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Nestle Posts Nine-Month Sales Growth Below Full-Year Goal

Oct. 17 (Bloomberg) -- Nestle SA, the world’s biggest food company, reported nine-month sales that were below its full-year target rate, highlighting the difficult environment faced by the makers of consumer products.

Revenue gained 4.4 percent excluding acquisitions, divestments and currency swings, the Vevey, Switzerland-based maker of Crunch chocolate bars and Carnation evaporated milk said today in a statement. The median estimate of 14 analysts surveyed by Bloomberg was for growth of 4.5 percent.

Food companies are grappling with an economic slowdown in emerging markets and ongoing weakness in Europe, which led Nestle to report the smallest gain in pricing for the first nine months of any year since 2003. Unilever said last month revenue growth weakened in the third quarter as emerging markets slowed. Danone cut its full-year forecast yesterday after a product-safety scare and regulatory problems in China weighed on infant formula sales.

“After the ‘excitement’ of Unilever’s reduced third-quarter sales guidance, Danone’s third-quarter sales miss and full-year profit warning, and Nestle’s disappointing year-to-date performance, third-quarter sales were solid (and somewhat dull), which is probably all that Nestle’s shareholders were hoping for,” Andrew Wood, an analyst at Sanford C. Bernstein & Co., said by e-mail.

‘Right Time’

The stock has gained 4 percent this year, compared with a 3.1 percent drop in the Amsterdam-traded shares of Unilever. Danone has gained 3.9 percent.

“Today’s challenging environment is the right time for us to further reinforce the fundamentals of our business,” Chief Executive Officer Paul Bulcke said in the statement, enumerating innovation, distribution and consumer engagement. The company reiterated it expects full-year organic growth of about 5 percent and improvement in underlying earnings per share and the operating margin based on constant currencies.

The volume of goods sold increased 3 percent, matching the analyst estimate, and an improvement from the 2.7 percent uptick in the first half of the year. Pricing added 1.4 percentage points to growth, compared with the 1.5 percent analyst estimate.

Sales Acceleration

In contrast to Unilever, Nestle said nine-month sales growth accelerated to 5.6 percent in Asia, Oceania and Africa zone from the first half’s 5 percent pace. That implies a 6.8 percent gain in the third quarter, according to Warren Ackerman, an analyst at Societe Generale. The growth was helped by gains above 10 percent in Africa, Indonesia, the Middle East and India, Nestle said.

“This is the acceleration that the market was looking for,” Ackerman said.

Organic sales growth for the Asia, Oceania and Africa zone was 5.6 percent, accelerating from the 5 percent pace of the first half.

Separately, Nestle spokesman Robin Tickle declined to comment on a report in Repubblica today that said the food company made an offer to buy Ferrero SpA, the Italian chocolate maker that makes Nutella hazelnut spread. The talks are at a preliminary stage, according to the article, which didn’t say how it got the information. A spokesman for Ferrero called the report “groundless” and said the company isn’t for sale.

To contact the reporter on this story: Matthew Boyle in London at mboyle20@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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