Nestle sees challenging 2013

Nestle said it expects 2013 to be as challenging as 2012 as the world’s biggest food group reported weaker-than-expected quarterly sales growth in Asia and the Americas.

Underlying 2012 sales growth at the maker of KitKat chocolate bars and Maggi soup came in at 5.9 per cent for the year, meeting average analyst expectations, and implying a slight recovery from third-quarter growth of some five per cent.

Yet sales growth in the Americas, which contributes almost a third of total sales, came in at 5.2 per cent, while Asia, Oceania and Africa (AOA), which accounted for about a fifth of sales, grew 8.4 per cent, the group said. Both were less than analysts had expected.

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“Sentiment is likely to take a knock after the disappointing Q4 performance in Zone AOA,” said analyst Ronny Landolt at Barclays Capital.

“This region has not bounced back after a series of one-offs affected Q3.”

Third-quarter sales took a surprise hit from one-off events such as typhoons in the Philippines, social unrest in Egypt and business disruptions due to sanctions on Iran.

Helvea analysts said in a note: “Not the ground breaking results as seen at peers. Given (the) recent share price increase and several upgrades, there could be some pressure.”

Full-year results at Unilever beat expectations last month, propelled by strong sales of its haircare products and soaps in emerging markets. French rival Danone publishes its 2012 results on February 19.

On the positive side, analysts highlighted growth of 6.4 per cent at Nestle’s bottled water business, which was helped by strong sales of premium brands like San Pellegrino and Perrier as well as its Pure Life budget brand.

The business had suffered in recent years from cash-strapped customers switching back to tap water as well as from criticism from green campaigners.

“The (business) environment looks to be every bit as challenging in 2013 as it was in 2012,” said chief executive Paul Bulcke.

“But 2013 will again provide opportunities to leverage our competitive advantages (and) deliver on our growth opportunities,” he said, reiterating Nestle’s standard outlook for the year.

Nestle has long targeted underlying sales growth of between five and six per cent as well as improved margins and underlying earnings per share growth in constant currencies.