Nestlé remains resilient in Europe amid decrease in important sectors
Nestlé, a multinational company, has recently reported better-than-expected sales growth in its recent quarterly and yearly results. Despite facing challenges such as ‘soft’ consumer demand and hesitancy towards global brands, the company managed to achieve organic sales growth of 2.2%, surpassing its projected 2% growth from the previous quarter. However, Nestlé’s earnings per share (EPS) experienced a decline due to a share buyback program, leading to lower net profit and underlying net profit as well. This was exacerbated by adverse foreign exchange movements, particularly with the strengthening of the Swiss Franc.
Remarkably, Nestlé’s performance was stronger in Europe and emerging markets, with pricing strategies driving growth in the region. Europe saw a reported sales increase of approximately 1%, with organic growth reaching 3.3% and Real Internal Growth (RIG) at 0.8%. In contrast, North America experienced a decline in organic growth and RIG, mainly attributed to a challenging consumer environment in categories like coffee creamers and frozen food. Despite global increases in coffee and cocoa prices, Nestlé’s key drivers for growth remained pet care, coffee, and confectionary, all reporting mid-single digit growth.
Looking ahead, Nestlé is optimistic about its guidance for 2025, despite recent commodity price hikes. The company believes that its focus on coffee and cocoa positions them well in the face of rising prices, especially since only these two commodities are rapidly increasing, unlike previous times when a variety of commodities were affected. CFO Anna Manz anticipates taking pricing actions on key commodities to counter the decrease in gross profit margins that occurred in the second half of the previous year.
Moreover, Nestlé seems well-prepared for potential tariff impacts, as a significant portion of its products sold in specific markets are also manufactured within those markets. For instance, in the US, 90% of Nestlé’s products sold are produced domestically, mitigating the tariffs’ potential effects on the company’s operations.
In conclusion, Nestlé’s recent financial results highlight the company’s resilience in the face of challenges and its ability to adapt to changing market conditions. With strong performance in Europe and confidence in its commodity pricing strategies, Nestlé remains optimistic about its future outlook despite the uncertainties in the global market.