Nestlé reports disappointing 2017 full-year results

Nestle InternationalMultinational giant Nestlé has released disappointing full-year results.

The company’s net profit declined nearly 16% and organic sales growth fell below expectations to 2.4%. It comes after poor performances in the US and Brazil.

“Our 2017 organic sales growth was within the guided range but below our expectations, in particular due to weak sales development towards the end of the year. Sales growth in Europe and Asia was encouraging while North America and Brazil continued to see a challenging environment,” said Mark Schneider, Nestlé CEO, in a statement.

“Our cost reduction initiatives delivered margin improvement ahead of 2017 expectations, in spite of considerable commodity price increases. During the past months, we have completed initial portfolio adjustments with very favorable results. We will continue this active portfolio management approach in a disciplined manner and fully in line with our strategy. Regarding our core portfolio, accelerating our growth through product innovation and renovation is high on the agenda. Organic sales growth is expected to improve in 2018 and we are firmly on track for our 2020 margin improvement target.”

Nestle reported in a statement, excluding the confectionery business, growth in the US was flat, reflecting soft consumer demand and challenging category dynamics. Brazil maintained solid RIG in a difficult trading environment, but pricing was negative due to deflationary pressures.

Organic growth of 2.4%, following slow growth of 1.9% in the fourth quarter. RIG was 1.6% for the full-year and remained at the high end of the food and beverage industry. Pricing of 0.8% was consistent with the prior year. Organic growth was 0.7% in developed markets and 4.8% in emerging markets. Net divestments reduced sales by 1.9%, largely related to the creation of the Froneri joint venture. Foreign exchange had a minimal negative impact of 0.1%. Total reported sales were CHF 89.8 billion, a 0.4% increase for the year.

Growth in Zone EMENA increased following a significant improvement in the second half of the year, with two consecutive quarters in excess of 3%. This was largely driven by strong results in petcare and coffee.

Nestle said Zone AOA saw its highest growth in four years, with positive RIG and pricing. This was based on a return to positive growth in China, which was achieved despite difficult comparables in the fourth quarter due to the timing of Chinese New Year. There was continued good growth across the other sub-regions.

Nestlé Waters posted high single-digit growth in the international premium brands. The regional brands in North America faced weak demand and pricing pressure. Growth remained soft in Nestlé Nutrition as sales were subdued in North America and declined in Brazil.

Nespresso reported consistent mid single-digit growth, with positive momentum in all regions and sustained mid-teen growth in North America. Nestlé Health Science maintained solid growth and Nestlé Skin Health improved slightly. All categories reported positive growth, led by coffee, petcare and Nestlé Health Science.

Moreover, the Board of Directors has decided not to renew the agreement between Nestlé and the Bettencourt family which will expire on March 21, 2018.

“Our shareholding in L’Oréal continues to be an important investment for us and we remain committed to the company that has given us very good returns over the years. We have full confidence in L’Oréal’s management and strategic direction,” said Nestlé in a statement. “We do not intend to increase our stake in L’Oréal and are committed to maintaining our constructive relationship with the Bettencourt family.”

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