Nestlé shrugs off COVID-19 impact
ZURICH • Nestlé SA raised its guidance for 2020 organic sales growth to around three per cent and reaffirmed its ambition to return to mid-single digit growth after strong demand for pet food, coffee and health products boosted quarterly growth.
Chief executive Mark Schneider told analysts on a call the new full- year guidance was “cautious” after the world’s biggest food group posted organic growth of 4.9 per cent in the third quarter.
“It’s very hard to predict where exactly COVID is going to turn next and what the measures are going to be in key markets for us,” he said. “With COVID around us, you will see roller coaster movements here in the numbers going forward.”
Nestlé had previously expected organic growth of two- to three- per- cent for this year.
Schneider said the company was working hard to reach its midterm target of mid- single digit organic growth, initially set for this year. “I feel good about our ability to be there in a reasonable amount of time.”
The maker of Nescafé coffee and Kitkat chocolate has weathered the pandemic better than some peers as its focus on high-growth categories helped offset a slump in food sales to restaurants and cafés.
In contrast, French peer Danone announced an extensive review this week that could lead to disposals after its like- for- like sales fell 2.5 per cent in the third quarter.
Unilever is due to release a trading statement on Thursday.
Shares in Nestlé are up 2.5 per cent so far this year.
Kepler Cheuvreux analyst Jon Cox said Nestlé remained his preferred pick in food, while Vontobel’s Jean- Philippe Bertschy called it a “must-have stock,” set to emerge a winner from the pandemic.
Demand for food and drinks consumed at home remained strong during lockdowns, while sales of products consumed outside home and on the go — about 15 per cent of Nestlé’s sales — fell 26.4 per cent in the third quarter, Nestlé said.
“The trend toward more in- home consumption, which favours us, I think, is here to stay, and that bodes well for next year,” Schneider said.
To boost growth, Nestlé wants to keep developing its portfolio, notably expanding its health science business recently bolstered by the US$ 2- billion Aimmune Therapeutics acquisition. It intends to double the unit’s sales to 4 billion Swiss francs ( US$ 4.42 billion) by 20212022 versus 2017 levels.
It has been ditching underperformers and put North American waters and its Chinese Yinlu peanut milk brand under strategic review.
While the Americas region posted the strongest growth rate, Asia was only slightly positive, dragged down by China, where Nestlé’s out- of- home business, infant nutrition, Yinlu and its sweets brand Hsu Fu Chi are struggling.