Financial results

KitKat pushes Nestlé’s confectionery growth

By Anthony Myers

- Last updated on GMT

Nestlé said organic sales rose 7.6% in the first nine months. Pic: Nestlé
Nestlé said organic sales rose 7.6% in the first nine months. Pic: Nestlé

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Nestlé said its confectionery sector recorded high single-digit growth, supported by a strong sales development for KitKat, after the company reported its nine-month sales for 2021, raising full-year organic sales growth guidance.

The Zurich-based food giant said it now expects full year organic growth of 6-7% after strong retail sales and a recovery in out-of-home food consumption that pushed organic sales 6.5% higher in the third quarter.

In its statement to the media, Nestlé said organic sales rose 7.6% in the first nine months, beating the company’s own forecast for a 6.6% increase.

The KitKat maker had previously raised its full-year guidance to 5-6% in July. The operating profit margin, under pressure from high raw material costs, is expected to be stable, it said.

"The underlying trading operating profit margin is expected around 17.5%, reflecting initial time delays between input cost inflation and pricing​," Nestlé said, keeping its mid-term outlook for "continued moderate margin improvement​" unchanged.

Rising costs

Like its peers, Nestlé is facing pressure on margins from rising input costs. Global supply chains are under strain due to factors such as a resurgence of COVID-19 cases in Asia and staff shortages in the United States, increasing the price for its ingredients, according to Reuters.

The Swiss company cautioned last month that input cost inflation would likely be even higher in 2022, which could at least temporarily squeeze margins until price increases take effect.

Joshua Raymond, Director at financial brokerage XTB​, told ConfectioneryNews: "Nestlé reported stronger organic growth of 7.6% for the first nine months of the year whilst also raising guidance for the full year to be between 6% and 7%. The improvement for the full year is certainly pleasing but it does remain a tad disappointing that there is no movement in margin, which the firm continues to expect to come in at 17.5% for the full year. Given inflationary headwinds and supply issues, it's going to be a challenge to improve this number​."

Mark Schneider, Nestlé CEO, said: "We are pleased with Nestlé’s strong organic growth in the nine months, driven by broad-based contributions from most geographies and categories. The relentless focus of our teams on local execution and agility enabled us to navigate input cost inflation and supply chain constraints. In the third quarter, we increased pricing in a responsible manner, while maintaining strong real internal growth. Investments in innovation, digitalisation and sustainability further supported growth by enhancing the relevance and differentiation of our offerings.

“Nestlé continues to take actions on sustainability. We recently laid out our plans to support a just transition to regenerative food systems, which will help achieve our climate targets as we work closely with farming communities around the world to improve soil health, restore water cycles and increase biodiversity for the long-term​."

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