Foodservice
Nestle closes Israel production facility, reports 9-month sales dip
October 20, 2023
Nestle SA has temporarily shut down its Israel production facility in response to Mideast tensions and has reported a 0.4% sales decline for the first nine months of the year over the prior year period, according to Seeking Alpha.
Highlights for the first nine months, according to a company press release, are:
- Total reported sales decreased by 0.4% from CHF 69.1 billion ($77.4 billion) in the first nine months of 2022 to CHF 68.8 billion ($77.06) for 2023. Foreign exchange decreased sales by 7.4%. Net acquisitions had a negative impact of 0.8%.
- Organic sales increased 7.8% for the comparative 9-month period, with pricing of 8.4% and real internal growth of -0.6%.
- Growth was broad-based across most geographies and categories. In developed markets, organic growth was 6.9%, led by pricing with negative real internal growth. In emerging markets, organic growth was 9%, driven by pricing and slightly positive RIG.
- By sales channel, organic retail sales increased 7.1%. E-commerce sales grew by 12.7%, reaching 16.6% of total group sales. Organic growth of out-of-home channels was 15.7%.
- Zone North America organic growth was 8%, with pricing of 8.9%. RIG was -0.9%, reflecting portfolio optimization actions and capacity constraints.
- Zone Europe organic growth was 8.8%, with pricing of 11.1%. RIG was -2.3%, following capacity constraints and portfolio optimization actions.
- Zone Asia, Oceania and Africa organic growth was 8.6%, with flat RIG.
- Zone Latin America organic growth was 10%, with pricing of 10.5%. RIG was -0.6%, turning slightly positive in the third quarter.
- Zone China organic growth was 4.9%, with pricing of 2.6%. RIG was 2.3%.
- Nestle Health Science organic growth was 2.5%, with pricing of 4.4%. RIG was -1.9%, impacted by a short-term supply constraint in the third quarter for the vitamins, minerals and supplements business.
- Nespresso organic growth was 5.2%, with pricing of 3.5%. RIG was 1.6%, reaching 3.5% in the third quarter.
Shares traded today at $110.15 against a 52-week range of $104.27 to $131.64.
The company's 6.9% organic sales growth missed analyst estimates of 8.1%, according to cnbc.com.
"Growth was driven by pricing as we continued to navigate historic inflation levels," CEO Mark Schneider said in the press release. "We are seeing the benefits of our portfolio optimization initiatives and increasing marketing investments behind our billionaire brands. These steps underpin our confidence that real internal growth, the sum of volume and mix, will turn positive in the second half of the year and again become the main driver of growth going forward."
The company confirmed expected 2023 organic sales growth between 7% and 8% and underlying trading operating profit margin between 17% and 17.5%. Underlying earnings per share in constant currency is expected to increase between 6% and 10%.
