Nestle S.A.

Overview Key strengths Key risks Leading global market positions and diversified product portfolio supported by well-known brands, enabling the pass on of inflation impact to final customers. Exposure to fast-changing consumer preferences, as inflation weighs on household budgets. Accelerated portfolio rotation toward higher-growth categories such as pet care, coffee, and health science. Track record of sizable share buybacks leading to negative discretionary cash flow . Wide manufacturing and distribution capabilities; large research and development (R&D) and marketing capability with good geographic diversity in emerging markets. Acquisitions and significant shareholder remuneration have lifted adjusted leverage close to 2.5x, reducing headroom for sizable bolt-on acquisitions. Free cash flow generation will rebound in 2023 and its consistent financial policy should support leverage of

...Recent earnings disclosure attests that NestlT has successfully passed on inflation to final customers, highlighting the strength of its various brands. Performance during first-half 2023 and in fiscal year 2022 was relatively stable year over year despite macroeconomic challenges. NestlT group sales increased by 1.6% (organic sales of 8.7%) for first-half 2023, constrained by a 6.7% of foreign exchange headwind. On an organic basis, all seven of its product categories posted sales growth, driven by prices to mitigate the effects of strong inflation. Therefore, sales prices grew 7.8% in Powdered and liquid beverages, 10.5% in water, 11.3% in Milk products and ice cream, 7.8% in Nutrition and health science, 10.0% in Prepared dishes and cooking aids, 8.2% in Confectionery, and 12.1% in PetCare. Overall volume and mix impact were only slightly negative, reflecting limited demand elasticity in the context of pricing actions. Majority of NestlT products are in the mid-price range, which has...

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