Nestle confirms outlook as volume growth picks up

The maker of KitKat chocolate bars confirmed on Thursday its target to grow organic sales by 2-4 percent this year and improve its trading operating margin. (Reuters)
Updated 19 April 2018
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Nestle confirms outlook as volume growth picks up

  • Nestle expects restructuring costs of around 700 million Swiss francs this year
  • Growth in Europe, the Middle East and North Africa slowed to 2.2 percent, hit by declining prices

ZURICH: Food group Nestle confirmed its full-year guidance after organic sales growth accelerated to 2.8 percent in the first quarter of 2018, helped by improving volumes.
Nestle is among packaged food companies taking action after seeing sales slow as many consumers prefer fresh foods, reacting by cutting costs, divesting underperforming businesses and increasing efforts to innovate with new products.
The maker of KitKat chocolate bars and Maggi soups confirmed on Thursday its target to grow organic sales by 2-4 percent this year and improve its trading operating margin. It also said it was on track to return to mid-single-digit organic sales growth by 2020.
It also confirmed it expected restructuring costs of around 700 million Swiss francs ($723 million) this year.
Quarterly organic growth of 2.8 percent, which strips out currency swings and portfolio changes, was ahead of the average estimate of 2.5 percent in a Reuters poll and up from 1.9 percent in the final quarter of 2017.
Volume growth picked up to 2.6 percent, from 1.2 percent in the final quarter of 2017, but prices rose by only 0.2 percent, Nestle said in a statement. Price pressures were illustrated by a price row with European retailers.
There were also broadly positive reports from other consumer goods companies.
French yogurt maker Danone on Wednesday reported a 4.9 percent rise in first-quarter underlying sales, helped by strong demand for baby formula products in China
Anglo-Dutch Unilever reported first-quarter sales that met expectations, helped by volume gains, and maintained its full-year outlook.
For Nestle, growth in the Americas accelerated to 1.2 percent and Asia (AOA), at 4.7 percent, was also better than the previous quarter, while Europe, the Middle East and North Africa (EMENA) slowed to 2.2 percent, hit by declining prices, Nestle said.
Kepler Cheuvreux analyst Jon Cox said sales figures were better than feared, highlighting the improvement in the US.
“However, we are now in the execution phase of efforts to accelerate sales,” he said. “While there is an improvement, it is clearly going to take time to accelerate sales for a group the size of Nestle.”
Vontobel’s Jean-Philippe Bertschy said deflationary pressures in Brazil and Europe had led to the weak pricing, but the slightly better-than-expected figures should help market sentiment.
Shares in the group, which have lost around 10 percent of their value this year, were indicated to open 1.1 percent higher, according to pre-market indications by bank Julius Baer.
They are trading at around 20 times forward earnings, at a premium to Danone at just under 18 times and in line with Unilever.


‘Don’t be too optimistic’: Huawei employees fret at US ban

Updated 26 May 2019
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‘Don’t be too optimistic’: Huawei employees fret at US ban

  • This week Google, whose Android operating system powers most of the world’s smartphones, said it would cut ties with Huawei
  • Another critical partner, ARM Holdings, said it was complying with the US restrictions

BEIJING: While Huawei’s founder brushes aside a US ban against his company, the telecom giant’s employees have been less sanguine, confessing fears for their future in online chat rooms.
Huawei CEO Ren Zhengfei declared this week the company has a hoard of microchips and the ability to make its own in order to withstand a potentially crippling US ban on using American components and software in its products.
“If you really want to know what’s going on with us, you can visit our Xinsheng Community,” Ren told Chinese media, alluding to Huawei’s internal forum partially open to viewers outside the company.
But a peek into Xinsheng shows his words have not reassured everyone within the Shenzhen-based company.
“During difficult times, what should we do as individuals?” posted an employee under the handle Xiao Feng on Thursday.
“At home reduce your debts and maintain enough cash,” Xiao Feng wrote.
“Make a plan for your financial assets and don’t be overly optimistic about your remuneration and income.”
This week Google, whose Android operating system powers most of the world’s smartphones, said it would cut ties with Huawei as a result of the ban.
Another critical partner, ARM Holdings — a British designer of semiconductors owned by Japanese group Softbank — said it was complying with the US restrictions.
“On its own Huawei can’t resolve this problem, we need to seek support from government policy,” one unnamed employee wrote last week, in a post that received dozens of likes and replies.
The employee outlined a plan for China to block off its smartphone market from all American components much in the same way Beijing fostered its Internet tech giants behind a “Great Firewall” that keeps out Google, Facebook, Twitter and dozens of other foreign companies.
“Our domestic market is big enough, we can use this opportunity to build up domestic suppliers and our ecosystem,” the employee wrote.
For his part, Ren advocated the opposite response in his interview with Chinese media.
“We should not promote populism; populism is detrimental to the country,” he said, noting that his family uses Apple products.
Other employees strategized ways to circumvent the US ban.
One advocated turning to Alibaba’s e-commerce platform Taobao to buy the needed components. Another dangled the prospect of setting up dozens of new companies to make purchases from US suppliers.
Many denounced the US and proposed China ban McDonald’s, Coca-Cola and all-American movies and TV shows.
“First time posting under my real name: we must do our jobs well, advance and retreat with our company,” said an employee named Xu Jin.
The tech ban caps months of US effort to isolate Huawei, whose equipment Washington fears could be used as a Trojan horse by Chinese intelligence services.
Still, last week Trump indicated he was willing to include a fix for Huawei in a trade deal that the two economic giants have struggled to seal and US officials issued a 90-day reprieve on the ban.
In Xinsheng, an employee with the handle Youxin lamented: “I want to advance and retreat alongside the company, but then my boss told me to pack up and go,” followed by two sad-face emoticons.