Nestlé reports upbeat third quarter, raises FY organic sales growth guidance

Oct. 20, 2021

Bolstered by strong demand for coffee, and in the face of supply chain disruptions and increasing input costs, the world's largest packaged food company raised its full-year sales guidance for a second straight quarter.

Nestlé SA today reported a 6.5% rise in third-quarter organic sales growth, with revenue for the first nine months reaching $68.60 billion. Nestlé said it expects full-year growth between 6% and 7%, up from its previous guidance of between 5% and 6%.

KEY POINTS

  • Organic growth reached 7.6%, with real internal growth (RIG) of 6.% and pricing of 1.6%. Growth was supported by continued momentum in retail sales, steady recovery of out-of-home channels, increased pricing and market share gains.
  • Total reported sales increased by 2.2% to CHF 63.3 billion (9M-2020: CHF 61.9 billion). Foreign exchange reduced sales by 2.0%. Net divestitures reduced sales by 3.3%.
  • Continued progress in portfolio management. On Aug.9, 2021, Nestlé completed the acquisition of the core brands of Bountiful Co..
  • Full-year organic sales growth is expected to reach between 6% and 7%. The underlying trading operating profit margin is expected around 17.5%, reflecting initial time delays between input cost inflation and pricing, as well as the one-off integration costs related to the acquisition of Bountiful Co.'s core brands.
  • Beyond 2021, Nestlé's mid-term outlook for continued moderate margin improvement remains unchanged. Underlying earnings per share in constant currency and capital efficiency are expected to increase this year.

By product category, Nestlé's largest contributor to organic growth was coffee, fueled by strong momentum for the three main brands Nescafé, Nespresso and Starbucks. Starbucks products posted 15.5% growth, with sales reaching CHF 2.2 billion across 79 markets. 

The company's confectionery business recorded high single-digit growth, supported by a strong sales development for KitKat. 

"We are pleased with Nestlé’s strong organic growth in the nine months, driven by broad-based contributions from most geographies and categories," said Nestlé chief executive Mark Schneider said. 

"The relentless focus of our teams on local execution and agility enabled us to navigate input cost inflation and supply chain constraints," he continued. "In the third quarter, we increased pricing in a responsible manner, while maintaining strong real internal growth."

Today's Wall Street Journal commented, "The upbeat quarter provides an early sign that consumer habits acquired during the pandemic, such as drinking more and better quality coffee at home, could continue to benefit the company, even as virus-related restrictions receded in some major markets—a view expressed by Nestlé executives."

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