October 18, 2012 / 10:05 AM / in 8 years

Nestle sales disappoint as Asian growth slows

ZURICH/SHANGHAI (Reuters) - Nestle’s NESN.VX sales growth slowed more than expected in the first nine months of the year as demand cooled in the emerging markets driving the world’s biggest food company.

A Nestle logo is pictured on a factory in Orbe April 20, 2012. REUTERS/Joao Vieria

Underlying sales growth at the maker of KitKat chocolate bars and Maggi soup slowed to 6.1 percent from 6.6 percent in the first half.

Growth in Asia, Oceania and Africa, which accounted for about one fifth of sales, fell to 9.4 percent from 11.6 percent.

Strong emerging market demand has been helping Nestle and rival Unilever (ULVR.L) UNc.AS buck a more negative trend set by its French and U.S. peers Danone (DANO.PA) and Procter & Gamble (PG.N). Unilever reports results on October 25.

Speaking at a news conference in Shanghai, Nestle Chief Executive Paul Bulcke said there was some nervousness about emerging markets, noting that China was not meeting potential. But he was optimistic for its future growth.

The Chinese economy grew by 7.4 percent in the third quarter, data showed earlier on Thursday, a sharp slowdown from previous years.

“Let’s face it when a country’s GDP goes up like China’s... that’s where we should grow ... That’s why I feel for China we should have double digit-growth for next year,” Bulcke said.

Roddy Child-Villiers, head of Nestle investor relations, said third-quarter sales were hit by one-off events such as typhoons in the Philippines, social unrest in Egypt and business disruptions due to sanctions on Iran.

That means the third quarter is not a good pointer to likely performance in the next three months, he said.

Nestle’s growth in Europe, struggling with a debt crisis, slowed to 1.9 percent from 2.4 percent and was steady in the Americas region at 5.5 percent.

Vontobel analyst Jean-Philippe Bertschy said growth in mature markets was reassuring compared with Danone’s results.

French food group Danone (DANO.PA) said on Wednesday growth slowed sharply at its dairy division as recession-pinched shoppers in Italy and Spain switched to cheaper alternatives, sending its shares down.

Nestle reiterated its conservative outlook of 5-6 percent underlying sales growth this year. Bulcke told reporters on the sidelines of the media conference he was confident the group would also achieve 5-6 percent sales growth next year.

“Today, Nestle missed expectations for the first time in many quarters,” Sarasin analyst Patrick Hasenboehler said, but added he was reiterating his “buy” rating on the stock.

Nestle shares, which hit a record high of 62.30 francs on Wednesday, fell 1.9 percent to 61.05 francs at 0950 GMT, underperforming a 1.3 percent weaker sector index .SX3P.

They are trading at about 17 times estimated 2013 earnings, broadly in line with Unilever (ULVR.L) UNc.AS but at a premium to Danone’s 14.2 times.

Price increases accounted for 3.2 percent of sales growth between January and September, less than the 3.7 percent seen in the first half.

“There’s not going to be much pricing this year,” Child-Villiers said.

Editing by Erica Billingham

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