2% and pricing of 2.7%.

Anna: Sales were negatively impacted by Foreign Exchange movements, especially in Q2 when the Swiss franc, strengthened by 10% against the dollar and similar amounts against other currencies.

Anna: Turning to sales growth.

Anna Manz: As expected, pricing accelerated and RIG has slowed during the half. Pricing improved across all of our categories in the quarter. The largest increases were in confectionery and coffee in response to input cost inflation. Most of our price increases took place during Q1. Q2 saw the full benefit. On RIG, there were two main drivers of the deceleration in Q2. Firstly, Greater China, which had a positive impact of 20 bps on growth rate- group RIG in Q1, a negative impact of 40 bps in Q2. At Q1, we said our growth in China had been driven by sell-in ahead of underlying consumption. We expected that to reverse. In Q2, we've seen that reversal. Secondly, we saw an impact from elasticities in response to pricing, particularly in confectionery.

Anna: As expected pricing accelerated and rigged has slowed during the half.

Anna: Pricing improved across all of our categories in the quarter.

Anna: The largest increases were in confectionery and coffee in response to input cost inflation.

Anna: Most of our price increases took place during q1, so Q2 saw the full benefit.

Anna: On rig, there were 2, main drivers of the deceleration in Q2.

Firstly greater China, which had a positive impact of 20 bits on Greece, ra group rig in the first quarter, but a negative impact of 40 bits in the second quarter.

Anna: At q1, we set our growth in China had been driven by selling ahead of underlying consumption and that we expected that to reverse.

Anna: And in Q2, we've seen that reversal.

Anna: Secondly, we saw an impact from elasticities in response to pricing particularly in confectionery.

Anna Manz: In coffee, we saw a different trend, with a lower elasticity and positive RIG in Q1 and Q2, despite more pricing. Going forward, we expect group RIG to improve over time as consumer behavior and the competitive environment adapts to higher prices. Turning next to profitability. We delivered a 16.5% UTOP margin in the first half, down 90 basis points. Gross margin decreased by 60 basis points. We stepped up advertising and marketing spend by 50 basis points. Distribution and admin costs were a small positive. Let me get into a bit more detail. Generally, input cost inflation has a negative impact on our margins in the short term, as price negotiation cycles mean we can't price immediately, and we can't always price to fully cover margins. However, over time, consumer-led innovation and further pricing sees our margins recover.

Anna: In coffee, we saw a difference from Trend with a lower elasticity, and positive rig in the first and second quarters, despite more pricing.

Anna: Going forward. We expect group rigged to improve over time as consumer Behavior and the competitive environment adapts to higher prices,

Turning next to profitability.

Anna: We delivered, a 16.5% Utah margin in the first half.

Anna: Down 90 basis points.

Anna: Gross margin decreased by 60 basis points and we stepped up advertising and marketing spend by 50 basis points.

Distribution and admin costs were a small positive. Let me get into a bit more detail.

Anna: Generally input, cost inflation. Has a negative impact on our margins in the short term.

Anna: The price negotiation Cycles mean we can't price immediately and we can't always price to fully cover margins.

Anna Manz: You can see that on this slide. The spike in inflation in 2022 impacted all categories. Since then, we recovered margins across our categories, illustrated here by pet care and food. Coffee and confectionery are below, and that's as we manage a new wave of input cost inflation. The margins of coffee and confectionery will get worse before they get better as commodity cost increases impact the P&L in the second half. Looking further forward, we expect gross margins in these categories to recover over time, and that's as a result of the actions that we're taking. The pace of that recovery will depend on what happens with commodity prices. Turning back to this year, gross margins declined 60 basis points in the first half against the same period last year.

however, over time consumer LED Innovation and further pricing sees our margins recover

Anna: and you can see that on this slide,

The spike in inflation in 2022, impacted all categories.

Since then, we recovered margins across our categories, Illustrated here by Peter and food.

But coffee and confectionery are below and that's as we manage a new wave of input cost inflation.

Anna: Impact the p&l in the second half.

Anna: Looking further forward, we expect gross margins. In these categories to recover over time and that's as a result of the actions that we're taking

Anna: the pace of that recovery. Will depend on what happens with commodity prices.

Anna: Turning back to this year.

Anna: Gross margins, decline, 60 basis points in the first half against the same period last year.

Anna Manz: Forward cover partially delayed the increase in commodity costs hitting the P&L, and the impact of tariffs was small due to short-term mitigation efforts. In the second half, we'll see a larger reduction in gross margin as the impact of commodity costs and tariffs increases. We said we would step up investment in our brands. Good progress in our brand value proposition has meant we've done this faster, and A&P reached 8.6% of sales in the first half. Our Fuel for Growth program is delivering efficiencies. That's allowing us to achieve more consumer impact from our spend. We're on track to reach our planned increase in marketing intensity earlier than expected and at a lower cost. Given the efficiencies, we expect second half A&P as a percentage of sales to be similar to the first half.

Anna: Forward cover partially delayed. The increase in commodity costs hitting the p&l

Anna: and the impact of terrorists was small due to short-term mitigation efforts.

In the second half, we'll see a larger reduction in gross margin as the impact of commodity costs and tariffs increases.

Anna: We said we would step up investment in our brands.

Anna: Good progress in our brand value proposition has meant we've done this faster and amp reached 8.6% of sales in the first half.

Anna: Our fuel for growth program is delivering efficiencies.

Anna: That's allowing us to achieve more consumer impact from our spend.

Anna: We're on track to reach our planned increase in marketing intensity earlier than expected and at a lower cost.

Anna: So given the efficiencies we expect second half amp as a percentage of sales to be similar to the first half.

Anna Manz: At the full year results, we said that we'd secured over CHF 300 million of Fuel for Growth savings for the year. In the first half, CHF 150 million of those savings were recognized in the P&L. The balance, plus additional savings secured since our last update, means that we now have over CHF 350 million benefiting the P&L in the second half. We're firmly on track to deliver our CHF 700 million target for the full year. Putting all of those pieces together, UTOP margin was 16.5%. Despite an acceleration of investment in A&P and some headwinds from FX and tariffs, this was slightly better than our expectations.

At the full year results, we said that we'd secured over 300 million, Swiss Francs of fuel for growth savings for the year.

Anna: In the first half, 150 million of those savings were recognized in the p&l.

Anna: The balance plus additional savings secured since our last update means that we now have over 350 million, benefiting the p&l in the second half.

Anna: So we're firstly on track to deliver our 700 million targets for the full year.

Anna: Putting all of those pieces together.

Anna: Utah, margin is 16.5%.

Anna: Despite an acceleration of investment in A&P and some headwinds from FX and tariffs, this was slightly better than our expectations.

Anna Manz: We landed pricing actions early and mix effects partially delayed the impact of cost inflation in the P&L. As we progress into H2, pricing will be more than offset by the increase in input costs. We'll see an increased tariff impact, and at current exchange rates, FX will be a further headwind. We expect the second half margin to be significantly below the first half. For the full year, we still expect our UTOP margin to be at or above 16%, and I'll come back to this when I talk about guidance. Now let's look quickly at the performance of our segments in the quarter. In Zone AMS, I'll focus on North America. Here, the consumer remains weak. Despite this, we delivered positive organic growth and RIG in both quarters, and we're making continued progress on market share.

Anna: We landed pricing actions early and mix effects partially delayed, the impact of cost inflation in the p&l.

Anna: As we progress into H2, pricing will be more than offset by the increase in input costs.

Anna: We'll see an increased tariff impact and at current exchange rate, FX will be a further headwind.

Anna: So, we expect the second half margin to be significantly below the first half.

Anna: For the full year, we still expect our utop margin to be at or above 16% and I'll come back to this. When I talk about guidance,

Anna: Now, let's now let's look quickly at the performance of our segments in the quarter.

In zone AMS, our focus on North America.

Anna: Here, the consumer remains weak.

Anna: Despite this we delivered positive organic growth and rig in both quarters.

Anna: And we're making continued progress on market share.

Anna Manz: Turning to AOA, growth was broad-based with the exception of Greater China. In the weak economic environment in China, we need to shift our model from driving distribution to driving consumer demand. This transition will be a headwind for up to a year, but it will strengthen our business for the medium term. In Europe, we saw both broad-based growth and market share improvement. The margin dynamic I just described can be seen playing out within each of the zones, with some differences due to category exposure. Turning to the globally managed businesses. In Nestlé Health Science, performance was mixed. Our VMS business was impacted by the discontinuation of some private label business and weaker performance in our mainstream brands. This was a drag on organic growth, but contributed to an improvement in UTOP margin.

Anna: Turning to AOA growth was broad-based with the exception of Greater China.

Anna: In the weak economic environment in China, we need to shift our model from driving distribution to driving consumer demand.

Anna: This transition will be a headwind for up to a year but it will strengthen our business for the medium-term.

Anna: And in Europe, we saw both broad-based growth and market share Improvement.

Anna: The margin Dynamic. I just described can be seen playing out within each of the zones with some differences, due to category exposure.

Turning to the globally. Managed businesses.

Anna: Unless they Health Science, performance was mixed.

Anna: Our VMS business was impacted by the discontinuation of some private label business and we could performance in our mainstream brands.

Anna: This was a drag on organic growth, but contributed to an improvement in Utah. Margin.

Anna Manz: Nespresso delivered another quarter of solid growth led by broad-based pricing while still maintaining positive RIG. Margin development was positive in the first half, thanks to pricing ahead of commodity increases, which impact later in Nespresso due to the longer supply chain. Turning to our categories. Powdered and liquid beverages, which is mainly coffee, grew strongly, led by positive price and RIG. The growth of the pet care category has come down from a year ago but is now stabilizing. A return to a more normal promotional environment contributed to the slowdown. Despite this, we've maintained or grown market share. I've talked about N-Health Science already. In nutrition, performance was particularly impacted by Gerber in the US. Gerber is a brand with great heritage, but it's been losing some of its relevance with consumers. We're working to address this.

