Nestle nine months sales fall as emerging markets rise

SWITZERLAND – Sales for Nestle SA fell slightly during the first nine months of 2017, where the weakness in the company’s European and North American businesses continued to challenge the company as performance in emerging markets improved.

The company recorded approximately US$66,863 million during the nine months to the end of September, a slight decline when compared to the same period of the previous year when the company generated US$67,108 million in sales.

“We finished the nine months with organic growth increasing to 2.6%, supported by improved RIG (real internal growth) of 1.8%,” said François-Xavier Roger, CFO, during a conference call with analysts.

“Pricing softened slightly to 0.8%. Foreign exchange was a mild headwind of negative 0.4%.

Net divestments reduced reported sales by 2.6%, for the most part attributed to the creation of the Froneri joint venture.

And sales totalled US$66,863 million (65.3 billion Swiss francs), representing the slight decline of 0.4% on a reported basis,” said Roger.

Looking at the company’s performance during the period, Roger said emerging markets were the driver of the company’s real internal growth improvements, particularly in Latin America and some markets in Asia.

“The growth in the developed markets was generally stable versus the half year in the context of generally weak consumer confidence and limited pricing opportunities,” he said.

In the company’s Zone Americas business unit, which includes North America and Latin America, sales rose slightly to US$20.74billion from US$20.34 billion the year before.

However, in North America, organic growth was flat according to the company, with coffee creamers, pet care, US frozen food and pizza generating growth, which was offset by declines in confectionery and ice cream.

“This consequently had a favourable impact on volumes in the third quarter,” Roger said. Mexico also delivered positive organic growth.

And as a category, pet care continued to see double-digit growth across Latin America, sustaining its position as a growth driver in the region.”

The company’s Zone Asia, Oceania and sub-Saharan Africa (AOA) saw a 5.3% organic sales growth and a 3.6% increase in RIG, with South-East Asia, Japan and China reporting good organic growth.

The region reported sales increase of 2% to CHF 11.9 billion. Sub-Saharan Africa continued to grow, reporting double-digit growth.

Looking forward, the company has confirmed its sales guidance for 2017, with expectations of organic growth for the full year to be around the level of the nine-month period.

It also expects the underlying trading operating profit margin for 2017 is set to improve by at least 0.2% in constant currency, in line with its expectations.

The company expects its trading operating profit margin will decrease by 0.4-0.6% due to increase in restructuring and related expenses in 2017.

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