Nestle beats sales forecasts as CEO's turnaround gains pace

By Alexander Marrow

LONDON, Oct 22 (Reuters) - Nestle reported better-than-expected organic sales growth for the third quarter on Thursday, pushing the Swiss packaged food maker's shares around 1.5% higher as a turnaround led by CEO Philipp Navratil gathered pace.

Navratil, who took over in September 2025, inherited a conglomerate struggling with subdued consumer spending and the impact of US tariffs. He has put real internal growth - or sales volumes - at the heart of a strategy that includes reducing Nestle's exposure to ice cream, water and vitamin brands.

"I am pleased with our progress," Navratil said. "But I am not satisfied. There is much more for us to do to deliver the potential of the business."

Nestle's shares, up more than 7% so far this year, were at a three-month high.

Nestle maintained its full-year 2026 organic sales outlook for 3% to 4% growth and recorded a 4% uptick in quarterly organic sales, above analyst expectations for a 3.4% rise.

Real internal growth of 2.8% beat expectations of a 1.5% rise, while the price-related increase was 1.1%, below forecasts of 1.9%. That marked the first quarter since 2024 that Nestle's organic sales growth has been driven more by volume than price.

Vontobel analysts said in a note that the volume-driven growth was "reassuring and provides further evidence of delivery on Nestle's growth priorities".

"The recovery is gaining credibility, though consistency remains the real test," they wrote.

Barclays analyst Warren Ackerman said in a note that "pricing remains the key debate" heading into 2027, with question marks over next year's margins as consumers tighten their belts at the same time as input costs rise.

CFO Anna Manz sought to allay any concerns over the pricing miss, saying that price rises in 2026 have been incremental compared to significant rises in 2025.

"We'll take pricing to the extent we can without damaging medium-term consumer penetration," Manz said. "As we look forward to 2027, it is an inflationary environment, it's likely we'll see more pricing."

RUSSIA EXCLUDED FROM FINANCIAL RESULTS

Nestle also said it had excluded its Russian unit from consolidated financial accounts after Moscow seized the business last month, part of an intensifying crackdown on European companies because of Europe's support for Ukraine.

The Maggi and Nescafe owner played down the overall impact of losing Russian operations.

Manz said the Russian business, which contributed around 2% of group sales, was no longer being consolidated into financial results from the end of September, with no impact on organic sales, volumes and pricing.

Moscow's seizure, however, affects reported sales, underlying trading operating profit and free cash flow from the fourth quarter, Manz said, adding that derecognising the net assets would negatively affect net debt by approximately 900 million Swiss francs ($1.1 billion) for 2026.

Nestle said in total it was removing from its balance sheet Russian assets worth 1.6 billion francs and recording a non-cash charge of around 1.4 billion francs for cumulative currency translation adjustments.

($1 = 0.8227 Swiss francs)

(Reporting by Alexander Marrow; Editing by Dave Graham, Barbara Lewis and Emelia Sithole-Matarise)