Anna: Nespresso delivered, another quarter of solid growth led by broad-based pricing while still maintaining positive rig.

Anna: Margin development was positive in the first half. Thanks to pricing ahead of commodity increases which impact later in this espresso due to the longest supply chain.

Turning to our categories.

Anna: Powdered and liquid beverages, which is mainly coffee, grew strongly, led by positive price and rig.

Anna: the growth of the Pet Care category has come down from a year ago, but is now stabilizing

Anna: No more promotional environment contributed to the Slowdown.

Anna: despite this we've maintained or grown market share,

Anna: I've talked about health science already.

Anna: In nutrition performance was particularly impacted by Gerber. In the US.

Anna: Gerber is a brand with great heritage, but has been losing some of its relevance with consumers. We're working to address this.

Anna Manz: Prepared dishes and cooking aids was impacted by challenges within the frozen category. Despite this, we're seeing improved market share trends, particularly in frozen meals. Milk products and ice cream organic growth was positive, with price-led growth in ambient dairy and positive RIG in coffee creamers. In confectionery, we took double-digit pricing to offset commodity inflation. We're now seeing an elasticity impact, which appears in RIG. We expect this to settle as consumers and competitors adapt. Finally, in water, we saw broad-based growth, particularly with Maison Perrier and S.Pellegrino brands. Now let's look at what sits below UTOP. On most lines, the change year-on-year is very limited, but I'll call out two factors. Net financing costs were slightly higher this period, reflecting a higher level of average net debt. The underlying tax rate was slightly lower than last year at 22%.

Prepare dishes and cooking AIDS was impacted by challenges within the Frozen category.

Anna: Despite this we're seeing improved market, share Trends, particularly in frozen meals.

Anna: Milk products are nice cream. Organic growth was positive with price-led growth in ambient, Dairy and positive rig in coffee creamers.

Anna: In confectionery, we took double digit pricing to offset commodity inflation.

Anna: We're now seeing an elasticity impact, which appears in rig.

Anna: We expect this to settle as consumers and competitors, adapt.

Anna: And finally, in water, we saw broad-based growth, particularly with Maison Perrier and Sam Pellegrino brands.

Anna: Now, let's look at what sits below utop.

Anna: On most lines, the change year on year is very limited, but I'll call out 2 factors.

Anna: Net financing costs were slightly higher this period reflecting a higher level of average. Net debt.

Anna Manz: This is consistent with our full year guidance. On the drivers of EPS, I've already talked about operating profit, interest, and tax. On share buyback, we completed the program in December, so there's still some benefit to EPS in H1 from the lower share count versus last year. However, this was more than offset by the significant adverse FX movement. On free cash flow, just a reminder that this is typically seasonally weaker in the first half, with much stronger cash generation in H2. On top of this normal seasonality, there were three main elements impacting cash flow this year. EBITDA was lower, reflecting the margin reduction as we invest for growth and the FX headwind. On working capital, we had a higher negative impact in the first half of this year, mainly reflecting a higher cost of inventory, and these were partially offset by a reduction in CapEx.

Anna: The underlying tax rate was slightly lower than last year at 22%.

Anna: This is consistent with our full year guidance.

Anna: On the drivers of eps.

Anna: I've already talked about operating profit interest and tax.

Anna: On share buyback. We completed the program in December. So there's still some benefit to EPS in H1 from the lower share Count versus last year.

Anna: However, this was more than offset by the significant adverse effects movement.

Anna: On free cash flow, just a reminder that this is typically seasonally weaker in the first half with much stronger, cash generation in H2.

Anna: On top of this normal seasonality, there were 3, main elements, impacting cash flow this year.

Anna: Ebit da was lower reflecting. The margin reduction as we invest for growth and the FX headwind

Anna: I'm working capital. We had a higher negative impact in the first half of this year mainly reflecting a higher cost of inventory.

Anna: And these were partially offset by a reduction in capex.

Anna Manz: As normal, net debt increased in the first half due to the payment of the dividend in April. Partially offsetting this, our net debt balance benefited by CHF two and a half billion from the strengthening of the Swiss franc. Turning finally to guidance. We're maintaining our full year guidance despite increased headwinds since the beginning of this year. Organic sales growth is expected to improve compared to 2024, strengthening as we continue to deliver on our growth plans. The UTOP margin is expected to be at or above 16% as we invest for growth, This includes the increased negative impact from tariffs currently in place and today's foreign exchange rates. While we're continuing to execute with focus, there is obviously macroeconomic and consumer uncertainty. As we navigate these headwinds, I want to be clear that we won't compromise on investing for the medium term.

Anna: As normal, net debt increased in the first half, due to the payment of the dividend in April.

Anna: Partially offsetting this our net debt balance benefited by 2 and a half billion from the strengthening of the Swiss franc.

Anna: Turning 5 me to guidance.

when maintaining our full year guidance despite increased headwinds since the beginning of this year,

Anna: Organic sales growth, is expected to improve compared to 2024.

Strengthening as we continue to deliver on our growth plans.

Anna: The Utah margin is expected to be at or above 16% as we invest for growth.

Anna: And this includes the increased negative impact from tariffs currently in place, and today's foreign exchange rates.

Anna: While we're continuing to execute with Focus, there is obviously macroeconomic and consumer and certainty.

Anna: As we navigate these headwinds, I want to be clear that we won't compromise on Investing For The medium-term.

Anna Manz: With that, I'll hand back to Laurent to discuss our strategic progress.

And with that, I'll hand back to Laurel to discuss our strategic progress.

Laurent Freixe: Thanks, Anna. We have clearly set out our strategy to accelerate performance and to transform for the future. To drive growth, we are accelerating our categories and improving our market share. We are doing that through implementing the Nestlé virtuous circle, delivering efficiencies, and investing to drive profitable growth. We are also simplifying our organization and digitally transforming our end-to-end processes. In doing this, we are leveraging Nestlé's scale, single ERP core, our enterprise data foundations, while expanding our AI platforms. This will further support us in improving execution, allowing us to run the business with greater agility and precision. As I will show on the next few slides, we are implementing this strategy, and it is bringing results. Driving growth starts with generating the fuel for investment. We are on track for the CHF 700 million in 2025 in our Fuel for Growth program.

Laurel: Thanks Anna.

We have Kelly set out our strategy to accelerate performance and to transform for the future.

Laurel: To drive growth. We are accelerating our categories and improving our market share.

Laurel: We are doing that through implementing the Nestle virtual Circle.

Delivering, efficiencies and investing to drive profitable growth.

Laurel: We are also simplifying our organization and digitally Transforming Our end-to-end processes.

Laurel: In doing this, we are leveraging Nestle's scale.

Laurel: Single Erp core our Enterprise data foundations. While expanding our AI platforms,

Laurel: This will further support us in improving execution, allowing us to run the business with greater agility and precision.

As I will show on the next few slides. We are implementing these strategy and it is bringing results.

Laurel: Starts with generating, the fuel for investment.

Laurel: We are on track for the 700 million Swiss Francs in 2025 in our fuel for growth program.

Laurent Freixe: I told you that procurement was the most important source of efficiencies. In the first half, we generated half savings from rolling out AI tools to review invoices, from increased use of e-auctions, and from deploying global specifications catalogs. Looking ahead to the second half of the year and beyond, we will drive further procurement gains and start to deliver savings from operational efficiencies and improvements in commercial investments. Investing this Fuel for Growth is not just about spending more on marketing. We are reinforcing our value proposition across four pillars: unrivaled product superiority, unbeatable value, unmissable visibility, and unforgettable brand communications. Let me go through two examples. On product superiority, we are stepping up our focus on ensuring we have the best tasting products. We are bringing back discipline in how we test them with consumers.

Laurel: I told you that procurement was the most important source of efficiencies.

Laurel: In the first half, we generated half savings from rolling out, AI tools to review invoices.

Laurel: From increased use of e auctions.

And from deploying Global specifications catalogs.

Laurel: Looking ahead to the second half of the year and Beyond, we will drive further procurement gains and start to deliver savings from operational. Efficiencies and improvements in commercial Investments.

Laurel: Testing. This should for growth is not just about spending more on marketing. We are reinforcing our value proposition across 4 pillars.

Laurel: Unrivaled product, superiority, unbeatable value, unmissable, visibility and Unforgettable, brand Communications.

Laurel: Let me go through 2 examples.

On product superiority, we are stepping up our Focus.

Laurel: On ensuring we have the best testing products.

Laurel: We are bringing back discipline in how we test them with consumers.

Laurent Freixe: Across 2022 to 2024, we tested 60/40 taste preference in less than a quarter of our top-selling products that account for half of our sales. By the end of this year, we will have tested two-third of these products, reaching 100% by this time next year. Of course, if we find products where we do not have taste preference, we'll be acting quickly to correct that. To achieve unmissable visibility, we are enhancing product performance across online channels. The digital shelf score tracks availability, discoverability, and attractiveness, three critical dimensions of execution, enabling faster interventions and more consistent retail performance. Finally, all four pillars are being enabled and scaled through the use of data and technology, ensuring we drive precision, speed, and measurable impact across the value chain.

Laurel: Across 22 to 24. We tested 6040 test preference in less than a quarter of our top selling products that account for half of our sales.

Laurel: By the end of this year, we will have tested 2. Third of this products, reaching 100%, by this time, next year,

Laurel: and of course, if we find products where we do not have test preference, we will be acting quickly to correct that

To achieve unmissable visibility, we are enhancing.

Laurel: Product performance across online channels.

Laurel: the digital shelf score tracks availability discoverability and attractiveness 3 critical dimensions of execution

Laurel: enabling faster interventions and more consistent retail performance.

