A Company like Nestlé spans so many markets, that is not surprising when they produce results that vary from one market to another.
In their latest set of results the company points to coffee as a growth product for them, but confectionery sales were disappointing, although they still saw some growth. Nevertheless, the guidance on future profits was subdued by Concerns over rising costs of inputs – an inclusive term that covers raw materials.
Input cost inflation would give the company a slight squeeze on margins this year, even as coffee demand boosted organic sales in the first half, allowing it to lift its full-year growth forecast.
Nestlé told investors that its underlying operating profit margin will slip to around 17.5% this year from 17.7% in 2020, then rebound from 2022.
In addition to 7.7% organic growth, real internal growth (RIG) reached 6.4% and pricing grew 1.2%. Growth across most geographies was supported by early signs of a comeback from out-of-home channels, as well as improved pricing and market share gains.
These metrics are perhaps more representative of the company’s actual performance since organic growth strips out growth by external factors like an acquisition. Real Internal Growth, is a bit more complex, but determines the impact of increases or decreases of sales volume, after taking into account the value of units sold – a kind of sales growth by-product.
Full-year 2021 outlook updated: we expect full-year organic sales growth between 5% and 6%. The underlying trading operating profit margin is now 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 The Bountiful Company’s core brands. Beyond 2021, our 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
Sales growth in the confectionery industry was in the single-digit range, with French and Russian customers showing good sales progress. Cocoa Fruit-based Incoa chocolate has been launched in France and the Netherlands, and other European markets will follow
Coffee was one of the identified key growth drivers, driven by e-commerce and new product launches. Double-digit growth was seen in the coffee category, led by strong demand for Nescafé and Starbucks products. A range of coffee capsules branded as Nescafé Farmers Origins was launched in Spain.