Nestle SA said it will fall short of its long-term growth target for a third consecutive year, highlighting the volatile conditions in emerging markets that continue to weigh on European consumer-product companies and retailers alike.
Sales are likely to rise about 4.5 percent on an organic basis this year, less than the company’s previous target of about 5 percent, the Vevey, Switzerland-based maker of Nespresso coffee and Cailler chocolate said yesterday.
Nine-month revenue advanced 4.2 percent on that basis, hurt by a recall of Maggi noodles and weakness in China, its second-largest market. Analysts expected a 4.7 percent gain. The stock fell as much as 3.1 percent.
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The KitKat maker’s performance is in contrast to Unilever, the producer of Ben & Jerry’s ice cream, which on Thursday said that full year-sales growth would be near the top end of its forecast. The British-Dutch company said it had double-digit growth in China, bolstered by online sales. Nestle has a long-term average goal of annual sales growth of 5 percent to 6 percent.
“This is exactly the opposite of Unilever yesterday [Thursday],” Sanford C Bernstein analyst Andrew Wood wrote.
“The comparisons are stark. The Maggi noodles withdrawal seemed to bite much harder,” he said.
Nestle shares declined 3 percent to 72.90 francs as of 9:01am in Zurich.
India’s recall of Maggi noodles wiped about 0.3 percentage points off nine-month sales growth, chief financial officer Francois-Xavier Roger said at a press conference. The company is working on reintroducing the products after being off the shelves for six months.
Sales in Nestle’s Asia, Oceania and Africa region fell 0.5 percent, after revenue in those markets rose 0.8 percent in the first half. The food company said the Chinese market is recovering slower than it expected. Nestle got 6.6 billion Swiss francs (US$6.88 billion) of revenue from Greater China last year, 7.2 percent of its total sales.
“This is a real disappointment and questions around the Nestle model of 5 percent to 6 percent organic growth will only increase,” Societe Generale analyst Warren Ackerman wrote.
Nestle also said its skin health unit took a one-time charge in the third quarter as it adjusted its prescription drug rebate policy in the US, taking a more “conservative” approach. Excluding that adjustment, Nestle’s nine-month organic sales growth was 4.5 percent, Bank Vontobel analyst Jean-Philippe Bertschy said.
The company’s definition of organic sales growth excludes acquisitions, divestments and currency shifts.
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