Laurel: Finally, all 4 pillars are being enabled and scaled through the use of data and Technology.

Laurel: Ensuring we drive precision.

Laurel: Speed and measurable impact across the value chain.

Laurent Freixe: We have talked about how we will drive growth through accelerating our categories and improving our market share, and the different ways we are doing this. With our 6 global big bets, we are following a fewer, bigger, better approach, concentrating our resources behind a small number of innovations and rolling them out at scale much faster. In the past, we would typically take an innovation to a handful of markets over the first couple of years. This has changed. Across our 6 big bets, we had 65 market launches in the first half of this year. This is driving impact. In the first half of 2025, we have reached CHF 200 million of sales with the 6 big bets. In parallel, we have taken targeted actions to improve underperforming businesses focused around gaps in our Four U's value proposition.

Laurel: We have talks about how we will drive growth through, accelerating our categories and improving our market share.

Laurel: And a different ways. We are doing this.

Laurel: With our 6, Global big bets. We are following a fewer bigger better approach.

Laurel: Concentrating, our resources behind a small number of Innovations and rolling them out at scale. Much faster.

Laurel: In the past, we would typically take an innovation to a handful of markets over the first couple of years. This has changed

Laurel: Across our 6, big bets, we had 65 Market launches in the first half of this year.

This is driving impacts.

Laurel: In the first half of 2025, we have reached 200 million Swiss Francs of sales with the 6, big bets.

In parallel, we have taken targeted actions to improve underperforming businesses.

Laurel: Focused around gaps in our 4, use value proposition.

Laurent Freixe: The impact can be seen in the improvement of our market share trends. The aggregate growth gap to market for the 18 key underperforming business sales has reduced by 1/3, with most of the business sales improving their performance versus category. Take Coffee mate Creamers in the US as an example. We resolved capacity issues, adjusted pricing, increased innovation, and reset shelves. Distribution is up, consumer engagement is back, and market share is improving. This is our value proposition in action, and it's a blueprint we are applying across our business. Greater China is our second-largest market after the US, and we have a great business there. With a strong local presence, it continues to offer significant long-term potential. In recent years, we have grown the business through expanding distribution. The model has become challenged in a weaker economic environment. To deliver sustainable growth, we need a different approach.

Laurel: The impact can be seen in the Improvement of our market share trends.

Laurel: The aggregate growth Gap to market for the 18 Kettleman.

With most of the business sales, improving their performance versus category. Take coffee made creamers in the US as an example.

Laurel: We resolve capacity issues, adjusted pricing, increase Innovation, and reset shelves.

Laurel: Distribution is up consumer engagement is back and market. Share is improving.

Laurel: This is our value proposition in action.

Laurel: And it's a blueprint, we are applying across our business.

Laurel: Greater China is our second largest market at the us and we have a great business there.

Laurel: With a strong, local presence, it continues to offer significant long-term potential.

Laurel: In recent years, we have grown the business through expanding distribution.

Laurel: The model has become challenged in a weaker economic environment to deliver sustainable growth. We need a different approach.

Laurent Freixe: One of the first changes I made to the organization when I took over as CEO was to bring Greater China back under Zone AOA to drive greater alignment and strengthen governance. Following that move, we have also changed the leadership of the Greater China business. In March this year, I visited China to meet with our teams, our customers, and our partners. The visit reaffirmed my belief that speed and agility are critical to win in this market. The new team will focus on driving growth through delivering our complete value proposition. We are confident in our ability to rebuild momentum and capture the potential of the market. Nestlé Health Science has built a leading position with a diverse portfolio of brands across VMS, active nutrition, and medical nutrition. VMS is an attractive category with clear growth drivers. To us, the highest potential is at the premium end.

Speaker Change: CEO was to bring greater China back under Zone, way to drive greater alignment and strengthen governance.

Speaker Change: Following that move. We have also changed the leadership of the greater China business.

Speaker Change: In March, this year, I visited China to meet with our teams, our customers and our partners.

The visit reaffirmed my belief that Speed and Agility are critical to win in this market.

Speaker Change: The new team will focus on driving growth through delivering our complete value proposition.

Speaker Change: We are confident in our ability to rebuild momentum and capture the potential of the market.

Speaker Change: They say, Health Sciences has built a leading position with a diverse portfolio of Brands, across VMS, active nutrition, and Medical Nutrition.

Speaker Change: BMS is an attractive category with clear growth drivers.

Speaker Change: To us The Highest Potential is at the premium end.

Laurent Freixe: Going forward, in VMS, we'll focus on our global premium brands such as Garden of Life, Solgar, and Pure Encapsulations, where our capabilities in science, innovation, and brand building give us a distinct competitive edge. We have launched a strategic review of our mainstream and value VMS brands, including Nature's Bounty, Osteo Bi-Flex, Puritan's Pride, and US Private Label, which may result in the divestment of these brands. All this is consistent with our approach across the group of focus and simplification, and it will help us to accelerate our performance in this important high-potential category. In summary, we delivered a good performance in the health, and our full-year guidance is maintained despite increased headwinds. We have a clear strategy, and we are focused on execution.

Speaker Change: Going forward in VMS will focus on our Global premium Brands such as Garden of Life solar and pure encapsulations where our capabilities in science, Innovation, and brand building give us a distinct Competitive Edge.

Speaker Change: We have launched a strategic review of our mainstream and value VMS Brands including Nature's Bounty Oyo biflex, puritans pride and US private level which may result in the divestment of these brands.

Speaker Change: All this is consistent with our approach across the group of focus.

Speaker Change: And simplification and it will help us to accelerate our performance.

In this important, high potential category.

Speaker Change: So in summary, we delivered a good performance in the half and our full year. Guidance is maintained despite increase headwinds

We have a clear strategy and we are focused on execution.

Laurent Freixe: We are taking the right actions today to strengthen our growth foundations for the future. We remain confident in delivering our medium-term ambition. Now let me hand over to David for the Q&A.

Speaker Change: We are taking the right actions today to strengthen our growth foundations for the future. And we remain confident in delivering our medium-term ambition.

David: And now, let me hand over to David for the Q&A.

David Hancock: Thank you, Laurent. Now let's move to the Q&A session. As usual, can I please ask you to limit yourself to two questions in order that everybody gets a chance to ask their questions. We will take our first question from Guillaume Delmat from UBS. Please go ahead, Guillaume.

David: Thank you lauron. So now let's move to the Q&A session as usual. Can I please ask you to limit yourself to 2 questions in order that everybody gets a chance to ask their questions.

Speaker Change: We will take our first question from guom delm from UBS. Please go ahead. Go.

Guillaume Delmat: Thank you very much, David, and good morning, Laurent and Anna. Firstly, some very quick housekeeping. What is your guidance for COGS inflation for this year? Is it still very high single digits? Can you tell us how much it was in the first half of the year? Likewise, any quantification for the tariffs impact this year? My two questions. First one on pricing. Are you satisfied with your current prices, or is there a scope or maybe even a need to implement additional pricing actions over the coming months? Is it still only about coffee and confectionery, or are you starting also to see some pricing opportunities in other categories? I'm thinking in particular pet care, where we've had four consecutive quarters now of negative pricing.

Speaker Change: Thank you very much, David, and good morning, Loren Anna. Um, firstly, some very quick housekeeping. What is your, uh, guidance for cogs inflation for this year? Is it still very high single digits? And can you tell us how much it was in the first half of the year and likewise any quantification for the tariffs, uh, impact this year?

Speaker Change: And then my um, 2 questions. So, first 1 on pricing, are you satisfied with your current prices? Or is there a scope of maybe even a need to implement, additional pricing actions over the coming months?

Guillaume Delmat: Then my second question, going back to Greater China, I'm curious to hear what prompted you, Laurent, to do this, what seems at least a strategy reset. I guess why, at least from the outside, it seemed to be quite abrupt, because it's not something that was flagged the Q1 trading update stage. Why acting so decisively now? Should we expect a stronger drag, at least at the organic sales growth and RIG levels over the coming quarters from China as you're in the process of fixing and adapting the business? Thank you very much.

Um, and is it still only about coffee and confectionery? Or are you starting also to see some pricing opportunities in other categories, I'm thinking in particular Pet Care where we've had 4 consecutive quarters. Now of negative pricing.

Speaker Change: Um and then my second question. Going back to Greater China. I mean, curious to hear what prompted you learn to do this. Uh, what seems at least a strategy reset.

Laurent Freixe: Thanks, Guillaume. Let me start with that last question, and then I will hand over to Anna for the COGS piece. China is a very, very important market for us, second largest. Since I took over the CEO role, I've taken action to bring back China into the broader Nestlé organization, having China as part of Zone AOA, getting the attention, the support and the focus it requires. That has been the first move. The second move has been, and just happening right now, a new leadership appointed for a new phase of the development in China.

Speaker Change: Uh, and I guess why? At least from the outside. It seemed to be quite abrupt because it's not something that uh was flagged. The q1 trading update stage so why acting so decisively now? And should we expect a stronger drag at least at the organic sales growth and rig levels over the coming quarters from China, as you are in the process of fixing and adapting, the business. Thank you very much.

Speaker Change: Thanks gum. And let me start with the last question. And then I will hand over to Anna for the the cogs piece.

Speaker Change: A China is very, very important market for us second. Second largest

Speaker Change: What's happening right now? Uh, a new leadership appointed for a new phase of the development in China.

Laurent Freixe: With the new leadership in place and with the oversight of Zone AOA, we realized that our model was probably too much focused on building up distribution, and commercially driven. Maybe that's, by the way, the way China works primarily into a period where, and very much like the government agenda, by the way, to support the consumption, to support the demand, the need to rebalance the model. It's not to shift from one side to the other, but rebalance the model and having more investment in the consumer demand, in the consumer pool. This is what's happening. It's an adjustment. This will have an impact in the next quarters, but controlled.

