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.
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.
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