Earnings

Nestle expects steady margins after beating 2021 expectations

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Nestle CEO 'extraordinarily pleased' with full-year results, warns of rising prices

Food group Nestle intends to defend its margin against cost pressures this year, it said on Thursday, as it sticks with price increases that helped it beat sales growth and profit expectations last year.

"It is a safe assumption that our input cost increases for 2022 will be higher than 2021, that is something that we have to reflect in our pricing," CEO Mark Schneider told reporters on a call, declining to give a precise forecast in a "super volatile environment".

"There is almost no place in the company that is exempt of inflation now," he said. "Some of these things you can hedge against, some not."

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.

Nestle, known for Nescafe instant coffee and Maggi bouillon cubes, said it expected its underlying trading operating profit margin to be broadly stable at 17.0%-17.5% this year, after a slight decrease to 17.4% last year.

It raised prices by 3.1% in the fourth quarter, up from 2.1% in the third.

Underlying or organic sales, which strip out currency swings and acquisitions, are expected to grow more slowly by around 5% this year, after an unexpectedly strong fourth-quarter rise of 7.2% and full-year growth to 7.5%, exceeding expectations.

Strong demand for coffee, pet food and health foods fuelled growth, benefiting from what Schneider called the "at-home revolution" during the pandemic.

"While some of that will lessen now with the pandemic coming to an end, some of it is also going to stay," he said.

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Nestle open to large acquisitions in 2022 but CEO says 'it is not our main focus'

Schneider repeated the group was committed to its infant nutrition business even though difficulties in the Chinese market led to an impairment charge of around 2 billion francs.

Schneider said 2022 had started well in terms of organic growth. "We're now well and solidly positioned for sustained mid-single-digit growth performance," he said.

He said the company, which recently acquired a majority stake in protein powder maker Orgain, was open to acquisitions but would be very disciplined.

Net profit rose 38.2% to 16.9 billion Swiss francs ($18.34 billion), prompting the company to propose a dividend of 2.80 francs per share versus 2.75 francs for 2020, slightly below expectations.

Nestle's shares were down 1.1% in early trade.

Down almost 8% this year, they are trading at almost 25 times 2022 earnings, according to Refinitiv data, a significant premium to Danone and Unilever.