Speaker Change: And with the new leadership in place and with the other side of Zone, we realized that our model was probably too much focused on building up distribution.

Speaker Change: Uh, and and and commercially driven, and maybe that's by the way.

Speaker Change: the way, uh, China Works, uh, primarily

Speaker Change: Into a period, where and very much like the government agenda, by the way, to support the consumption, to support the demand. They need to rebalance.

Speaker Change: The model, it's not to shift from 1 side to the other, but rebalance the model and having more investment in the consumer demand in the consumer pool. So, this is what, what's happening? It's an adjustment

Laurent Freixe: I'm confident that we will see a strong performance from China once adjustment has been made. We got the right leadership, we got the right organization, we got the right structure, we got the right brands, we got the scale, and the determination to grow China. The market share position is in the right place. I think it should be read more as an adjustment that we had to make and which we are making right now. Maybe one word on the pricing. Are we satisfied with the pricing? Well, you know, we face an unprecedented scenario that two of our major commodities have reached historical highs. And we are not talking 10, 20% increase. We are talking double, triple historical levels. We obviously had to take action.

Speaker Change: Uh, this uh, will have an impact uh in the next quarters, but controlled. And uh, I'm confident that we will see a strong performance from China. Uh, once adjustment has been made, we got the right leadership, we got the right organization, we got the right structure. We got the right Brands, we got the scale.

Speaker Change: And the determination to grow China. And the market share position is is in the right place. So I think it's more it's to be read more as an adjustment that we had to make and which we are making right now.

Maybe 1 Word on the on the pricing, we satisfied with the pricing. Uh well you know we Face an unprecedented scenario. That 2 of our major Commodities have reached historical highs

Laurent Freixe: We had to take action, being the leaders in the industry, quickly. It's a good idea to recover the cost anyway, but also to send a signal to the market. I'm happy, satisfied with the way this has been implemented, that we managed, especially in Europe, to do that without major hiccups. The pricing is getting implemented. Will we need a bit more? We might need a little bit more, but most of it is already done and will be seen reflected in the next quarters. Let me hand over now to Anna for the COGS part.

Speaker Change: And, and we are not talking 10, 20% increase. We are talking double triple historical levels so we obviously had to take action. We had to take action being the leaders in the industry quickly. It's a good idea to recover the cost anyway, but also to send a signal to, to the markets. Uh, so I'm, uh, Happy satisfied with the way. Uh, this has been implemented as we manage, especially in Europe to do that uh without major hiccups. Um, and and the pricing is is getting implemented. Will we need

Anna Manz: Sure. Just before I turn to COGS, just to build a little bit on China, just a little bit of market context maybe. The overall market is quite flat given consumer demand is depressed, and it's a deflationary environment. You've got a market environment before you start that is negative, and then what we've seen is some stock correction on top. It's this underlying negative market environment that's gonna take us a while up to a year to build the consumer pull to really outperform that underlying negative environment. Now on COGS. We said at the full year that our COGS guidance was high single digit. That on top of that, we had then the benefit of efficiencies that would offset that.

Speaker Change: A bit more. We might need a little bit more but most of it is already done and we'll be be seen reflected in the next quarters and let me hand over now to 1 and a half for uh the Cox path.

Speaker Change: Sure. And and just before I turn to coach, just to build a little bit on China, um,

Speaker Change: Just a little bit of Market context. Maybe the overall Market is quite flat giving consumer demand is depressed and it's a deflationary environment. So you've got a market environment before you start that is negative. And then what we've seen is some stock correction on top and it's this underlying negative Market environment that's going to take us a while to build the or up to a year to build the consumer pool to really outperform that underlying negative environment.

Speaker Change: Now on cogs. So we said at the full year that our cogs guidance uh, was high single digit, um,

Anna Manz: The CHF 1 billion+ that François has always talked about, delivering year on year, plus the benefit of Fuel for Growth. That was how we framed our COGS guidance at that time. That is actually unchanged for the full year. In the first half, we saw slightly lower COGS inflation. That's really about the timing of these commodity costs coming through. We saw a bit of a FX benefit against that, but that's really a phasing issue. Full year, you'll still see the underlying input cost inflation coming through, and you'll see those efficiencies that we're driving, that will offset it. On tariffs, small impact in H1, and that's really because we worked hard to mitigate, the impact.

Speaker Change: And that on top of that, we had, then the benefit of of efficiencies, that would offset that the billion plus that that France has always talked about, um, delivering year on year, plus the benefit of fuel for growth and, and that was how we framed, our cogs guidance. At that time, that is actually unchanged for the full year, uh, in the first half. We saw slightly lower cogs inflation. That's really about the timing of these commodity costs coming through. Uh, we saw a bit of a FX benefit against that but that's really a phasing issue. Uh full year you'll still see the underlying input cost inflation coming through and you'll see those deficiencies that we're driving uh that will offset it.

Speaker Change: and on tariffs,

Anna Manz: As I look at the full year, I think about tariffs as a couple of tens of basis points impact for the group.

Speaker Change: uh, small impacts in H1. Uh, and that's really because we worked hard to mitigate. Uh, the impact, as I look at the full year, uh, think about tariffs as a couple of tens of basis points impact for the group,

Laurent Freixe: Thank you.

Speaker Change: Thank you very much.

David Hancock: Thanks, Guillaume. We'll take our next question from Victoria Petrova from Bank of America. Go ahead, Victoria.

Speaker Change: Thanks again, we'll take our next question. From Victoria Petra from Bank of America. Go ahead Victoria.

Victoria Petrova: Thank you, David. Thank you, Laurent Freixe and Anna Manz. My first question is a continuation of Guillaume Delmat's one on A&P. If I interpreted your comments correctly, you are talking about kind of flat A&PS percent of sales at 8.6%. Previously, my understanding was that you expected to kind of go to 9% of sales towards the end of the year and hence A&PS percent of sales to be higher in the second half of the year. Could you comment on that? Maybe I just misinterpreted that. My second question, looking outside of two very inflationary categories, which are coffee and confectionery, and also putting aside VMS and China, in other categories, what we are seeing right now is underlying category growth significantly below the comments you provided during your capital markets day or investor seminar in November.

Half of the Year. Could you comment on that? Maybe I just misinterpreted that and my second question looking outside of 2, very inflationary categories, which are coffee and confectionery.

And also putting aside VMS and China. In other categories, what we are seeing right now is

Victoria Petrova: When do you think there is a path towards mid-single digit, 3% to 4% underlying category growth in such categories as, for example, pet care or prepared dishes and cooking aids? Should we think about it differently given the current market environment, what you are seeing on the consumer side of things? Thank you very much.

Speaker Change: Underlying category growth significantly below the comments. You provided during your Capital markets day or investor seminar in November.

Laurent Freixe: Thank you, Viktoria. On the A&P, I just would like to highlight that the strategy is at play. It works. We are achieving efficiencies end to end across our Fuel for Growth program and have started to redeploy strongly 50 basis points more than last year in a challenging market environment with inflationary pressures. We are doing what we said we would do, and we see the impact. We had Q2 at 3%. We are talking the 3 to 5, where we are at 3% in Q2 despite the hiccup in China. While we were comparing with the strongest quarter last year, you know, I think in relative terms, the momentum is there. Q2 better than Q1, better than Q4.

When do you think there is a path towards um meet single digits, 3 to 4% uh underlying category growth in such categories? As, for example, pet care or prepare dishes and cooking eats or should be. Should we think about it differently? Given the current market environment? What you are seeing on the consumer side of things? Thank you very much.

Victoria: Thank you, Victoria.

Victoria: Hey on the NP uh I just would like to highlight that. The the strategy is at play it works. We are achieving efficiencies

Victoria: End to end, uh, across our fuel for growth program. And I started to redeploy strongly 50 basis points more than um,

Laurent Freixe: Strategy is at play and the strategy works. On the investments for H2, we are determined to keep investing. This is part of the model. We just flagged that as we are getting increasingly efficient, effective through the way we invest, the investment will be there as planned. Just reflecting, the percentage of sales might be more around the 8.6% for the full year than maybe the 9% everyone was. We are flagging towards the end of the period. In the spirit and the quality and the quantity of investment, that will be very much in line with what we indicated. It's more a reflection of the fact that we are getting increasingly effective in the way we spend and the way we invest.

Victoria: Last year in challenging Market environment with inflationary pressures. So we are doing what we said we would do and we see the impact we have Q2 at 3%. So we we are talking the 3 to 5 where we are at 3% in Q2 despite the hiccup in China uh and why we were comparing with the uh strongest quarter last year. Uh so you know I think in relative terms the the momentum is there Q2 better than q1 better than Q4 and strategies that play and the strategy. Uh works.

on the, uh,

Victoria: Investments for uh H2 we are determined to keep investing. This is part of the model. We just flagged that as we are getting increasingly efficient effective.

Laurent Freixe: Investments will be there, and they are showing impact in the way the brands are reacting and our capacity to improve our market share position. On the underlying category growth, we see interestingly enough, a bit of improvement in terms of the category growth on average. It's not that we are distant from what we indicated at the capital market day. We are pretty much in line. The good news is that we are catching up, and we are improving our market share position month after month as the strategy works and as our investment in the core, investments in the growth platforms, investment in innovation big bets, and our efforts to improve our underperformers is paying off.

Uh, through the way we invest, uh, the investment will be there as planned. Uh, just reflecting in percentage of sales, might be more around the 8.6% for the full year. Uh, then, uh, maybe the 9%, everyone was we, we are flagging towards the end of the period, but in the spirit and the quality and the quantity of investment, that will be very much in line with what we indicated. So it's more reflection of the fact that we are getting increasingly, uh, effective in the way we spend. And the way we invest investments will be there and they are showing impact in the way. Uh, the brands are

Victoria: Uh, reacting and our capacity to improve our market share position.

