Nestle SA warned profitability may decline for a second year in 2022, showing that even the world’s largest food and beverage company isn’t immune to cost inflation wracking the industry.
Input costs will probably increase more this year than in 2021, Chief Executive Officer Mark Schneider told reporters Thursday, forecasting an underlying trading operating profit margin of 17% to 17.5% this year compared with 17.4% in 2021.
“This is of course something we have to reflect in our pricing, and that’s across the board, in all geographies and categories,” he said. “There’s almost no place in the company that’s exempt from inflation now.”
Nestle is the latest company to warn that inflation will bite into profitability. Unilever Plc said last week it will take two years for its margin to return to 2021 levels. Heineken NV warned Wednesday that consumers’ budgets are being pinched by the worst inflation in a decade.
Nestle’s forecast still leaves room for the possibility of some margin improvement, however. The Nespresso maker Nestle is in a better position than its peers as it sells categories with a long shelf life and strong brands that makes it easier to pass on higher costs, Baader Helvea analyst Andreas von Arx said last week.
The KitKat maker’s sales rose 7.5% on an organic basis last year. Analysts expected 7% growth. The company forecast revenue growth to decelerate to about 5% this year.
Nestle increased pricing to 3.1% in the fourth quarter.
Separately, the company is proposing to add Apple Inc. Chief Financial Officer Luca Maestri and Schneider Electric SE Chief Marketing Officer Chris Leong to its board of directors.
CEO Schneider also said Nestle is open to consider acquisitions across the board.