VEVEY, SWITZERLAND — To no surprise, Purina PetCare was “the largest contributor to organic growth” for Nestlé in the first six months of 2022, as reported in the company’s second-quarter and half-year earnings. Premium, science-based and veterinary offerings from Purina continue to fuel growth for the category and the company at large.
Purina posted 6-month sales of CHF 8.59 million (roughly $9.03 million USD), up 16% from ayear ago, with a real internal growth of 5.1% and organic growth of 13.9%. Pricing increased 8.8% over the first two quarters as the company continued to mitigate supply chain constraints and cost inflation.
“We limited the impact of unprecedented inflationary pressures and supply chain constraints on our margin development through disciplined cost control and operational efficiencies,” said Mark Schneider, chief executive officer of Nestlé. “At the same time, investments behind capital expenditure, digitalization and sustainability increased significantly.”
Note: Swiss franc (CHF) to USD conversions are based on July 29 exchange rates.
Profit margin suffered for Purina PetCare in the first six months of the year, “as significantly higher commodity and distribution costs more than offset pricing and growth leverage,” added François-Xavier Roger, executive vice president and chief financial officer at Nestlé.
In North America, Purina PetCare and the company’s frozen foods business were acutely impacted by supply chain constraints, according to Roger. However, pet category sales in North America grew at a strong double-digit rate over the first six months of 2022, supporting 9.6% organic growth for the area overall.
In Europe, Purina saw continued market share gains alongside Nestlé’s coffee and infant nutrition businesses. Purina PetCare remained a key growth driver in this region, according to Roger.
Purina reported high single-digit growth in AOA [Asia, Oceania and Sub-Saharan Africa], and posted market share gains and strong double-digit growth in Latin America.
The company increased its capital expenditure to meet strong volume demand for Purina PetCare and coffee, Roger said. He noted CapEx levels for Nestlé “should start to normalize from 2023 onward.”
Overall, the company reported a 9.2% increase in sales to CHF 45.6 billion ($4.79 billion USD), including a positive impact of 1% from acquisitions. According to Roger, this is the highest revenue growth the company has seen in more than 15 years. Organic growth for the company landed at 8.1%, with real internal growth of 1.7%. The company’s pricing increased across the board by 6.5%.
“Pricing continued to increase, reflecting higher inflation levels for our commodities, energy and labor, Schneider said. “As before, we made a point of acting responsibly in our price increases.”
Real internal growth was stifled by “continued supply chain issues and tough comparables” from the second quarter of 2021, Schneider noted.
“This has been a year of extraordinary supply chain challenges and input cost inflation,” he said. “The situation was difficult before, but the war in Ukraine brought this to a whole new and unforeseen level, in particular for the food industry.”
Nestlé updated its 2022 outlook based on its half-year results. Organic sales are now expected between 7% and 8%, and underlying trading operating profit margin is pegged around 17% for fiscal 2022.
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