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Pet food, health products help Nestle outshine its peers

Nestle has outshone its peers in the latest reporting period. Reuters/Arnd Wiegmann

Nestle wants to boost organic sales growth towards a mid-single-digit rate this year, the food giant said on Thursday, after strong demand for pet food and health products in the Americas helped its growth outshine peers last year.

Consumers have kept buying packaged food throughout the pandemic and Nestle has fared better than some rivals by shedding underperforming businesses and investing in growth areas such as plant-based food, coffee and health science.

“We’re seeing continued improvement in organic growth for the third year in a row now,” CEO Mark Schneider told reporters on a call.

“There’s a possibility to cross over the 4 per cent point (this year), which would be great, but in light of the uncertainties it’s hard to commit to that right now.”

He said the Swiss group wanted to achieve sustained mid-single-digit growth in the medium term and also expected to keep doing acquisitions.

Full-year organic sales, which strip out currency effects, acquisitions and divestitures, grew 3.6 per cent last year, ahead of Nestle’s own guidance of “around 3 per cent” and peer Unilever’s 1.9 per cent underlying sales growth.

France’s Danone is due to post its latest results on Friday, with analysts expecting negative like-for-like growth.

Analysts in a consensus compiled by Nestle were looking for 3.5-per-cent organic sales growth for the full year.

Net profit fell 3 per cent to US$13.58 billion, beating expectations. The year-ago period had benefited from a one-off gain linked to the sale of its skin health business.

The underlying operating margin improved to 17.7 per cent last year, after reaching 17.6 per cent and thus the group’s mid-term profitability target range of 17.5-18.5 per cent in 2019, a year earlier than planned.

Nestle proposed hiking its dividend 5 cents to 2.75 francs per share for 2020, its 26th consecutive increase. It also has a share buyback program under way.

Shares in Nestle, down almost 4 per cent this year, were indicated to open 1.1 per cent lower.

  • Reporting by Silke Koltrowitz; editing by Michael Shields and Jason Neely, of Reuters.

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