Nestle (NSRGY) — headquartered in Switzerland — recently reported a reasonable set of full-year results with sales up 8.4% and organic growth of 8.3%, but hurt by higher costs, suggests Adrian Day, international investing specialist and editor of The Global Analyst.
The second half saw a dip in sales compared with the first half, compounded by higher costs. Indeed, the company said that its price increases –– nearly 12% on average in North America –– were insufficient to offset its higher input costs. Acquisitions had a positive effect on sales of just over 1%.
All in all, what the company calls “real internal growth” was barely positive, at 0.1%. The company achieved production guidance but costs were above target. The Greater China region was weaker than it has been, and weaker than other regions, with growth of just 3.5%, largely due to the covid shutdowns.
Looking ahead, the company expects organic sales growth of between 6% and 8% with operating margins of 17%. It expects continue increased in the prices of staple items. It promised a continued focus on Nestle Health Science, which saw several acquisitions last year.
The company has a solid balance sheet, boosted by recent sales of shares in L’Oreal. Proceeds helped fund the repurchase of Sfr 10.6 billion in Nestle shares last year, with more repurchases expected this year.
The company boosted the dividend for the year ahead, the 28th consecutive annual increase. For 63 years, the company has increased or maintained it dividend. The prospective yield of 2.7% will be the highest since 2016. If you do not own Nestle, this is a good price at which to take an initial position in this global blue chip.
