Nestle reported its slowest first-quarter sales growth since 2009 on a deceleration in emerging markets; “It seems rather odd to us that Nestle claims to be holding or growing its market shares in the region.”
April 18, 2013 Leave a comment
Nestle Has Slowest 1st-Quarter Sales Growth in Four Years
Nestle SA (NESN), the world’s biggest food maker, reported its slowest first-quarter sales growth since 2009 on a deceleration in emerging markets and amid lower prices in Europe.
Sales rose 4.3 percent excluding acquisitions, divestments and currency swings in the three months through March, the Vevey, Switzerland-based maker of DiGiorno pizzas said in a statement today. That fell short of the 4.7 percent average estimate of 21 analysts surveyed by Bloomberg. Volume increased 2.3 percent, the slowest growth since the third quarter of 2011.
Nestle said sales were hurt by “softening” in certain emerging markets, which it would not identify, compared to last year. Revenue grew 4.4 percent in the Asia, Oceania and Africa region, below analysts’ estimates and less than half of the 11 percent growth in the same quarter last year. The miss in Asia, Oceania and Africa was the “real stand out” in the results, according to Jeff Stent, an analyst at Exane BNP Paribas.
“This is not what people own Nestle for,” Stent wrote in a note to clients. “It seems rather odd to us that Nestle claims to be holding or growing its market shares in the region.”Nestle stock dropped as much as 1.9 percent in Zurich trading as of 9:03 a.m., extending yesterday’s decline of 2.4 percent. That was the biggest two-day decline since Sept. 5, 2011 on an intraday basis. The stock is up 5.9 percent this year.
Below Target
Four of the company’s seven product categories missed the company’s long-term target of 5 percent to 6 percent. They were beverages, water, milk and ice cream, and prepared dishes.
In February, Chief Financial Officer Wan Ling Martello told analysts to expect “lumpiness” in Nestle’s results in the first half of 2013 as price increases provide less of a lift than in past years. Higher prices contributed 2 percent to sales growth, more than analysts’ estimates of 1.2 percent. Pricing boosted sales in the year-earlier quarter by 4.4 percent.
Revenue at the Nestle Waters unit gained 1.8 percent, down from 8 percent last year, hurt by “intense” price pressure in the U.S. and the late arrival of spring, the company said. Nestle owns Pure Life, the world’s largest bottled-water brand.
Nestle cut prices on Gold Blend Nescafe in Russia last year. Switzerland, a market where the company gets about 2 percent of sales, has had pressure on prices for four years, Eugenio Simioni, head of the business, said April 11.
Nespresso Sales
Sales in the business unit that includes its Nespresso single-serve coffee business rose 4.2 percent, less than half of the 8.7 percent growth generated in 2012. This is the first time in four quarters that Nestle didn’t say that Nespresso generated sales growth of at least 10 percent. The company did say Nespresso sales grew “in all regions.”
“The start to the year reflects the caution we expressed in February,” Chief Executive Officer Paul Bulcke said in the statement. “We continue to expect some volatility throughout 2013.”
The maker of Dreyer’s ice cream reiterated its guidance for 2013, saying so-called organic sales growth is expected to meet its target of 5 percent to 6 percent. Nestle also has a goal to widen its trading operating profit margin in constant currencies and boost earnings per share on the same basis.
In Europe, where the company said consumer sentiment “remains low,” sales grew 1.5 percent. Frozen food and pizza “had a weak start” while ice cream sales suffered due to the cold weather, the company said. Revenue in the Americas region grew 5.3 percent, helped by “strong growth” of dairy and ice cream in Mexico.
Organic sales at Nestle’s nutrition unit, which also makes BabyNes baby-formula capsules and Jenny Craig weight-loss products, increased 7.6 percent in the quarter, yet were hurt as sales of weight-management products continued to decline.
Sales of prepared dishes and cooking aids declined 0.1 percent. Pet care was the category that grew the most, with revenue increasing 7.9 percent in the quarter.
Earlier this week, Danone (BN) said like-for-like revenue rose 5.6 percent in the first quarter, beating analysts’ estimates, as renewed concern in China over the safety of baby-food products caused consumers to turn to established brands.
To contact the reporter on this story: Matthew Boyle in London at mboyle20@bloomberg.net