Nestle is confident price raise will help it meet its 2022 goals

April 25, 2022: -On Thursday, Food group Nestle confirmed its margin and sales growth targets for 2022 after a solid price surge to cushion cost inflation helped organic sales rise over expected in the first quarter.

Russia’s invasion of Ukraine has forced consumer goods companies to rethink their strategy in Russia while accelerating inflation is threatening their profitability. But until now, both challenges have not left a significant mark on the performance of the world’s biggest food group.

“Cost inflation continues to increase sharply, which will require further pricing and mitigating actions over the year,” the company known for Nescafe instant coffee said.

The group based in Vevey on Lake Geneva confirmed that it expects organic sales to increase by almost 5% this year, with a trading operating profit margin between 17% and 17.5%.

At Nestle, organic sales, which strip out currency swings, acquisitions, and divestments, were up 7.6%, over a 5.0% average forecast in a company-compiled consensus, helped by price increases of 5.2%, the maker of KitKat chocolate bars said.

Pet care and coffee were again the best-performing categories, helping group sales surge to 22.2 billion Swiss francs ($23.37 billion), also ahead of expectations.

“Organic growth now excludes the Russia region, given significantly disrupted trading conditions and Nestle’s decision to focus on providing essential food,” said the group, which had sales of 1.7 billion francs in Russia last year.

Nestle has stopped selling non-essential products in Russia, such as KitKat chocolate bars, but keeps supplying infant formula and medical nutrition.

Nestle shares, less than 4% this year, were indicated to open 1.7% higher based on pre-market indications.

In a note, Jefferies analyst Martin Deboo said that he expected a positive reaction this morning, with the immediate debate on why Nestle isn’t raising its top-line guidance.