Nestlé pays attention to margins despite increased sales

File Photo: The company logo can be seen at the Nestlé plant in Konolfingen, Switzerland, on September 28, 2020. REUTERS / Arnd Wiegmann

July 29, 2021

By Silke Koltrowitz

ZURICH-Nestlé says input cost inflation will margin slightly this year, even if strong demand for coffee boosts organic sales in the first half and allows the world’s largest food group to raise growth guidance for the full year. He said it would put pressure on him.

The food group is working on rising product costs that are reaching margins, and famous brands such as Nescafe Coffee and Purina Pet Food, Nestlé, said price increases can only be done without a time lag.

Nestlé said in a statement Thursday that its underlying trading operating margin is expected to fall from 17.7% in 2020 to about 17.5% this year and improve again from 2022.

“We’re a little more cautious about the year as the system continues to inflate (in terms of margins),” CEO Mark Schneider told reporters. He said the company can hedge some rises, such as coffee prices soaring this week, but not the rise in shipping costs.

“Inflation has been virtually non-existent for years and has been pointed out very sharply since then, which has hit us directly,” Schneider said, adding that the problem is temporary. ..

Inflation in input costs is expected to reach about 4% this year, Schneider said, and the company will accelerate price increases in the second half of the year. He said Nestlé needs to raise prices by about 2% to offset 4% cost inflation. He said he would raise prices by 1.3% in the first half and that better product mix and efficiency would also help.

Peer Unilever said last week that it expects cost inflation to be in its late teens in the second half of this year, but Danon also reported Thursday that operating margins fell in the first half.

Nestlé’s share has risen almost 10% so far this year, down 0.9% at 0721 GMT, outpacing the weaker 1.1% sector.

“The market probably didn’t want to hear about late price passages,” said Jon Cox, an analyst at Kepler Cheuvreux, but was expected to see a strong topline and increased growth guidance.

Nestlé has raised its annual organic growth guidance from its previous “over 3.6%” to 5-6% after initial sales growth of 8.1% due to strong demand for coffee, out-of-home businesses and a recovery in China. rice field. Half of the second quarter and 8.6%.

Vontobel analyst Jean-Philippe Bertschy said, “Sales in developed markets have grown significantly to 6.7%, showing the strength of Nestlé’s innovation compared to the flat results in Mondelez and Unilever. It shows. “

Nestlé has confirmed that it will achieve “consistent mid-single-digit organic growth over the next few years.”

Net profit increased slightly to CHF 5.9 billion ($ 6.49 billion).

(Report by Silke Koltrowitz, edited by Michael Shields, Sonali Paul, Emeria Sithole-Matarise)

Nestlé pays attention to margins despite increased sales

Source link Nestlé pays attention to margins despite increased sales

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