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

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.


Easy credit poses tough challenge for Russian economy minister

Updated 18 August 2019

Easy credit poses tough challenge for Russian economy minister

  • Measures being prepared to help indebted citizens; situation might blow up in 2021

MOSCOW: New machines popping up in Russian shopping centers seem innocuous enough — users insert their passport and receive a small loan in a matter of minutes.

But the devices, which dispense credit in Saint Petersburg malls at a sky-high annual rate of 365 percent, are another sign of a credit boom that has authorities worried.

Russians, who have seen their purchasing power decline in recent years, are borrowing more and more to buy goods or simply to make ends meet.

The level of loans has grown so much in the last 18 months that the economy minister warned it could contribute to another recession.

But it’s a sensitive topic. Limiting credit would deprive households of financing that is sometimes vital, and could hobble already stagnant growth.

The Russian economy was badly hit in 2014 by falling oil prices and Western sanctions over Moscow’s role in Ukraine, and it has yet to fully recover.

“Tightening lending conditions could immediately damage growth,” Natalia Orlova, chief economist at Alfa Bank, told AFP.

“Continuing retail loan growth is currently the main supporting factor,” she noted.

But “the situation could blow up in 2021,” Economy Minister Maxim Oreshkin warned in a recent interview with the Ekho Moskvy radio station.

He said measures were being prepared to help indebted Russians.

According to Oreshkin, consumer credit’s share of household debt increased by 25 percent last year and now represents 1.8 trillion rubles, around $27.5 billion.

For a third of indebted households, he said, credit reimbursement eats up 60 percent of their monthly income, pushing many to take out new loans to repay old ones.

Orlova said other countries in the region, for example in Eastern Europe, had even higher levels of overall consumer debt as a percentage of national output or GDP.

But Russian debt is “not spread equally, it is mainly held by lower income classes,” which are less likely to repay, she said.

The situation has led to friction between the government and the central bank, with ministers like Oreshkin criticizing it for not doing enough to restrict loans.

Meanwhile, economic growth slowed sharply early this year following recoveries in 2017 and 2018, with an increase of just 0.7 percent in the first half of 2019 from the same period a year earlier.

That was far from the 4.0 percent annual target set by President Vladimir Putin — a difficult objective while the country is subject to Western sanctions.

With 19 million people living below the poverty line, Russia is in dire need of development.

“The problem is that people don’t have money,” Andrei Kolesnikov of the Carnegie Center in Moscow wrote recently.

“This is why we can physically feel the trepidation of the financial and economic authorities,” he added. Kolesnikov described the government’s economic policy as something that “essentially boils down to collecting additional cash from the population and spending it on goals indicated by the state.”

At the beginning of his fourth presidential term in 2018, Putin unveiled ambitious “national projects.”

The cost of those projects — which fall into 12 categories that range from health to infrastructure — is estimated at $400 billion by 2024, of which $115 billion is to come from private investment.