City News: Nestlé posts strongest quarter in a decade

Nestlé solidified its position as one of food and drink’s star performers in the pandemic by smashing expectations so far in 2021 to post its strongest quarter in a decade. The world’s largest food company saw organic sales surge 7.7% in the first three months of the year, primarily driven by volume gains of 6.4% amid growing market share and 1.2% from pricing as input costs ticked up.

The quarterly growth was its strongest since 2011 and more than double analysts’ expectations of 3.3%, as the market expected growth to tail off from last year’s 4.3%.

At-home consumption of coffee was one of the main drivers of the spectacular outperformance, with Nespresso growing at 17.1%.

Dairy was also in double-digit growth, up 15.7%, with petcare up 8.7%, confectionery up 10.3%, beverages up 9.9% and vegetarian and plant-based seeing strong double-digit gains.

This growth more than mitigated sales drops at infant nutrition and waters, the latter suffering a 8.1% fall in due to its exposure to out of home.

Some eyebrows were raised by Nestlé declining to raise guidance despite this first quarter overperformance, while a hit from foreign exchange, along with divestments, meant reported sales increased by a far more modest 1.3% to CHF21.1bn.

Nonetheless, Jefferies called it an “eye-blinking” quarter, with “accelerating performance, pure and simple, across a broad base”.

Nestlé solidified its position as one of food and drink’s star performers in the pandemic by smashing expectations so far in 2021 to post its strongest quarter in a decade. The world’s largest food company saw organic sales surge 7.7% in the first three months of the year, primarily driven by volume gains of 6.4% amid growing market share and 1.2% from pricing as input costs ticked up.

The quarterly growth was its strongest since 2011 and more than double analysts’ expectations of 3.3%, as the market expected growth to tail off from last year’s 4.3%.

At-home consumption of coffee was one of the main drivers of the spectacular outperformance, with Nespresso growing at 17.1%.

Dairy was also in double-digit growth, up 15.7%, with petcare up 8.7%, confectionery up 10.3%, beverages up 9.9% and vegetarian and plant-based seeing strong double-digit gains.

This growth more than mitigated sales drops at infant nutrition and waters, the latter suffering a 8.1% fall in due to its exposure to out of home.

Some eyebrows were raised by Nestlé declining to raise guidance despite this first quarter overperformance, while a hit from foreign exchange, along with divestments, meant reported sales increased by a far more modest 1.3% to CHF21.1bn.

Nonetheless, Jefferies called it an “eye-blinking” quarter, with “accelerating performance, pure and simple, across a broad base”.

Hargreaves Lansdown commented: “Volume increases have been achieved in part thanks to lockdown trends like home baking… As the world starts to reopen it will be interesting to watch how quickly Nestle’s sales rebalance towards something resembling normal.”

The Swiss consumer giant It has certainly had a better pandemic than French dairy group, which posted a further 3.3% drop in like-for-like first quarter sales to €5.7bn on a volume decline of 3.7%. It was hurt by a significant drop in infant nutrition sales, which dragged its specialised nutrition back by 7.7%, and an 11.6% drop in waters. The group reiterated its 2021 guidance and expects like-for-like growth in Q2, and to return to profitable growth in the second half.

But broker Bernstein argued that its claims of tough comparisons the first quarter of next year suggests the company things a more normal level of growth is “well below” the 3.7% it saw in the corresponding period last year.