Nestlé has warned of price increases for its products as the cost of production continues to rise as a result of inflation.
The warning comes as the Swiss food group reported underlying sales jumped up 3.3% to £69.5 billion (CHF 87.1 billion) in its full year results from 2021, with a 2% point rise coming from price increases – a trend that accelerated to 3.1% in the fourth quarter, to offset significant cost inflation.
Total reported sales increased by 3.3% to £69.4 billion (CHF 87.1 billion) compared to £67.2 billion (CHF 84.3 billion) in the same period in 2020. Foreign exchange also reduced sales by 1.3%, with net divestitures having a negative impact of 2.9%.
READ MORE: 500 jobs axed as Nestlé factory closure confirmed
“It is a safe assumption that our input cost increases for 2022 will be higher than 2021, that is something that we have to reflect in our pricing,” Nestlé chief executive Mark Schneider said.
“There is almost no place in the company that is exempt of inflation now,” he added. “Some of these things you can hedge against, some not.”
The company expects organic sales growth of around 5% and underlying trading operating profit margin between 17% and 17.5% for 2022 as inflationary pressure across its core markets is passed on to consumers.
Commenting on the results, financial brokerage XTB’s chief market analyst Walid Koudmani added: “Nestle’s results managed to reassure investors with organic growth reaching 7.5% and total reported sales increasing by 3.3% while indicating that the company expects organic sales growth around 5% for 2022.
“While the stock price may see a short term positive reaction, potential supply chain issues and overall rising costs could hinder performance down the line if these issues are not addressed appropriately.”
The news comes after the Office for National Statistics (ONS) revealed inflation hit a 30-year high of 5.5% in the year to January, with the Bank of England forecasting that cost of living could reach over 7% by spring – far above its 2% inflation target.
Click here to sign up to Grocery Gazette’s free daily email newsletter
