Nestle raises guidance after coffee drinkers boost its first half

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Logo of Nestle is seen in Konolfingen
FILE PHOTO: The company’s logo is seen at a Nestle plant in Konolfingen, Switzerland September 28, 2020. REUTERS/Arnd Wiegmann

July 29, 2021

By Silke Koltrowitz

ZURICH (Reuters) -Food giant Nestle raised its full-year organic growth guidance to 5-6% after strong demand for coffee lifted organic sales by a better-than-expected 8.1% in the first half of the year.

Food groups are grappling with surging commodity costs that are hitting margins, but Nestle, with well-known brands like Nescafe coffee and Purina pet food, may be better placed than others to offset them through price increases and efficiency gains.

“We expect full-year organic sales growth between 5% and 6%,” Chief Executive Mark Schneider said in a statement on Thursday. “We have built the foundation for delivering consistent mid-single-digit organic growth for years to come.”

The company had been aiming for 2021 organic sales growth in excess of the 3.6% achieved last year.

Organic sales growth, which excludes acquisitions and currency swings, at Nestle accelerated to 8.1%, from 2.6% in the year-ago period, the world’s biggest food group said. This was ahead of an estimate for 7.4% growth in a company-compiled consensus.

Growth accelerated to 8.6% in the second quarter, from 7.7% in the first three months of the year.

Net profit rose slightly to 5.9 billion Swiss francs ($6.49 billion), also ahead of a consensus estimate of 5.84 billion Swiss francs.

The underlying trading operating profit margin remained stable at 17.4% in the first half despite increases in commodities, packaging and transportation costs.

Peer Unilever said last week it expected cost inflation to be in the high-teens in the second half of the year.

Nestle said it was raising prices, optimising its product mix, rolling out revenue management tools and running its businesses more efficiently to manage cost inflation.

The company, based in Vevey on Lake Geneva. It is targeting an underlying trading operating profit margin around 17.5% this year and a moderate margin improvement beyond 2021.

(Reporting by Silke KoltrowitzEditing by Caroline Copley, Michael Shields and Sonali Paul)