Wednesday, 26 April, 2017

KitKat maker Nestle misses forecasts as profit falls

Melissa Porter | 17 February, 2017, 01:02

Chief executive Mark Schneider, who joined the firm on January 1, said last year's organic growth was at the "high end of the industry but at the lower end" of expectations.

The KitKat, Smarties and Nespresso maker has announced another year of slowing growth in a tough environment and has slashed its sales growth target as a result. It said Thursday that organic growth should come in between 2% and 4% this year.

The earnings from Nestle are the latest in a series of tepid results from consumer goods groups which have blamed weakness in the emerging markets that had previously fueled their growth.

Schneider changed the long time "Nestle Model", which the company has not reached for four consecutive years, with a goal that was described as slightly vaguer of organic growth in the mid-single digit and significant cost savings before 2020.

He said Nestle expects restructuring costs to rise to about 500 million francs (S$706 million) in 2017, putting pressure on profitability, which will probably be stable.

Revenues rose 0.8% to 89.47 billion Swiss francs (£71.4 billion) over the period, but it had to stomach a double-digit decline from Chinese food company Yinlu, in which Nestle took a 60% stake in 2011.

In 2016, net profit for Nestle was down and sales increased less than what was expected, hit by a slowdown in its emerging markets and from deflation.

The company based in Vevey, Switzerland, reported a 6 per cent drop in net profit to 8.53 billion Swiss francs ($A11.08 billion), with double-digit declines at its Chinese unit dragging on growth.

Nestle said pricing improved in the second half of last year and should continue to do so this year.