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Nestle cautious on 2022 targets, given rising costs

ZURICH (AFP) – Swiss food giant Nestle was cautious on Thursday about its 2022 targets in the face of rising costs, despite robust results thanks to its shift towards the booming vegetarian market.

Nestle reported a significant increase in its costs last year for raw materials, packaging, transport and energy.

Businesses have faced supply chain disruptions and decades-high inflation as the global economy recovers from the COVID-19 pandemic and energy prices surge.

Faced with exceptional inflation, Nestle hiked its prices – in particular during the last quarter, when they went up 3.1 per cent – as the agri-food sector as a whole passes on cost increases to consumers.

Nestle – which makes everything from coffee to pet food and plant-based products – nevertheless published better-than-expected 2021 results.

Nestle hiked its prices as the agri-food sector as a whole passes on cost increases to consumers. PHOTO: AFP

Nestle’s organic growth – which excludes the effects of acquisitions or divestments to focus on a company’s core operations – reached 7.5 per cent, exceeding objectives, with coffee the largest contributor.

This is its “best organic growth since 2011”, said Zurich Cantonal Bank analyst Patrik Schwendimann.

Organic growth had been 3.6 per cent in 2020.

Nestle’s operating margin was however slightly below its forecasts, at 17.4 per cent against a predicted 17.5 per cent, due to cost increases.

On top of this came the costs of integrating the brands of The Bountiful Company, a United States (US) dietary supplements firm, as well as impairments on its baby formula brand Wyeth.

Net profit bounced 38.2 per cent higher to CHF16.9 billion (USD18.3 billion) last year, fuelled by the sell-off of shares in the cosmetics company L’Oreal.

Nestle was less optimistic in its forecasts for 2022, lowering the bar for its organic growth target to five per cent, while it also expects an operating margin of 17-17.5 per cent.

“It is conservative, because I think being conservative in a volatile environment with significant inflation around us and uncertainty about what will happen this year is the right way to approach it,” Nestle chief executive Mark Schneider told reporters.

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