Nestlé cuts FY sales target on softer environment

Swiss food giant Nestlé has cut its full-year sales outlook, blaming the current softer environment, which has been marked by deflation and low raw material prices.

The company, whose confectionery and chocolate brands include Kit Kat, Aero and Crunch, said sales rose 3.3% in organic terms for the nine months to September, composed of 2.5% real internal growth and 0.8% pricing.

The Americas region posted organic sales growth of 4.5% to reach CHF18.8bn, while Europe, Middle East and North Africa (EMENA) and Asia, Oceania and sub-Saharan Africa (AOA) increased 2.2% to CHF12.2bn and 2.8% to CHF10.6bn respectively. Although Latin America delivered good growth driven by Mexico across dairy, Nescafé and confectionery, growth in Brazil was resilient but affected by necessary price increases, particularly in dairy and confectionery.

Total sales reached CHF65.51bn ($65.90bn), up from CHF64.86bn in the same period of the previous year.

However, confectionery sales fell to CHF5.93bn from CHF6.15bn last year.

Considering the current softer environment, Nestlé said it now expects organic growth of around 3.5% for the full year, down from the 4.2% annual growth it forecast in August.

However, it does expect improvements in margins and underlying earnings per share in constant currencies, and increased capital efficiency.

CEO Paul Bulcke explained, “In an environment marked by deflation and low raw material prices, we continued to privilege volume growth, resulting in real internal growth at the higher end of the industry in both emerging and developed markets. Pricing remained soft but increasing.

“Our growth was broad-based across categories, allowing us to gain or maintain market share in most of our businesses. We are making progress in addressing our challenges and driving our different initiatives amidst a generally softer trading environment.

“In line with our strategy we continue to invest for the future. We maintain a high level of brand support while building our innovation pipeline, both globally and locally. At the same time, we drive more operational and structural efficiencies by standardising, sharing and scaling more activities above market.”

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