Nestlé Reports Slowdown In Q1 Growth

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The FINANCIAL — Mark Schneider, Nestlé CEO: “Organic growth of 2.3% this quarter is within our full-year guidance range. The leap year comparison and other seasonal effects made the start of this year particularly challenging. We were encouraged by the growth in Asia and the resilience of consumer spending in Europe. Consumer demand in the Americas remained soft. Our pricing improved moderately. We confirm our 2017 guidance and have made good progress with our growth and efficiency projects to position our company for enhanced value creation.”

Zone Americas (AMS)

0.4% organic growth: -1.4% RIG; 1.8% pricing

Sales in North America declined slightly on an organic basis due to negative RIG

Latin America achieved low single-digit organic growth driven by pricing, RIG was slightly negative

Reported sales in zone AMS increased by 2.6% to CHF 6.4 billion. Organic growth was subdued at 0.4% owing to a decline in RIG of 1.4%. Pricing of 1.8% mainly came from Latin America, although North America also saw slightly positive pricing. Net divestments reduced reported sales by 0.8% and foreign exchange was a 3.0% benefit.

North America faced an environment of soft consumer demand. In the US coffee creamers and frozen food maintained good momentum but confectionery and petcare declined. Brazil had a difficult quarter with subdued Easter trading and fragile economic conditions resulting in negative RIG and organic growth. Mexico’s growth remained positive but decelerated, reflecting difficult comparables and weaker consumer confidence. Petcare saw good growth across Latin America, according to Nestlé.

Zone Europe, Middle-East and North Africa (EMENA)

1.7% organic growth: 1.7% RIG; 0% pricing

Western Europe grew slightly on an organic basis with positive RIG but slightly negative pricing

Central and Eastern Europe achieved mid single-digit organic growth, with both positive RIG and pricing

The sub-region Middle East and North Africa saw mid single-digit organic growth

Reported sales in zone EMENA declined by 6.9% to CHF 4.0 billion. Organic growth was solid at 1.7%, based on resilient RIG of 1.7% and flat pricing. Net divestments reduced reported sales by 5.9%, mainly due to the transfer of ice cream to the Froneri joint venture. Foreign exchange headwinds reduced reported sales by a further 2.7%.

Pricing improved, mainly from increases taken in Nescafé throughout the zone. Pricing actions had a moderate impact on RIG. Petcare saw strong growth across the zone, particularly in Russia. Turkey and North Africa performed well, while the Middle East declined as political instability and deflation persisted.

Zone Asia, Oceania and sub-Saharan Africa (AOA)

4.5% organic growth: 3.0% RIG; 1.5% pricing

South-East Asia saw good organic growth and was the largest contributor to the zone’s RIG

China had negative organic growth due to Yinlu and the earlier timing of Chinese New Year

India and sub-Saharan Africa posted strong growth

Oceania and Japan had solid organic growth with good RIG, partially offset by negative pricing

Reported sales in zone AOA increased by 1.0% to CHF 4.0 billion. Organic growth was strong at 4.5%, comprised of 3.0% RIG and 1.5% pricing. Net divestments lowered reported sales by 0.5% and foreign exchange also had a negative impact, reducing sales by 3.0%.

The zone’s growth accelerated for a fourth consecutive quarter, driven by robust performances in South-East Asia, India and sub-Saharan Africa. The zone gained momentum despite a decline in China which was impacted by the earlier timing of Chinese New Year, particularly in confectionery. Yinlu continued to weigh on growth, although the pace of decline has reduced.

Nestlé Waters

3.1% organic growth: 2.6% RIG; 0.5% pricing

The US delivered low single-digit organic growth with negative pricing

Europe achieved solid RIG and organic growth with slightly negative pricing

The Middle East, Turkey and China slowed but South-East Asia and Latin America had good growth

Sales in Nestlé Waters increased on a reported basis by 1.1% to CHF 1.8 billion. Organic growth decelerated but remained solid at 3.1%, with 2.6% RIG and 0.5% pricing. Net divestments and foreign exchange reduced reported sales by 0.2% and 1.8% respectively.

Nestlé Waters continued to grow in all regions although there was some deceleration, partly owing to challenging comparables. The US and Europe had solid organic growth, although intense competition in both regions led to deflationary pricing. Among emerging markets the Middle East, China and Turkey declined but South-East Asia saw good growth and Latin America delivered double-digit organic growth.

Nestlé Nutrition

1.1% organic growth: -0.4% RIG; 1.5% pricing

In China organic growth recovered as category momentum gradually improved

Price increases in the US, Brazil and Mexico weighed on RIG in these markets

Organic growth in South-East Asia was strong


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