As at 14 April 2026

Executive Summary

Key highlights

In this report, we review NESN’s FY25 results, released in February 2026 and assess the impact on our outlook.

Financial results at a glance:

• Reported group revenue declined by 2% for the period, primarily due to a 5.7% foreign exchange headwind from the strengthening Swiss franc.

• Group organic revenue increased by 3.5%

  • Powdered and liquid beverages grew 7.3%, with pricing up 6.6% and volume/mix up 0.7%.

  • PetCare rose by 2.2%, with pricing down 0.4% and volume/mix up 2.6%.

  • Nutrition and health science edged up 0.6%, driven by pricing of 0.5% and a modest 0.1% contribution from volume/mix.

  • Prepared dishes and cooking aids decreased 0.4%, reflecting a 0.1% pricing drop and 0.2% volume/mix contraction.

  • Milk and ice cream advanced by 1.3%, with pricing and volume/mix increasing 0.5% and 0.8%, respectively.

  • Confectionery expanded by 8.2%, with pricing up 8.8% and volume/mix down 0.7%.

  • Water lifted by 3.9%, with pricing up 2.9% and volume/mix gaining 1%.

• Gross profit margin declined by 110bps to 45.6%, reflecting significant commodity inflation impacting input costs in coffee and confectionery products. The margin is expected to improve in FY26.

• The underlying trading operating profit margin decreased by 110bps, primarily due to higher input costs, tariffs and FX, as well as increased advertising spend. This was offset by cost savings and pricing actions to protect margins.

• Although pricing has been used to offset the detractors, volumes have been negatively impacted over the past four years, albeit with some improvement. Volumes declined by 0.7% in FY25, similar to the previous year.

• The net income margin decreased by 180bps to 10.1%, driven by financing costs, gains/losses on disposals and other costs. EPS fell 16% to CHF 3.51 per share.

• Leverage improved, with net debt to adjusted EBITDA reduced from 2.9x to 2.85x.

• The infant formula recall partially impacted FY25 results via estimated customer returns and inventory write-offs, trimming underlying trading operating margin by 10bps. 1Q26 is expected to see a once-off impact on sales returns and stock shortages due to the recall and the need to restock inventory.

• Our take on the results:

  • The strengthening Swiss franc has negatively impacted margins. Ongoing US dollar volatility remains a looming concern, given current geopolitical conditions and the potential impact on FX for NESN.

  • Commodity inflation has also put pressure on costs and margins. Volumes have declined over the past four years, and while pricing has partly offset the impact, overall growth has remained subdued considering the last five years of topline performance.

  • Guidance points to improved organic growth and margin expansion in FY26 versus FY25, despite ongoing FX headwinds.

Analyst thesis

Our recommendation is based on:

• Nestlé has a wide range of products with a strong brand and market position across multiple geographical regions.

• Higher inflation input costs have been shown to be partially passed on to consumers through pricing.

• Organic growth has primarily been driven by pricing, with volumes remaining subdued.

• Valuations appear attractive on a P:E and EV/EBITDA basis, but current risks to margins, earnings and organic growth limit upside potential.