Nestle pushes back growth target after solid 2019

Food giant Nestle expects growth to accelerate over the next two years towards its mid-single digit organic growth target, initially set for 2020, after it hit a four-year high at 3.5% and profitability improved in 2019.

Like other large food companies such as Unilever, Nestle has been working hard to streamline its diverse portfolio in keeping with changing consumer tastes and growing demand for healthier and more environmentally friendly produce.

“(We see a) continued increase in organic sales growth (in 2020), expecting further acceleration in 2021/2022 towards sustainable mid single-digit growth,” Nestle said in a statement on Thursday, adding it was too early to quantify the financial impact of the coronavirus outbreak.

The maker of KitKat chocolate bars and Nescafe instant coffee reported full-year net profit up 24% to 12.6 billion Swiss francs (US$12.89 billion), against a consensus forecast of 12.36 billion francs in a company-supplied analysts’ poll.

It proposed to increase its dividend to 2.70 Swiss francs per share.

Organic sales growth accelerated to 3.5% from 3% in 2018, and just below a 3.6% estimate in the company poll. It slowed to 3.0% in the final quarter of 2019, from 3.7% in the third quarter.

Rival Unilever reported underlying sales growth of 1.5% in the final quarter of 2019, the slowest in a decade. Danone reports results on Feb 26.

Under the leadership of Mark Schneider, who became CEO in 2017, Nestle has sought to focus on premium products in fast-growing market segments such as coffee while retreating from slower-growth areas such as chocolate and processed meat.

Schneider has already conducted more than 50 transactions and reviews while also improving profitability towards its 17.5-18.5% target. The margin reached 17.6% in 2019.

(US$1 = 0.9773 Swiss francs)

Source: Reuters