The turnover of the manufacturer of Nespresso, Maggi, KitKat or Perrier climbed to 94.4 billion francs in 2022.
(Photo: imago/IP3press)
Zurich The Swiss food group Nestlé grew last year mainly through price increases. Sales increased by 8.3 percent to 94.4 billion francs (around 95 billion euros), as the company announced on Thursday. At 8.2 percent, higher prices for products such as Nespresso, Maggi, Kitkat or San Pellegrino accounted for the largest part of the increase in sales.
Profits, on the other hand, collapsed by 45.2 percent to 9.3 billion francs. However, in 2021 the sale of a block of shares in the cosmetics group L’Oreal inflated the profit at the time. According to a survey conducted by Nestlé itself, analysts had expected an average profit of 11.6 billion francs and sales of 95 billion francs for 2022.
The food giant’s margin also came under pressure last year due to higher raw material prices, transport costs and wages. Gross margin fell 2.6 percentage points to 45.2 percent. The decline is a sign that Nestlé has not been able to pass higher production costs on to customers on a one-for-one basis. Nestlé CEO Mark Schneider was able to stabilize the operating margin at 17.1 percent through austerity measures. That corresponds to a decline of just 0.4 percentage points – significantly less than the gross margin.
Nestlé boss Schneider said with a view to 2022: “Inflation reached an unprecedented level, the cost of living was troubling many people, and the consequences of geopolitical tensions moved the whole world.” Delivering results: “Our organic growth has been solid and our margins have remained robust. At the same time, we have ensured access to nutritious and affordable products worldwide.”
Nestlé wants to keep profitability targets
Schneider believes the group is on the right track to achieving its medium-term profitability targets. For the current year, the CEO has forecast organic sales growth of six to eight percent and an operating profit margin of 17.0 to 17.5 percent. He has set a target corridor for the margin of 17.5 to 18.5 percent by 2025. Nestlé is also planning a dividend increase of around five percent to CHF 2.95 per share. At the current price, this corresponds to a return of 2.6 percent.
In North America, the market with the highest sales, Nestlé had to cope with a drop in sales after deducting price increases. The capsule coffee brand Nespresso also weakened last year. The food giant wants to grow primarily with health products and dietary supplements. With three acquisitions with a total value of over one billion Swiss francs, Nestlé has therefore strengthened its Health Science division.
The group is also appointing two new board members: Rainer Blair from the US conglomerate Danaher and Marie-Gabrielle Ineichen-Fleisch, a lawyer specializing in trade and long-time head of the Swiss State Secretariat for Economic Affairs.
More: Nestlé and Unilever raise prices sharply – but pay no inflation premium