Nestle confident price hikes will help it meet 2022 goals By Reuters

By Silke Koltrowitz

ZURICH (Reuters) -Food group Nestle on Thursday confirmed its margin and sales growth targets for 2022 after strong price increases to cushion cost inflation helped organic sales rise more than expected in the first quarter.

Russia’s invasion of Ukraine has forced consumer goods companies to rethink their strategy in Russia, while accelerating inflation is threatening their profitability. But so far, both challenges have not left a significant mark on the performance of the world’s biggest food group.

“Cost inflation continues to increase sharply, which will require further pricing and mitigating actions over the course of the year,” the company known for Nescafe instant coffee said in a statement.

The group based in Vevey on Lake Geneva confirmed that it expects organic sales to rise by around 5% this year, with a trading operating profit margin between 17% and 17.5%.

Peer Danone kept its financial goals unchanged on Wednesday after like-for-like sales rose 7.1% in the first quarter and beat expectations.

At Nestle, organic sales, which strip out currency swings, acquisitions and divestments, were up 7.6%, more than a 5.0% average forecast in a company-compiled consensus, helped by price increases of 5.2%, the maker of KitKat chocolate bars said.

Pet care and coffee were again the best-performing categories, helping group sales rise to 22.2 billion Swiss francs ($23.37 billion), also ahead of expectations.

“Organic growth now excludes the Russia region, given significantly disrupted trading conditions and Nestle’s decision to focus on providing essential food,” said the group, which had sales of 1.7 billion francs in Russia last year.

Nestle has stopped selling non-essential products, such as KitKat chocolate bars, in Russia but keeps supplying infant formula and medical nutrition.

Nestle shares, down just over 4% so far this year, were indicated to open 1.7% higher based on pre-market indications.

Jefferies analyst Martin Deboo said in a note that he expected a positive reaction this morning, with the immediate debate on why Nestle isn’t raising its top-line guidance.

($1 = 0.9499 Swiss francs)