Nestle powers ahead despite recession

By staff reporter

- Last updated on GMT

Related tags Real internal growth Switzerland Stock market Nestlé

Recession-hit 2009 wrecked havoc for multinationals in many sectors, but Nestle’s full year results show a company relatively unscathed and still reporting good growth rates.

The Swiss multinational today reported sales of CHF 108bn last year, representing 4.1 per cent organic growth and 1.9 per cent real internal growth. Food and beverages made up the lions share of this, with sales of CHF 100bn.

Overall EBIT was CHF 15.7 bn, and for food and beverages CHF 13.1bn; in both cases this represents a margin up 30 basis points, 40 in constant currencies.

These results are in line with Nestle’s projections and long-term strategy.

CEO Paul Bulcke gave an insight into how the company weathered 2009 so well:

“We stepped up investment in out brands and the pace of our innovation, adapted our products to the changing needs of consumers and further accelerated efficiencies,”​ he said, adding that the company’s workforce was gathered behind “clear strategic priorities”.

Organic growth was especially strong in the US and Asia, at rates of 6.5 per cent and 6.7 per cent respectively. In Europe, however, organic growth was 0.3 per cent and real internal growth -0.9 per cent. The company says it succeeded in defending its market positions in Europe, and growth and its margins accelerated over the course of the year.

Nestle Waters was something of a blight on the results sheet, with -1.4 per cent organic growth and -1.5 per cent real internal growth.

Andrew Wood, an analyst from Sanford C Berstein, said: “After a slower start to 2009, Nestlé’s operating performance picked up steam in H2…which certainly bodes well for H1 2010. Similarly to Unilever, Nestlé hit its “sweet spot” in Q4/H2, with easing commodities driving a major gross margin improvement (+181bps in H2)…”

Wood said that the guidance for 2010 is “somewhat prudent”,​ but to be expected “given that management hopefully learned from its mistake last year of being too overly-bullish in the beginning of the year”.

That said, Nestle has said it expects its food and beverage business to achieve “higher organic growth than in 2009, and further increase its EBIT margin in constant currencies for the year as a whole”.

Nestle will buy back CHF 10bn in shares in 2010, completing its CHF share buyback programme launched in 2007.

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