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Nestlé has lowered its growth expectations for the year after a disappointing third quarter as the world’s biggest food company struggled with soft consumer demand.
Organic sales growth in the first nine months of 2024 came in at 2% and was mostly driven by pricing of 1.6%, with real internal growth (Nestle’s measure of volumes) of 0.5%.
Total reported sales declined 2.4% to CHF 67.1bn (£59.7bn) as currency headwinds reduced revenues.
Nestlé blamed “soft consumer demand and consumer hesitancy towards global brands” for the performance.
Analysts at Bernstein said the update was “very challenging”, while RBC called the results “poor”.
Nestlé did not detail sales growth for the third quarter but analysts put the figure at 1.9%, which was well below market expectations.
The Swiss group lowered organic sales growth forecasts for the year from “at least 3%” to “around 2%”, with underlying trading operating margin set to be around 17%.
It’s been a tough few months for Nestlé, with the unexpected departure of former CEO Mark Schneider, who was replaced by Laurent Freixe at the helm.
“Consumer demand has weakened in recent months, and we expect the demand environment to remain soft,” Freixe said this morning.
“Given this outlook and our further actions to reduce customer inventories in the fourth quarter, we have updated our full-year guidance.”
He added: “Nestlé is uniquely positioned to win in our industry, given our global scale, broad portfolio of iconic brands and innovative products that connect with people every day and in every stage of their lives. Building on this strong foundation, we will sharpen our focus on consumers and customers and advance our categories to accelerate performance and gain market share.”
Shares in the group slumped 2.2% to CHF 82 as markets opened this morning, with the stock down 17% so far this year.
In a bid to simplify the business, Nestlé also announced a series of organisational changes to its executive board.
Zone Latin America and Zone North America will merge to form Zone Americas, which will be led by Steve Presley.
Zone Greater China Region will become part of Zone Asia, Oceania and Africa (AOA), under the leadership of Remy Ejel. David Zhang will step down from the executive board but will remain chairman and CEO of the Greater China region.
Zone Europe will continue to be led by Guillaume Le Cunff and remains unchanged.
“A leaner executive board structure and close collaboration of the leadership team at the headquarters will increase simplicity, speed up decision-making and strengthen the momentum behind global initiatives,” Freixe said.
“We will continue to build on the strengths of our market heads to ensure consistent in-market execution across the group.”
Morning update
Shares in Tate & Lyle have dropped back 3.1% to 782p this morning as markets digested yesterday’s news of a possible takeover approach for the group by PE firm Advent International.
The stock soared by more than 12% after The Financial Times reported the US buyout firm was in the early stages of preparing a bid of more than £2.8bn for the London-listed ingredients business.
Tate has not commented on the speculation and did not release any update to the London Stock Exchange this morning.
Deliveroo has reported “another solid quarter of growth” as gross transaction value increased 6% year on year in Q3, with orders up 2%.
The group maintained its FY2024 guidance, with GTV growth expected to be in the range of 5-9% and adjusted EBITDA at the upper end of the £110m-£130m range.
Founder and CEO Will Shu added: “There are many exciting opportunities ahead for the on-demand delivery industry.
“With our market-leading CVP [consumer value proposition], our pioneering approach to new verticals and our continuing work on loyalty, price integrity and service, Deliveroo is well-positioned to capture the significant growth potential in an industry still early in its maturity.”
Pernod Ricard remains confident of a return to growth in its new financial year despite a 5.9% decline in organic sales in Q1 to €2.8bn (£2.3bn), which was worse than expected.
The French spirits giant was hit by a slow start to the year in China, where it experienced a sharp decline, and ongoing troubles in the US.
For FY25, the group said it expected full-year organic net sales to be back to growth with continuing volume recovery and sustained organic operating margin.
The FTSE 100 opened flat this morning at 8,328.89pts.
Deliveroo shares have soared 3.5% to 152.1p on the back of its Q3 results, while Pernod Ricard also managed to see a 0.7% rise to €123.40 despite the difficult Q1 performance.
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