Zurich - Nestle SA reported the slowest first-half sales growth since 2009 as the world’s biggest food company struggled to raise prices.
Revenue increased 3.5 percent on an organic basis, the Vevey, Switzerland-based company said in a statement on Thursday. Analysts expected 3.7 percent.
“Pricing in general outside Latin America is astonishingly weak,” said Patrik Lang, head of equity research at Julius Baer Group.
Chief Executive Officer Paul Bulcke said he expects pricing to start rebounding in coming months after reaching “historically low” levels. The outgoing CEO of Europe’s biggest company by market value is on track to report sales growth below his average long-term target rate for a fourth year.
The stock, which touched a record 80.05 Swiss francs Wednesday, fell as much as 0.9 percent.
Nestle reiterated that it expects full-year organic revenue growth to be similar to last year’s 4.2 percent, and repeated it aims to achieve improvements in margins and underlying earnings per share in constant currencies. The company’s long-term target is 5 percent to 6 percent sales growth.
The first-half trading operating profit margin widened to 15.3 percent from 15 percent a year earlier, benefiting from savings and lower raw material costs. Nestle announced in May plans to improve the margin by 2 percentage points from 2019 through cost savings.
Chief Financial Officer Francois-Xavier Roger has said that the second half will be boosted by more favourable comparisons and higher prices in some emerging markets such as Brazil and Russia.
In June, Nestle appointed Fresenius SE’s Ulf Mark Schneider as successor to Bulcke. He’s joining next month and will take the CEO role on January 1. Schneider’s background is in the medical industry, supporting Nestle’s shift towards nutrition and health in a quest for faster growth.
Unilever has reported second-quarter sales growth that beat estimates as it sold more deodorants and haircare products. Growth remained steady with the first quarter, yet the gains came mostly from higher prices for its goods as sales volumes slowed. Danone’s first-half earnings beat estimates as a revamp of Actimel and Danonino and higher-priced products offset lower-than-expected volume.
* With assistance from Charlotte Ryan and Laura Wright
BLOOMBERG