MILAN – Swiss food group Nestle reported slightly better than expected earnings for the first half of 2017, but failed to deliver an expected rebound in sales growth.
The Vevey-based group said on Thursday net profit rose 19 percent to 4.9 billion Swiss francs (S$6.99 billion) in the first six months of the year, beating a 4.83 billion franc estimate in a Reuters poll.
In a sign of the difficult environment the company faces, it also said organic growth, which strips out the effects of currency changes, acquisitions and divestments, was just 2.3%, missing analyst forecasts for 2.7% growth.
Nestlé also warned that organic growth would likely be in the “lower half” of the 2-4% range this year.
The worse-than-expected growth figures are a setback for Mark Schneider, who took over in January as chief executive of the world’s largest food and drinks company.
Overall, Nestlé reported first-half revenue of 43 billion Swiss francs ($45.2 billion), compared with 43.2 billion francs in the same period last year, slightly below analysts’ forecasts of 43.8 billion francs.
Net profit came in at 4.9 billion francs, up 19% on the year, although the sharp rise was partly because of a one-off tax adjustment last year. Analysts had expected profit at 4.8 billion francs.
Nespresso
Nespresso continued to be a key growth driver for the Group. Nestlé’s single serve brand delivered mid single-digit growth, accelerating in the second quarter, as all geographies gained momentum. Growth in North America continued at a double-digit pace.
Buyback program
In late June, Nestlé announced a 20 billion franc share buyback program and said it would orient its capital spending toward high-growth parts of its business including pet care, infant nutrition, coffee and bottled water.
The buyback announcement came days after billionaire activist investor Daniel Loeb’s Third Point LLC said it had taken a $3.5 billion stake in Nestlé, or about 1.25% of shares.
“Organic growth in the first half did not fully meet our expectations,” Mr Schneider said. “While volume growth remains at the high end of our industry, pricing continues to be soft. Asia and Africa confirmed their positive growth momentum. Western Europe experienced a volume decline, which we consider largely transitory.”
