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Nestle SA Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- Gross profit margin improved by 80 bps due to pricing, portfolio optimization, and net input cost reduction.
- The company is addressing through science-based innovation with HMOs and improvements on distribution, which is starting to drive an improvement in share.
- The zone delivered solid RIG-led growth in China, thanks to continued innovation with strong performance in RTD coffee and e-commerce.
- The company is focused on improving volume trajectory to maximize margin and invest behind products.
- The company lost share in frozen food and was held back in coffee creamers by capacity constraints for most of the year.
- The company's regional mix has been impacted by consumer hesitancy to global brands.
- The company's growth in Zone North America was disappointing.
- Inventory reduction actions impacted Q3 and to a lesser extent, Q4.
- FCF is expected to be below the level of 2024.
- The company expects a smaller improvement in working capital and higher restructuring costs as it steps up its cost savings program.
- The company will need to take price in the context of increasing commodity prices in coffee and cocoa.
- The company will not fully recover the cost inflation through price and efficiency.
- The company is upbeat on the PetCare category, and pet adoption will continue to increase.
Q&A Highlights from Nestle SA Earnings Call Q4 2024
- Analyst asked about the impact of price increases on volumes, specifically in the coffee and cocoa categories.
- The company's portfolio is well-positioned, with coffee and confectionery categories showing resilience in the face of cost increases. The company has a cost savings program, the Fuel for Growth program, to help offset the impact of cost increases.
- The company's portfolio is well-positioned, with coffee and confectionery categories showing resilience in the face of cost increases. The company has a cost savings program, the Fuel for Growth program, to help offset the impact of cost increases.
- Analyst asked about the potential for negative volumes in 2025.
- The company is committed to returning to positive volume in 2025, but volumes may be negative in the short term due to input costs.
- The company is committed to returning to positive volume in 2025, but volumes may be negative in the short term due to input costs.
- Analyst asked about the impact of commodity inflation on confectionery and coffee categories.
- The company's confectionery category is less impacted by commodity inflation, and the company will take advantage of cost savings programs to offset the impact of cost increases. The company's coffee category has been resilient to price increases, and the company expects to see some trade-down, but overall benefits from price increases.
- The company's confectionery category is less impacted by commodity inflation, and the company will take advantage of cost savings programs to offset the impact of cost increases. The company's coffee category has been resilient to price increases, and the company expects to see some trade-down, but overall benefits from price increases.
- Analyst asked about the potential for negative volumes in 2025.
- The company is committed to returning to positive volume in 2025, but volumes may be negative in the short term due to input costs.
- The company is committed to returning to positive volume in 2025, but volumes may be negative in the short term due to input costs.
- Analyst asked about the impact of commodity inflation on confectionery and coffee categories.
- The company's confectionery category is less impacted by commodity inflation, and the company will take advantage of cost savings programs to offset the impact of cost increases. The company's coffee category has been resilient to price increases, and the company expects to see some trade-down, but overall benefits from price increases.
- The company's confectionery category is less impacted by commodity inflation, and the company will take advantage of cost savings programs to offset the impact of cost increases. The company's coffee category has been resilient to price increases, and the company expects to see some trade-down, but overall benefits from price increases.
- Analyst asked about the potential for negative volumes in 2025.
- The company is committed to returning to positive volume in 2025, but volumes may be negative in the short term due to input costs.
- The company is committed to returning to positive volume in 2025, but volumes may be negative in the short term due to input costs.
- Analyst asked about the potential for negative volumes in 2025.
- The company is committed to returning to positive volume in 2025, but volumes may be negative in the short term due to input costs.
- The company is committed to returning to positive volume in 2025, but volumes may be negative in the short term due to input costs.
- Analyst asked about the potential for negative volumes in 2025.
- The company is committed to returning to positive volume
- The company is committed to returning to positive volume
- Analyst asked about the company's plans for CapEx and free cash flow margin.
- The company's management stated that they are focused on improving their free cash flow margin and that they are working to reduce CapEx as a percentage of sales. They also mentioned that they are working on pricing and that they will balance their pricing to maintain penetration while optimizing margin.
