Nestle lowers outlook for full-year sales growth, misses expectations

Nestle lowers outlook for full-year sales growth, misses expectations

Nestle lowered its full-year sales forecast in an environment "marked by deflation" and soft pricing today (20 October) after reporting nine-month sales that missed analyst expectations.

Delivering its sales results for the first nine months of the year, Nestle said it now expects full-year sales to increase by "around" 3.5% compared to its prior guidance for growth above 4%. The company confirmed it still anticipates improved margins and underlying earnings. 

"For the full year 2016, considering the current softer environment, we expect organic growth of around 3.5%, improvements in margins and underlying earnings per share in constant currencies, and increased capital efficiency," CEO Paul Bulcke revealed. 

"In line with our strategy we continue to invest for the future. We maintain a high level of brand support while building our innovation pipeline, both globally and locally. At the same time, we drive more operational and structural efficiencies by standardising, sharing and scaling more activities above market."

For the first nine months of the year, Nestle said reported sales increased 1% to CHF65.5bn (US$53.9bn). Sales were supported by organic growth of 3.3%, which was somewhat offset by the impact of currency exchange, which weighed 1.7% on the top line. 

The group's underlying performance was supported by real internal growth – which strips out pricing and largely reflects volume gains – of 2.5%. Pricing added 0.8% to the top line. 

Nestle stressed it "continued to grow both in developed markets", where sales on an organic basis grew 1.9%. Sales rose 5.3% in emerging markets. On a regional basis, growth was fastest in the Americas, where organic sales rose 4.8%. In Europe, the Middle East and North Africa organic sales were 2.1% higher, while in Asia, Oceania and sub-Saharan Africa sales growth stood at 2.5%. 

"Despite management efforts to informally guide down expectations for Q3, the sales results were a little disappointing and below expectations," Sanford Bernstein analyst Andrew Wood noted. "Indeed, Nestle missed consensus expectations for the eleventh time in the last 17 quarters."