Nestlé Reports Lower Than Forecast Growth, Similar Outlook For 2015

19 Feb 2015 --- The world’s biggest food manufacturer, Nestlé, has reported an annual profit increase of 45%, up to CHF14.5bn in 2014, compared with CHF10.02bn in 2013. Overall sales were down on 2013, with CHF91.6bn reported, compared with CHF92.16bn in 2013.

Nestlé reports that profits were buoyed due to a sale of a stake in beauty products brand L’Oreal.

Organic growth was lower than forecast, up 4.5%, under the forecast 5%, which was anticipated since Nestlé announced late last year that profits would be below forecast. Chief executive Paul Bulcke said that he expects 2015 figures to be largely the same, as market pressures such as currency fluctuations remain.

The food and beverages arm of the company, which makes products such as Nescafé coffee and KitKat chocolate bars, reported increased organic growth in all areas except ‘prepared dishes and cooking aids’. The biggest organic growth was seen in the Nutrition and Health Science group, with growth of 8.7%. Confectionery showed 4.2% growth.

Nestlé will continue to feel the effects of a changing Western consumer, who is more health- and cost-conscious and looking for added value in his product. Sales in Europe and the US have been affected by changing consumer demands. Similarly, in key emerging markets, such as China and Brazil, growth was slower than hoped.

The slow Chinese market was reflected in disappointing Zone Asia growth, at 2.6%, but the difficult and established European market showed the weakest growth at just 1.5%.

Highlights of the report include:

Sales of CHF 91.6 billion

4.5% organic growth and 2.3% real internal growth

Trading operating profit margin up 10 basis points to 15.3%, up 30 basis points in constant currencies

Underlying earnings per share up 4.4% in constant currencies 

Strong operating cash flow at CHF 14.7 billion

Proposed dividend increased to CHF 2.20 per share

2015 outlook: we aim to achieve organic growth of around 5% with improvements in margins, underlying earnings per share in constant currencies and capital efficiency
 
Bulcke, said: "These are strong results, building on the good growth of past years and delivered in a soft trading environment. They demonstrate the intrinsic strengths of Nestlé: the commitment of our people, our global footprint, the strength of our portfolio and the quality of our innovation. While delivering in the short term, we remain focused on our business long term, strengthening the foundations of future growth. We expect 2015 to be similar to 2014 and we aim to achieve organic growth of around 5% with improvements in margins, underlying earnings per share in constant currencies and capital efficiency."

Last month Nestlé shares were affected by the announcement that the Swiss Franc currency cap was being abolished, but shares have largely recovered.

Yesterday Nestlé announced that it will be removing all artificial ingredients from is US confectionery lines.