• Nestle CEO Mark Schneider
    Nestle CEO Mark Schneider
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    Nestle has announced ambitious climate change tarkets for 2025.
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Nestle has recorded organic growth of 3.5 per cent for FY19, with CEO Mark Schneider expecting it to accelerate through 2021/22 to sustainable mid-single digit growth.

Nestle CEO Mark Schneider
Nestle CEO Mark Schneider

Real internal growth was 2.9 per cent and pricing growth of 0.6 per cent. Total reported sales increased 1.2 per cent to CHF92.6 billion (AU$140.7 billion).

One year ahead of Nestlé's medium-term plan, the company reached its 2020 profitability target range. The underlying trading operating profit (UTOP) margin increased by 60 basis points to 17.6 per cent. The trading operating profit (TOP) margin decreased by 30 basis points to 14.8 per cent due to increased restructuring and related expenses, the company said.

At the end of 2019, Nestlé completed the CHF20 billion (AU$30.4 billion) share buyback program initiated in July 2017. It started a new share buyback program of up to CHF20 billion in January 2020.

Nestlé divested Nestlé Skin Health in 2019 and announced the sale of its US ice cream business for USD 4 billion to Froneri (transaction closed 31 January 2020) (Food & Drink Business, 14/01/2020). 

Nestlé also agreed to sell a 60 per cent stake in its Herta charcuterie (cold cuts and meat-based products) business to Casa Tarradellas. Portfolio rotation over the past three years amounts to 12 per cent of total 2017 sales.

Schneider said 2019 brought strong progress with key operating and financial metrics improving for the second year in a row. “Cash flow was strong, while underlying earnings per share and returns to shareholders reached record levels. In 2020, we expect continued organic sales growth improvement as we take further steps to decisively address underperforming businesses,” he said.

“In 2019, we made significant progress in our portfolio transformation. We did what we said we would do and more. We are not done yet. We will respond to rapid changes in the industry and fast-evolving consumer preferences to position our portfolio for higher growth.

“Nestlé will continue to focus on fast innovation. The launch of our premium Starbucks products, for example, has been a great success. We are very pleased with the speed of the product rollout and the positive response by consumers. The company is fully embracing the need for speed, as the rapid expansion of our new plant-based food and beverage offerings has shown. We are getting to market faster with must-have products.”

GlobalData food correspondent Simon Harvey said: “The KitKat maker has been undergoing a rejig since chief executive Mark Schneider came on-board three years ago, selling a host of ill-fitting, lower-margin assets, while at the same time investing in on-trend, high-growth areas such as plant-based foods.

“Judging by the top-line sales figure and net profit for 2019, which were both the best in almost a decade (2010) when Nestlé was in another era and consumer habits were very different, the strategy appears to be paying dividends.”

Harvey pointed out an emerging unknown that could hurt the company – Covid-19. Schneider said China accounts for eight per cent of the company’s business, making it the second largest market for the company. Harvey said Nestlé already faces challenges with its Yinlu and Hsu Fu Chi businesses. “It’s been speculated that those two assets could also be sold, providing food for thought for 2020,” he said.

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