Nestle sales rise at slowest pace in 6 years on Asian weakness

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Zurich: Nestle SA reported the smallest annual sales gain in six years, hurt by weak Asian demand and a Maggi noodles recall in India, and forecast growth at a similar pace this year as raising prices becomes more difficult.

Revenue increased 4.2% on an organic basis, the Vevey, Switzerland-based maker of Nespresso coffee and Gerber baby food said in a statement on Thursday. That matched analysts’ median estimate. The 150-year-old company trailed its target of about 4.5%.

The KitKat maker forecast organic sales growth this year in line with that of 2015, plus improvements in margins and underlying earnings per share in constant currencies. Nestle’s long-term average goal of 5% to 6% growth has been out of reach in half of the eight years that Paul Bulcke has been chief executive officer.

“A disappointing end to the year for Nestle,” wrote Jeff Stent, an analyst at Exane BNP Paribas. “Guidance is underwhelming albeit realistic and there is no buyback.”

Pricing boosted 2015 sales by 2 percentage points.

“We anticipate that our trading environment in 2016 will be similar to previous years with even softer pricing,” Bulcke said in the statement.

Sales in the Asia Oceania Africa zone added 0.5% in 2015. Europe’s largest company by market value faced a recall of its Maggi noodles in India that resulted in that market’s first quarterly loss in 15 years. The Chinese market improved towards the end of the year, Nestle said.

Nestle’s revamp of its frozen-food brands Lean Cuisine and Stouffer’s to offer healthier options such as gluten-free, high-protein and organic meals has supported growth in North America. Zone Americas sales growth was 5.5%.

Chairman Peter Brabeck-Letmathe is scheduled to retire next year, and tradition would normally have Bulcke succeed him. Alain Oberhuber, an analyst at MainFirst Bank AG, has mentioned three potential candidates to take the CEO job: Chris Johnson, who runs the company’s cost-efficiency programme, Laurent Freixe, who heads the Americas business, and Wan Ling Martello, who took over Nestle’s struggling Asia, Oceania and Africa region last year.

Unilever, the maker of Ben and Jerry’s ice cream, said on 19 January that it’s preparing for tougher market conditions and high volatility this year.

Nestle’s definition of organic growth excludes acquisitions, divestments and currency swings. Bloomberg