Nestle, the world's biggest food company, reported the slowest first-half revenue growth in four years, as price reductions and cold weather in Europe weighed on sales of ice cream and frozen food.
Revenue increased 4.1 per cent, excluding acquisitions, divestments and currency shifts, the Vevey, Switzerland-based company said in a statement. That missed the median estimate of 4.5 per cent growth. The shares fell as much as 2.1 per cent.
First-half net income rose to 5.12 billion Swiss francs from 4.94 billion francs. The company said on Thursday it expects to reach organic sales growth of about five per cent this year, the low end of its long-term target. Attaining six per cent growth in the second half in order to make the goal for 2013 will be a "stretch," Chief Financial Officer Wan Ling Martello said on a webcast on Thursday. Nestle has been grappling with weaker demand for frozen foods, bottled water and diet products.
Unilever, the British-Dutch maker of Magnum ice cream, said last month that underlying sales, which exclude acquisitions, disposals and currency fluctuations, gained five per cent in the first half. Danone, the world's biggest yogurt maker, said that revenue on the same basis increased six per cent during the period.
Nestle shares fell as much as 1.35 Swiss francs to 63.35 francs and traded down 2 percent at 63.4 francs at 9:28 am in Zurich, paring the gain this year to 6.3 per cent. Nestle reiterated it expects an improvement in margins and underlying earnings per share at constant rates of exchange in 2013.
First-half organic sales growth of the European business unit was 0.5 per cent, compared with the median analyst estimate for 1.5 per cent. Customers in Europe are "extremely sensitive" to price, leading Nestle to boost investment in brands to win market share.
Pricing added 0.8 percentage point to sales growth, according to Andrew Wood, an analyst at Sanford C Bernstein, lower than the 2.1 percentage-point gain he had anticipated.
That was the weakest growth in Nestle's pricing since 2002, he said, leading to "fears of a collapse in pricing in coming quarters." Nespresso coffee capsules, one of Nestle's largest brands, had a "sharp acceleration" and posted "double-digit" growth, while measures the company took to improve its underperforming Jenny Craig weight-loss business have yet to show results, the company said.
CFO Martello has told analysts to expect "lumpiness" in 2013 results as price increases provide less of a lift than in past years. Higher prices contributed 1.4 percentage points to first-half sales growth, compared with 3.7 percentage points a year earlier. Nestle's volume rose 2.7 per cent, while total sales jumped 5.3 per cent to 45.2 billion francs.
Revenue increased 4.1 per cent, excluding acquisitions, divestments and currency shifts, the Vevey, Switzerland-based company said in a statement. That missed the median estimate of 4.5 per cent growth. The shares fell as much as 2.1 per cent.
First-half net income rose to 5.12 billion Swiss francs from 4.94 billion francs. The company said on Thursday it expects to reach organic sales growth of about five per cent this year, the low end of its long-term target. Attaining six per cent growth in the second half in order to make the goal for 2013 will be a "stretch," Chief Financial Officer Wan Ling Martello said on a webcast on Thursday. Nestle has been grappling with weaker demand for frozen foods, bottled water and diet products.
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"The organic sales growth is disappointing," Jon Cox, head of European consumer equities at Kepler Cheuvreux in Zurich, said over phone. "It's going to take a while to sort out the top-line issue with the company."
Unilever, the British-Dutch maker of Magnum ice cream, said last month that underlying sales, which exclude acquisitions, disposals and currency fluctuations, gained five per cent in the first half. Danone, the world's biggest yogurt maker, said that revenue on the same basis increased six per cent during the period.
Nestle shares fell as much as 1.35 Swiss francs to 63.35 francs and traded down 2 percent at 63.4 francs at 9:28 am in Zurich, paring the gain this year to 6.3 per cent. Nestle reiterated it expects an improvement in margins and underlying earnings per share at constant rates of exchange in 2013.
First-half organic sales growth of the European business unit was 0.5 per cent, compared with the median analyst estimate for 1.5 per cent. Customers in Europe are "extremely sensitive" to price, leading Nestle to boost investment in brands to win market share.
Pricing added 0.8 percentage point to sales growth, according to Andrew Wood, an analyst at Sanford C Bernstein, lower than the 2.1 percentage-point gain he had anticipated.
That was the weakest growth in Nestle's pricing since 2002, he said, leading to "fears of a collapse in pricing in coming quarters." Nespresso coffee capsules, one of Nestle's largest brands, had a "sharp acceleration" and posted "double-digit" growth, while measures the company took to improve its underperforming Jenny Craig weight-loss business have yet to show results, the company said.
CFO Martello has told analysts to expect "lumpiness" in 2013 results as price increases provide less of a lift than in past years. Higher prices contributed 1.4 percentage points to first-half sales growth, compared with 3.7 percentage points a year earlier. Nestle's volume rose 2.7 per cent, while total sales jumped 5.3 per cent to 45.2 billion francs.