Nestle SA (NESN), the world’s biggest food company, said it expects to achieve its targeted long-term sales growth rate next year after an acceleration in revenue from Asia and Africa in the third quarter.
Nestle’s sales growth excluding acquisitions, divestments and currency swings may reach its goal for an average level of 5 percent to 6 percent in 2014, Chief Executive Officer Paul Bulcke said today. The Vevey, Switzerland-based company also reiterated it expects growth of “around” 5 percent this year.
“If this is the line we walk, that is the intention we have,” Bulcke said at a press conference, saying the goal is “doable” for 2014. “We see some colors coming back in many areas of the world, in spite of some slowing down.”
Nestle’s acceleration in emerging markets over the past three months contrasts with the slowdown seen by consumer-product companies like Unilever and PepsiCo Inc. (PEP:US) Still, the Swiss company faces headwinds as European consumers cut spending, which led to Nestle’s lowest pricing growth for the first nine months of any year since 2003.
The stock rose as much as 3.2 percent, the biggest intraday gain in four months. The shares traded 3.1 percent higher at 63.90 Swiss francs at 1:33 p.m. in Zurich. The shares have gained 7.2 percent this year, compared with a 1.3 percent drop in the Amsterdam-traded shares of Unilever (UNA), the maker of Magnum ice cream.
Total nine-month revenue rose 4 percent to 68.35 billion Swiss francs ($76 billion), the maker of Nespresso coffee capsules said today in a statement. That compares with a median analyst estimate of 69 billion francs. Nestle’s emerging-market revenue rose 8.8 percent in the first nine months of the year, excluding acquisitions, divestments and currency swings, speeding up from the first-half’s 8.2 percent pace.
The weakness of currencies such as the Brazilian real and Indian rupee against the franc reduced nine-month sales by 2.5 percent, more than the 0.9 percent reduction in the first half. The weakness of the Brazilian real and Indian rupee weighed on sales growth, Chief Financial Officer Wan Ling Martello said.
Unilever said Sept. 30 that third-quarter revenue growth had slowed due to a deterioration in emerging markets across Asia. PepsiCo, the maker of Frito-Lay chips, said yesterday that sales growth in Asia, the Middle East and Africa decelerated to 6 percent in the period, down from 14 percent in the previous three months.
Nestle’s performance in emerging markets was “the acceleration that the market was looking for,” said Warren Ackerman, an analyst at Societe Generale.
The growth was helped by gains exceeding 10 percent in Africa and Indonesia in the first nine months, and single-digit gains in the Middle East and India, Nestle said. Growth in China slowed to high-single-digits, Martello said.
Nestle’s revenue gained 4.4 percent excluding acquisitions, divestments and currency swings. The median estimate of 14 analysts surveyed by Bloomberg was for growth of 4.5 percent.
After Unilever and Danone, and following Nestle’s performance so far this year, the Swiss’ company’s third-quarter sales were “solid (and somewhat dull), which is probably all that Nestle’s shareholders were hoping for,” Andrew Wood, an analyst at Sanford C. Bernstein, wrote.
Nestle reiterated it expects improvement in underlying earnings per share and the operating margin based on constant currencies in 2013.
The volume of goods sold increased 3 percent, matching the analyst estimate, and an improvement from the 2.7 percent uptick in the first half of the year. Pricing added 1.4 percentage points to growth, compared with the 1.5 percent analyst estimate.
Nestle is “serious” about divesting underperforming businesses, though it doesn’t want to give a timeframe, Bulcke said. He also said the company is keeping “all options open” over when exactly in 2014 it will announce its decision over what to do with its stake of about 29 percent in L’Oreal SA. (OR)
Analysts have said Jenny Craig diet centers and PowerBar snacks are candidates for divestment. Bulcke declined to comment on whether they’re for sale. Nestle said Jenny Craig continues to be “challenged.”
Bulcke also declined to comment on a report in Repubblica today that said the food company made an offer to buy Ferrero SpA, the Italian chocolatier that makes Nutella hazelnut spread. The talks are at a preliminary stage, according to the article, which didn’t say how it got the information. Ferrero has received no takeover bid and the company isn’t for sale, Giovanni Ferrero, the company’s CEO, said in a statement.
Nestle declined to comment further on its 2013 sales growth outlook except to say it expects an acceleration in the fourth quarter.
When asked whether 4.5 percent is around 5 percent, Bulcke said “I don’t know, but Versailles is around Paris. Good question though.”
To contact the reporter on this story: Matthew Boyle in London at firstname.lastname@example.org
To contact the editor responsible for this story: Celeste Perri at email@example.com