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Nestlé’s growth falls for fifth consecutive year

By James Ridler+

17-Feb-2017
Last updated on 17-Feb-2017 at 12:27 GMT2017-02-17T12:27:37Z

Nestlé's 2016 results were ‘at the lower end of our expectations’ said ceo Mark Schneider
Nestlé's 2016 results were ‘at the lower end of our expectations’ said ceo Mark Schneider

Nestlé has posted its fifth consecutive year of falling organic growth – after a “challenging year” in the UK – in its latest financial results for the 12 months to December 31.

The food giant reported 3.2% organic growth, down from the 4.2% reported in 2015. Sales rose by just 0.8% to £71.5bn, following the adverse effects of volatile currency exchange rates, claimed Nestlé.

It had previously reported growth of 3.3% in its third-quarter results in October and expected it to hit 3.5% by the end of the year.

‘Lower end of our expectations’

Nestlé ceo Mark Schneider said: “Our 2016 organic growth was at the high end of the industry but at the lower end of our expectations. We saw a solid trading operating profit margin improvement and our cash flow grew significantly.”

Sales for the firm’s European, Middle East and North Africa (EMENA) division were £12.9bn, fuelled by growth in Germany, France and Spain.

What is organic growth?

Organic growth is the growth rate a company can achieve by increasing output and enhancing sales internally. This does not include profits or growth acquired from takeovers, acquisitions or mergers.

Source: Investopedia 

However, Nestlé said it had been a particularly challenging year in the UK, with both pricing and volume declining.

Operating profit for the company grew to £10.5bn from £9.9bn in the previous year. Profit after tax was £7bn, falling by 7% compared with last year.

Reacted negatively

The markets have reacted negatively to the results, with shares falling 1.3% in morning trading to £57.64.

Schneider offered a subdued outlook for 2017, with Nestlé ditching its sales target and adopting a more cautious tone in an uncertain environment.

“In 2017, we expect organic growth between 2% and 4%. In order to drive future profitability, we plan to increase restructuring costs considerably in 2017,” said Schneider.

Analysts had previously estimated Nestlé’s growth to be 5–6%.

Schneider added: “As a result, the trading operating profit margin in constant currency is expected to be stable. Underlying earnings per share in constant currency and capital efficiency are expected to increase.”

 

 

Nestlé full-year results for 2016 – at a glance
  • 3.2% organic growth
  • Sales rose by 0.8% to £71.5bn
  • EMENA sales were £12.9bn
  • Operating profit for the company grew to £10.5bn
  • Profit after tax was £7bn

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