Nestle share price falls after disappointing sales slashing growth forecast

 
Clara Guibourg
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Maggi noodles
The popular Maggi noodles were temporarily banned in India (Source: Getty)

Nestle has cut its growth forecast for 2015 as “exceptional events” kept the company from meeting its sales targets.

The figures

Organic sales growth was up 4.2 per cent year-on-year for the first nine months, against forecasts of 4.7 per cent.

The company reported sales of £44bn for the period, weighed down 6.9 per cent by forex headwinds.

Having missed estimates, Nestle now expects its growth for the full year to land on 4.5 per cent, down from the five per cent it originally forecast.

The food giant grew by 6.8 per cent in emerging markets, and 2.2 per cent in developed markets.

Nestle shares, which are up just 2.8 per cent since the start of the year, had dropped 2.3 per cent by afternoon trading.

Why it’s interesting

Nestle was well on track for a good 2015 with strong sales in the first half of the year, but underwhelming sales in the last quarter have caused trouble, forcing the company to revise its growth forecasts for the year.

The food giant blamed “exceptional events” in the past months that have hit against third quarter sales, such as the temporary ban on Maggi noodles in India, after the noodles were deemed unfit for human consumption in the country.

Sales in Asia were down 0.5 per cent, affected not just by the Maggi ban but by “slower than expected” recovery in China.

What they said

Paul Bulcke, the company’s chief executive, said:

After a good performance in the first half of the year we were impacted in the third quarter by exceptional events, with Maggi noodles in India and a rebate adjustment in Nestlé Skin Health.

On the whole, organic growth fell short of our expectations and therefore we project organic growth of around 4.5 per cent for the full year, with improvements in margins and underlying earnings per share in constant currencies, and capital efficiency.

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