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Nestlé growth slower than expected

Nestlé CEO Peter Brabeck says investors can expect the multinational to meet its targets

(Keystone)

Swiss multinational Nestlé has increased its global sales by six per cent for the first nine months of the year, but core revenue growth has slowed.

Management pointed to the poor economic environment as a key factor behind the lower than expected growth.

Nestlé said on Thursday that the key real internal growth (RIG) figure for the January to September period had dropped to 3.4 per cent, despite increased sales of SFr66.2 billion ($43.92 billion).

RIG was down from 3.5 per cent after six months. RIG measures internal growth by removing the effects of price movements, currency fluctuations and acquisitions.

While sales met analysts' expectations, they had counted on 3.8 per cent RIG based on last year's weaker figures.

"RIG is disappointing," said Anne Alexandre, an analyst at HSBC in London. "No one expected them to hit four per cent for this year, though."

Weak economy

Nestlé had set this target for internal growth in 2002, but said that given the weak economic environment, it was unlikely to reach this goal.

The key Latin American markets in particular had failed to live up to expectations according to the world's biggest food group, with no growth to speak of.

"RIG in Latin America felt the full impact of the deteriorating economic situation in several countries."

Nestlé added it was not prepared to sacrifice margins to reach its RIG goal, although it expects the growth figure to improve before the end of the year.

"At the end of the year, we are confident that we will not disappoint our investors," said Nestlé CEO Peter Brabeck.

Better news

Emerging markets in Europe and Asia provided Nestlé with brighter news. Eastern European growth was 11.6 per cent overall, while in China it was nearly 19 per cent.

Nestlé Waters, seen by analysts as a key growth driver, and the group's Alcon eye care business, grew 9.3 per cent and 8.1 per cent respectively.

Growth in the chocolate business lagged on the other hand, with an increase of just 0.8 per cent. This result comes just weeks after a joint $10 billion bid by Nestlé and Cadbury Schweppes for US confectionery maker Hershey was rejected.

Nestlé wants to be number one or two in all of its markets, but remains distant third in the United States, the world's largest for confectionery.

swissinfo with agencies

nestlé facts

Nestlé said key real internal growth (RIG) figure dropped to 3.4 per cent in the year to September.
Sales were up six per cent to SFr66.2 billion.
Markets had counted on 3.8 per cent RIG.
Growth was flat in Latin America, but stronger in eastern Europe and Asia.

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