Nestlé predicts challenging 2013

Nestlé said it expected 2013 to be as challenging as 2012 as the world's biggest food group reported weaker-than-expected quarterly sales growth in Asia and the Americas.

Underlying 2012 sales growth at the maker of KitKat chocolate bars came in at 5.9 per cent for the year, meeting average analyst expectations, and implying a slight recovery from third-quarter growth of some 5 per cent.

In Europe, Ireland and the UK were identified as areas of growth for the company, performing strongly last year. The company said the business achieved the growth by responding to changing shopping habits.

“Our consumers are adapting to the tough economic climate by changing the way they shop,”chief executive of Nestlé UK & Ireland Fiona Kendrick said. “We have grown our business by responding to this new reality, particularly in fast growing channels such as online shopping, convenience stores and discounters, as well as the more traditional outlets.”

The company increased sales of its coffee pods by almost 40 per cent last year through its Nescafé Dolce Gusto product, and opened its first Nescafé Dolce Gusto in Ireland in 2012. It also increased sales of its Kit Kate, Rolo and Yorkie brands over the year.

Yet sales growth in the Americas, which contributes almost a third of total sales, came in at 5.2 per cent, while Asia, Oceania and Africa (AOA), which accounted for about a fifth of sales, grew 8.4 per cent, the group said, both less than analysts had expected.

"Sentiment is likely to take a knock after the disappointing Q4 performance in Zone AOA," said analyst Ronny Landolt at Barclays Capital. "This region has not bounced back after a series of one-offs affected Q3."

Third-quarter sales took a surprise hit from one-off events such as typhoons in the Philippines, social unrest in Egypt and business disruptions due to sanctions on Iran.

"Not the ground breaking results as seen at peers. Given (the) recent share price increase and several upgrades, there could be some pressure," Helvea analysts said in a note.

Full-year results at Unilever beat expectations last month, propelled by strong sales of its haircare products and soaps in emerging markets. French rival Danone publishes its 2012 results on February 19th.

On the positive side, analysts highlighted growth of 6.4 per cent at Nestlé’s bottled water business, which was helped by strong sales of premium brands like San Pellegrino and Perrier as well as its Pure Life budget brand.

The business had suffered in recent years from cash-strapped customers switching back to tap water as well as from criticism from green campaigners.

"The (business) environment looks to be every bit as challenging in 2013 as it was in 2012," chief executive Paul Bulcke said.

"But 2013 will again provide opportunities to leverage our competitive advantages (and) deliver on our growth opportunities," he said, reiterating Nestlé's standard outlook for the year.

Nestlé has long targeted underlying sales growth of between 5 and 6 per cent as well as improved margins and underlying earnings per share growth in constant currencies.

The group said it would pay a 2012 dividend of 2.05 francs per share, versus forecasts for 2.09.

Reuters