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Nestlé reports slower growth, expects challenging year ahead

By Caroline Scott-Thomas , 14-Feb-2013

Nestlé’s share price fell 2.3% on Thursday as the company announced its slowest growth in three years, with developing markets hit by natural disasters and continued market weakness in Europe and the Americas.

However, the company still reported a 12% rise in net profit, with underlying sales growth of 5.9% for the full year 2012. Total revenue was CHF92.2bn (about €74.9bn) and net profit was CHF10.6bn (about €8.6bn).

Sales growth in the Americas was up 5.2%, lifted by higher prices, while emerging markets, which account for 43% of the company’s sales, grew by 11% - slowing from 13.3% growth a year earlier.

The results were “certainly not the strong outperformance we have come to expect from Nestlé over many years,” Sanford C. Bernstein analyst Andrew Wood said in a note.

CEO Paul Bulcke said the company still expected 5% to 6% organic growth over the next year, “despite the many challenges 2013 will no doubt bring.”

In Europe, sales grew 1.8% and Bulcke defended the company’s performance in the region.

“Many companies worldwide are not achieving the growth that we are achieving in Europe,” Bulcke said in a conference with reporters.

Nestlé’s share price fell to CHF62.85 on the FTSE 100 by 10.39am on Thursday morning from a year-high of CHF64.70 on Wednesday.

The company said in a statement: “The environment looks to be every bit as challenging in 2013 as it was in 2012. But 2013 will again provide opportunities to leverage our competitive advantages, deliver on our growth opportunities and benefit from our drive for continuous improvement across the Group.”

Horse meat scandal affects whole industry

Responding to a question about whether Nestlé has been affected by the current horse meat scandal, Bulcke told reporters: “It has affected us because the whole industry is in question again…That is really bad for so many people working really hard to produce safe and good food.”

However, he added that Nestlé products have not directly been affected, although the company had intensified scrutiny of its supply chain in the wake of the scandal.

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