Nestlé reported slightly better than expected annual sales growth on Thursday driven by price increases, though the world’s largest packaged food company warned of a narrower profit margin in 2025.
Under new CEO Laurent Freixe, the world’s biggest packaged food maker is trying to grow sales volumes, invest in innovation and restore investor confidence after years of soaring prices alienated shoppers and ate into its marketing budget.
Nestlé forecast that 2025 full-year organic sales would be higher than last year, maintaining the target it outlined during its capital markets day in November.
However, the maker of Nescafé coffee forecast an underlying trading operating profit margin of 16% or more, down from 17.2% last year.
Freixe said, “(We expect) a lower underlying trading operating profit margin in the short term as we invest for growth.”
Shares in the company were up nearly 6% at 0809 GMT.
Vontobel analyst Jean-Phillippe Bertschy said, “Although the environment remains very challenging, we believe that the 2024 results mark a new beginning.”
Challenges
While two of Nestlé’s most important commodities – coffee for Nescafé and cocoa for KitKats – are at record-high prices, it said it would only pass some input price increases on to shoppers.
Nestlé’s competitors – including Knorr stock cube maker Unilever – slowed price increases last year in a move to woo back shoppers who had turned to cheaper products.
However, the Swiss company did not ease prices as quickly, with several quarters of weak sales volumes leading to the ousting of former CEO Mark Schneider in August.
Nestlé said in late 2024 that it was aiming for cost savings of 2.5 billion Swiss francs ($2.75 billion) by the end of 2027.
It said on Thursday it had already secured over 300 million francs of savings for this year.
Results
Price increases of 1.5% last year just topped the average analyst estimate of 1.4%.
Real internal growth – or sales volumes – rose 0.8% versus expectations of a 0.7%.
Organic sales, which exclude the impact of currency movements and acquisitions, rose 2.2% in the full year ended 31 December, broadly in line with expectations for 2.1%.
Sales fell 1.8% to 91.35 billion francs, with net profit down 2.9% to 10.88 billion francs.
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