Nestle disappoints in 2017, no plan to increase L’Oreal stake

Friday, 16 February 2018 00:00 - - {{hitsCtrl.values.hits}}

VEVEY, Switzerland (Reuters) - Nestle expects organic sales to grow 2-4% this year, the Swiss food giant said on Thursday after they rose a mere 2.4% in 2017 and a goodwill impairment on its skin health business hit net profit.

Last year’s organic growth -- which strips out the impact of acquisitions and currency swings -- was the company’s weakest since it began recording the measure in 1996 and missed even the lowest estimate of 2.6% in a Reuters poll of analysts.

The cautious outlook and weak performance are likely to add grist to the mill of activist investor Third Point, which has been pushing Nestle to speed up its transformation into a better-performing health food company.

Nestle said it had decided not to renew a shareholder agreement with L‘Oreal beyond March 21 to maintain “all available options”, but had no intention to increase its 23% stake and remained committed to the cosmetics company.

Nestle’s organic sales grew 1.9% in the fourth quarter to Dec. 31, well below the 2.85% estimate in the Reuters poll.

Net profit in the full year dropped 16% to 7.2 billion Swiss francs ($7.76 billion), short of the 9.625 billion average poll estimate.

It proposed a dividend of 2.35 francs per share for 2017, also shy of the 2.40 francs average in the poll.

Nestle’s growth, of which 1.6% came from higher volume and 0.8% from price increases, lagged that of rival Unilever, which this month posted a 4% rise in underlying quarterly sales. Danone is due to report full-year results on Friday.

Nestle and its peers are under pressure to make their businesses more efficient by cutting costs and selling underperforming brands as sales slow due to changing consumer tastes favoring healthier foods and independent, local brands.