Nestlé expects slower growth this year after 2021 performance beat expectations

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Food group Nestlé said it expects underlying sales to rise around 5% and a broadly flat margin this year, after strong demand coupled with price hikes helped growth to accelerate more than expected in the fourth quarter.

Underlying or organic sales, which exclude currency fluctuations and acquisitions, rose 7.5% last year, ahead of a forecast of 7.1% in an analyst survey compiled by the company, thanks to a 7.2% rise in the fourth quarter, the maker of Nescafé instant coffee said in a statement.

Acceleration of growth investments

“In 2021, we remained focused on executing our long-term strategy and scaling up growth investments, while addressing global supply chain challenges,” commented Mark Schneider, Chief Executive Officer of Nestle.

Under the pressure of high raw materials, energy and transport costs, the underlying trading operating profit margin decreased slightly to 17.4% in 2021, compared to 17.7% in 2020, reflecting the delays between the cost inflation and pricing measures.

“We have limited the impact of exceptional cost inflation through diligent cost management and responsible pricing,” Schneider added. “Our strong underlying earnings per share growth demonstrates the resilience of our value creation model.”

Rising costs

Consumer goods companies are grappling with soaring costs for raw materials, energy, transport and labour, prompting Unilever last week to warn of profitability as that it strives to raise prices enough to offset rising costs.

At Nestlé, organic sales growth was driven by higher volumes and a 3.1% price increase in the fourth quarter, compared to 2.1% in the third quarter, as the group passed on higher costs.

He said he expects organic sales to grow around 5% while maintaining a trading operating margin between 17.0% and 17.5% in 2022. He also said he expected organic sales to grow 4-6% in the medium term.

Nestlé’s net profit rose 38.2% to CHF 16.9 billion (€16.15 billion), prompting the company to propose a dividend increase of CHF 2.80 per share, from CHF 2.75 for 2020, but slightly below expectations.

News by Reuters, edited by ESM. For more A-Brands news, click here. Click subscribe to register ESM: European Supermarket Magazine.

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