Nestle Stock Up On 9M Organic Sales Growth; Cuts FY24 View

Nestle SA on Thursday trimmed its fiscal 2024 outlook for earnings as well as organic sales growth after reporting weak sales in the first nine months of the year. However, organic growth was 2 percent in the period, with positive real internal growth.

The Swiss food and beverage major also announced changes to its organization, effective as of January 1, along with certain key changes to its Executive Board, to drive performance and transformation.

In Switzerland, Nestle shares were gaining around 2.6 percent to trade at 86.08 Swiss Francs.

The company said the full-year 2024 outlook revision reflects the consumer environment and further actions to reduce customer inventories in the fourth quarter.

Laurent Freixe, CEO of Nestle, said, “Consumer demand has weakened in recent months, and we expect the demand environment to remain soft. Given this outlook and our further actions to reduce customer inventories in the fourth quarter, we have updated our full-year guidance, with organic sales growth expected to be around 2 percent, in line with the first nine months…. Disciplined in-market execution will drive Nestlé’s virtuous circle to sustain profitable growth over time.. Today’s organizational changes will align Nestlé, bringing simplicity and focus.”

For the full year, Nestle now expects underlying earnings per share growth in constant currency to be broadly flat, compared with earlier expectation for an increase at a mid single-digit rate.

Underlying trading operating profit margin is expected to be at around 17 percent.

Organic sales growth is now seen around 2 percent, lower than prior outlook of at least 3 percent increase.

For the nine-month period, the company registered sales of 67.148 billion francs, 2.4 percent lower than prior year’s 68.829 billion francs.

Real internal growth or RIG was 0.5 percent, in an environment of softening consumer demand and actions taken in the third quarter to reduce customer inventory. Pricing increased 1.6 percent.

Sales of North America Zone stood at 18.524 billion francs, 2.6 percent as against prior year’s 19.027 billion francs.

Zone Europe sales of 13.90 billion francs dropped 1.8 percent, and the decline was 5.2 percent in Zone AOA, 2.3 percent in Zone Latin America, 2 percent in Zone Greater China, and 0.7 percent in Nespresso, while Nestlé Health Science alone recorded a 1.3 percent growth.

By geography, organic growth was driven by emerging markets and Europe, which together more than offset a slight decrease in North America.

By channel, organic growth in retail sales was 1.9 percent. Organic growth of out-of-home channels was 3.4 percent. E-commerce sales grew organically by 9.7 percent.

Regarding the company reorganization, Nestle announced that starting in 2025, its reporting will comprise five segments: Zone AMS, Zone AOA, Zone EUR, Nestle Health Science and Nespresso, instead of current seven segments.

Zone Latin America and Zone North America will merge to form Zone Americas or AMS, which will be led by Steve Presley.

Further, Zone Greater China Region will become part of Zone Asia, Oceania and Africa or AOA, which will be led by Remy Ejel. David Zhang will step down from the Executive Board and will remain Chairman and CEO of the Greater China Region.

Nestle noted that Zone Europe or EUR will remain unchanged and will continue to be led by Guillaume Le Cunff.