SWITZERLAND – Nestlé, in outlining its value creation model and 2025 targets to investors, said it expects to return to an underlying trading, operating profit margin range of 17.5% to 18.5% by 2025, following the margin impact of a sharp increase in cost inflation in 2021 and 2022.
The Swiss conglomerate also expects to deliver an annual underlying EPS growth range of 6% to 10% in constant currency over the period 2022 to 2025.
Nestlé plans to boost growth through brand building, innovation, and digitalization while supporting margin development through efficiency programs.
Nespresso-owner said it will continue to pursue external growth opportunities in fast-growing segments and regions.
Recently, it announced US$1.8 billion investment plans in Saudi Arabia over 10 years in a bid to strengthen its presence in the kingdom, which is looking to attract more foreign investments to diversify its oil-dependent economy.
In addition, with a focus on the Latin America region, the company commissioned a new R&D center in Chile and invested more than EUR50m (US$51.43m) in its factory in Montes Claros in Brazil, to enable the company to build capacity that will help in the manufacturing of new pods for the Neo system.
The company noted that it has already created significant value through portfolio management, contributing to increased growth and improved margins. It pledges to remain disciplined in its approach to portfolio management, looking for strategic and cultural fit, as well as attractive financial returns.
Mark Schneider, Nestlé CEO: “We have made significant progress in recent years, accelerating organic growth, increasing margins, and enhancing capital efficiency. Today, we outline our value creation model and targets for 2025 as we aim to deliver consistently in turbulent times.
“We will continue to invest for future growth, investing behind our brands, delivering impactful innovation, leveraging digitalization, and improving speed and agility. Creating shared value for stakeholders remains our focus, with Good for You, Good for the Planet at the heart of our strategy.”
In a statement to investors, the company said the net annual return on acquisitions since 2018 is between 11% and 13%, with a large majority of transactions at or above their business plans.
Nestlé confirmed its share buyback programme is targeting the repurchase of 20 billion Swiss francs (US$21.09 billion) of shares from 2022 to 2024, with about 9.7 billion francs of shares already bought.
The company said it has already bought around CHF 9.7 billion of shares in 2022 and aims to maintain the practice of increasing its dividend year-on-year in Swiss francs.
“Nestlé is now looking to 2025 with strong self-confidence, as seen in the ambitious financial targets,” Vontobel analyst Jean-Philippe Bertschy wrote in a note to clients.