Nestle S.A

Good morning and welcome to Nestlé's three-month 2026 sales update. I'm David Hancock, Head of Investor Relations, and I'm joined today by Philip Navratil, CEO, and Anna Manns, CFO. Before we get started, please take a moment to review the disclaimer on slide two. Let me quickly take you through our short agenda. We'll start with an overview of the key messages from Philip before Anna reviews the three-month sales in more detail. We will then open up the lines for Q&A. With that, I'll hand over to Philip.

Thank you, David. Good morning, and thank you for joining us today. We have started the year well. Our performance demonstrates that our rig-led growth strategy is delivering in a complex and uncertain environment. Before turning to the details, I would like to thank our people around the world for their continued dedication and focus, as well as our customers and consumers for their trust. Let me start with the key messages for the quarter. Growth momentum continued with organic growth of 3.5% and RIG of 1.2%. Our performance is broad-based. RIG was positive across all zones and categories except infant formula within nutrition, which was impacted by the recall. By category, coffee was the star, with recovering volumes and positive mix. Emerging markets also continued to stand out, driven again by RIC. The infant formula recall impacted performance in the quarter as expected. We acted quickly, product availability is back to normal, and we're seeing new parents coming to our brands as they enter the category. So Q1 was a quarter of focused execution and good momentum. At the same time, it is clear that geopolitical and macroeconomic uncertainties have increased. Taking these together, we're maintaining our full year 2026 guidance. Here is a reminder of our strategic priorities. As I have said before, my highest priority is rigged lead growth. There is still much to do in order to drive this sustainably. Let me talk about what we have done in Q1. Where are accelerating investments behind our growth platforms? These are areas where structural growth drivers, competitive advantages, and our strong innovation pipelines come together driving high single-digit organic growth or better. Elsewhere, we are addressing affordability and driving premiumization by sharpening our price pack architecture. We are investing more behind fewer, stronger brands. And our marketing transformation is a key enabler. Winning portfolio is another priority. We are making progress on the waters and VMS disposals, and we have announced this morning that we have reached an agreement to sell Blue Bottle Coffee. All this is underpinned by disciplined execution. I have talked about clear accountabilities and aligning incentives with delivery of sustainable high quality growth. To support this, we needed to strengthen our KPIs and performance management system. And this is now fully rolled out. Taking together action on these priorities positions us well to deliver our plans for this year and beyond. And with that, I will now hand over to Anna to go through our Q1 performance.

