Nes­tle sales rise at slow­est pace in 6 years on Asian weak­ness

The Pak Banker - - COMPANIES/BOSS -

Nes­tle SA re­ported the small­est an­nual sales gain in six years, hurt by weak Asian de­mand and a Maggi noo­dles re­call in In­dia, and fore­cast growth at a sim­i­lar pace this year as rais­ing prices be­comes more dif­fi­cult.

Rev­enue in­creased 4.2% on an or­ganic ba­sis, the Vevey, Switzer­land-based maker of Nespresso coffee and Ger­ber baby food said in a state­ment on Thurs­day. That matched an­a­lysts' me­dian es­ti­mate. The 150-year-old com­pany trailed its tar­get of about 4.5%.

The KitKat maker fore­cast or­ganic sales growth this year in line with that of 2015, plus im­prove­ments in mar­gins and un­der­ly­ing earn­ings per share in con­stant cur­ren­cies. Nes­tle's long-term av­er­age goal of 5% to 6% growth has been out of reach in half of the eight years that Paul Bul­cke has been chief ex­ec­u­tive of­fi­cer.

"A dis­ap­point­ing end to the year for Nes­tle," wrote Jeff Stent, an an­a­lyst at Ex­ane BNP Paribas. "Guid­ance is un­der­whelm­ing al­beit re­al­is­tic and there is no buy­back." Pric­ing boosted 2015 sales by 2 per­cent­age points.

"We an­tic­i­pate that our trad­ing en­vi­ron­ment in 2016 will be sim­i­lar to previ

ous years with even softer pric­ing," Bul­cke said in the state­ment. Sales in the Asia Ocea­nia Africa zone added 0.5% in 2015. Europe's largest com­pany by mar­ket value faced a re­call of its Maggi noo­dles in In­dia that re­sulted in that mar­ket's first quar­terly loss in 15 years. The Chi­nese mar­ket im­proved to­wards the end of the year, Nes­tle said.

Nes­tle's re­vamp of its frozen-food brands Lean Cui­sine and Stouf­fer's to of­fer health­ier op­tions such as gluten-free, high-pro­tein and or­ganic meals has sup­ported growth in North Amer­ica. Zone Amer­i­cas sales growth was 5.5%.

Chair­man Peter Brabeck-Let­mathe is sched­uled to re­tire next year, and tra­di­tion would nor­mally have Bul­cke suc­ceed him. Alain Ober­hu­ber, an an­a­lyst at MainFirst Bank AG, has men­tioned three po­ten­tial can­di­dates to take the CEO job: Chris John­son, who runs the com­pany's cost-ef­fi­ciency pro­gramme, Lau­rent Freixe, who heads the Amer­i­cas busi­ness, and Wan Ling Martello, who took over Nes­tle's strug­gling Asia, Ocea­nia and Africa re­gion last year. Unilever, the maker of Ben and Jerry's ice cream, said on 19 Jan­uary that it's pre­par­ing for tougher mar­ket con­di­tions and high volatil­ity this year. Nes­tle's def­i­ni­tion of or­ganic growth ex­cludes ac­qui­si­tions, di­vest­ments and cur­rency swings.

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