Nestle raises outlook again, shares surge higher

[ZURICH] Swiss food giant Nestle on Wednesday raised its growth outlook for the second time this year after nine-month sales beat expectations, sending its share price soaring.

Even though the company which makes Nespresso capsules and Smarties candies signalled it would have to raise prices further as its input costs rise, Nestle has so far been able to get consumers to swallow the increases.

Sales rose 2.2 per cent over the first nine months of the year from the same period last year to 63.3 billion Swiss francs (US$58.8 billion), thanks in particular to coffee and vegetarian products, the company said.

Given the large size of the group, many analysts prefer to look at organic growth that strips out the effects of sales and acquisitions as well as currency fluctuations.

By this measure the company posted 7.6 per cent growth.

That beat handily the analyst consensus forecast of 6.4 per cent organic growth and 62.7 billion in sales compiled by Swiss financial news agency AWP.

The group, which also makes Kit Kat bars and Maggi soup bouillon cubes, raised in July its organic growth forecast for 2021 to between 5 and 6 per cent.

On Wednesday, it raised it again to between 6 and 7 per cent.

Nestle chief executive Mark Schneider said he was pleased with the performance of the company's teams which allowed it to "navigate input cost inflation and supply chain constraints."

The company put the rise of input costs at 4 per cent of sales in 2021, which represents an increase from the forecast this summer.

It expects input prices to rise further this year and next.

Kepler Cheuvreux analyst Jon Cox said Nestle's ability to command higher prices for its goods helped it beat expectations.

"The company is using the whole toolkit in terms of increasing pricing, innovation and increased productivity to offset inflationary pressures and I am confident that ultimately it can do so," he said.

Nestle shares gained nearly 2.7 per cent to 115.96 Swiss francs, far outpacing the 0.6 gain of the SMI index.

AFP