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Nestle's revenue growth sours
VEVEY, Switzerland (Reuters) -- Nestle, the world's top food group, said on Thursday core revenue growth slowed in the first nine months of 2002 despite a six percent uptick in sales to an in-line 66.2 billion Swiss francs. Nestle, maker of world-leading brands such as Kit-Kat chocolate bars and Perrier bottled waters, said the closely-watched real internal growth (RIG) figure fell to 3.4 percent for January to September from 3.5 percent for the half-year, as Latin American markets sagged. It said it expected 2002 profit and sales to be above that of 2001 and said it was confident that the real internal growth figure would grow by the end of the year -- although it did not specify by how much. "An expected third-quarter improvement was not there, so slightly disappointing,'' said Rene Weber, analyst with Bank Vontobel. "I expect the market will react (negatively).'' Nestle was indicated down around one percent in premarket trading, according to Bank Leu data. Analysts expected sales of 66.160 billion francs and a nine-month RIG -- Nestle's key internal growth measure that strips out the effects of price movements, currency changes and acquisitions -- of 3.8 percent. "RIG is disappointing, that's the main thing. Consensus was 3.8 for the nine months. I had 3.7 percent personally. They talk about Latin America on the downside. No-one really expected them to hit four percent (for the year),'' said Anne Alexandre, analyst at HSBC in London. The firm has a target of four percent annual for RIG but has already said that in view of the poor economic environment, particularly in key Latin American markets, it was unlikely to reach this goal and would not sacrifice margins to do so. "RIG in Latin America felt the full impact of the deteriorating economic situation in several countries and was flat,'' Nestle said on Thursday. The strength of the Swiss franc had a negative impact on reported figures of 7.3 percent, with sales up 13.3 percent in constant exchange terms. Prices rose 1.4 percent. Europe's RIG was 1.3 percent, Americas was 2.4 percent and Asia, Oceania and Africa's RIG was 3.7 percent. Nestle Waters, seen as a key growth driver, saw RIG of 9.3 percent. Beverages, which accounts for around a quarter of group sales with Nescafe coffee at its core, saw RIG of 4.6 percent. Milk and nutrition businesses saw RIG of 2.4 percent, while chocolate RIG lagged at only 0.8 percent. Nestle is still smarting after a $10-billion-plus joint bid for U.S. chocolate maker and icon Hershey along with Britain's Cadbury Schweppes was rejected last month. The deal would have boosted its confectionery business. Nestle aims to be number one or a strong number two in all of the markets in which it operates but is a distant third in the U.S. confectionary sector and has been linked with Pfizer's $4 billion auction of its unit Adams, although insiders say chewing gum, a big part of Adams, is not of strategic interest to Nestle. At the start of the year, Chief Executive Peter Brabeck was adamant that 2002 would be a year of consolidation as it digested last year's $10 billion acquisition of U.S. pet food producer Ralston Purina and concentrated on a number of cost savings programmes. However, Nestle has gobbled up a number of small acquisitions in the water business, U.S. frozen food maker Chef America and announced plans to take over Dreyer's ice cream. This has put pressure on Nestle's shares, down around a fifth since hitting an all time high at 397 francs in May, with investors concerned it might overstretch itself and its top credit rating seen under threat.
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