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China Performance Impacts Nestlé Full Year Growth

By square1
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China Performance Impacts Nestlé Full Year Growth

Nestlé, the world’s biggest food company, reported the slowest annual sales growth in five years, hit by stagnant revenue in China, its second-largest market, and deflationary pressure in Europe.

Revenue gained 4.5 per cent in 2014 excluding acquisitions, disposals and currency shifts, the Swiss food giant said in a statement

It's Nestlé's the slowest pace since 2009 and is in line with the 4.5 per cent median estimate of 20 analysts in a Bloomberg News survey.

Revenue in the Greater China region was little changed at 6.64 billion francs ($7.1 billion). Nestlé has also been struggling with price competition in Europe and is trying to turn around its frozen- food business in North America.

“With organic growth again below the long-term target, it raises the question whether the goal should not be corrected downwards,” said Patrik Lang, an analyst at Julius Baer Group in Zurich. "But it’s still clearly better than what we’re seeing the rest of the sector, which is why investors will still be happy.”

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The company said it targets organic growth this year of around five per cent and aims to achieve improvements in margins and underlying earnings per share in constant currencies.

Sales growth in the Asia Oceania Africa region was 2.6 per cent, compared with 2013's 5.6 per cent pace.

“The slower growth in the zone was due to our largest market China and to Oceania,” Nestlé said. “We needed to adapt our portfolio to reconnect with the fast-changing expectations of the Chinese consumer.”

Nestlé’s earnings-per-share growth in 2015 will be wiped out due to the surge in the franc against the euro after the Swiss National Bank eliminated the cap to the European currency and the European Central Bank began its quantitative easing program, Sanford C. Bernstein analyst Andrew Wood said in January.

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Nestlé faces the biggest foreign-exchange exposure among European food and beverage companies as 98 per cent of its sales are generated outside its home market, the note said.

Bloomberg News, edited by ESM

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