Nestle says it will ‘moderate’ its price increases

BERN (AFP): Nestle raised its sales outlook for 2023 on Thursday as the maker of chocolate bars, baby food and pet-care products said it would temper price increases that boosted its half-year revenue.

The Swiss group, whose brands include KitKat bars, Nespresso coffee capsules and Purina dog food, said revenue reached 46.3 billion Swiss francs ($54 billion) in the first six months of the year, up 1.6 percent from the same period in 2022.

Its net profit jumped 7.7 percent to 5.6 billion francs, but it fell short of forecasts.

Organic sales growth — closely followed by financial analysts as it excludes currency fluctuations and acquisitions — fared better.

It was up 8.7 percent, pulled up by double-digit growth in infant nutrition, sweets and pet products. This compared to 8.1 percent expected by analysts surveyed by Swiss news agency AWP.

Prices grew 9.5 percent in the same period, though sales volume fell 0.8 percent.

Inflation began to rise worldwide as economies emerged from Covid restrictions and it worsened as Russia’s invasion of Ukraine sent energy and commodity prices soaring last year.

Central banks have hiked interest rates in efforts to rein in consumer price inflation.

Nestle said it still faced “significant inflation” for commodities, packaging costs and wages in the first half. The company said price increases and cost efficiencies helped to partly offset the impact of higher costs.

“We are still repairing our gross margin which was significantly impacted over the last two years,” Nestle chief executive Mark Schneider told journalists.

“Looking forward, pricing actions will moderate and will be more targeted to products that are still subject to input costs inflation,” he said.

Inflation has slowed for some commodities but costs remain “quite high” for robusta coffee, cocoa and sugar, he said.

The company upgraded its outlook for organic sales growth to a range of seven to eight percent for 2023, up from six to eight percent previously, following the “strong performance” in the first half.