Victoria: On the, uh, underlying, uh, Cal growth. Uh, we see, uh, interestingly enough, uh, a bit of

Victoria: Improvement in terms of the career growth on on average.

Victoria: Uh, so it's not that we are distant from what we indicated that the Capital Market day, we are pretty much in line. And the good news is that we are catching up and we are, uh, improving our market share position months after months as the strategy works, and as our investment in the core investments in the, uh, growth platforms investment in Innovation, big bets

Laurent Freixe: That's what I would like to highlight, in broad terms, and Anna can complement in more detail.

Victoria: and our efforts to improve on the performance is paying off. So, uh, that's what I would like to highlight, uh, in Broad terms and and I can complement in in more detail.

Anna Manz: Not much to add. I mean, just maybe just to clarify on the A&P point. What we'd said to you at the full year was that we would be ramping up through the year to be at 9% by the end of the year. That meant on average, we'd be about 50 basis points more, so about 8.6 for the year. Actually, the fact that we're already at 8.6% at H1 is we're investing faster than we thought we were going to be going into this year. That's because we've got plans that we feel confident of. I think that's really good. We're still ramping up to the 9% in intensity terms. The activity is still ramping up.

Victoria: Uh, not much to add. I mean, just maybe just to clarify on the

Speaker Change: What we'd said?

Victoria: The full year was that we would be ramping up through the year to be at 9% by the end of the year. And that meant on average, we'd be about 50 basis points more, so about 8.6 for the year.

Speaker Change: To actually the fact that we're already at 8.6%, at the at H1 is is we're investing faster than we thought. We were going to be going into this year. And that's because we've got plans that we feel confident of

Anna Manz: Because we're starting to see those efficiencies flow through from Fuel for Growth, the actual reported number for the second half will be similar to the first, 'cause you've got sort of 30 basis points or so of efficiencies coming from Fuel for Growth. A good progress actually, I think, on the A&P point. I think that's the only build I've got.

Speaker Change: So I think that that's really good. We're still ramping up to the 9%, um, in intensity terms. So the activity is still ramping up, but because we're starting to see those efficiencies flow through from fuel for growth. Uh, the actual reported number for the second half will be similar to the first, um, because you've got sort of 30 basis points or so of efficiencies coming from, uh, fuel for growth. So a good progress actually, I think, on the amp point,

Speaker Change: I think that's the only build I've got.

David Hancock: Great. Thank you. Thanks, Victoria.

Anna Manz: Thank you.

David Hancock: The next question comes from Warren Ackerman at Barclays. Please go ahead, Warren.

Speaker Change: Great. Thank you. Thanks Victoria. The next question comes from Warren akiman at Barclays. Please go ahead Warren.

Warren Ackerman: Yeah. Good morning, Laurent, Anna, David. I've also got one housekeeping and two questions. The housekeeping one, there's lots of market share numbers thrown out in the deck today. Can you tell us what % of your portfolio globally is holding or winning share? That's the housekeeping. My two questions are, firstly, for Anna. On free cash flow, Anna, it's kinda halved in the first half to around CHF 2 billion. You've got working capital build. I hear your point about it's H2 phase, but it's hard not to conclude it's pretty poor in H1, and it's certainly not helping your deleveraging when your balance sheet is already stretched. I mean, the free cash flow is not gonna cover the dividend, which obviously long term is not sustainable. Can you maybe like just dive into free cash flow a little bit?

Warren Akiman: Morning lauron, Anna David. I've also got 1 house and 2 questions, the housekeeping 1, there's lots of market share numbers thrown out in the deck today. But can you tell us what percentage of your portfolio globally is holding on winning share?

Warren Akiman: Uh, that's a housekeeping and then my 2 questions are firstly for Anna on free cash flow. Anna is kind of hard in the first half. So around 2 billion. Um you got working capital build.

Warren Ackerman: What's happening to improve the fundamental free cash flow of the company? Could you maybe give us an idea of what the free cash flow could be for this year and any kind of expectations on some of the key drivers of working capital and CapEx would be useful. The second question is really on the VMS strategic review, maybe for Laurent. What is the revenue weight of the non-strategic brands we're talking about? Maybe could you tell us what the EBIT contribution and what the book value of the business is? I'm just trying to figure out like, you know, how material is this? I mean, you've obviously spent $6 billion buying Bountiful. It looks like you're reversing pretty much all of that except for Solgar.

Speaker Change: Uh I hear your point about is 82 phase, but it's hard not to conclude it's pretty poor in H1 and it's certainly not helping your deleveraging when your balance sheet is already stretched. Um, I mean the free cash flow is not going to cover the dividend, um, which obviously long term is not sustainable. So can you maybe like just dive into free cash flow a little bit? What's happening to improve the fundamental free cash flow of the company? And could you maybe give us an idea of what the free cash flow could be for this year, and any kind of expectations on some of the key drivers of working capital and capex, would be would be useful. And then the second question is really on the VMS strategic review, maybe for lauron, what is the revenue weight of a non-profit Brands? We're talking about and maybe could you tell us what the ebit contribution and what the book value of the business is, I'm just trying to figure out like, you know, uh, how material?

Warren Ackerman: Are you looking at a straight divestment, or would you be open to maybe a partnership or any other kind of imaginative solutions? Thank you.

Speaker Change: Material is this, I mean, you've obviously spent 6 billion dollars buying Bountiful. It looks like you're reversing pretty much all of that, except for soular. And are you looking at a straight divestment or would you be open to maybe a partnership or any other kind of imaginative Solutions? Thank you.

Laurent Freixe: Hi, Warren. Lots of questions in one.

Warren Ackerman: Hi.

Laurent Freixe: Two. On the market shares, it's great to see that we have significantly improved our position in the last one year. We covered large part of the gap that we had to our categories. We see that through the growth platform. We see that also very, in a very spectacular way on the underperformers. Out of the 18, we got already 2 in green territory on an MAT basis, on a moving annual basis, which are biscuits, Brazil and soluble coffee, Europe. Those are big chunks and quite competitive businesses. We got also MILO in ASEAN moving to also green territory. A large part of those businesses are on an improving path.

Speaker Change: Hi. Yeah. We're in lots of questions in 1. Hi or 2. Uh on the market shares. Uh is great to uh see that. Uh we have significant improve our position in the last 1 year, uh, recovered large part of the Gap that we had to our categories.

Speaker Change: Um, and uh, and and we see that, uh, through the growth platform, we see that also uh, very in a very spectacular way on the, on the performance.

Laurent Freixe: How many of the businesses are stable or improving? That's a bit more than half. Things are really moving in the right direction from a market share standpoint. On the free cash flow, I will let Anna Manz answer, but I will continue with the VMS piece. What we will do is really focus on where we believe is the space where we can win and where we can create value. That's essentially the premium side of it, with Garden of Life, with Solgar, with Pure Encapsulations, all of this in Nestlé Health Science territory, which is critical, which is strategic for us. When you think of healthy aging, healthy longevity, when you think of weight management, affordable nutrition, women's health, there are huge opportunities going forward. Our biggest play there is Nestlé Health Science.

Out of the 18. We got already 2 uh in green territory, on the NAT basis on the moving annual um basis uh which are biscuits Brazil and cereal, coffee Europe. So those are big chunks and quite competitive business sales and we go to to Milo in Azan moving to uh also green territory and a large part of those uh business sales are uh on an improving pass.

Speaker Change: Uh, how many of the business sells are stable or improving? That's a bit more than half?

Speaker Change: So things are really moving in the right direction from a market share.

Speaker Change: Standpoint.

Speaker Change: On the uh, free cash flow. I will let Anna and swear but I will maybe

Continue with the VMS piece. So uh, what we will do is really focus on where we believe is the space where we can win and where we can create value and that's, uh, essentially the, um,

Laurent Freixe: That remains absolutely core. We just want to make sure that we focus, and the focus is the name of the game. Focus on where we can win, where we can create value. The size of the business, which will be in the review, is a bit more than CHF 1 billion, CHF 1.2 billion at low single-digit profit. On the fresh free cash flow?

Premium side of it, uh, with Garden of Life, with solar with pure encapsulations. All of these in necessary Health Science territory, which is critical, which is strategic for us. When you think of, um, LC edging healthy longevity. When you see think of weight management affordable nutrition, Women's Health that are huge opportunities going forward. Our biggest play there is necessary Health Science, so that remains absolutely core. We just want to make sure that we focus and the focus is the name of the game.

Focus on where we can win, where we can create value, the size of the business, which will be in the review is a bit more than 1 billion. 1.2 billion at low.

Speaker Change: Single digit profit.

Speaker Change: And on the free free cash flow.

Anna Manz: Sure. Free cash flow in H1, as you say, is lower. Now, seasonally, H1 is always a lower half for us because of the timing of both the seasonality of our business and also, when our dividend payment occurs. That said, you're right, it is lower. The drivers of that is, firstly, as you know, we've got a lower margin and some FX headwinds in the first half. Secondly, working capital has been an outflow. I'll come back to that. Thirdly, we've had a benefit from the reduced CapEx investment as we've come off of the big step-up investment that we did post-COVID. Really the thing that has flattened our cash flow or reduced our cash flow a little bit in the first half is working capital. Couple of things going on there.

Speaker Change: Sure. So, um, free cash flow in H1. Uh, as you say is lower. Now, seasonally H1 is always a lower, uh, half for us because of the timing of both, the seasonality of our business. And also, uh, when our our dividend payment occurs that said, you're right, it is lower and the drivers of that is firstly, as you know, we've got um, a lower margin and some FX headwinds in the first half.

