Nestlé posts strong growth and higher margins in 2023

Nestlé, the world’s largest food and beverage company, announced its full-year results for 2023 on Thursday, showing robust organic growth and improved profitability despite the challenges of the COVID-19 pandemic and currency fluctuations, a company announcement noted.

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The Swiss-based company reported organic growth of 7.2%, driven by strong pricing of 7.5% and offset by a slight decline in real internal growth (RIG) of -0.3%. The growth was broad-based across geographies and categories, with particularly strong performance in North America, Latin America, and pet care.

Total reported sales were CHF 93.0 billion, a decrease of 1.5% compared to the previous year (FY-2022: CHF 94.4 billion). This was mainly due to the negative impact of foreign exchange, which reduced sales by 7.8%, and net divestitures, which had a negative impact of 0.9%.

The underlying trading operating profit (UTOP) margin was 17.3%, increasing by 20 basis points on a reported basis and by 40 basis points in constant currency. The trading operating profit (TOP) margin was 15.6%, increasing by 160 basis points. The company attributed the margin improvement to pricing, portfolio management, operational efficiencies, and lower restructuring costs.

Underlying earnings per share increased by 8.4% in constant currency and by 0.1% on a reported basis to CHF 4.80. Earnings per share increased by 23.7% to CHF 4.24 on a reported basis, mainly reflecting one-off items in the prior year.

Free cash flow was CHF 10.4 billion, an increase of CHF 3.8 billion following a significant reduction in working capital.

The board of directors proposed a dividend of CHF 3.00 per share, an increase of 5 centimes, marking 29 consecutive years of dividend growth. In 2023, CHF 12.8 billion were returned to shareholders through a combination of dividend and share buybacks.

For 2024, the company expects organic sales growth around 4% and a moderate increase in the underlying trading operating profit margin. Underlying earnings per share in constant currency is expected to increase between 6% and 10%.

The company also confirmed its 2025 mid-term targets, which include mid single-digit organic sales growth and an underlying trading operating profit margin range of 17.5% to 18.5% by 2025. Underlying earnings per share in constant currency is expected to increase between 6% and 10%.

Mark Schneider, Nestlé CEO, commented: “Unprecedented inflation over the last two years has increased pressure on many consumers and impacted demand for food and beverage products. In this challenging context, we delivered strong organic growth and solid margin improvement with increased marketing and other growth investments. Our free cash flow generation returned to historical levels. 

Looking to 2024, we are prioritizing volume- and mix-led growth with increased brand support, as we enhance value for consumers through active innovation and renovation, premiumization, affordability and more nutritious options. We will continue to focus capital allocation on our fast-growing billionaire brands, which enables us to deliver dependable growth while enhancing brand loyalty.

To drive market share gains, our key priorities are delighting consumers through differentiated offerings and focusing on superior execution. We are confident that we have the right strategy, portfolio and capabilities to deliver on our 2025 targets.”

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