Second quarter constant dollar sales were 3% lower than Q2 2014. The group said that lower volumes sold in Asia and Latin America were partially offset by improved pricing and performance in the US business.
Foreign exchange adversely impacted reported Q2 sales which were $1032.4 million compared to $1111.1m in the same quarter a year earlier.
Q2 earnings before interest and income taxes (EBIT) dropped to $229.2m from $244.9m in Q2 2014. The group said lower dairy costs led to an increase in gross margin to 65.5% from 61.6% in Q2 2014. This wasn't enough to offset the lower revenue and an increased investment in demand creation which attributed to the drop in EBIT.
Net earnings for the group in Q2 2015 were reported at $162.9m compared to $171.4m in Q2 2014.
“We faced a number of challenges in the second quarter and that is reflected in our results,” Kasper Jakobsen, chief executive said. “While we are pleased with our strong performance in North America and Europe, we are determined to improve performance in specific Asian and Latin American markets. While disappointed with our overall sales in China in the latest quarter, we are encouraged by the early trajectory of our new growth initiatives there – and expect to see a return to sequential quarterly growth within the year. We remain committed to investing in support of our long term strategy.”
First half results showed flat constant dollar sales compared to the previous year although reported sales were $2126.8m, compared to $2224.4m a year earlier as foreign exchange had an adverse affect.
As with Q2 results gross margin of 64.7% increased in H1 from 62.6% in the prior year as the business benefited from lower dairy costs and improved pricing.
EBIT for H1 2015 was reported at $514.4m, down from $536.1m in H1 2014.
Net earnings attributable to shareholders for the six months to June 30 were $370.3m compared to $373.8m in the prior year period.
The group increased sales in North America and Europe by 5% and with improved pricing and lower product prices, gross margin also improved.
Sales in Latin America increased by 7% on a constant dollar basis but dropped on a reported basis due to adverse affects of foreign currency. Volumes dropped compared to the same period a year earlier but operating costs also dropped. The result for the EBIT for the region was an increase of 2% to $102.1m from H1 2014.
A drop in performance in the Asia segment offset the gains made in the US, Europe and Latin America segments.
H1 2015 sales in Asia decreased by 5% compared to H1 2014 on a constant dollar basis. On a reported basis sales were $1094.2m, compared to $1168.3m in the prior year. Solid performance across several other Asian markets did not fully offset the effects of lower market share in Thailand, competitors' increased promotional activities in China and a reduction in cross border trade from Hong Kong.
See the full results announced by Mead Johnson here
