Nestle H1 sales dip, keeps outlook

August 17 02:51 2015

Nestle reported slightly worse-than-expected half-year sales on Thursday, hurt by a recall of its Maggi noodles in India. The world’s largest packaged food company, with brands like Nescafe, KitKat and Perrier, reported sales fell 0.3 percent to 42.84 billion Swiss francs ($43.87 billion) in the half year to June versus analysts’ expectation for a dip of 0.1 percent to 42.95 billion, according to a Reuters poll.

Net profit fell 2.5 percent to 4.52 billion francs, lagging analysts’ average estimate for a 2.3 percent rise to 4.74 billion. Like all consumer goods companies, Nestle has been grappling with slowing sales as once-hot economies like China and Brazil cool and European consumers continue to purchase cautiously.

The company kept its outlook for the year. It had earlier forecast annual sales growth of around 5 percent, at the low end of its long-term model calling for 5 to 6 percent growth. Organic growth was 4.5 percent in the first half. The second-quarter organic sales growth was the “biggest surprise” as it beat expectations of 4 percent or below, according to Jon Cox, head of Swiss equities & head of European consumer equities at Kepler Cheuvreux.

All consumer goods companies are suffering from sluggish markets worldwide but Nestle’s particular problems involve its U.S. frozen foods business where sales are falling amid weak consumer perceptions around the health of frozen food, and a pullback in China.  In addition, Nestle’s India unit last month reported a 20 percent slide in second-quarter sales, after its Maggi noodles were pulled off shelves due to safety concerns. “In India, our withdrawal of Maggi noodles resulted in negative organic growth which will continue into the second half. We are engaging fully with the authorities as we work to relaunch the product,” it said on Thursday.