Nestlé’s Forecast Warns Of Weakest FY Sales Growth In 20 Years
Nestle SA warned that sales growth this year will be the weakest in at least two decades, giving activist investor Dan Loeb ammunition that the world’s largest food company needs to rejuvenate its businesses.
Organic revenue growth will be at the lower half of its 2 percent to 4 percent forecast, the Vevey, Switzerland-based company said in a statement Thursday. Sales increased 2.3 percent in the first half, missing analysts’ estimates for 2.7 percent.
“The numbers are a bit disappointing,” said Patrik Lang, head of equity research at Julius Baer Group Ltd. “The adjusted guidance makes sense and shows management doesn’t see any recovery soon.”
Leadership From The Top
Chief Executive Officer Mark Schneider (pictured) is under pressure to prove he’s taking strides to turn around the maker of Nespresso coffee and Gerber baby food after Loeb revealed a $3.5 billion stake last month, demanding asset sales and higher shareholder returns.
The food industry has been struggling with slowing sales as consumers shun packaged food they perceive as unhealthy. Unilever last week said it’s boosting efficiency measures after reporting sales growth that met analysts’ estimates, helped by price increases that offset stagnant volume.
Increased restructuring activity weighed on Nestle’s operating profit margin by some 30 basis points on a reported basis, which James Targett, an analyst at Berenberg, said highlights the challenge in turning around the business.
Schneider has started an overhaul by reviewing Nestle’s U.S. confectionery unit for a possible sale, as well as announcing a buyback of as much as 20 billion francs ($21 billion) in shares.