Nestle to cut costs as profit drops

NestleConsumer goods giant Nestle felt the pressure of food prices worldwide.

It affected the company’s earnings, which led to its decision to cut costs.

“Our 2016 organic growth was at the high end of the industry but at the lower end of our expectations. We saw a solid trading operating profit margin improvement and our cash flow grew significantly,” said Nestle CEO Mark Schneider.

“Based on these results, our board of directors is pleased to propose the 22nd consecutive dividend increase, underlining our commitment to continuity.”

Nestle reported a 6 per cent drop in net profit to 8.53 billion Swiss francs ($A11.08 billion), with double-digit declines at its Chinese unit dragging on growth. Revenue barely rose, by 0.8 percent to 89.47 billion francs.

The confectionery giant boss said the company behind Maggi and KitKat plans to increase restructuring costs this year.

“In 2017, we expect organic growth between 2 per cent and 4 percent. In order to drive future profitability, we plan to increase restructuring costs considerably in 2017. As a result, the trading operating profit margin in constant currency is expected to be stable. Underlying earnings per share in constant currency and capital efficiency are expected to increase,” said Schneider.

He further added Nestle will continue to invest in future growth and operating efficiency. They are targeting a “mid-single digit organic growth and significant structural cost savings by 2020.”

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