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Nestlé, sales rise but profit falls

Revenues up 8.4 percent in 2022: analysts' forecasts disappointed

Not pleasing the market were Nestlé's 2022 results, which reported sales growth of 8.4 percent to 94.42 billion Swiss francs (about $ 102.4 billion), up from $ 94.3 billion a year earlier. The performance, just below forecasts of 95.02 billion Swiss francs, was driven by prices in both developed and emerging markets, while organic growth, which excludes the impact of acquisitions and currency movements, was 8.3 percent, weaker than the 8.6 percent expected.

Not at all satisfying, however, was net income, which missed analysts' expectations in 2022, falling 45.2 percent to about $ 10.1 billion: hence, on the Zurich Stock Exchange, the stock that started in the red continues to lose and comes in at -2.7 percent. Blame this substantial drop, which reflects the capital gain on the sale of L'Oréal shares in 2021 but still falls short of forecasts of more than $ 12.5 billion that emerged from a survey of analysts organized by the company.

The world's largest food manufacturer, in short, has struggled to pass on higher raw material costs to financially struggling customers despite raising prices: the company says in an official statement that it raised prices by 8.2 percent last year in response to cost inflation, which "reached unprecedented levels".
In North America alone, Nestlé posted sales of $ 28.56 billion in 2022 with organic growth of 10.3 percent: it was here that the multinational gained additional market share, led by pet food, portioned coffee, and baby food.

In Europe, sales growth was +7.2% reaching over $ 20.7 billion despite the fact that the exchange rate had a negative impact on sales "due to the appreciation of the Swiss franc against the Euro". According to the company, the area still "demonstrated resilience and commitment to long-term investment". In Ukraine, Nestlé announced an investment approximately $43.3 million for a "new production plant in the Volyn region". Sales in Asia, Oceania, and Africa grew 8.2 percent: Latin America and Greater China grew 13.1 percent and 3.5 percent, respectively.

"Last year brought many challenges and difficult choices for families, communities and businesses - emphasizes Mark Schneider, ceo of Nestlé-. Inflation reached unprecedented levels, cost-of-living pressures intensified, and the effects of geopolitical tensions were felt around the world. Organic growth was solid, margins continued to hold up, and our underlying earnings per share were strong. At the same time, we ensured access to nutritious products and affordable offerings globally". 

"In 2022 -Schneider continues- we took important steps to further strengthen our industry-leading responsible marketing practices and provide transparency on the nutritional value of our global portfolio. At the same time, we also advanced the implementation of our climate roadmap".

"Looking ahead to 2023 -the ceo adds- we expect another year of robust organic growth, with a focus on restoring our gross margin, intensifying marketing investments, and increasing free cash flow. Nestlé's value creation model puts us in a strong position to achieve our 2025 goals and generate reliable and sustainable returns for shareholders".

Nestlé's board of directors will propose a dividend of 2.95 Swiss francs per share, an increase of 15 cents. If approved, this will be the company's 28th consecutive annual dividend increase. It also plans to reduce the company's share capital by 80 million shares through the cancellation of shares purchased under the share buyback program

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EFA News - European Food Agency