Nestle revenue growth falls
August 18, 2016 | 11:56 AM
by Bloomberg News
Revenue increased 3.5 per cent on an organic basis. - File picture

Zurich: Nestle SA reported the slowest first-half sales growth since 2009 as the world’s biggest food company struggled to raise prices.

Revenue increased 3.5 per cent on an organic basis, the Vevey, Switzerland-based company said in a statement on Thursday. Analysts expected 3.7 per cent. Volume rose 2.8 per cent, missing the 3.1 per cent estimate.

“Pricing in general outside Latin America is astonishingly weak,” said Patrik Lang, head of equity research at Julius Baer Group Ltd.

Pricing has reached “historically low levels,” though should rebound “somewhat” in coming months, chief executive officer Paul Bulcke said in the statement. The outgoing CEO is on track to report sales growth below the company’s average long-term target rate for a fourth year.

Nestle reiterated that it expects full-year organic revenue growth to be similar to last year’s 4.2 per cent, and repeated it aims to achieve improvements in margins and underlying earnings per share in constant currencies. The company’s long-term target is 5 per cent to 6 per cent sales growth.

The first-half trading operating profit margin widened to 15.3 per cent from 15 per cent a year earlier, benefiting from savings and lower raw material costs. Nestle announced in May plans to improve the margin by 2 percentage points from 2019 through cost savings.

Chief Financial Officer Francois-Xavier Roger has said that the second half will be boosted by more favourable comparisons and higher prices in some emerging markets such as Brazil and Russia.

In June, Nestle appointed Fresenius SE’s Ulf Mark Schneider as successor to Bulcke. He’s joining next month and will take the CEO role on January 1. Schneider’s background is in the medical industry, supporting Nestle’s shift towards nutrition and health in a quest for faster growth.

Subscribe to our newsletter and be the first to know all the latest news