Nestlé posts ‘weaker than expected’ results for 2017

In 2017 Nestlé’s net profits decreased by 15.8% to Sfr7.2bn ($7.77bn) while earnings per share fell by 15.8% to Sfr2.23 ($2.51).

Net divestments had a negative impact of 1.9%. This was mainly due to the recently completed joint venture between Nestlé and R&R called Froneri, an ice cream, frozen foods and chilled dairy company.

CEO Mark Schneider recognised that the multinational company’s results were not in line with projections, although total reported sales increased by 0.4% to Sfr89.8bn.

“This was a very demanding year and we kicked off a lot of initiatives this year. Fourth quarter sales came in somewhat weaker than expected, coming in at the lower end of our guidance but there are still positives,” Schneider said.

“There was very uniform development across all of our categories which contributed to positive growth and a very even profile, especially in turbulent times, which is very important.”

Nestlé has reported organic growth of 2.4%, of which 1.6% was attributed to real internal growth (RIG) while the remaining 0.8% was due to pricing.

“Organic growth is at the higher end of our industry, at the lower end of our guidance. Solid improvements of underlying trade operations margin put us on track for our 2020 margin target,” said Schneider.

The trading operating profit margin demonstrates pricing strategy and operating efficiency. Nestlé recorded a decrease by 60 basis points to 14.7%, but this was in line with expectations and attributed to restructuring and related cost increases from Sfr900m ($972bn) to Sfr1.5bn ($1.6bn).

Schneider mentioned Nestlé’s offloading of their US confectionary business to Ferrero that brought in an estimated $2.6bn. It will allow Nestlé to focus on product growth in categories such as bottled water, frozen meals and infant nutrition.

“During the past months, we have completed initial portfolio adjustments with very favourable results. We will continue this active portfolio management approach in a disciplined manner and fully in line with our strategy. Regarding our core portfolio, accelerating our growth through product innovation and renovation is high on the agenda,” said Schneider.

He further commented on the need to innovate more quickly in response to emerging consumer trends around health, transparency and environmental impact.

Regarding the deal with Ferrero, Schneider added: “When these transactions are closed, the benefit you will have is the sales profile in North America that is much more aligned with our nutritious and wellness goals. Portfolio management can really advance our goals and a product line up that has a more attractive profile.”

Earlier this year Nestlé investor Daniel Loeb sent an open letter to the company over its future direction including a revision of its agreement with cosmetic business L’Oréal. Nestlé has decided it does not intend to increase its stake in L’Oréal. The agreement between Nestlé and the Bettencourt family, the major shareholders, is due to expire on 21 March 2018.