Nestlé shares dropped by 3.4% on Thursday morning after the global food giant missed its own revenue target and reported a sharp drop in full-year profits.
Nestlé reported organic growth of 4.2% in 2015 - missing its previous guidance of 4.5% growth given in October and well short of its long-term aim of 5%-6% organic growth. Total sales were CHF88.8bn (£62bn), but were hit by a foreign exchange impact of 7.4%. Net profits fell by more than a third, dropping by CHF5.4bn to CHF9.1bn due to currencies, the disposal of its L’Oréal stake and the revaluation of its stake in Galderma.
The shares were down 3.4% to CHF71.55 as the market reacted. Bernstein analysts commented: “Overall, it was nothing better than average (at best) compared to its peers.” Liberum suggested future earnings downgrades were likely: “Some [problems] are one-off such as the Maggi recall and changes for prescription drug rebates and will drop out. Other factors such as sluggish global growth, low commodity prices and deflationary markets appear less transient and cap organic sales growth near-term.”
Nestlé said growth in 2016 would only reach a “similar” level to last year partly due to “even softer pricing”. Jefferies welcomed the lower 2016 guidance: “Ahead of the numbers we were arguing for a more balanced ticket of margin, cash and growth. We now have the growth bit of that… but with cash conversion close to best in class, the remaining lever to pull is on margin progress.”
Fellow fmcg giant Reckitt Benckiser’s shares soared by 7% to 6,371p on Monday after it released “phenomenal” full-year figures, according to Bernstein. The Durex, Dettol and Vanish owner was the FTSE’s top riser on Monday as fourth quarter revenues were up 7% on a like-for-like basis, comfortably beating consensus expectations of a 4% like-for-like rise.
Analysts at Morningstar said Reckitt would continue to “grow at the high end of its peer group next year”, but warned there were reasons to expect a slowdown in organic growth.