Nestlé shares rise: Nestlé grows faster at the start of the year | 04/22/21

Coffee, dairy and forage products are particularly well sold. The group remained on track to top growth in the previous year for the full year.

The world’s largest food maker grew 7.7 percent in the first quarter of 2021, it announced Thursday. Organic growth consists of a 6.4 percent increase in volume and a 1.2 percent increase in prices.

This means that Nestlé has increased its pace significantly compared to the previous period: in the last quarter of 2020, the French-speaking Swiss group increased by “only” 3.9 percent. The high growth from January to March came despite strong comparative numbers: Because a year ago, purchases of hamsters in industrialized countries in the wake of the Corona pandemic have driven sales strongly. Additionally, the quarter also counted another work day.

Excess expectations

With the latest growth numbers, Nestlé significantly exceeded analyst expectations. The highest growth estimate was assumed at 3.9 percent.

Overall, the manufacturer of Cailler chocolate, Nespresso coffee and Purina Feed achieved sales of 21.1 billion Swiss francs in the January-March period, an increase of 1.3%. However, this growth figure is of secondary importance to investors, as it is also influenced by exchange rate effects, acquisitions and sales of parts of the company. For example, a strong franc reduced sales by 5.3 percent.

The strongest growth driver in the first three months was the coffee business. Nespresso alone, which appeared as a standalone segment for the first time since this year, has accelerated organic growth to 17.1 from 7.0 percent in 2020. But Nescafé and Starbucks have done well, according to the statement.

Demand for dairy products has also been great: this product category has grown approximately 16 percent. According to Nestlé, this was due to an increased demand for home bakery products and fortified milk. Finally, the animal feed business with brands like Purina and Felix grew 8.7 percent.

Conversely, sales of baby and baby food and water have declined.

China is growing again

By region, growth has been widespread. The Asia, Oceania and Sub-Saharan Africa (AOA) region achieved a membership increase of 9.1 percent. China has grown in the two-digit range and thus is back in the growth zone. In China, the epidemic led to a sharp drop in sales in the same quarter of the previous year.

Overall, emerging countries grew by 11.4 percent, while industrialized countries grew by 5.0 percent. Thus, the balance of power was reversed again compared to the same quarter of the previous year.

Nestlé sees itself on the right track to accelerate growth for the whole year and affirms its goals. Organic growth should exceed the previous year’s figure of 3.6 percent this year and again close to the long-term target growth in the single-digit range. This corresponds to a growth of 4 to 6 percent.

Nestlé also has the potential for further improvements in the profit for the year as a whole: the adjusted operating profit margin should improve continuously and on average and both should increase the adjusted earnings per share at constant exchange rates and capital efficiency.

Nestlé strived for the highest growth in 10 years

Nestlé shares began trading on Thursday with huge gains. Vevey’s food company posted its strongest growth in nearly ten years and has so far exceeded analysts’ expectations. Hence, market participants are excited about the result.

On occasion, Nestlé shares rose 2.87 per cent to 110.01 francs. The daily high so far has risen to 110.92 francs. This feature is extremely rare for the Swiss share with the highest market value or defensive food ration. If stocks have not traded without dividends of 2.75 CHF since the start of the week, they are close to their all-time high in September 2019 of 113.20 CHF.

Experts are in awe of the strong growth in organic sales. At 7.7 percent, this is not only clearly higher than 3.9 percent in the previous quarter, but also significantly higher than analysts’ estimates (the consensus of the AWP 3.5 percent with a range of 3.1 to 3.9%). The strong advance also surprised analysts because the benchmark from the previous year was already so high.

Organic growth was higher in the fourth quarter of 2011 at 8.4 percent; The group achieved its best value in the modern era in the first quarter of 2008, at 9.8 per cent. The price component was nothing short of strong growth in volume (RIG) which was a particularly positive surprise.

RIG is very powerful

In January-March 2021, this ratio was 6.4 percent, which, according to ZKB, is the strongest value for at least 20 years. This is despite the higher base effect in the previous year with leap year and hamster purchases at the start of the Corona pandemic. “Nestlé Brings Joy” is Zürcher Bank’s title in its commentary on the outcome. Nestlé is on track to achieve further improvements in growth in 2021 (at least 4% organic growth) and for the coming years.

The positive performance in the pet food and in the coffee business is particularly welcomed by analysts. This was said to be expected, but not in the current range. They are also amazed at the double-digit percentage growth in the dairy and ice cream business.

Nespresso, recently shown separately, has also managed to impress with organic growth of 17.1 percent. According to Vontobel, this reflects the continued expansion of the Vertuo system and the strong demand for the original device.

The analyst in charge of the private bank believes the Nestlé medium-term model is “very transparent with very little fluctuation”. He is convinced that Nestlé is “indispensable” in the current environment. Seldom has the company’s fundamentals of value creation been this strong.

At most, the fact that data on this year’s sales development continues to coincide with that on the occasion of the publication of the annual results in mid-February causes some eyebrows. It is said that the aforementioned statements appear increasingly conservative. One analyst said Nestlé is likely to try to dampen expectations a bit when calling the numbers at 2 p.m.

tt / uh

Fifi (AWP)