Nestle expects to meet long-term sales and earnings targets in 2012

Nestle expects to meet long-term sales and earnings targets in 2012

Shares in Nestle rose today (16 February) after the world's largest food maker issued a solid outlook for 2012 after a year of increased underlying sales and profits.

The Kit Kat maker said it did not "expect 2012 to be any easier than previous years" but insisted it was "well positioned to deliver the Nestle model" of organic growth of 5-6% and an improvement in trading operating profit margin and underling earnings per share at constant currencies.

Yesterday, Danone trimmed its forecasts for sales and profits in 2012 after the French food giant said it saw no improvement in trading conditions this year.

Nestle provided its outlook for the year after reporting an increase in underlying sales and profits for 2011. Net profit from continuing operations was CHF9.49bn, up 8.1% on the year. Operating profit was up 2.7% at CHF12.47bn.

Nestle said its trading operating profit margin rose 60 basis points. Sanford Bernstein analyst Andrew Wood argued the metric includes non-operating items including impairment and restructuring costs and said analysts prefer to look at underlying EBIT margin. This fell 15 basis points.

Net sales fell 4.9% to CHF83.64bn but Nestle said its sales increased 7.5% on an organic basis. The company uses a sales measure called "real internal growth", which excludes M&A, price increases and currency movements. On that basis, sales increased 3.9%.

"We delivered good performance, top and bottom line, in both emerging and developed markets in 2011," Nestle CEO Paul Bulcke. "It was a challenging year, and we do not expect 2012 to be any easier."

Wood added: "Overall we believe the market will react well to the strong sales results and positive outlook on 2012, despite the margin miss. However, we remain cautious on sales momentum entering 2012."

Nestle's stock was up 1.47% at CHF55.25 at 11:24 CET.