VEVEY, Switzerland: Nestle, the world’s largest packaged foods maker, forecast sales growth around 5 percent this year, at the low end of its long-term goal, as it grapples with deflation in Europe and a slowdown in China.
Nestle’s long term model calls for growth of 5 to 6 percent, but it fell below that in 2014, coming in at 4.5 percent.
Chief Executive Paul Bulcke called the results “solid” in a tough environment. He said 2015 would be similar, but that Nestle still aimed for growth “around 5 percent”, language analysts perceived as giving some wiggle room to again miss its long-term target.
“I think in the volatile world we’re living in, that’s appropriate,” Bulcke said. “We are aiming as an organization for 5 percent growth … we’ll see how far we get.”
The goal includes improvements in margins, helped by cost savings and efforts to turn around the struggling North American frozen foods business and food business in China.
Nestle also proposed to raise its dividend to 2.20 Swiss francs per share from 2.15 francs.
“The dividend increase is the lowest in years, however still allows an attractive dividend yield,” said Vontobel analyst Jean-Philippe Bertschy. “Nestle remains best-in-class in the industry, and a core holding in our view.”
Nestle’s organic sales, which exclude currency swings and acquisitions, were in line with analysts’ average expectation, a Reuters poll found, after Nestle signaled in October it was likely to fall short of its 5 percent goal.
Net profit rose 4.4 billion francs to 14.5 billion francs in 2014, helped by price increases, cost-savings and the profit realised on the sale of shares in L’Oreal.
The scale of Nestle’s portfolio, which includes KitKat chocolate and Nescafe coffee as well as bottled water and pet food, allows it to deliver consistent results and often outperform rivals.
Indeed, its 2014 growth was greater than that of Unilever and Mondelez International.
The global consumer goods sector has toned down its expectations as once hot economies like China and Brazil have slowed, and cost-conscious shoppers in Europe and North America remain cautious. Still, Nestle’s shares trade at nearly 22 times earnings, only a slight premium to its peers, as yield-starved investors have turned to consumer staples for their reliable earnings.
Full year organic sales rose 5.4 percent in the Americas, 1.9 percent in Europe and 5.7 percent in Asia, Oceania and Africa.
($1 = 0.9407 Swiss francs)