Nestle tested by weakness in European, North American markets

by Keith Nunes
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US frozen food and pizza generated growth for Nestle.
 
VEVEY, SWITZERLAND — Sales for Nestle SA fell slightly during the first nine months of 2017. Weakness in the company’s European and North American businesses continued to challenge Nestle even as the company’s performance in emerging markets improved.

Sales during the nine months totaled 65,272 million Swiss francs ($66,863 million), a slight decline when compared to the same period of the previous year when the company generated 65,514 million Swiss francs ($67,108 million) in sales. As is customary, the company did not report earnings for the period.

Francois
François-Xavier Roger, c.f.o. of Nestle

“We finished the nine months with organic growth increasing to 2.6 percent, supported by improved RIG (real internal growth) of 1.8 percent,” said François-Xavier Roger, CFO, during a conference call with analysts on Oct. 19. “Pricing softened slightly to 0.8 percent. Foreign exchange was a mild headwind of negative 0.4 percent. Net divestments reduced reported sales by 2.6 percent, for the most part attributed to the creation of the Froneri joint venture. And sales totaled 65.3 billion Swiss francs, representing the slight decline of 0.4 percent on a reported basis.”

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 20.5 billion Swiss francs from 20.1 billion Swiss francs the year before. In North America organic growth was flat, according to the company, with coffee creamers, pet care, US frozen food and pizza generating growth. That growth, however, was offset by declines in confectionery and ice cream.

In Latin America, Roger said real internal growth increased significantly, mainly driven by Brazil. During the nine months the company introduced broad-based price decreases due to local input cost deflation.

“This consequently had a favorable 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.”

Nescafe
Growth in China in coffee and culinary was cited as a positive during the period.
 
In Zone Europe, Middle East and North Africa, sales fell to 11.8 billion Swiss francs from 13 billion Swiss francs the year before. The transfer of the business unit’s ice cream operations to the Froneri joint venture reduced sales by 10.5 percent and was a key reason for the unit’s sales decline during the period, the company said.

In Zone Asia, Oceania and sub-Saharan Africa, sales rose slightly to 11.9 billion Swiss francs from 11.6 billion Swiss francs the year before. Growth in China in coffee and culinary was cited as a positive during the period.  

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