Nestle 9-month Sales Down, Cuts 2015 Forecast
16 Oct 2015 --- Global food producer Nestlé has announced a fall in sales of 2.1% for the nine months to September as sales were impacted by the recall of Maggi noodles in India. The outlook for the full year has been reduced as growth slowed to 4.2%, while growth of 5% was forecast.
Paul Bulcke, Nestlé CEO: "After a good performance in the first half of the year we were impacted in the third quarter by exceptional events, with Maggi noodles in India and a rebate adjustment in Nestlé Skin Health. Yet our real internal growth increased, reflecting broad-based positive momentum across our business and many of our markets. There was continued solid performance in Europe, Nestlé Waters and Nestlé Health Science. We made good progress in much of Latin America and delivered a significant improvement in North America, especially in frozen food, contrasting with slower sales recovery in China. On the whole, organic growth fell short of our expectations and therefore we project organic growth of around 4.5% for the full year, with improvements in margins and underlying earnings per share in constant currencies, and capital efficiency."
The company continued to grow in its three geographies with organic growth of 6.2% in the Americas (AMS), 4.0% in Europe, Middle East and North Africa (EMENA) and 1.1% in Asia, Oceania and sub-Saharan Africa (AOA).
In the Americas, 5.8% organic growth was achieved. The growth in the Zone accelerated, led by the improvement in the frozen food business in the US and continued good momentum in Mexico. Nescafé Dolce Gusto, soluble coffee, confectionery and petcare were the main growth drivers.
In North America the relaunch and repositioning of Lean Cuisine and Stouffer's gained further traction. The new Lean Cuisine Market Place and Stouffer's Fit Kitchen ranges have delivered growth for several months now, outpacing the market and driving recovery in the frozen meals category. Pizza gained momentum and in ice cream new products delivered solid growth with Häagen-Dazs and Outshine. Coffee-mate liquid and powder formats both grew solidly. Petcare continued to grow with strong performances from Purina One and Brightminds in the super premium dog food segment and from cat litter. The Beneful case continued to have an impact.
In Latin America, in the face of economic uncertainties, Brazil was resilient with soluble coffee, Nescafé Dolce Gusto and KitKat contributing. Mexico's accelerated growth momentum was driven by soluble coffee and Nescafé Dolce Gusto, Coffee-mate, confectionery and ambient dairy. Other highlights were the performances in Chile, Ecuador, Colombia and the Plata Region. Petcare continued to be a growth driver, helped by increased capacity in the factory in Argentina and a new dog food factory in Mexico.
In Europe, Middle East and North Africa, the company achieved sales of €12.6bn and 4.1% organic growth. The Zone's positive growth momentum accelerated, driven by petcare, soluble coffee, Nescafé Dolce Gusto and ice cream.
In Western Europe Nescafé Dolce Gusto and petcare continued to be growth drivers, helping deliver a solid performance in the Great Britain region and growth in France. Frozen pizza and soluble coffee both contributed. Ice cream did well in mature markets. Growth for petcare was well distributed among the key European markets with Felix and Gourmet the drivers.
Central and Eastern Europe delivered good growth, especially in Russia and Ukraine. Chocolate, soluble coffee and petcare led the growth in Russia and pricing also contributed.
In the Middle East and North Africa region soluble coffee and confectionery helped deliver good growth in several markets, compensating partly for the difficult situation in Iraq, Yemen, Libya and others. Lower input costs for dairy across the region led to negative pricing.
In Zone AOA, sales of €9.7bn were reached but the material impact of the withdrawal of Maggi noodles in India, and the situation in China where the recovery is slower than expected, continued to affect the Zone's growth significantly, overshadowing better performances elsewhere in the emerging markets and the solid growth in the developed markets.
In the emerging markets lost sales of Maggi noodles continued to have a significant impact on growth in the South Asia Region. Nestlé India received a favourable ruling from the Honourable Bombay High Court and is actively engaging with the authorities to get the product back on the shelves. In China we continued improving the fundamentals of the business at Yinlu, while seeing solid performances with Nescafé soluble coffee and ready-to-drink and also with Hsu Fu Chi confectionery. Elsewhere, Vietnam and Indonesia were among the highlights. Sub-Saharan Africa continued to generate growth ahead of the market with the business accelerating strongly in the Central West African region, in spite of falling oil revenues there. South Africa also performed well.
In the developed markets Japan continued to perform well thanks to innovation in KitKat and in Nescafé. Oceania also achieved good momentum in an intensely competitive trading environment.
Nestlé Waters maintained its good growth momentum as it continued to capitalise on rising demand for healthy beverages. There was a strong performance from the emerging markets with the Middle East, Africa, Turkey and Mexico all growing double-digit. Developed markets delivered solid growth with North America, Spain, Italy, UK and France among the highlights. Growth for Nestlé Pure Life accelerated, and premium international brands, Perrier and S.Pellegrino, delivered good growth. The local brands also continued to perform well, with Buxton in the UK, Poland Spring in the US, and Santa Maria in Mexico all making positive contributions.
Nestlé Nutrition faced tough comparables from the same period last year and saw slower growth in the Middle East and Latin America. However in Asia, Wyeth Nutrition and its premium brand Illuma performed well and the e-commerce platform in China was expanded. In Latin America Mexico continued to grow strongly across all categories driven by innovations in our NAN, Nido and Gerber brands. Infant cereals delivered good growth, driven by the US and Europe where Russia and Poland were highlights. The pouch segment did well for meals and drinks.
