Nestle Forecasts Revenue Growth to Rebound From Seven-Year Lowby
KitKat maker increasing prices in U.K., Brazil, Russia
Sales growth needs to accelerate to reach full-year target
Nestle SA, the world’s biggest food company, forecast it will be easier to raise prices in the second half after deflation led to its weakest first-half sales growth in seven years.
“I’m confident we hit the bottom in the second quarter,” Chief Financial Officer Francois-Xavier Roger said on a conference call Thursday. Nestle is “well-positioned” to reach its full-year forecast, he said.
Revenue increased 3.5 percent on an organic basis in the first half, missing analysts’ expectations for 3.7 percent growth. Nestle needs growth of about 5 percent for the Swiss company to reach its full-year target of growth near last year’s level, which was 4.2 percent, the CFO said.
While deflation will remain in western Europe, the outlook for other markets is better as some commodity prices have been increasing lately, according to Roger. Nestle has been raising prices in Brazil and Russia and plans increases in the U.K. after the vote to leave the European Union provoked a slump in the pound.
The stock rose as much as 1.3 percent to 79.40 Swiss francs, approaching a record after initially declining in early trading in Zurich.
Outgoing Chief Executive Officer Paul Bulcke is on track to report sales growth below his average long-term target rate for a fourth year. Earlier this year, Nestle announced it didn’t expect sales growth to meet that goal, which is 5 percent to 6 percent.
In June, Nestle appointed Fresenius SE’s Ulf Mark Schneider as successor to Bulcke. He’s joining next month and will take the CEO role on Jan. 1. Schneider’s background is in the medical industry, supporting Nestle’s shift towards nutrition and health in a quest for faster growth.