Nestlé’s chief exec Paul Bulcke has warned UK price rises could be on the way after what analysts dubbed a ““disappointing” third quarter update.
Bulcke said the post-Brexit plunge in the pound meant the business in the UK would have to look at “all possible actions” to absorb the currency hit.
However, he also cautioned to ”let the dust settle” before any discussion on price was concluded and suggested UK input cost rises would be mitigated to some extent as it already manufactures most of its biggest selling products in the country.
Overall, the consensus among analysts of big consumer stocks is that Nestlé’s third quarter update was “disappointing” and worse than feared, despite some undemanding comparatives a year ago.
The Kit Kat maker suffered as developed markets, including the UK, remained deflationary and currency volatility hampered growth.
Organic sales increased 3.3% to CHF65.5bn (£53.9bn) in the first nine months of 2016, in line with industry peers Danone and Unilever, but below analysts’ low forecasts. Volume growth in the third quarter was actually up 1.9%, compared with declines at Danone and Unilever, but Nestlé has been slower in hiking prices.
Most worryingly, full-year guidance was revised down from 4.2% to 3.5%. Liberum worried that even 3.5% of growth was challenging in light of deflation in developed markets.
“Matters could get worse before they get better,” consumer goods analyst Robert Waldschmidt said. “Investors can hold out hope that the worse it gets the more likely incoming CEO Ulf Schneider will take aggressive actions.”
Shares in Nestlé, which have been weak in the past three months, were down 1.3% to CHF73.70 on late Thursday afternoon.
Danone disappointed with its third-quarter results as volumes fell 0.7%. Prices being raised 2.8% helped salvage the performance and pushed like-for-like sales up 2.1%, but currency headwinds of -4.1% saw reported revenues fall 1.8% to €5.5bn. The French group’s share price dipped just 0.2% to €63.69 on Tuesday. But the stock has continued to fall, now down 1%.
Reckitt Benckiser shares slumped 2.7% to 7,133p on Wednesday as the Dettol and Durex manufacturer continued to be plagued by a boycott in South Korea. Poisonous chemicals in humidifier sterilisers it sold in South Korea have been linked to more than 70 deaths. The decline in sales in the Asian country knocked 1.5 percentage points off like-for-like sales in the third quarter.
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