Investing.com -- Nestlé’s (SIX:NESN) full-year 2024 results reflect a mixed performance amid a challenging macroeconomic environment and shifting consumer demand.
The Swiss consumer goods company on Thursday reported organic growth of 2.2%, a sharp decline from the 7.2% seen in 2023.
However, real internal growth (RIG) turned positive at 0.8% after contracting by 0.3% the previous year, signaling some recovery in sales volume.
Pricing adjustments contributed 1.5% to growth, a significant slowdown compared to the 7.5% price hikes in 2023, reflecting an easing inflationary environment.
Overall sales declined by 1.8% to CHF 91.4 billion, primarily due to unfavorable foreign exchange movements (-3.7%) and net divestitures (-0.3%).
Emerging markets and Europe led organic growth, while North America experienced a sales contraction of 0.5%, largely driven by weak performance in frozen foods and coffee creamers.
By category, coffee, confectionery, and pet care were the strongest contributors to growth, while dairy and frozen meals in North America weighed on performance.
Profitability metrics presented a mixed picture. The gross profit margin improved by 80 basis points to 46.7%, supported by pricing actions and cost controls.
However, the underlying trading operating profit margin slipped slightly by 10 basis points to 17.2%. Reported net profit declined by 2.9% to CHF 10.9 billion, impacted by currency fluctuations and restructuring costs.
Basic earnings per share dropped 1% to CHF 4.19, while underlying EPS decreased by 0.8% to CHF 4.77.
Despite the softer topline performance, Nestlé continued to generate strong cash flow, with free cash flow increasing by 2.5% to CHF 10.7 billion.
This allowed the company to propose a dividend increase to CHF 3.05 per share, marking 65 consecutive years of dividend growth.
Meanwhile, the company completed its CHF 20 billion share buyback program but does not plan a new repurchase initiative for 2025.
A key focus in 2024 was improving efficiency and reinvesting in growth. Nestlé launched a CHF 2.5 billion cost-savings program, with CHF 300 million already secured for 2025.
Marketing and advertising spend, which had dipped to 6.6% of sales in 2022, rebounded to 8.1% and is set to reach 9% in 2025. Additionally, the company restructured its geographic reporting, consolidating its five operating zones into three and positioning Nestlé Waters (NYSE:WAT) and premium beverages as a standalone business.
Nestlé anticipates improved organic sales growth in 2025, driven by ongoing investments in innovation and marketing.
Their six key innovation projects ("big bets") will see a faster global expansion. However, they foresee some margin pressure in the near term due to these strategic investments.
The underlying trading operating profit margin is projected to be at least 16% in 2025, while their long-term goal remains above 17%.