Thanks, and good morning. We delivered 3.5% organic sales growth in the quarter, with rig of 1.2% and pricing of 2.3%. Sales were significantly impacted by foreign exchange. Last year, the Swiss franc strengthened sharply in early Q2, so assuming current spot rates, the year-on-year impact will reduce significantly from now on. We currently expect a full year currency headwind on sales of around 5%, which is a little less than we expected in February, as the Swiss franc has weakened since then. Looking at organic growth in a bit more detail. On RIG, we maintained our second half momentum, despite the infant formula recall and US pet care phasing, both of which I called out at the full year. The chart on the right shows rig for the first quarter by category. The impact in nutrition and pet care were compensated in particular by coffee. You see the standout performance that it mentioned with 3.5% rig in Q1 compared to less than 1% last year. Food and snacks also improved, delivering rig above 2% for the first time since 2021. Let me get into a bit more detail. Performance in coffee was very strong. Pricing continues to contribute positively, although its impact will ease as we progress through the year. Rig momentum is improving, supported by the strength of our brands. Take Nescafe as an example. In the US, we had very strong pricing and double-digit rig in Q1, even in a more difficult consumer environment. This reflects smart price pack architecture and strong in-store execution, as well as occasion-expanding innovation, like Nescafe Gold Espresso. Overall pet care growth was subdued during 2024 and most of 2025, but has showed signs of improving momentum over the last two quarters. Q4 and Q1 are distorted by customer order phasing in the US, which boosted growth in Q4 by a bit more than a percentage point, and that reversed in Q1. Over the two quarters, the effect is neutral. The improvement in pet care is largely coming from the U.S., and this is driven by additional capacity coming online, allowing us to finally service unmet demand in wet cat, where the market is growing. And we see that same strong demand for wet cat in Europe, too. And here we have greater skew towards cat and fewer capacity issues, and so continue to deliver strong rig-led growth. As expected, our performance in nutrition was largely driven by the impact of the infant formula recall, and I'll cover this in a bit more detail later. Outside of this, medical and adult nutrition performed well, and the combination of nutrition and the former Nesse Health Science business will help us unlock further growth. And finally, food and snacks. Overall organic growth has been relatively stable over the last five quarters, but the quality of that growth has been improving. RIG was negative in Q1 and Q2 last year, but has been improving progressively in the last three quarters to reach more than 2% in Q1. A major factor has been our confectionery business returning to growth as we've moved through our pricing actions. Before moving to our zones, here's a view by geography. In developed markets, growth is a bit lower, reflecting the softer macroeconomic environment and weaker consumer confidence. but our performance versus our categories is improving. On the other hand, as Philip mentioned, we're seeing good growth in emerging markets. Excluding China, OG is close to 7%, with almost 3% rig. In most of these markets, momentum in our categories is supportive, and the actions that we're taking are driving growth and share gains. Turning to the zones. In AMS, we delivered another good quarter with an improving momentum and positive OG across all markets and categories. Riggs has strengthened as a result of our focused investments despite the difficult consumer environment in the U.S. Many of the category dynamics I mentioned for the group are playing out in AMS. I'll highlight coffee and pet care in particular. I referenced Nescafe in the U.S., but the strength in coffee is actually really broad-based. In each of our other large coffee markets, including Mexico, Brazil, Chile, and Canada, RIG was mid-single digit or better. In pet care, underlying momentum is improving, driven by our good category growth in cat and by our super premium brands, One and Fancy Feast. In AOA, there are a few moving pieces, and this chart doesn't quite tell the full story. The infant formula recall accounts for all of the slowdown in growth from Q4 to Q1. And overall growth is still impacted by the continued correction of trade inventory in China. That aside, we're performing well. This is especially true in some of our emerging markets, including India, Indonesia, and Central and West Africa, as well as developed markets such as Japan. Market dynamics have generally been supportive and we're outperforming. Take Maggi in India, which delivered strong double-digit OG and rig. Maggi is a loved brand in India, and we've built on that by combining affordable price points and flavour innovation, such as spicy noodles, to capture rural and younger consumers. In Zone Europe, growth is solid. Here we are continuing to deliver great growth in pet care, as I already mentioned, and coffee is recovering nicely, with growth still price-led, but with improving rigs. The growth in pet and coffee was partly offset by the impact of the infant formula recall and a competitive environment in food. And finally, but importantly, we've largely navigated the annual price negotiations in Europe with limited disruption. Turning to the globally managed businesses. In Nespresso, growth is still led by pricing, which is expected to moderate as we begin to annualise increases from 2025. RIG recovered in the quarter, partly due to an increase in active consumers in Europe, as well as the reversal of negative customer order phasing from Q4 last year. For Nespresso, the big news of the quarter was the launch of our new global brand ambassador, Dua Lipa. We've had a great response from a much broader consumer demographic. This collaboration, along with others like Kit Kat with Formula One, reflects our new approach to brand building. investing in the right partnerships which elevate our brands and engage a broad spectrum of consumers and especially those younger demographics. Finally, in L'Essai waters and premium beverages, we delivered solid growth led by our international brands of San Pellegrino with innovations like Chow and the continued expansion of Maison Perrier. Turning to the infant formula recall, the recall was executed rapidly during the first quarter. Our priority has been to replenish shelves and ensure parents have access to the products that they need. And as of April, product availability is back to normal. The overall impact of the recall in Q1 was around 90 basis points on organic growth. And about half of this reflected the direct effects of sales returns, temporary stop shortages, and the subsequent replenishment. The remainder was driven by lower consumer demand. Our teams have done a great job engaging with healthcare professionals, retailers and consumers to rebuild trust in our brands. And this is key to supporting a recovery with new consumers recruited continuously as babies enter the category every day. We estimate that our infant formula sales are currently down around 10% or so due to the consumer impact. And we're already seeing early signs of improvement and expect to fully recover by the end of the year. Now turning to guidance. We're pleased with the Q1 growth performance, especially our rigged delivery. At the same time, we're clearly facing increased geopolitical and macroeconomic uncertainties. The conflict in the Middle East will have some impact on commodity and distribution costs and possibly on consumer behaviour, but it's too early to know the full extent of this. Taking into account the momentum in the business alongside these uncertainties, our guidance for 2026 remains unchanged. We expect organic sales growth to be in the range of around 3%, up to 4%, with accelerating rig compared to 2025, driven by our focused growth plans. Our new top margin, we expect to improve versus 2025, with strengthening in the second half. Lastly, we expect to deliver over $9 billion of free cash flow. And with that, I'll hand over to David to open the Q&A.