Nestle sees slower growth this year as stockpiling effect wanes

Nestle sees slower growth this year as stockpiling effect wanes

Nestle logo is pictured on the door of the supermarket of Nestle headquarters in Vevey
FILE PHOTO: Nestle logo is pictured on the door of the supermarket of Nestle headquarters in Vevey, Switzerland, Feb 13, 2020. (REUTERS/Pierre Albouy)

ZURICH: Nestle cut its full-year underlying sales growth forecast to 2 to 3 per cent on Thursday (Jul 30), saying demand had slowed as customers worked their way through cupboards they stocked up with food at the start of coronavirus related-lockdowns.

Packaged food companies have weathered the crisis better than other industries as consumers bought coffee, pasta or infant formula in bulk during COVID-related lockdowns, although Nestle's business supplying restaurants and cafes has suffered.

Organic sales growth, which excludes the effect of currency swings and acquisitions, eased to 1.3 per cent in the three months to June, from 4.3 per cent in the first quarter, the maker of KitKat chocolate bars said in a statement.

"Most categories saw consumer destocking in the second quarter," Nestle said.

The Swiss giant lowered its expectations for organic growth this year to 2 to 3 per cent, from "more than 3.5 per cent" previously. Its trading operating margin is expected to improve after progressing to 17.4 per cent in the first half.

French peer Danone also on Thursday reported lower like-for-like sales in the second quarter and Unilever posted a smaller-than-expected fall in second-quarter sales last week. Neither gave a growth forecast for this year.

At Nestle, organic growth for the first half reached 2.8 per cent, above a forecast for 2.3 per cent in a company-compiled analyst poll.

Net profit grew by 18.3 per cent to 5.9 billion Swiss francs (US$6.46 billion) in the first half, ahead of a forecast for 5.07 billion francs in the poll.

"A solid set of figures which were ahead of street expectations and once again underscore the group’s solid characteristics," said Kepler Cheuvreux analyst Jon Cox.

Nestle said the overhaul of its business toward high-margin foods such as plant-based burgers remained on track. As part of the shift it has put underperforming North American water brands and Chinese peanut milk Yinlu up for sale.

Shares in the group, which have risen over 5 per cent so far this year were indicated to open 0.42 per cent higher, in line with the market.

Source: Reuters/kv

Bookmark