Nestlé cuts revenue forecast amid slowdown in emerging markets

Nestlé, the world’s biggest food company, cut its full-year revenue forecast amid slowing growth in emerging markets. Revenue will rise about 3.5 per cent on an organic basis, the company said in a statement, abandoning a goal for growth similar to last year’s 4.2 per cent.

Sales gained 3.3 per cent on that basis in the first nine months of the year. Analysts had expected an increase of 3.6 per cent.

For several years Nestlé, the Vevey, Switzerland-based maker of Nespresso coffee, has grappled, along with rival consumer-goods makers such as Unilever and Danone, with deflation across Europe that has crimped their ability to raise prices. They're now facing the opposite situation in emerging markets as rising raw material costs have forced them to hike prices of their goods, repelling shoppers.

Soft prices

The volatile markets will heap pressure on Nestlé’s incoming chief executive Ulf Mark Schneider. “Pricing remained soft but increasing,” Paul Bulcke, who hands the chief executive job to Schneider on January 1st, said in the statement.

Nestlé also forecasts improvements in margins and underlying earnings per share in constant currencies. Sales growth in emerging markets slowed to 5.3 per cent in the first nine months of the year from the 8.9 per cent increase Nestlé had in the full year 2015.

Unilever, which gets more than half its sales from emerging markets, last week reported its first drop in quarterly shipments since 2014 as price increases in countries such as Brazil cut into volume.

This week, Danone announced its slowest third-quarter sales growth in a decade and Reckitt Benckiser Group Plc narrowed its revenue growth outlook to the bottom of its forecast on waning demand in Russia.

Schneider comes from the medical industry and is expected to support Nestlé’s shift towards nutrition and health. – (Bloomberg)