Nestlé reports challenging conditions with latest results amid ongoing global pandemic

The Swiss-headquartered Nestlé group has reported testing conditions in its latest annual results, which saw the business incur significant additional global operating costs amid the coronavirus pandemic, writes Neill Barston.

While the company reported 3% organic growth, sales revenues for 2020 stood at CHF 84.3 billion across its portfolio, down by 8.9%, with net profit amounting to CHF 12.2 billion, down 3% year-on-year, with segments, including its confectionery interests, also suffering a dip in performance amid the covid crisis.

As it noted, dealing with the pandemic added a total of CHF 420 million to its costs in terms of bonuses paid to frontline workers, additional employee safety protocols, donations and other staff and customer allowances, though some of these costs have been offset by reduced travel expenses, with the second half of 2020 showing an improved picture.

However, there were encouraging innovations for the year that included the development of its Swiss R&D accelerator centre focusing on plant-based product ranges, a notable advancement within confectionery as its Smarties ranges switches to paper-based packaging, as well as a venture into new territory in producing a new vegan KitKat variety.

The business recorded progress some of its key areas including it American territories, with momentum noted in its Health Science and pet care segments of the company. Performance within confectionery was described as ‘slightly negative,’ due to a reduced demand for gifting and impulse buys.

CEO Mark Schneider (pictured at last year’s results press conference), believed its digital operations and innovation focus were key to handling the ongoing challenging conditions, as the company projected continued moderate organic growth.

He said: “2020 was a year of hardship for so many, yet I am inspired by the way it has brought all of us closer together. I want to thank our employees and our partners – from farmers to retailers – who worked with us to ensure the supply of food and beverages to communities globally. In this unprecedented environment, we achieved our third consecutive year of improvement in organic growth, profitability and return on invested capital.

“The global pandemic did not slow us down. Our nutrition expertise, digital capabilities, decentralised structure and innovation engine allowed us to adapt quickly to changing consumer behaviours and trends. We advanced our portfolio transformation, continued to build Nestlé Health Science into a nutrition powerhouse and expanded our presence in direct-to-consumer businesses. At the same time, we remained focused on sustainability and set out our path to achieve net zero greenhouse gas emissions by 2050.

“This journey is expected to support future growth and be earnings neutral – it will generate value for society and our shareholders. Looking to 2021, we expect continued improvement in organic growth, profitability and capital efficiency in line with our value creation model.”

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