Nestle Half year numbers

14-AUG-15

Nestle released 2015 Half-year results yesterday, at the same time an Indian court dismissed charges of a noodle scandal in that country, further testing of the product is underway, an independent body will test whether or not the product is harmful. Maggi Noodles. As they say in the English release: In India, our withdrawal of Maggi noodles resulted in negative organic growth which will continue into the second half. We are engaging fully with the authorities as we work to relaunch the product. Do you eat boxed or packaged noodles?

Whilst sales growth has been muted, this is against a backdrop of struggling markets everywhere, developed and emerging. Yet, the company still maintained their growth trajectory across all of those markets, the strongest being in the Americas where pet-care products, coffee and creamers were the drivers. My dogs must be dumb, the excitement they get is the same day in and day out when I feed them, at least the two male dogs. The female husky must be smarter, if there are no "added extras" in her bowl she gives me "the look". EPS for the first half clocked 1.43 Swiss Francs, the Swiss Franc share price is 74.15, the ADR Dollar price is 76 (the stock was up 2 percent last evening). That is about spot on, 1 US Dollar is around 0.98 Swiss Francs.

The stock trades on a 16 multiple and is hardly expensive for a global business of this size and scale, the company has a market capitalisation of 236 billion Swiss Francs, around 242 billion Dollars. I guess with the growth rates relatively muted, the stock will trade at this sort of level. Also remember that the Swiss government gobbles up around one-third of the dividend, taxes that you cannot avoid, the pre tax yield is around three percent. Compare that to the Swiss government bond rate of nothing, then it is pretty good, in that context.

Why own this company? They are the gold standard (Maggi Noodle scandal aside) of food production globally, their infant care and coffee brands are solid, strong, in fact all of their brands are pretty amazing. Quality, definitely not quantity is the name of their 110 year old business. Yet global sales are expected to be in the coming years approaching 100 billion Dollars. At the current growth rates expected of around 5 percent per annum, you could easily see it there before the decade is out, 2019. We continue to believe that this business is well poised to continue to attract more customers over time, with their well known and quality brands. Buy.