Nestlé's full-year profit disappoints despite higher prices

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Nestlé's full-year profit disappoints despite higher prices
Credit: © Reuters.

By Peter Nurse -- Nestlé (SIX: NESN ) reported weaker than expected full-year net profit Thursday, as the world's largest food producer struggled to pass on higher raw material costs to cash-strapped customers despite hiking prices.

The Swiss conglomerate, which owns brands like Nescafe, KitKat, and Nespresso, stated that net profit in 2022 came in at CHF 9.3 billion ($1 = CHF 0.9225), a 45% drop from the prior year.

That substantial fall reflected the gain on disposal of L'Oréal (EPA: OREP ) shares in 2021, but still came in below the forecast of CHF 11.6B in a poll of analysts arranged by the company.

Shares in Nestlé fell 0.4% in Zürich on Thursday.

"Last year brought many challenges and tough choices for families, communities and businesses. Inflation surged to unprecedented levels, cost of living pressures intensified, and the effects of geopolitical tensions were felt around the world," said CEO Mark Schneider.

Sales increased to CHF 94.4B, just below its forecast of CHF 95.02B, while its organic growth, which cuts out the impact of acquisitions and currency movements, came in at 8.3%, weaker than the 8.6% expected.

That said, Schneider remained confident of the future, saying "we expect another year of robust organic growth (in 2023)", and "Nestlé's value creation model puts us in a strong position to achieve our 2025 targets and to generate reliable, sustainable shareholder returns."

Nestlé's board is set to propose a dividend of CHF 2.95 per share, an increase of 15 centimes. If approved, this will be the company's 28th consecutive annual dividend increase. 

Additionally, it intends to reduce the share capital by 80 million shares through the cancellation of shares purchased, as part of the share buyback program.

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