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• Organic Sales Growth: 2.2% with RIG of 0.8% and pricing of 1.5%.

• UTOP Margin: 17.2%, down 10 basis points versus 2023.

• Gross Profit Margin: Increased by 80 basis points.

• Advertising and Marketing Investments: Increased by 40 basis points.

• Administration Expenses: Increased by 50 basis points due to higher labor costs.

• Efficiencies Delivered: Over CHF1.2 billion, with CHF500 million from recipe reformulation.

• Free Cash Flow: Improved by CHF0.9 billion to CHF10.7 billion.

• Net Debt: Increased due to CHF12.2 billion return to shareholders and CHF2.1 billion adverse FX impact.

• Return on Invested Capital: Increased due to improvements in working capital and lower restructuring costs.

• Net Financing Costs: Increased with higher average net debt and interest rates.

• Underlying Tax Rate: Increased by 70 basis points to 21.9%.

• Warning! GuruFocus has detected 4 Warning Sign with NSRGF.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Nestle SA (NSRGF) delivered 2024 results in line with or slightly better than guidance, with strong cash flow.

• The company has initiated a CHF2.5 billion cost savings program called Fuel for Growth to fund investments in calorie growth and market share improvement.

• Gross profit margin increased by 80 basis points, driven by pricing, portfolio optimization, and net input cost reduction.

• Nestle SA (NSRGF) is ahead of schedule on key sustainability targets, including greenhouse gas reduction and regenerative agriculture.

• The company is expanding its innovation efforts, with new product launches in ready-to-drink coffee and wet cat food, indicating strong growth potential.

Negative Points

• Organic sales growth was only 2.2% in 2024, impacted by soft consumer demand and foreign exchange movements.

• Consumer hesitancy towards global brands in certain markets negatively impacted growth, particularly in Zone AOA.

• The UTOP margin decreased by 10 basis points compared to 2023, with expectations for further decreases in 2025.

• Higher labor costs and increased growth investments, particularly in digitization, led to a 50-basis point increase in administration expenses.

• Nestle SA (NSRGF) expects free cash flow in 2025 to be below 2024 levels due to higher restructuring costs and smaller improvements in working capital.

Q & A Highlights

Q: What kind of price elasticity does Nestle anticipate given the higher commodity costs, and will this impact volumes negatively? Additionally, when is PetCare expected to return to mid-to-high single-digit organic sales growth? A: Laurent Freixe, CEO, explained that while input costs are increasing, particularly in coffee and cocoa, these categories have shown resilience in the past. Nestle's savings programs will help offset some costs. Regarding PetCare, Freixe noted that while growth slowed in 2024, the category remains promising due to ongoing trends like pet adoption and premiumization. The company expects gradual improvement in 2025, driven by capacity expansion and opportunities in Asia.