Anna Manz: Commodity costs are feeding through to working capital. That's why you see it a little bit higher in the first half. Also, we've taken some actions to manage tariffs. That's one of the reasons that you're seeing a small impact from tariffs in the first half, and you'll see that work through. As you know, I'm very focused on working capital, and we are as a group really managing our cash flow, but working capital is one of the big levers of that. You'll see us working to reduce consistently the volumes of our inventory and really tackle that working capital number. Although commodity prices a little bit will be what they will be.

Anna Manz: In terms of the full year, you know, full year cash flow, I think we said it, when we guided at the beginning of the year, that cash flow would be a little bit lower this year 'cause we wouldn't see the levels of working capital improvement that we saw previously. You know, still on track to deliver good cash flow this year. You know, a little bit subject to commodity movements and how they move around.

Speaker Change: I will reduce our cash flow a little bit in the first half is working capital, couple of things going on there. Commodity costs are feeding through to working capital and so that's why you see it a little bit, uh, higher in the first half and also, we've taken some actions to manage tariffs, that's 1 of the reasons that you're seeing, uh, a small impact from tariffs of the in the first half and you'll see that work through, um, as you know, uh, I'm very focused on working capital, and we are as a group, uh, really managing our cash flow, but working capital is 1 of the big levers of that. So you'll see us working to reduce consistently, the volumes, um, of our inventory, uh, and really tackle that working capital number. Although commodity prices are a little bit, will be what they will be. Uh, and in terms of the full year, you know, fully a cash flow, I think we said it. Um,

Speaker Change: when we guided at the beginning of the year that cash flow would be a little bit lower this year because we wouldn't see the levels of working capital Improvement that we saw previously. Uh, but you know, still on track to deliver, um, good cash flow this year. And, you know, a little bit subject to commodity movements, and, and, and how they move around.

David Hancock: Great. Thank you, Warren. The next question comes from Callum Elliott at Bernstein. Please go ahead, Callum.

Speaker Change: Great. Thank you, Warren. The next question comes from Callum Elliot at Bernstein, please. Go ahead. Kalam

Callum Elliott: Perfect. Thank you very much for the question. Firstly, I wanted to circle back on China, if that's okay. Really what I want to focus on is what are you actually doing? You talk a little bit about demand generation. You also talk about strengthening the value proposition. You spoke to Guillaume about strengthening the consumer pull, but you've highlighted in the press release that you expect this to hurt growth over the next 12 months. My question is, how does strengthening the consumer pull impact growth in a negative way? What are you actually going to do? Are you talking about price cuts? Are you talking about exiting categories? Are you talking about exiting channels, given all the comments about distribution? Just looking for a little bit more color on what you're actually doing in China.

Speaker Change: Perfect. Thank you very much for the question. Um, firstly I wanted to Circle back on China if that's okay. So uh really what I want to focus on is what are you actually doing?

Speaker Change: Um, you talked a little bit about demand generation, you also talk about strengthening the value proposition. Uh, you spoke to geom about strengthening the consumer poll, uh, but you've highlighted in the, the press release that you expect this to hurt growth over the next 12 months. So my question is, how does strengthening the consumer pool?

Speaker Change: Impact growth in a negative way. Will you actually going to do are you talking about price cuts?

Callum Elliott: My second question is on the really fascinating chart that you've provided on gross margin by category, where I think coffee really stands out as being quite challenging for 3 or 4 years now on that chart, which is especially interesting in the context of the very good elasticity performance that we've seen in the first half of the year on coffee. My question is, do you think there are lessons for you in that positive elasticity and whether you could maybe be more aggressive on pricing in coffee going forwards? Thank you.

Speaker Change: Are you talking about exiting categories? Are you talking about exiting channels, given all the comments about distribution, just looking for a little bit more color on what you're actually doing in China?

Speaker Change: And then my second question is on uh the really fascinating chart that you provided on gross margin by category.

Speaker Change: Um, well I think coffee really stands out as being quite challenging for 3 or 4 years. Now on that chart which is especially interesting in the context of the, the very good elasticity performance that that we've seen in the first half of the year on coffee. Um, so my question is, do you think there are lessons for you in that positive elasticity and whether you could maybe be more aggressive on on pricing in coffee? Uh, going forwards,

Speaker Change: Thank you.

Laurent Freixe: Yeah. On the first question on China, to give you the full picture, as we had a model more focused on building up distribution and in the context that Anna described of a slowing down of the demand and in a deficient environment, we ended up with, and that's our assessment, as we had a new leadership, that we had a bit too much stock in the trade. Not massive, but a little bit too much, and that has an impact on the way we manage pricing, promotional activities, and freshness. Hence the willingness to rebalance. Of course, distribution is very, very important in a China context, but we need, and again, that's a silver lining in China, we need to activate more the consumer side. We need more consumer pool.

Speaker Change: yeah, on the first question on China uh to uh give you uh the full picture as we had a model more focused on building up distribution and in the context that and I described of the slowing down

Speaker Change: Of, uh, the demand, uh, and in the definition of environment we ended up with and that's our assessment.

Speaker Change: As we had a new leadership that we had a bit too much talk in the trade, uh, not massive, but a little bit too much and that has an impact on the way, we manage pricing promotional activities and freshness.

Laurent Freixe: We need to strengthen our value propositions. This is what we have started to do, normalizing also the levels of stocks in the trade and moving from a push model to a pull model. That's to make it simple, what we'll be doing. Nothing dramatic, but an adjustment that is necessary, and that will position us well to win in the China context for the long term. Pricing?

Speaker Change: Uh, so, uh, hence the, uh, willingness to rebalance of course distribution is very, very important in a China context, but we need. And again, that's, uh, silver lining in China. We need to activate more, uh, the consumer side. We need more consumer pool. We need to strengthen our value propositions, and this is what we have started to do normalizing. Also, the levels of

Speaker Change: Um, stocks in the trade and moving from a push model, to a pool model, that's to make it simple. What will be doing? Nothing dramatic, but an adjustment that is necessary, uh, and that will position as well to win in the China context for the long term.

Speaker Change: Um,

Speaker Change: on the

Anna Manz: Oh, coffee.

Laurent Freixe: Yeah.

Anna Manz: We've seen really good elasticity on coffee, 'cause it's deeply established in consumer behavior. You see us taking price at the moment, and you see RIG momentum continuing, and I think that is very comforting. I think a couple of things on coffee. Looking forward, you'll see us continue to do what we've done actually across all of the other categories, which is to innovate into those right consumer price points at the right margin levels, and continue to take price appropriately, whilst maintaining medium-term consumer penetration. You'll see us do that. Also, if coffee commodity prices stay where they are today, we'll of course get a bit of a benefit in margin terms as we move through 2026.

Speaker Change: Pricing. Oh, coffee. Yeah. Um,

so,

Anna Manz: This is not a 2025 benefit associated with those, some of those lower input costs coming through.

Term consumer penetration and so you'll see us do that. But also um, if commodity coffee commodity prices, stay where they are today, well of course get a bit of a benefit in March in terms as we move through 2026. This is not a 2025 benefit associated with those, some of those lower input costs coming through

David Hancock: Thank you, Callum. The next question comes from Olivier Nicolai at Goldman Sachs. Please go ahead, Olivier.

Speaker Change: Thank you, Callum. The next question comes from Olivier Nikolai at Goldman Sachs. Please go ahead Olivier.

Olivier Nicolai: Hi, good morning, Laurent, Anna, and David. Just a couple of questions on my side, no housekeeping. Could you please give us an update on the pet food trends globally? Then more specifically for the US, if you are concerned about the increased competition in US pet food and the lack of pricing in the category, due to the lack of input costs in inflation? That's the first question.

Hi. Um, good morning Laura and I'm and David just a couple of questions by side no housekeeping. Uh could you please give us an update on the pet food, Trends globally and then more specifically for the us. If you are concerned about the increased competition in US, pet food and the lack of pricing is a category uh due to the lack of of input cost in inflation. That's the first question.

Laurent Freixe: Yeah. We strongly believe in the fundamentals of the category. We are still in adjustment mode after such a spike in consumption that everyone forgets during the Covid and post-Covid period, which is in the base. This is what we compare with today. The category is still growing, though at a slower pace. If you look at the long-term fundamentals, US and way beyond US, there is a massive potential to grow. Population is aging. There are less babies, unfortunately, and more pets, fortunately for pet food business. Population globally is becoming more urban, which goes also well with pet adoption. We see, by the way, pet adoption continuing. Maybe this is the multi-pet ownership, which is a little bit under pressure in the US.

Speaker Change: Yeah, uh we uh strongly believe in the fundamentals of the category. Uh, we are still in adjustment mode after such a spike in consumption that everyone forgets

Speaker Change: Uh during the coid and post-covid period, which is in the base. This is what we compared with today. Uh and and the calorie is still growing though at a slower Pace. But if you look at the long-term fundamentals,

Laurent Freixe: The opportunity to premiumize through science-based nutrition offering is there. You know that we are rolling out, for instance, our LiveClear. The cat allergy offering that we got in the Pro Plan and now Purina ONE. Just one example of a new party that we got going forward to increase pet adoption and grow the category. Balance sheet coverage is a massive opportunity in Asia, in Latam, in most markets actually, including the US, where it's around 80%, so still some potential to grow. The fundamentals, we should never forget the fundamentals. The fundamentals are extremely solid. Yes, you're right, there is little pricing because there is little input cost inflation. We got, interestingly enough, coffee and cocoa much impacted, but pet care very little impacted, if any impact.

