Nestle 9-month Sales Down, Cuts FY15 Organic Growth View

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The FINANCIAL — Nestle reported on October 16 lower net sales in its nine-month period with weak results in most categories, mainly emerging markets, impacted by the withdrawal of Maggi noodles in India and slower than expected recovery in China. Organically, sales grew 4.2 percent, but the growth fell short of its expectations. Nestle shares were losing around 3 percent in the early morning trading in Switzerland.

For the full year, Nestle now projects organic growth of around 4.5 percent, while the previous growth view was 5 percent. The company continues to project improvements in margins and underlying earnings per share in constant currencies, and capital efficiency, according to Nasdaq.

Nestle noted that its business in India received a favourable ruling from the Bombay High Court and is actively engaging with the authorities to get the product back on the shelves.

Total sales for the nine month period were 64.86 billion Swiss francs, compared to 66.22 billion francs in the previous year. Organic growth was 4.2 percent, composed of 2 percent real internal growth and 2.2 percent pricing. The company said its total sales were negatively impacted by 6.7 percent drop in foreign exchange, while acquisitions, net of divestitures, added 0.4 percent to sales.

Organic growth in the developed markets increased 2.2 percent and in emerging markets grew 6.8 percent. In the prior year nine-month period emerging markets grew 9.5 percent.

In Zone Americas, sales of 18.5 billion francs grew 5.8 percent on organic basis, and the real internal growth growth was 1.2 percent. The growth in the Zone was led by the improvement in the frozen food business in the US and continued good momentum in Mexico.

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In Europe, Middle East and North Africa, sales of 12 billion francs increased 4.1 percent organically, with 2.5 percent real internal growth.

In Asia, Oceania and sub-Saharan Africa zone, organic sales dropped 0.5 percent and real internal growth was down 1.4 percent. In the emerging markets, lost sales of Maggi noodles continued to have a significant impact on growth in the South Asia Region.

Nestlà Nutrition sales increased 3.4 percent organically with 1.4 percent real internal growth, even though it faced tough comparables from the same period last year and saw slower growth in the Middle East and Latin America.

Commenting on the results, Paul Bulcke, Nestlé CEO, said, “…We were impacted in the third quarter by exceptional events, with Maggi noodles in India and a rebate adjustment in Nestlé Skin Health.”

Nestle shares are currently trading at 72.85 francs, down 3.06 percent.


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