Nestlé’s unexpectedly strong volume growth in the third quarter will help it “build credibility” with investors, analysts have said.
The Swiss fmcg giant revealed this morning that real internal growth (RIG), its measure of volumes, had hit 2.8% in the quarter, against stock market expectations of just 1.8%.
Combining the volume gains with a 1.1% bump to pricing, Nestlé won 4% organic growth in the quarter to take CHF22.8bn (£20.7bn) in revenue.
Philipp Navratil, Nestlé CEO, said his team’s strong execution was responsible for the growth.
“RIG was positive across all zones and globally managed businesses and reached 2.8% in the third quarter, continuing the performance improvement of recent quarters,” he said.
“The agreement to divest our mainstream vitamins, minerals and supplements business marks another important step in focusing our portfolio where we have the strongest competitive advantage.
“Against a challenging external backdrop, our focus remains on delivering value, consistently executing with discipline and driving sustainable RIG-led growth across the business.”
Nestlé’s unexpectedly strong volume growth came as “another step in the right direction,” according to Bernstein analyst Callum Elliott.
“For the past two years, the core debate around Nestlé has been whether new management teams could drive a turnaround in executional performance at this sleeping giant which has consistently lost share for the past fifteen-plus years, and reinvigorate volume growth,” he said.
“Today’s results see the strongest quarterly performance since 2021, before the big step-up in inflationary pricing.”
Jefferies’ David Hayes called it a “helpful update for building credibility” with the markets.
While headline RIG was “flattered” a little by timings and a 20bp contribution by Nestlé’s soon-to-be-divested waters business, the “inflection in pet volumes is clear, and coffee volumes are rebuilding post-price hikes”.
RBC’s James Edwardes Jones, meanwhile, estimated a higher contribution from the waters business’ volume gains – a “slight wrinkle” given it is in the process of being carved out into a joint venture.
“We shouldn’t be grumpy – this is Nestlé’s best RIG performance since 2021,” he said.
“Both RIG and organic sales growth accelerated in the US, where the improvement was broad based across Nestlé’s business. China’s organic sales growth of 4.2% benefited from soft comps, and the market remains tough, albeit Nestlé saw some underlying improvement.”
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