View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. News
February 16, 2017

Nestle plans restructuring as 2016 profit misses expectations

Nestle has indicated it expects a jump in restructuring charges during 2017 as it booked net earnings that failed to meet analyst expectations this morning (16 February). 

Nestle has indicated that it expects a jump in restructuring charges during 2017 as it booked net earnings that failed to meet analyst expectations this morning (16 February). 

Free Report
img

Identify the trends of tomorrow using filings sentiment analysis

Business sentiment continues to improve, showing a clear recovery since the onset of COVID-19. Sentiment in 2021 was up by 8% compared to 2020.   Consumer industries had the highest sequential filings sentiment growth in Q3 2021. Optimism around digital themes and general outlook drove the positive trend in overall business sentiment.   GlobalData’s Filing Analytics Annual Report 2021 on the Consumer industries provides insights into sentiment and mention trends for companies, geographies, and themes. Get real-time analysis of:  
  • Quarterly & annual reports 
  • Earnings call transcripts 
  • IPO filings 
  • Events presentations 
  • ESG filing trends  
Understand the overall outlook for Consumer and spot the topics and themes that will be most impactful in the next few years.   Download the full report to understand what to expect and how to align your business for success.  
by GlobalData
Enter your details here to receive your free Report.

Nestle’s 2016 net earnings of CHF8.5bn (US$8.47bn) were lower than 2015’s earnings of CHF9.01bn and well below analyst forecasts of CHF9.5bn, according to expectations compiled by the company. The Maggi owner said “several items” dented the bottom line, including a “large” one-time deferred tax charge. Those financial expenses more than offset Nestle’s growth in operating profit, which increased by 6% year-on-year. 

The world’s largest food maker said it was able to strengthen its operating profit margin, which it raised back to 2014 levels after a dip in 2015. The result represented a 20 basis point improvement on a reported basis or a 30 basis point  increase when currency exchange is excluded. The improvement was achieved despite increased brand support and CHF300m in restructuring charges, Nestle said. 

Operating profit improvements were broad-based with all of Nestle’s food operating units reporting higher operating profit, with the exception of its business in the Americas, which declined 10 basis points due to restructuring costs and cost inflation in Latin America amid currency devaluation. The greatest improvements were seen in Nestle’s operations in Europe, the Middle East and North Africa, where the KitKat maker said “profitability improved across most categories as a result of premiumisation, volume leverage and favourable input costs”. 

On a group-wide basis, Nestle’s sales edged up by 0.8% as modest growth from two parts of the group – the operations in the Americas and the businesses in Asia, Oceania and sub-Saharan Africa – offset lower sales from its division covering Europe, the Middle East and north Africa, as well as the SMA owner’s infant nutrition unit. Nestle said growth accelerated in North America while the top line was supported by pricing in Latin America.

Higher sales in Asia, Oceania and sub-Saharan Africa were achieved despite the ongoing decline of Nestle’s joint venture in China, Yinlu, which the company said was down at double-digit rate. Nestle said the “stabilisation” of Yinlu is expected to be achieved next year. Nestle’s nutrition business was also impacted by “challenging” conditions in China, with adjustments in trade inventory levels taking place ahead of the introduction of new legislation governing the sector in 2018. Nestle stressed its Europe, the Middle East and north Africa division was able to deliver organic growth, although currency exchange meant reported sales were down. 

Nestle’s new CEO, Mark Schneider, said the company’s 2016 organic growth was “at the high end of the industry” but “at the lower end of our expectations”. The organic growth rate also failed to meet consensus analyst expectations, which forecast organic growth of 3.6%. Nestle said real internal growth – an internal company metric that strips out pricing, M&A and currency exchange – reached a “three-year high” of 2.4%. Nestle said pricing – which contributed 0.8 percentage points – was “limited”. But, with higher pricing coming in at the end of the year, the company suggested it anticipates an improved pricing environment in 2017. 

Outlook

Looking to 2017, Nestle suggested it anticipates organic growth of 2-4%. This is below the “Nestle model” which calls for 5-6% annual organic growth. The company also revealed that it will step up its restructuring efforts in 2017 and revealed it will “increase restructuring costs considerably” in the year. Nestle said that it expects “stable” trading operating profit at constant currencies. Underlying earnings per share and capital efficiency are, however, expected to increase. 

MainFirst analyst Alain Oberhuber suggested the reduced sales outlook and focus on margin was expected given Schneider’s recent assumption of CEO responsibilities. “The weaker outlook on organic growth rate and operating margin improvement is clearly offset by Mark Schneider’s handwriting to do what we expected, e.g. a) guidance cut to a more realistic level; b) increase of restructuring programme and c) focus on capital efficiency improvement,” he wrote in an investor note.

just-food analysis: Nestle’s plans for 2017 and beyond under new CEO Mark Schneider – 5 things to learn

Related Companies

Free Report
img

Identify the trends of tomorrow using filings sentiment analysis

Business sentiment continues to improve, showing a clear recovery since the onset of COVID-19. Sentiment in 2021 was up by 8% compared to 2020.   Consumer industries had the highest sequential filings sentiment growth in Q3 2021. Optimism around digital themes and general outlook drove the positive trend in overall business sentiment.   GlobalData’s Filing Analytics Annual Report 2021 on the Consumer industries provides insights into sentiment and mention trends for companies, geographies, and themes. Get real-time analysis of:  
  • Quarterly & annual reports 
  • Earnings call transcripts 
  • IPO filings 
  • Events presentations 
  • ESG filing trends  
Understand the overall outlook for Consumer and spot the topics and themes that will be most impactful in the next few years.   Download the full report to understand what to expect and how to align your business for success.  
by GlobalData
Enter your details here to receive your free Report.

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. A weekly roundup of the latest news and analysis, sent every Friday. The industry's most comprehensive news and information delivered every other month.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Just Food