- The company's management stated that they are focused on improving their free cash flow margin and that they are working to reduce CapEx as a percentage of sales. They also mentioned that they are working on pricing and that they will balance their pricing to maintain penetration while optimizing margin.
- Analyst asked about the company's response to inflation and whether they would under-recover inflation again.
- The company's management stated that they have been through a period of high food price inflation and that they are mindful of the impact of inflation on consumers. They also mentioned that their response to cost inflation will always be the same, which includes mitigating the cost inflation through savings programs and Fuel for Growth. They also stated that they will not fully recover the cost inflation through price and efficiency, and that they will focus on driving consumer penetration to deliver their medium-term growth trajectory.
- The company's management stated that they have been through a period of high food price inflation and that they are mindful of the impact of inflation on consumers. They also mentioned that their response to cost inflation will always be the same, which includes mitigating the cost inflation through savings programs and Fuel for Growth. They also stated that they will not fully recover the cost inflation through price and efficiency, and that they will focus on driving consumer penetration to deliver their medium-term growth trajectory.
- Analyst asked about Nestle's approach to pricing elasticity and how it affects volumes.
- Laurent Freixe explained that Nestle is working on partnerships to realize the potential of global premium brands and develop new spaces for premium beverages. He also mentioned that the organization is fully-fledged and up and running, preparing for the next phase.
- Laurent Freixe explained that Nestle is working on partnerships to realize the potential of global premium brands and develop new spaces for premium beverages. He also mentioned that the organization is fully-fledged and up and running, preparing for the next phase.
- Analyst asked about Nestle's approach to pricing elasticity and how it affects volumes.
- Anna Olive Magdelene Manz explained that Nestle is working on pricing increases in the context of inflation and that the consumer will respond accordingly. She also mentioned that the company is well-positioned in portioned and soluble categories, which are less exposed to pricing vis-à-vis roast and ground coffee.
- Anna Olive Magdelene Manz explained that Nestle is working on pricing increases in the context of inflation and that the consumer will respond accordingly. She also mentioned that the company is well-positioned in portioned and soluble categories, which are less exposed to pricing vis-à-vis roast and ground coffee.
- Analyst asked about Nestle's approach to marketing spending and how it affects growth.
- Laurent Freixe explained that Nestle is focused on accelerating growth and driving category growth and market share performance. He mentioned that the company is using its Fuel for Growth savings program to enable investments while protecting margins. He also mentioned that there is an element of phasing in marketing spending, and that the company is prioritizing getting the value equation right before investing in communication and A&P.
- Laurent Freixe explained that Nestle is focused on accelerating growth and driving category growth and market share performance. He mentioned that the company is using its Fuel for Growth savings program to enable investments while protecting margins. He also mentioned that there is an element of phasing in marketing spending, and that the company is prioritizing getting the value equation right before investing in communication and A&P.
- Analyst asked about the impact of lower income consumers on Nestle's business and the company's strategy to address this issue.
- Laurent Freixe explained that lower income consumers are more sensitive to price increases and are more impacted by economic challenges, but premiumization is still possible even in challenging times. The company is focused on affordability and ensuring that its value equations are rock solid, and it wants to be preferred by relevant segments of the population.
- Laurent Freixe explained that lower income consumers are more sensitive to price increases and are more impacted by economic challenges, but premiumization is still possible even in challenging times. The company is focused on affordability and ensuring that its value equations are rock solid, and it wants to be preferred by relevant segments of the population.
- Analyst asked about the procurement clawback and cost savings, specifically the process that led to the realization of the CHF 300 million savings.
- Laurent Freixe explained that the company is reviewing its contracts and invoices to identify inconsistencies and get back to suppliers, finding quick savings. He also mentioned the impact of AI on procurement activities and the work being done to improve productivity and eliminate automated tasks. Anna Olive Magdelene Manz added that the company will continue to look for efficiencies and invest in growth.
- Laurent Freixe explained that the company is reviewing its contracts and invoices to identify inconsistencies and get back to suppliers, finding quick savings. He also mentioned the impact of AI on procurement activities and the work being done to improve productivity and eliminate automated tasks. Anna Olive Magdelene Manz added that the company will continue to look for efficiencies and invest in growth.