Nestle half-year profit disappoints, strikes deal to sell waters stake

(AWP Alliance News) - Nestle SA shares tumbled on Thursday, after the consumer goods maker reported a decline in half-year profit and announced a deal to offload for EUR3.0 billion a chunk of its bottled water business, which houses brands such as Source Perrier and Acqua Panna.

Nestle shares were down 6.4% to CHF80.63 each in Zurich on Thursday morning.

Nestle will form an equally-owned joint-venture with private equity firm Platinum Equity LLC named Peranel.

"Spanning more than 30 brands with products sold in 120 countries, Peranel includes iconic natural mineral water brands such as S.Pellegrino, Source Perrier and Acqua Panna as well as premium and functional hydration beverages, the global Nestle Pure Life brand and other leading local water brands," Nestle said.

"As an independent company focused exclusively on water and premium beverages, Peranel will have full flexibility to invest in its brands and pursue growth opportunities. The business includes an in-house R&D team that has contributed to approximately 120 launches since 2022 and has built a robust product development pipeline."

The deal values Peranel at EUR4.9 billion on an enterprise basis, with Nestle's expected cash proceeds to be around EUR3.0 billion. The agreement is expected to close in the second half of 2027.

Nestle said net profit in the first half of 2026 was CHF3.47 billion, around USD4.26 billion, down 31% from CHF5.07 billion a year prior.

The KitKat and Nescafe owner's sales fell 2.5% to CHF43.11 billion from CHF44.23 billion.

Profit missed company-compiled consensus of CHF5.07 billion, but sales beat consensus of CHF43.04 billion.

A CHF1.3 billion non-cash write-down hurt the firm's bottom line.

Organic growth was 3.6% over the period, and there was a 0.1% boost from acquisitions, though Nestle took a 6.2% hit from foreign exchange movements. Pricing improved 2.1%.

The company, based in the town of Vevey on Lake Geneva in Switzerland, said real internal growth was 1.5% in the half-year, picking up pace from 0.2% a year prior. RIG is Nestle's measure that "represents the impact on sales of volume increases or decreases, weighted by the relative value per unit sold".

In the second quarter alone, organic growth was 3.7%, and real internal growth was 1.8%. Second quarter pricing was up 1.9%.

"Our RIG-led growth strategy is delivering, with organic growth of 3.7% and RIG of 1.8% in Q2, making steady progress towards our medium-term guidance. Emerging markets growth accelerated, and we delivered solid performance in developed markets. We are increasing and prioritising our investment behind our leading brands and growth platforms, sharpening our portfolio focus and driving further efficiencies to reinvest. While the external environment remains uncertain, we are taking actions to accelerate consistent growth," Chief Executive Officer Philipp Navratil said.

Navratil became CEO in September, installed in the position after Laurent Freixe was dismissed with immediate effect following an investigation into an undisclosed romantic relationship with a direct subordinate.

Navratil joined Nestle in 2001 as an internal auditor. He was appointed country manager for Honduras in 2009 and in 2013 assumed leadership of the coffee and beverage business in Mexico.

In 2020, he moved to Nestle's Coffee Strategic Business Unit and became CEO of its Nespresso SA subsidiary in July 2024.

Freixe was only in post for a year.

Looking ahead, Nestle still expects organic sales growth in the range of 3% and 4% for 2026, and an acceleration in real internal sales growth from the 0.8% achieved in 2025. Free cash flow is still expected to be above CHF9 billion.

It now expects the second half underlying trading operating profit margin to be "broadly similar to the first half". It had previously predicted the margin would strengthen "in the second half of the year".

In the first half, the margin was 16.4%, down from 16.5% on-year, but up from 15.7% in the second half of 2025.

The underlying trading operating profit for the full-year is still expected to "improve" from 2025s 16.1%.

By Eric Cunha, Alliance News news editor

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