Nestlé (NESN) H2 2023 earnings summary

Executive summary

• FY 2023 organic sales growth was 7.2%, UTOP margin 17.3% and free cash flow CHF 10.4bn amid soft consumer demand.

• Growth was pricing-led: pricing +7.5%, RIG -0.3%; RIG improved to 0.4% in Q4 after negative readings in the first three quarters.

Financial highlights

• Sales fell 1.5% to CHF 93.0bn; organic growth +7.2% was offset by FX -7.8% and net M&A -0.9%.

• UTOP was CHF 16.053bn; margin rose 20 bps to 17.3% reported and 40 bps in constant currency. FY gross margin was 45.9%, up 70 bps.

• Net profit rose 20.9% to CHF 11.2bn; reported EPS was CHF 4.24, while underlying EPS was CHF 4.80, up 8.4% in constant currency.

• Free cash flow increased CHF 3.8bn to CHF 10.4bn, supported by a CHF 4.3bn working-capital contribution and lower inventory levels.

• TOP increased 10.0% to CHF 14.5bn; reported TOP margin rose 160 bps to 15.6%.

Outlook and guidance

• FY 2024 guidance: ~4% organic sales growth, a moderate increase in UTOP margin and underlying EPS growth of 6%–10% in constant currency.

• 2025 targets: mid-single-digit organic sales growth, UTOP margin of 17.5%–18.5% and underlying EPS growth of 6%–10% in constant currency.

• 2024 priorities include RIG-led growth, higher marketing and growth investment, innovation, affordability, premiumization, execution excellence and gross-margin restoration.