Nestle settles for modest sales growth target after Q1 slowdown

Nestle Chairman Paul Bulcke attends the shareholders’ meeting in Lausanne, Switzerland. (Reuters)
Updated 21 April 2017
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Nestle settles for modest sales growth target after Q1 slowdown

ZURICH: Swiss food giant Nestle maintained its modest 2-4 percent growth target for underlying sales this year, slightly less than Anglo-Dutch rival Unilever, after growth in the first quarter was hit by weak consumer demand for packaged foods in North America and weaker prices in western Europe.
Comparable or organic sales growth at the maker of Buitoni pasta and Maggi soups slowed as expected to 2.3 percent in the first quarter, from 3.9 percent in the same period last year, when there was one more trading day and an earlier Easter, the company said in a statement on Thursday.
It also reaffirmed new Chief Executive Mark Schneider’s forecast given in February of 2-4 percent organic sales growth, a stable operating profit margin and an increase in underlying earnings per share in constant currencies this year.
Earlier on Thursday, Unilever reported underlying first-quarter sales growth of 2.9 percent, helped by some higher prices, and said it aimed for 3-5 percent growth this year.
Volume growth at Nestle decelerated to 1.3 percent, from 3 percent a year ago, hit by soft demand in North America and China, while the overall increase in prices edged higher to 1 percent, from 0.9 percent.
Underlying sales by the company’s confectionery business declined 2.9 percent, due to the later Easter holiday and weaker demand for chocolate, and its Yinlu drinks business dragged down its performance in China.
Nestle said pricing was still negative in western Europe, but the trend was improving thanks to increases in prices for the group’s flagship Nescafe products.
Nestle’s overall sales increased to 21 billion Swiss francs ($21.1 billion) from 20.9 billion last time, just short of the average of analysts’ forecasts of 21.2 billion francs given in a Reuters poll.
Analysts said Nestle’s quarterly growth was the lowest in more than a decade but they expected the situation to get better, with Kepler Cheuvreux analyst Jon Cox pointing to an improvement in Europe and Asia.
Helvea Baader analyst Andreas von Arx said the pricing trend was good news and should help the share price, which was up 1.1 percent at 76 francs by 0730 GMT, when London-listed shares in Unilever were up 1.4 percent at 3,994 pence.


British Steel collapses, threatening thousands of jobs

Updated 22 May 2019
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British Steel collapses, threatening thousands of jobs

LONDON: British Steel Ltd. has been ordered into liquidation as it struggles with industry-wide troubles and Brexit, threatening 5,000 workers and another 20,000 jobs in the supply chain.
The company had asked for a package of support to tackle issues related to Britain’s pending departure from the European Union. Talks with the government failed to secure a bailout, and the Insolvency Service announced the liquidation on Wednesday.
“The immediate priority following my appointment as liquidator of British Steel is to continue safe operation of the site,” said David Chapman, the official receiver, referring to the Scunthorpe plant in northeast England.
The company will continue to trade and supply its customers while Chapman considers options for the business. A team from financial firm EY will work with the receiver and all parties to “secure a solution.”
“To this end they have commenced a sale process to identify a purchaser for the businesses,” EY said in a statement.
The government said it had done all it could for the company, including providing a 120 million pound ($152 million) bridging facility to help meet emission trading compliance costs. Going further would not be lawful as it could be considered illegal state aid, Business Secretary Greg Clark said.
“I have been advised that it would be unlawful to provide a guarantee or loan on the terms of any proposals that the company or any other party has made,” he said.
Unions had called for the government to nationalize the business, but the government demurred.
The opposition Labour Party’s deputy leader, Tom Watson described the news as “devastating.”
“It is testament to the government’s industrial policy vacuum, and the farce of its failed Brexit,” he said in a tweet.
The crisis underscores the anxieties of British manufacturers, who have been demanding clarity around plans for Britain’s departure from the EU. Longstanding issues such as uncompetitive electricity prices also continue to deter investment in UK manufacturing, said Gareth Stace, the director-general of UK Steel, the trade association of the industry.
“Many of our challenges are far from unique to steel — the whole manufacturing sector is crying out for certainty over Brexit,” Stace said. “Unable to decipher the trading relationship the UK will have with its biggest market in just five months’ time, planning and decision making has become nightmarish in its complexity.”
Greybull Capital, which bought British Steel in 2016 for a nominal sum, said turning around the company was always going to be a challenge. It praised the trade union and management team, but said Brexit-related issues proved to be insurmountable.
“We are grateful to all those who supported British Steel on the attempted journey to resurrect this vital part of British industry,” it said in a statement.