By Richa Naidu and Oliver Hirt
LONDON (Reuters) – Nestle reported slightly better than expected annual sales growth on Thursday, driven by price increases, but the world’s largest packaged food company warned of a narrower profit margin in 2025.
Under new CEO Laurent Freixe, the company 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.
Nestle said it was expecting 2025 full-year organic sales to be higher than last year, maintaining the target it outlined during its capital markets day in November.
But the maker of Maggi stock cubes and Nescafe coffee forecast an underlying trading operating profit margin of 16% or more, down from 17.2% last year.
Freixe said he expected the margin to narrow in the short term “as we invest for growth”.
Shares in the company were up nearly 6% at 0809 GMT.
“Although the environment remains very challenging, we believe that the 2024 results mark a new beginning,” Vontobel analyst Jean-Philippe Bertschy said.
While two of Nestle’s most important commodities – coffee for Nescafe and cocoa for Kit-Kats – are at record-high prices, it said it would only pass on some input cost increases to shoppers.
Freixe is doing “exactly what we had hoped for”, said Simon Jaeger, a portfolio manager at Flossbach von Storch. “He is focussing on execution. He can already present the first results of the cost-cutting efforts.”
“You can already see that volume growth is accelerating slightly.”
Nestle’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.
The Swiss company, however, did not ease as quickly, with several quarters of weak sales volumes leading to the August ouster of former CEO Mark Schneider.
Nestle 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 has already secured more than 300 million francs of savings for this year.
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% increase.
Organic sales, which exclude the impact of currency movements and acquisitions, rose 2.2% in the full year ended December 31, broadly in line with expectations for 2.1%. That represented Nestle’s lowest organic growth in at least 25 years.
Sales fell 1.8% to 91.35 billion francs, with net profit down 2.9% to 10.88 billion francs.
($1 = 0.9083 Swiss francs)
(Reporting by Richa Naidu; Editing by Sherry Jacob-Phillips, Kirsten Donovan and Jan Harvey)
