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Coffee lovers and home bakers drive strongest Nestle quarter in a decade

04/22/2021 | 10:00am EDT
FILE PHOTO: Logo is pictured on the Nestle research center in Lausanne

ZURICH (Reuters) - Coffee drinkers, pet owners and home bakers helped to drive the biggest rise in quarterly sales at Nestle for 10 years, as the world's biggest food group outshone Danone and set a high bar for Unilever.

The Swiss group has weathered the COVID-19 pandemic well so far, as consumers have bought more packaged foods and tried to brighten up lockdowns with Starbucks at-home coffee or making treats with Carnation evaporated milk.

"Our confidence level to get to an organic growth rate of more than 4% (this year) has certainly increased on the back of our first-quarter performance," Chief Executive Mark Schneider told investors on a call on Thursday.

Nestle's ecommerce business also fared well in the first quarter, with sales up 40%, and its health science business benefitted as people bought more vitamins and supplements. Demand for fortified milks boosted dairy too.

"What a blow out - the strongest quarterly number since 2011," Kepler Cheuvreux analyst Jon Cox said, pointing to a recovery in emerging markets, while Bernstein analyst Bruno Monteyne described the figures as an "amazing beat".

Shares in Nestle, up just over 2% so far this year, were 2.9% higher at 1321 GMT, outperforming the European food sector.

The maker of KitKat chocolate bars and Maggi soups confirmed its full-year guidance for higher organic sales growth, which strips out currency swings and acquisitions/divestments, than the 3.6% achieved last year.

Schneider said he wanted to see how the COVID-19 recovery played out in the second quarter before revisiting a full-year guidance that might now seem conservative. He cautioned against excessive margin expectations as input costs were on the rise.

Organic sales leapt 7.7% in the first quarter versus 4.3% in the same period last year, easily beating a forecast for 3.3% growth in a company-compiled consensus https://www.nestle.com/investors/analysts-consensus and a 3.3% drop in sales posted by peer Danone this week.

Unilever is due to post its first-quarter update on April 29.

The Americas, and also Asia where the pandemic struck first last year, showed strong growth, while Europe saw a 4.4% rise.

Coffee was the largest growth driver, with Nespresso portioned coffee up more than 17%, dairy almost 16% and petcare around 9%.

The group's out-of-home business, which sells food and drinks to restaurants and hotels, struggled, although not as badly as earlier in the pandemic.

The infant nutrition business returned to growth in China, but was under pressure elsewhere as birth rates fell.

Nestle said it had made further progress in reshaping its portfolio, as it expands in health and wellness foods and pulls out of underperforming businesses.

Schneider said the company's focus for acquisitions was on high-growth categories like coffee or petcare, but "across the full spectrum, if something is a good fit and strengthens us, we're open".

Nestle recently sold its North American water brands to One Rock Capital Partners for $4.3 billion, but bought U.S. premium water brand Essentia. It also offloaded its Yinlu peanut milk business in China.

(Reporting by Silke Koltrowitz. Editing by Kim Coghill, Mark Potter and David Evans)

By Silke Koltrowitz


© Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
AMERICAN WATER WORKS COMPANY, INC. 0.09% 153.2 Delayed Quote.-0.27%
CLASS III MILK FUTURES (DC) - CMG (ELECTRONIC)/C1 0.00% 18.9 End-of-day quote.11.65%
CLASS IV MILK?FUTURES (GDK) - CMG (ELECTRONIC)/C1 0.00% 16.07 End-of-day quote.11.82%
DANONE -0.20% 58.99 Real-time Quote.9.95%
DRY WHEY?FUTURES (DY) - CMG (ELECTRONIC)/C1 -0.50% 64.975 End-of-day quote.38.80%
NESTLÉ S.A. 0.17% 108.9 Delayed Quote.4.28%
NONFAT DRY MILK FUTURES (GNF) - CMG (ELECTRONIC)/C1 -0.18% 124.775 End-of-day quote.3.63%
S&P GSCI CLASS III MILK (USD) -3.80% 144.3432 Delayed Quote.12.98%
S&P GSCI COFFEE INDEX 2.97% 118.8295 Delayed Quote.16.84%
STARBUCKS CORPORATION 1.11% 114.74 Delayed Quote.6.66%
UNILEVER PLC 1.97% 4304.5 Delayed Quote.-3.88%
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Financials
Sales 2021 23 572 M 28 434 M 28 434 M
Net income 2021 1 762 M 2 125 M 2 125 M
Net Debt 2021 11 190 M 13 498 M 13 498 M
P/E ratio 2021 21,6x
Yield 2021 3,34%
Capitalization 38 331 M 46 210 M 46 237 M
EV / Sales 2021 2,10x
EV / Sales 2022 2,01x
Nbr of Employees 100 383
Free-Float 91,8%
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Technical analysis trends DANONE
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TrendsNeutralBullishNeutral
Income Statement Evolution
Consensus
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Mean consensus HOLD
Number of Analysts 29
Average target price 60,87 €
Last Close Price 58,99 €
Spread / Highest target 18,7%
Spread / Average Target 3,18%
Spread / Lowest Target -23,7%
EPS Revisions
Managers and Directors
NameTitle
Véronique Penchienati-Bosetta Co-Chief Executive Officer & CEO-International
Shane Grant Co-Chief Executive Officer
Juergen Esser Chief Financial, Technology & Data Officer
Gilles Schnepp Non-Executive Chairman
Domitille Doat-Le Bigot Chief Digital Officer
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THE KRAFT HEINZ COMPANY22.53%51 947
GENERAL MILLS, INC.5.10%37 715