Nestlé has agreed to place its global water business into a €4.9bn (£4.3bn) joint venture as the KitKat and Nescafé maker posted better-than-expected second-quarter sales growth.

It will form a 50:50 partnership with US investment firm Platinum Equity, which is expected to generate approximately €3bn (£2.6bn) in cash proceeds for Nestlé.

The new business, named Peranel, will bring together more than 30 brands sold across 120 countries, including S.Pellegrino, Acqua Panna, Source Perrier and Nestlé Pure Life, alongside a number of local bottled-water brands.

The transaction, which remains subject to employee consultation and regulatory approval, is expected to complete during the first half of 2027.

Nestlé said the partnership would create a more focused standalone player capable of accelerating growth across water and premium beverages.

Chief executive Philipp Navratil said working with Platinum Equity would give Peranel “enhanced agility” to carry out its growth strategy.

Nestlé upgrades sales outlook

The announcement came as Nestlé reported organic sales growth of 3.7 per cent during its second quarter, marginally ahead of analysts’ expectations of 3.6 per cent.

Prices increased by 1.9 per cent, while real internal growth – the company’s measure of sales volumes and product mix – rose by 1.8 per cent.

Nestlé upgraded its full-year organic growth forecast to between three per cent and four per cent, compared with its previous guidance of around three per cent.

For the first half, organic sales increased by 3.6 per cent, driven by pricing growth of 2.1 per cent and real internal growth of 1.5 per cent.

However, reported sales fell 2.5 per cent to CHF43.1bn (£40.1bn), as foreign exchange movements reduced revenue by 6.2 per cent.

Organic retail sales increased by 3.6 per cent, while ecommerce surged 12.2 per cent and represented 21.8 per cent of total group sales.

Coffee led category growth during the half, rising 7.5 per cent on the back of Nescafé, while food and snacks grew 3.7 per cent, supported by Maggi, KitKat and Milo.

Petcare sales increased 2.7 per cent, although nutrition declined 1.2 per cent as Nestlé continued to feel the impact of its infant formula recall.

Water sales accelerate before separation

Nestlé Waters & Premium Beverages recorded organic growth of 5.1 per cent during the first half, including a 6.6 per cent increase in the second quarter.

S.Pellegrino delivered high-single-digit growth, while Sanpellegrino and Maison Perrier achieved strong double-digit increases.

The company said favourable European weather, stronger retail execution and new product launches had supported the category’s performance.

However, the water division has lower margins than several of Nestlé’s core categories. Its underlying trading operating profit margin stood at 9.5 per cent during the half, compared with 19 per cent for coffee and 21.8 per cent for petcare.

The business has also faced legal and regulatory scrutiny in France over the treatment of mineral water, alongside criticism concerning water use and environmental sustainability.

Profit falls amid portfolio overhaul

Nestlé’s first-half net profit fell 31.4 per cent to CHF3.5bn (£3.3bn), reflecting higher restructuring costs and a CHF1.3bn (£1.2bn) write-down linked to businesses classified as held for sale.

Underlying trading operating profit declined 2.8 per cent to CHF7.1bn (£6.6bn), with higher coffee and cocoa costs, tariffs, the formula recall and increased marketing investment weighing on profitability.

The company is also progressing sales of its mainstream vitamins, minerals and supplements operation and its remaining directly operated ice cream businesses as Navratil narrows the group’s focus.

Nestlé said it had generated CHF1.7bn (£1.6bn) in cumulative savings through its Fuel for Growth programme and remained on track to reach CHF2bn (£1.9bn) by the end of 2026.

It expects lower coffee and cocoa costs to benefit profitability during the second half, although higher energy and transport costs linked to conflict in the Middle East are anticipated to offset part of the improvement.

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