Nestlé (NESN) H2 2021 (Media) earnings summary

Executive summary

• FY21 sales rose 3.3% to CHF 87.1bn; organic growth was 7.5%, with RIG of 5.5% and pricing of 2%.

• Underlying trading operating profit rose 1.4% to CHF 15.1bn, while its margin fell 30 bps to 17.4%; underlying EPS rose 5.8% in constant currency.

• Portfolio transformation continued through growth investments, divestments and environmental and social initiatives.

Financial highlights

• Net M&A reduced sales growth by 2.9% and FX by 1.3%.

• Gross margin fell 130 bps to 47.8% amid commodity, packaging, freight and energy inflation; pricing and efficiencies partly offset pressure.

• Net profit rose 38.2% to CHF 16.9bn, with the L'Oréal disposal gain more than offsetting higher impairments and other one-off items.

• Free cash flow declined 14.9% to CHF 8.7bn; cash generated from operations was CHF 16.6bn, partly reflecting higher year-end working capital.

Outlook and guidance

• FY22 guidance: organic sales growth of ~5%, underlying trading operating profit margin of 17.0%–17.5%, and increases in underlying EPS at constant currency and capital efficiency.

• Mid-term outlook targets sustained mid-single-digit organic sales growth, moderate margin improvement and prudent capital allocation.

• Pricing actions were expected to continue as significant cost inflation persisted, with margin effects depending on inflation and price-reset timing.