Shares in Nestle fell this morning (20 October) after the world’s largest food maker lifted its forecast for annual sales but betrayed some concern over its margins.
The company said it saw its sales increase by 7.3% on an organic basis in the first nine months of the year. The result indicated Nestle’s sales had slowed in the third quarter – its sales were up 7.5% in the first half of 2011 – but the company said today that it expects to beat its long-term target for organic sales growth of 5-6%.
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“We expect to slightly over-perform against our long-term organic growth range of 5-6%,” Nestle said.
However, the group was more cautious on its annual margins. Nestle said it would “continue to strive for a margin improvement in constant currencies”. Nestle’s previous outlook, given in August when it announced its half-year results, was more definite, for “a margin increase in constant currencies”.
Nevertheless, CEO Paul Bulcke defended the company’s performance over the first nine months of the year.
“In a tough environment, we continued to build our capabilities and positions for the future while maintaining strong growth across regions and categories. The constant renovation of our existing product portfolio together with our strong pipeline of game-changing innovations resulted in many market share gains,” Bulcke said.
He also pointed to the investment Nestle was making to support the development of new products. “A high rate of innovation also requires significant consumer-facing marketing support.”
Nestle uses a sales measure called “real internal growth”, which excludes M&A, price increases and currency movements. On that basis, sales increased 4.1% during the nine months to the end of September. In the first half of the year, Nestle’s real internal growth was 4.8%.
On a reported basis, including the impact of the strong Swiss franc and the missing contribution from businesses sold, sales fell 13.1% to CHF60.89bn (US$68bn)
Nestle shares were down 0.78% at CHF51.15 at 11:03 CET.
