MILAN – Nestle SA reported Thursday that net profit for fiscal 2022 fell 45.2% to CHF 9.3 billion from CHF 16.9 billion a year earlier, missing forecasts for CHF 11.6 billion (US$ 12.6 billion) in a company gathered consensus of analysts. Earnings per share decreased 43.5% year-over-year to CHF 3.42. The drop in profit reflected prior year’s gain on disposal of L’Oréal shares. Nespresso sales rose slightly to 0.5% to CHF 6.4 billion.
Sales increased to CHF 94.4 billion (US$102.2 billion), missing forecasts for CHF 95.02 billion, despite price increases introduced during the year.
Organic growth, which cuts out the impact of acquisitions and currency movements, came in at 8.3%, lower than the 8.6% expected.
Key results, as reported by Nestlé, were as follows:
- Total reported sales increased by 8.4% to CHF 94.4 billion. Net acquisitions had a positive impact of 1.1%. Foreign exchange decreased sales by 0.9%.
- Organic growth reached 8.3%. Pricing was 8.2%, reflecting significant cost inflation. Real internal growth (RIG) was positive at 0.1%. Organic growth was broad-based across most geographies and categories.
- The underlying trading operating profit (UTOP) margin was 17.1%, decreasing by 30 basis points on a reported basis and by 40 basis points in constant currency. The trading operating profit (TOP) margin was unchanged at 14.0%.
- Underlying earnings per share increased by 9.4% in constant currency and by 8.4% on a reported basis to CHF 4.80. Earnings per share decreased by 43.5% to CHF 3.42 on a reported basis, mainly reflecting the 2021 gain on the disposal of L’Oréal shares.
- Free cash flow was CHF 6.6 billion, as working capital increased temporarily in the context of supply chain constraints and capital expenditure remained above historic trendlines.
- Board proposes a dividend of CHF 2.95 per share, an increase of 15 centimes, marking 28 consecutive years of dividend growth. In total, CHF 18.2 billion were returned to shareholders in 2022 through a combination of dividend and share buybacks.
- 2023 outlook: we expect organic sales growth between 6% and 8% and underlying trading operating profit margin between 17.0% and 17.5%. Underlying earnings per share in constant currency is expected to increase between 6% and 10%.
- 2025 targets fully confirmed: we expect sustainable mid single-digit organic sales growth and a return to an underlying trading operating profit margin range of 17.5% to 18.5% by 2025. We expect annual underlying earnings per share growth to be in the range of 6% to 10% in constant currency.
Nestlé Coffee Business
Sales in coffee grew at a high single-digit rate, with broad-based growth across brands and geographies, supported by a strong recovery of out-of-home channels. Sales of Starbucks products grew by 12.9% to reach CHF 3.6 billion, generating over CHF 1.5 billion of incremental sales compared with 2018.
On October 19, 2022, Nestlé announced the acquisition of Seattle’s Best Coffee from Starbucks. This transaction is part of Nestlé’s focus on driving sustained profitable growth in the coffee category and strengthens the Global Coffee Alliance by allowing both companies to focus on their core strengths. The transaction was completed on January 13, 2023.
In North America, beverages, including Starbucks at-home products, Coffee mate and Nescafé, posted high single-digit growth, helped by new product launches.
In Europe, coffee posted mid single-digit growth, led by Nescafé soluble coffee and continued strong sales developments for Starbucks by Nespresso.
In Asia, Oceania and Africa, coffee saw high single-digit growth, with continued strong demand for Nescafé and Starbucks products. The Zone launched Starbucks ready-to-drink products in seven markets. Infant Nutrition reached high single-digit growth, based on innovation and increased distribution.
In Latin America, coffee posted broad-based double-digit growth, supported by Nescafé soluble coffee, Nescafé Dolce Gusto and Starbucks products. Dairy reported high single-digit growth, based on strong sales developments for fortified milks and home-baking products.
In Greater China, coffee posted high single-digit growth, led by Nescafé soluble and ready-to-drink coffee as well as Starbucks products.
Nespresso
Organic growth was 3.5%, with pricing of 5.2%. RIG was -1.7%, following strong growth of 8.2% in 2021 during the pandemic. Foreign exchange negatively impacted sales by 2.7%. Reported sales in Nespresso increased by 0.5% to CHF 6.4 billion.
Growth in Nespresso was led by broad-based momentum for the Vertuo system. Vertuo Pop, a new compact machine, was launched in 10 markets. Growth was also supported by a strong recovery of out-of-home channels, with continued expansion of the Momento system and improved sales development for the office segment.
Innovation and new product launches, including the year-end festive campaign with Pierre Hermé, continued to resonate with consumers.
By geography, North America posted double-digit growth with continued market share gains. Europe reported a sales decrease, with growth turning positive in the fourth quarter. Other regions combined recorded high single-digit growth.
The underlying trading operating profit margin of Nespresso decreased by 150 basis points, impacted by cost inflation and investments in the rollout of the Vertuo system.
