Nestle

  • Nestle’s   trading update beat market expectations as it passed on higher costs to   consumers. In addition to announcing the hikes, it said more price increases   were likely considering the increase in raw material input costs.

  • Results for the third quarter ended September 2021   reflected an organic sales increase of 6.5% on the back of price increases of   2.1% and volume growth of 4.4%. The global diversified food group had a strong   recovery in retail sales and a robust turnaround in out-of-home sales due to   a relaxation of Covid restrictions.

  • The portfolio of strong diversified products, and   large geographic footprint, have resulted in Nestle gaining market share   despite a volatile trading environment. Emerging market sales grew 8.3% with   Brazil, India, and Russia performing well. Developed market sales were up   7.1%.

  • In terms of products, confectionary sales grew 9.5%,   milk products and ice cream sales rose 6.4%, and prepared and cooking aids   increased by 7.5%. Nestle also experienced strong sales in the Petcare   division, of 12.1%, as well as Nespresso growth of 11%.

  • Organic Health Sciences, a relatively new entity   within the group, reflected growth of 14.3% and continues to roll-out   plant-based alternative to popular meat products like burgers, sausages, and   tuna. This trend is now becoming mainstream and is still only in its infancy.

  • Organic revenue growth guidance for the current year   to December 2021 is between 6% and 7%, which is up on previous expectations   for growth of between 5% and 6%. Underlying operating profit margins are   estimated to be around 17.50%.

  • Nestle continues to invest in new products and   capacity expansion on the back of strong demand. This is in spite of an   estimated rise in input costs of 4%, which should be offset by volume and   price increases, as well as product mix.

  • Delivery by management has been consistent with innovation a major   positive for the Swiss giant. The company has a strong balance sheet, and   cash flows - and share buy backs as well as a strategy of investing in growth   has proven to be a successful formula for both management and shareholders.   The Nestle share price is on a PE of 26x and is, for new investors who are   prepared to be patient, a fair valuation for this high-quality company. We   are long term investors in in the stock in managed portfolios.

Nestle