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Wednesday, August 05, 2020

Nestle cuts 2020 growth forecast as consumers ate into stockpiles in second quarter

Packaged food companies have weathered the crisis better than other industries as consumers bought coffee, pasta or infant formula in bulk during COVID-related lockdowns, although Nestle's business supplying restaurants and cafes restaurants has suffered.

By: Reuters | Zurich | Published: July 30, 2020 12:01:50 pm
A bird’s nest logo sits on display at the Nestle SA headquarters in Vevey, Switzerland, on Wednesday, Feb. 12, 2019. (Photographer: Stefan Wermuth/Bloomberg)

Nestle cut its full-year underlying sales forecast on Thursday, saying demand had slowed as customers worked their way through cupboards they stocked up with food at the start of coronavirus related-lockdowns.

Packaged food companies have weathered the crisis better than other industries as consumers bought coffee, pasta or infant formula in bulk during COVID-related lockdowns, although Nestle’s business supplying restaurants and cafes restaurants has suffered.

Organic sales growth, excluding currency swings and mergers and acquisitions, slowed to 1.3% in the three months to June, down from 4.3% in the first quarter, the maker of KitKat chocolate bars and Nescafe coffee, said in a statement.

“Most categories saw consumer destocking in the second quarter,” Nestle said.

Organic growth for the first half reached 2.8%, above a forecast for 2.3% in a company-compiled analyst poll.

Net profit grew by 18.3% to 5.9 billion Swiss francs ($6.46 billion) in the first half, ahead of a forecast for 5.07 billion francs in the poll, and the margin improved by 30 basis points to 17.4%.

The Swiss giant lowered its expectations for organic growth this year to 2-3%, from “more than 3.5%” previously.

“A solid set of figures which were ahead of street expectations and once again underscore the group’s solid characteristics,” said Kepler Cheuvreux analyst Jon Cox.

Last week, peer Unilever posted a smaller-than-expected fall in second-quarter sales, citing a pickup in eating at home.

($1 = 0.9133 Swiss francs)

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