Speaker Change: Us and Way Beyond us, that is a massive potential to grow population. Is aging. That is there are less babies unfortunately and more pets. Fortunately, for Pet Food business. H population globally is becoming more urban, which goes also well with pet adoption. We see by the way pet adoption continuing. Maybe this is the multipet ownership which is a little bit under pressure in the US and the opportunity to premise through science-based nutrition offering is there, you know that we are rolling out for instance, our life clear Leaf, clear the um catalog

Speaker Change: Offering that we got on the prop plan and now Purina 1. Just 1 example of the opportunities that we got going forward to increase pet, adoption and grow, uh, the category and Cal Fe coverage is a massive opportunity in Asia, in latam, in most markets actually including the US where it's around 80%, so still some potential to grow. So the fundamentals we should never forget. The fundamental, the fundamentals are extremely solid.

Speaker Change: And yes, you're right. There is little pricing because there is little input cost inflation. So we got

Laurent Freixe: As we got more capacity like the rest of the industry, by the way, we can promote again, and that has an impact also on the pricing dynamics. Fundamentally, the category is healthy and you will see the category returning to healthy levels of growth. If there is so much interest in the category, so many investments, it's because it's fundamentally healthy, offers tremendous potential for growth going forward.

Anna Manz: Two... Sure.

Speaker Change: Uh, interestingly enough uh, coffee and cocoa match impacted, but Pet Care. Very little impacted if any impact. And as we got more capacity, like the rest of the industry, by the way, we can promote again and that has an impact, also, on the pricing Dynamics, uh, but fundamentally the calorie is healthy and you will see the Cal returning to healthy levels of growth if there is so much interest in the Cal so many Investments. It's because it's fundamentally healthy, uh, offers tremendous potential. For growth going forward.

Anna Manz: Two... Sure.

Olivier Nicolai: Just a quick question, slightly perhaps more personal, but you celebrated your birthday recently. What kind of reinsurance you could give to investors who want you to be a CEO of Nestlé for the long term and well beyond 65?

Laurent Freixe: Nutrition, you mean?

Speaker Change: And and 2 stores and just a good question slightly perhaps more a personal but you celebrated your birthday recently. What kind of food Insurance, you could give to investors, who want you to be a CEO of nestle for the long term and well beyond 65 nutrition. You mean,

Anna Manz: No, on your age.

Laurent Freixe: On my age. Look, it's a question that has been coming a few times. It's a question I had with the board. Being a board member, there is no limit. 65 is not a limit. Provided the board wants me to stay, which seems to be the case, and, if, you know, conditions permit it, and therefore, for the medium long term.

Speaker Change: No on your age. How many aged look? Uh it's a question that has been coming a few times. It's a question that I had with the board being a board member. There is no limit, 65 is not a limit and provided the the board wants me to stay.

Speaker Change: which seems to be the case and, uh, uh, if uh, you know, conditions permitted and therefore

Speaker Change: For the medium long term.

Olivier Nicolai: Very clear. Thank you.

Speaker Change: Exactly. Thank you.

David Hancock: Thank you, Olivier. The next question comes from Jeremy Fialko from HSBC. Your line's open, Jeremy.

Olivier Nikolai: Thank you, Olivier. The next question comes from Jeremy. Felco. From HSBC. Your Line's open Jeremy.

Jeremy Fialko: Hi. Morning. Just a couple questions from me. I think the first thing will be very useful is just to get some clarity on the moving parts for RIG in the second half and, you know, the extent to which you can be sort of confident that that will be positive in the second half. The second thing is, I know this is a little bit far out, but just thinking on 2026 margins. Clearly, you're, you know, you're sort of 16.5%, you're gonna be somewhere in the upper part of the 16% in NIC 2. That seems to be implying some sort of a drag as we get into next year.

Jeremy: Morning. So just a couple of questions from me. So I think the first thing will be, uh, very useful is just to get, um, some clarity on the moving parts for rig, uh, in the second half and, you know, the extent to which you could be sort of confident that that will be positive uh, in the second half. Um, and then the second thing, I noticed a little bit far out, we're just looking on.

Olivier Nikolai: 26 month.

Jeremy Fialko: Or actually, do you think there is some scope for the margins to sort of sequentially, you know, that will be a bit of a nadir, then the sort of the cost and the pricing will get more relevant as we get into the early part of next year? I think it's just an interesting question given the sort of dynamics that you're painting today. Thanks.

Olivier Nikolai: Yeah. Um, or actually do you think there is more scope for the margins to sort of sequentially? You know, that will be a bit of a dear. And then the sort of the cost of the pricing will get more aligned as we get into the early part of next year, but I think it's just an interesting question given that sort of dynamics that you're you're painting today. Thanks.

Laurent Freixe: Let me start, and I will hand over to Anna. All our strategy is geared towards driving growth in all its components, and RIG is part of it. Our investment in the core business, our investment in growth platforms, our drive, the six big bets that are off to a good start is exactly geared towards that. Then we operate in the context, which is the context. Every elements of our strategy is focused towards that, to gain the consumer, to drive the demand, increase penetration, increase intensity. And by the way, the categories are responding. The resiliency of coffee is very, very impressive. Yes, we got some elasticity in confectionery, but as expected and as the rest of the industry.

Speaker Change: Let me start and I will hand over to Anna. Um,

Anna: All our strategy is geared towards.

Anna: Uh, driving growth.

Anna: Um,

Anna: in all these components and rig is part of it. Uh, our investment in the core business,

Anna: Our investment in the growth platforms, I'll drive the 6, big beds that are off to a good start is exactly geared towards that. Uh, and then we operate in the context, which is the context. But every, uh, uh, elements of our strategy is focused towards that to gain the consumer to drive the demand.

Laurent Freixe: I think it's quite remarkable, and especially if you take into account the comps on the one end and the impact of China to see the momentum in the organic growth in all its components. Let me hand over to Anna for the rest of the question.

Anna: Increase penetration increase, intensity. Uh and uh and and by the way, the calories are responding, uh the resiliency of coffee is very very impressive. And yes, we got some elasticity and confectionery but as expected and as the rest of the industry. So I think it's quite remarkable and especially if you take into account the uh comps on the 1 hand and the impact of China to see a the momentum uh in the organic growth in all its components. Um, but let me hand over to Anna for the

Anna Manz: Sure. We don't guide on RIG. Just some moving parts as you think about H1 and H2. As we look forward to the second half, of course, we would expect some of the consumer reaction associated with the confectionery price increases to settle down. In a number of our big markets, we moved ahead of our competitors. They've then followed. The consumer has to react to that new pricing, and all of that just takes some weeks and months just to play through. We should see that come through in the second half. Secondly, we've just been talking about pet care. We're now lapping the more normal promo environment, and we have the capacity online, coming online now that allows us to bring innovation back into this category, which drives RIG growth.

Anna: Rest of the question. Sure. So, so we don't guide on rig. Um, but just some moving Parts as you think about H1 and H2. Um, as we look forward to the second half. Of course, we would expect some of the, uh, consumer reaction associated with the confectionery price increases to settle down. So, in a number of our big markets, we moved ahead of our competitors, they've Then followed the consumer has to react to that new, new pricing, and all of that just takes some weeks and months just to play through. So we should see that come through in the second half. Secondly, we've just been talking about Pet Care. Um,

Anna Manz: You know, that is helpful to us. There's also a piece around comps. You know, we are lapping some quite high comps in Q2, less so as we move into the second half. Those are just some of the moving pieces, as well as all of those actions that Laurent has laid out that we're really driving to focus on in performing, improving our share position, driving those big bets and really growing our categories. You would, you know, we would be looking to drive RIG over the medium term. In terms of 2026 margins, again, it's too early to get into 2026 margins, but there are a few moving parts that should shape how you think about it.

Anna: We're now lapping the more normal promo environment and we have the capacity online coming online. Now that allows us to bring Innovation back into this category, which drives um, rig growth. So, you know that is, is, is helpful to us and there's also a piece around comps. Um, you know, we were lacking some quite High comps in in Q2 less. So, as we move into the second half, so those are just some of the moving pieces as well as all of those actions that Laura has laid out that we're really driving to focus on in performing, improving our share position, driving those big bets and really growing our categories. Um, so you would, you know, we would be looking to drive rig over the medium term in terms of 2026 margins again, it's too early to get into 2026.

Anna Manz: Firstly, as you see, we're perpetually taking action to improve our margins through innovating at, into the consumer need at the right margin level and through adjusting our prices where appropriate against that consumer opportunity. That will continue to help us from a margin perspective. Now, if you look at where commodity costs are today, particularly on green coffee and a little bit on cocoa, they've come down. That if they stay at this level, will start to give us a benefit as we move through 2026. Of course, we don't know what other commodity costs will do yet, but just, you know, as I look at where we are today, that should be helpful as we move into 2026. Of course, you see the work that we're doing on cost efficiency and what we've laid out with Fuel for Growth.

Anna: Margins. But there are a few moving parts that should shape. How you think about it.

Firstly, as you see, we're perpetually taking action to uh, improve our margins through innovating.

Uh, into the consumer, need at the right, margin level and through adjusting, our prices, where appropriate against that consumer opportunity, and that will continue to help us from a margin position. Now, if you look at where commodity costs are today, particularly on green coffee, and a little bit on Cocoa, they've come down.

Anna Manz: There is absolutely no letup there. We're very focused on driving those efficiencies again, which should be helpful to margin. Okay. Thanks. Thanks very much.

Anna: And that, if, if they stay at this level, we'll start to give us a benefit as we move through 2026. Of course, we don't know what other commodity costs will do yet. But just, you know, as I look at where we are today, that should be helpful, uh, as we move into 2026 and of course, you see the work that we're doing on cost efficiency and what we've laid out with fuel for growth, there is absolutely no let up there. Uh and we're very focused on driving those efficiencies again which should be helpful to margin.

David Hancock: Thank you. The next question comes from Celine Pannuti from JPMorgan. Please go ahead, Celine.

Okay. Thanks. Thanks very much. Thank you. The next question comes from Selene ponui from JP Morgan. Please go ahead Seline.

