24 April 2025
If you are covering Nestle or Unilever's latest results, please see the following comment from Chris Beckett, head of equity research at Quilter Cheviot:
"Nestle and Unilever posted good results this morning, though certainly not exceptional. The biggest takeaway from both sets of results is that pricing is increasing once again. Both companies are affected, but it is easier to understand for Nestle given the prices of coffee and cocoa have climbed recently. This has resulted in Nespresso and instant coffee prices rising and confectionary prices up by 10% year on year – as anyone who recently purchased an Easter egg would no doubt attest to.
"Last year, the talk was of a decline in inflation and the improved balance between volume and price. Currently, while the balance remains, pricing is accelerating, and volumes for both companies are still positive. Consumers worldwide are understandably uncertain. Europe remains a tough region for achieving improved volume growth, and Unilever's emerging markets audience, particularly in Indonesia, also presents difficulties.
"Nestle posted sales growth of 2.8%, which was slightly better than expected, helped along by increased pricing as well as improved volumes. In terms of the broad spread across Nestle’s regions and categories, the strongest growth is coming from coffee and confectionary due to higher prices, with KitKat being the top performer. Innovation has been good, but the price of chocolate is weighing on sales. Management reaffirmed Nestle’s guidance, though this came with the expected caveat of heightened risks and uncertainty.
"Unilever’s sales were up 3%, marginally better than expected due to being propped up by price rises. Beauty, personal care and ice cream were the company’s top performers, while its homecare business was a little weaker. Its guidance was also reconfirmed, and management confirmed that the spin out of its ice cream business remains on track and investors will be updated in September so we can still expect to see it complete this year.
"Unilever deemed the tariff impacts to be limited and manageable, which is understandable given the majority of its products are produced locally for local consumption, such as large bottles and boxes of laundry products. Comparatively, Nestle will face the unavoidable battle of input costs for key ingredients such as cocoa beans and coffee beans.
"In terms of valuation, Nestle and Unilever are coming in at 19.4x and 18x respectively, both with three and a half per cent yields. While they are solid businesses, Nestle has more attractive categories and slightly better operational performance. Unilever’s new management still needs to prove itself, but this quarter has got them off to a good start."
