VEVEY, Switzerland – Nestlé reported on Friday their nine-month sales for 2017. Organic growth reached 2.6%, with 1.8% of real internal growth (RIG) and pricing of 0.8%. Total reported sales decreased by 0.4% to CHF 65.3 billion (9M-2016: CHF 65.5 billion), reduced by net divestments of 2.6% (mainly due to the creation of the Froneri joint venture) and negative foreign exchange effects of 0.4%.
Organic growth was 0.8% in developed markets and 5.1% in emerging markets.
The company confirms its sales guidance for 2017, and now expects organic growth for the full year to be around the level of the nine-month period. The underlying trading operating profit margin for 2017 is set to improve by at least 20 basis points in constant currency, in line with our expectations.
Structural savings initiatives are progressing faster than originally planned, leading to an additional increase of CHF 400-500 million in restructuring and related expenses in 2017. As a result, the trading operating profit margin will decrease by 40-60 basis points in constant currency. The company expects underlying earnings per share in constant currency and capital efficiency to increase.
Mark Schneider, Nestlé CEO stated: “Our sales results for the nine-month period are in line with our expectations communicated in July. Organic sales growth continued to benefit from industry-leading volume growth, which illustrates our ability to innovate and meet consumer demand. Pricing remained soft. Zone AOA saw further improvement in organic growth.
As expected, Western Europe returned to positive organic growth, with significant contributions from coffee and confectionery.
Improving our efficiency is a key priority. We have identified further opportunities to accelerate our margin improvement, leading to a further increase in restructuring and related expenses in 2017. Consequently, we now expect our trading operating profit margin to decrease by 40-60 basis points. The development of our underlying trading operating profit margin is fully in line with our expectations for 2017.”
Group sales
Organic growth increased to 2.6%, supported by improved RIG of 1.8%. Pricing softened slightly to 0.8%. Net divestments had a negative impact of 2.6%, largely related to the creation of the Froneri joint venture. Foreign exchange reduced reported sales by a further 0.4%. Total reported sales were CHF 65.3 billion (-0.4%).
Growth in Zone AMS remained subdued. North America was flat in the context of negative category dynamics. Brazil was affected by the difficult trading environment, while Mexico remained resilient and other parts of Latin America continued to deliver good growth. Zone EMENA saw a significant improvement in growth compared to the half year, as the coffee and petcare categories drove strong RIG in the third quarter. Zone AOA’s growth was strong, with steady improvement in China and sustained high growth in other sub-regions supporting the positive trend. Nestlé Waters was impacted by poor weather, which weighed on growth in the third quarter. Growth in Nestlé Nutrition remained soft. Nespresso reported mid-single-digit growth, with double-digit growth in North America. Nestlé Skin Health benefited from the phasing of several new product launches. Nestlé Health Science reported mid-single-digit growth.
Growth by category was broad-based, led by coffee, petcare and ambient culinary.
Nespresso continued its mid-single-digit organic growth, including double-digit growth in North America.
Nespresso’s consistent mid-single-digit organic growth was supported by double-digit growth from North America, solid growth in EMENA and strong growth in AOA. Nestlé Skin Health benefited from several new product launches during the third quarter. Nestlé Health Science maintained mid-single-digit growth driven by medical nutrition, particularly in pediatric care and specialty products.
Outlook
This is what the company stated in its press release: “We confirm our sales guidance for 2017, and now expect organic growth for the full year to be around the level of the nine-month period. The underlying trading operating profit margin for 2017 is set to improve by at least 20 basis points in constant currency, in line with our expectations. Our structural savings initiatives are progressing faster than originally planned, leading to an additional increase of CHF 400-500 million in restructuring and related expenses in 2017. As a result, our trading operating profit margin will decrease by 40-60 basis points in constant currency. We expect underlying earnings per share in constant currency and capital efficiency to increase.”
