1H/2Q Preview: Accelerating Vol/mix Is Key

Research evidence excerpt

1H/2Q Preview: Accelerating Vol/mix Is Key

4.5% 5.8% 3.9% 4.7%

Petcare 4.2% 6.5% 5.5% 4.6%

strengthened, with volumes returning to growth alongside firmer pricing, while prepared dishes Nutrition 2.9% -3.5% -8.0% -1.0%

saw a sharper decline and creamers slowed. We have NORAM LFL at 1.5%, matching 1Q26, .Source:F&S Jefferies analysis3.5% & estimates,7.5% company2.5% data 4.7%

but with 1.0% vol/mix, up from 0.2% last qtr.

In Europe, coffee (incl. Starbucks) continues to show resilient momentum, with sequential

improvement in volume as pricing moderates. Market share pressures persist but are easing.

We have Europe regional growth slowing to 2.5% YoY in 2Q, down from 3.9% in 1Q. That mostly

reflects less price contribution being assumed on the higher price lapping dynamic related to

coffee/cocoa.

Margin and FCF. Our 1H26 op margin forecast of 16.3% implies a 20bp YoY decline. This

assumes an underlying CHF200m increase in A&P (of the guided 600m for FY26), a 20bp

increase YoY as % sales. We have COGs inflation assumed to be 2%, net of cost save actions.

We anticipate about 30% of the FY26 estimated FCF (CHF9.5bn) to be delivered in 1H.

FY estimates, +2%. Our earnings estimate for FY26 increases 2%. This mostly reflects an

update on FX (now calculate to be a 2.3% headwind for sales v prior 5%) and more confidence

on price retention in coffee/ pet care than before. That is premisd on indications YTD of more

resilient vol/mix than we feared.

Valuation. That optimism on FX and vol/mix resilience feeds through to a 5% increase in our

price target, to CHF84. That implies a NTM P/E de-rate to 17x over the year ahead, but that is

more than offset by earnings growth of 6% and the dividend yield of 3.7%. Retain Hold.

David Hayes * | Equity Analyst