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

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.


IMF experts visit Lebanon amid worsening economic crisis

Updated 20 February 2020

IMF experts visit Lebanon amid worsening economic crisis

  • IMF team will provide broad technical advice
  • Lebanon has not requested IMF financial assistance

BEIRUT: A team of IMF experts met Prime Minister Hassan Diab on Thursday at the start of a visit to provide Lebanon with advice on tackling a deepening financial and economic crisis, an official Lebanese source said.

The IMF has said the team will visit until Feb. 23 and provide broad technical advice. Lebanon has not requested financial assistance from the Fund.

The long-brewing economic crisis spiraled last year as capital flows into the country slowed and protests erupted against the ruling elite over decades of corruption and bad governance.

Diab’s government, which took office last month, must decide what to do about upcoming debt payments, notably a $1.2 billion dollar-denominated sovereign bond due on March 9.

Lebanese President Michel Aoun meanwhile said on Thursday measures would be taken to hold to account all those who contributed to Lebanon’s financial crisis through illegal actions be they transfers abroad, manipulation of Eurobonds or other acts.

“There is information that we are still in need of with regards to the banking situation. There are measures that we will take to hold to account all who participated in bringing the crisis to where it is,” Aoun said, according to his Twitter account.

Opinion

This section contains relevant reference points, placed in (Opinion field)

One of Lebanon’s most influential politicians, Parliament Speaker Nabih Berri, said on Wednesday that debt restructuring was the best solution for looming maturities.

Lebanon will on Friday review proposals from firms bidding to give it financial and legal advice on its options, a source familiar with the matter said on Thursday. The government aims to take a quick decision on who to appoint, the source said.

So far, firms bidding to be Lebanon’s legal adviser are Dechert, Cleary Gottlieb, and White and Case, the source said.

Lebanon has issued requests for proposals to seven firms to provide it with financial advice.

The government on Wednesday formed a committee tasked with preparing an economic recovery plan that includes ministers, government officials, a central bank representative and economists, according to a copy of a decree seen by Reuters.