Laurent Freixe: Yes. Good morning. Thank you for taking my question. First one, you mentioned there was an increasing macro headwind you were flagging. Can you go through maybe the key regions where you are seeing this increased headwinds? Yeah, that's my first question.

Celine Pannuti: Yes. Good morning. Thank you for taking my question. First one, you mentioned there was an increasing macro headwind you were flagging. Can you go through maybe the key regions where you are seeing this increased headwinds? Yeah, that's my first question.

Selene Ponui: Yes, uh, good morning. Thank you for taking my question. So, first 1, um, you mentioned, there was increasing micro headwind. Um, you were flagging, could can we go through maybe the key, uh, regions where you are seeing this, uh, uh, increase headwinds?

Anna: Um, yeah, that's my first question.

Anna Manz: Yeah. Maybe talking about the consumer sentiment, because I think this is what matters the most. It's not completely new. We come from 2024, where we had already a subdued consumer environment, so it's more of the same with a bit more uncertainties in North America. We see, of course, the ripple effect on LatAm, which is much connected to it. We see remittances that for the first time in years have declined, and this is pure consumption. We see Europe surprisingly resilient, although we got consumers seeking value and looking for promotions logically given the context.

yeah, so maybe talking about the consumer sentiment because I think this is what matters the most

Speaker Change: Environment. So, it's more on the same with a bit more uncertainties in North America. We see, of course, the ripple effect on latam, which is much connected to to it. And we see remittances that for the first time in years have declined, and this is pure consumption.

Anna Manz: When it comes to Asia, to focus maybe on the two main geographies, we see a bit better India and China, which is a bit under pressure when it comes to consumption for the reasons that Anna flagged earlier.

we see Europe, surprisingly resilient, although we got consumer seeking value and looking for promotions, logically, uh, given given the context

Speaker Change: And when it comes to Asia to focus maybe on the 2 main geographies, we see a bit better India and China which is a bit under pressure when it comes to consumption for the reasons that Anna flagged earlier.

Laurent Freixe: Thank you. Maybe coming back to North America, can you talk about your market share position in two categories? Obviously, you're doing quite well in creamers, but can you talk about the competitive performance there?

Speaker Change: Thank you. And then maybe coming back to North America. Um, can you talk about your, uh, market share position. Uh, in a ticket categories, obviously you're doing quite well in Crews. Uh, but can you talk about the competitive, uh, performance? Um, there

Anna Manz: Yeah. I think, globally speaking, the momentum is back. Performance is improving. You saw the creamers. We got solid positions in pet care. Coffee is also in a good place. We see improvement in the food part of the business. Where we got some challenges is the nutrition part with Gerber. We are on top of it, addressing it.

yeah, I think, uh,

Speaker Change: Globally, speaking. The momentum is

Speaker Change: back and performance is improving. You saw the creamers.

Speaker Change: We got solid positions in Pet Care. Coffee is also in a good place.

Speaker Change: Uh, we see Improvement in the food part of the business.

Laurent Freixe: With an end-to-end perspective. globally speaking, I would say, we got a much more competitive North America in most of its components. Maybe exception would be the nutrition piece.

Speaker Change: Uh where we got uh uh some challenges is uh the nutrition part with with Gerber but we are on top of it addressing it.

With an end to end perspective.

Speaker Change: so globally, speaking I would say, uh, a much we got a much more competitive

Speaker Change: uh,

Speaker Change: North America, in all, its in most, its components. Maybe exception would be the nutrition piece.

David Hancock: Thank you, Celine.

Celine Pannuti: Just to North America, are you expecting more? Are you seeing big retailers? How do you feel about the stock levels, and you know, how you think that the retailer behavior is evolving?

Thank you so much just to North America. Are you expecting more? Are you seeing big retailers? How do you feel about the stock levels? Um and you know how you think that the retailer behavior is evolving?

Laurent Freixe: Stock level is okay. We would have flagged if we would have any issue there. On the retail environment, super competitive obviously. We see fragmentation of the channels. We see the dynamic behind the e-commerce, and we are of course on top of it. That drives retailers' behaviors. They are demanding, they are aggressive and competitive, but we play well in that context. From discussion, recent discussion with key ones, there is real willingness to partner with Nestlé to accelerate growth. Those are fresh from the open discussion that we had with some of the key ones. That's the good news, that there is the shared vision that more is possible and that working together, we can achieve more.

Speaker Change: Uh,

Speaker Change: Stock level is is okay, we would have flagged if we would have any any issue there.

Speaker Change: Uh, and on the return environment, super competitive obviously. Uh, we see fragmentation of the channels, we see, uh, the dynamic behind the e-commerce and we are, of course on top of it.

Speaker Change: Uh, so that drives, uh, retailers behaviors, they are demanding, they are aggressive and competitive, but, uh, we play well in that context and, uh, from discussion recent discussion with

Speaker Change: Key wants their is really willingness to partner with Nestle to accelerate growth. Uh, those are fresh from the oven discussion that we had with some of the key ones. So that's the good news that there is. There is the

Speaker Change: shared Vision that more is possible and that working together we can achieve uh more

Celine Pannuti: Thank you.

Anna Manz: At Q1, the only area where we flagged that we'd sold a little bit more was Nespresso. We haven't seen that unwind because there's just so much good demand for the Nespresso brand. We did flag that as an area where we thought we might see some stock reduction in Q2. We didn't, and that's due to the great momentum that we've got in the brand at the moment.

Speaker Change: Sold a little bit more with Nespresso. And we haven't seen that online because there's just so much. Good demand for the Nespresso brand. So we did we did flag that as an area where we thought, we might see some stock reduction in Q2 we didn't, and that's due to the great momentum that we've got in the brand at the moment.

David Hancock: Thank you, Celine. We have time for one last question, which we will take from David Hayes at Jefferies. Please go ahead, David.

Speaker Change: Thank you, Celine. We have time for 1 last question. Uh, which we will take from David Hayes at Jeff? Please go ahead. David.

David Hayes: Thanks, David. Good morning, all. Yes, two from us. Firstly, just on the margin guidance, I know before you talk about direct impacts of tariffs, that has been dropped as wording. Is that just a reference to FX or other indirect tariff impacts that are still not included in the guidance? Is that now sort of fully taking into account all factors as you guide today? Secondly, just coming back to the free cash flow. From a working capital perspective, reverse factoring or vendor financing was up CHF 1.5 billion, I think, last year. Is that something that you've still got capacity to continue to increase to help working capital?

David Hayes: Is that actually something which maybe is slightly coming down because of the big increase that you saw, during 2024 to help working capital metrics? Thank you.

Speaker Change: Thanks, David. Good morning all. Um, yeah, so Chief from us. Um, first, he's on the margin guidance. I know before you talk about direct impacts of tariffs, uh that has been dropped as wording. So is that just a reference to FX or the other indirect, uh, tariff impacts that are still not included in the guidance or is that now to fully taking into account all factors? Uh, as you guide today, uh, and then secondly, just come back to the the free cash flow um, from a working capital perspective, reverse factoring or vendor. Um, financing was was up 1.5 billion. I think last year is that something that you've still got capacity to continue to increase to help working capital or is that actually something which maybe is slightly coming down because of the, the big increase that you saw, uh, during 2024 to to help working capital, um, metrics, thank you.

Anna Manz: On the guidance wording. At Q1, we talked about the direct impact of tariffs, meaning the tariffs that were hitting us as opposed to FX and any potential consumer slowdown that could possibly come as a result of a changed economic environment because of tariffs. What we've guided on today, to be super clear, is again, the FX that we see today, so current sort of spot prices, and the tariffs that are currently enacted. What we're not guiding on because we don't know what will happen in the future is any future change in tariffs or frankly, any change in consumer environment. That's how we think about guidance. In terms of cash flow, the big opportunity for us is managing the group better.

Speaker Change: consumer slowdown that could possibly come as a result of a change economic environment because of terrorists

Speaker Change: so what we've guided on today to be super clear is again the FX that we see today, so current sort of spark prices and the tariffs that are currently enacted

Speaker Change: Um, what we're not guiding on because we don't know what will happen in the future is any any future change, in tariffs, or frankly, any change in consumer environment. So it's so that's how we think about guidance. And in terms of cash flow,

Anna Manz: You know, getting much tighter around the amount of stock that we have, and where we have it as we manage our global supply chain. I'm very focused on that because that is not just about cash. I mean, it is about cash, but it's also about freshness, agility, and ability to deliver for the customer. That's my number 1 focus. We do at the edge use some factoring and vendor financing, but in the overall context of the group, it's relatively small and isn't materially changing.

Speaker Change: the big opportunity for us is managing the group better, you know, get getting much tighter around the amount of um

Speaker Change: Stocks that we have and where we have it as we manage our, our Global supply chain. And I'm I'm very focused on that because that is not just um, about cash. I mean, it is about cash, but it's also about freshness, agility and ability to deliver further customer. So that's my number 1 Focus. Um, we we do at the edge use, um, some factoring and vendor financing. But in the overall context of the group, it's it's, it's relatively small, um, and isn't materially changing

David Hayes: Great. Thank you.

David Hancock: Thank you, David. Thank you, everyone. That brings today's call to a close. Thanks for your interest and your questions. We look forward to meeting with many of you over the coming weeks. Wish you a good summer, and we'll hear you again at the Q3 call in October, if not before that. Many thanks.

Speaker Change: Great. Thank you.

Speaker Change: Thank you, David. Thank you everyone. That brings today's call to a close. Thanks for your interest and your questions. Uh, we look forward to meeting with many of you over the coming weeks. Uh, wish you a good summer and we'll hear you again at the Q3 call in October if not before that. Any thanks.

Mhm.

Speaker Change: Mhm.

Speaker Change: Hm.

Speaker Change: oh,

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