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A-Brands

Nestlé Expects Slower Growth This Year After 2021 Performance Beats Expectations

Food group Nestlé has said that it expects underlying sales to rise around 5% and a broadly stable margin this year after strong demand coupled with price hikes helped growth accelerate ahead of expectations in the fourth quarter.

Underlying or organic sales, which strip out currency swings and acquisitions, rose 7.5% last year, ahead of a 7.1% forecast in a company-compiled poll of analysts, thanks to a 7.2% rise in the fourth quarter, the maker of Nescafé instant coffee said in a statement.

Stepping Up Growth Investments

"In 2021, we remained focused on executing our long-term strategy and stepping up growth investments, while at the same time navigating global supply chain challenges," commented Mark Schneider, Nestlé chief executive.

Under pressure from high costs for raw materials, energy and transportation, the underlying trading operating profit margin declined slightly to 17.4% in 2021, from 17.7% in 2020, reflecting time delays between cost inflation and pricing actions.

"We limited the impact of exceptional cost inflation through diligent cost management and responsible pricing," Schneider added. "Our robust underlying earnings per share growth shows the resilience of our value creation model."

Surge In Costs

Consumer goods companies have been grappling with a surge in costs for commodities, energy, transport and labour, prompting peer Unilever last week to warn on profitability as it struggles to lift prices enough to offset the higher costs.

At Nestlé, organic sales growth was driven by higher volumes and a 3.1% increase in prices in the fourth quarter, up from 2.1% in the third quarter as the group passes on higher costs.

It said it expected organic sales to grow around 5% while maintaining an underlying trading operating profit margin between 17.0% and 17.5% in 2022. It also said it expected organic sales to grow 4-6% over the medium term.

Net profit at Nestlé rose 38.2% to CHF 16.9 billion (€16.15 billion), prompting the company to propose an increased dividend of CHF 2.80 per share, up 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 sign up to ESM: European Supermarket Magazine.

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