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.


UK core pay growth strongest in nearly 11 years, but jobs growth slows

Data showed the unemployment rate remained at 3.8 percent as expected. (Shutterstock)
Updated 16 July 2019
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UK core pay growth strongest in nearly 11 years, but jobs growth slows

  • Core earnings have increased by 3.6 percent annually, beating the median forecast of 3.5 percent
  • The unemployment rate fell by 51,000 to just under 1.3 million

LONDON: British wages, excluding bonuses, rose at their fastest pace in more than a decade in the three months to May, official data showed, but there were some signs that the labor market might be weakening. Core earnings rose by an annual 3.6 percent, beating the median forecast of 3.5 percent in a Reuters poll of economists. Including bonuses, pay growth also picked up to 3.4 percent from 3.2 percent, stronger than the 3.1 percent forecast in the poll. Britain’s labor market has been a silver lining for the economy since the Brexit vote in June 2016, something many economists attribute to employers preferring to hire workers that they can later lay off over making longer-term commitments to investment. The pick-up in pay has been noted by the Bank of England which says it might need to raise interest rates in response, assuming Britain can avoid a no-deal Brexit. Tuesday’s data showed the unemployment rate remained at 3.8 percent as expected, its joint-lowest since the three months to January 1975. The number of people out of work fell by 51,000 to just under 1.3 million. But the growth in employment slowed to 28,000, the weakest increase since the three months to August last year and vacancies fell to their lowest level in more than a year. Some recent surveys of companies have suggested employers are turning more cautious about hiring as Britain approaches its new Brexit deadline of Oct. 31. Both the contenders to be prime minister say they would leave the EU without a transition deal if necessary. A survey published last week showed that companies were more worried about Brexit than at any time since the decision to leave the European Union and they planned to reduce investment and hiring. “The labor market continues to be strong,” ONS statistician Matt Hughes said. “Regular pay is growing at its fastest rate for nearly 11 years in cash terms and its quickest for over three years after taking account of inflation.” The BoE said in May it expected wage growth of 3 percent at the end of this year.