Nestle sales growth lags rival, sees tough year ahead

Thu Feb 14, 2013 5:44am EST
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By Emma Thomasson

VEVEY, Switzerland (Reuters) - The world's biggest food company, Nestle SA NESN.VX, sees no respite this year from a tough trading environment after sales growth undershot rival Unilever last year as emerging markets like Asia slowed.

Nestle is trying to keep earnings growing in a flagging global economy by focusing on its most profitable food businesses such as infant formula and premium coffee Nespresso.

Its exposure to emerging markets has helped it outperform rivals like Danone (DANO.PA: Quote) and Procter & Gamble (PG.N: Quote) that are more reliant on sluggish developed economies.

But that has also made the maker of KitKat chocolate bars and Maggi soup sensitive to any slackening of demand in those faster-growing regions.

Its expansion in emerging markets, which make up 43 percent of sales, slowed last year to 11 percent from 13.3 percent in 2011.

Analysts said they were disappointed by weaker-than-expected growth in the last quarter in the Americas, which contributes a third of sales, and Asia, Oceania and Africa (AOA), resulting in annual sales growth of 5.2 percent and 8.4 percent respectively.

Chief Financial Officer Wan Ling Martello said there had been fewer of the one-off events such as typhoons in the Philippines and social unrest in Egypt that hit sales in the third quarter, but analysts were underwhelmed.

"Sentiment is likely to take a knock after the disappointing Q4 performance in Zone AOA," said analyst Ronny Landolt at Barclays Capital. "This region has not bounced back after a series of one-offs affected Q3."   Continued...

Nestle Chief Executive Officer Paul Bulcke pauses during the annual results news conference at the company headquarters in Vevey February 14, 2013. REUTERS/Denis Balibouse