Nestlé expects operating margin to fall up to half a percentage point
By Silke Koltrowitz and John Revill - Oct 19th 2017, 16:12
Nestlé said it expected its operating margin to slip 40 to 60 basis points in 2017 due to higher restructuring costs from a faster overhaul, and said full-year organic sales growth should be in line with the 2.6% seen in the first nine months.
But the world’s biggest food company said its underlying margin, which strips out costs of closing factories and other charges from its revamp, was set to improve.
Makers of packaged foods are under pressure to review their business models and brand portfolios to satisfy consumers’ appetite for fresh, healthy, local foods, while at the same time improving returns to silence increasingly vocal activist investors.
The maker of KitKat chocolate and Nescafe instant coffee said on Thursday that restructuring was progressing faster than planned, taking overall spending to as much as Sf1bn ($1.02bn) in 2017.
"We maintain our guidance for overall restructuring costs of up to Sf2.5bn until 2020," chief finance officer Francois-Xavier Roger told reporters on a call.
Organic sales growth accelerated to 3.1% in the third quarter, from 2.3% in the first and 2.4% in the second, Nestlé said. This matched the forecast in a Reuters poll.
In the nine-month period, sales reached Sf65.272bn as growth in Asia and Europe picked up, while in the Americas sales growth eased, Nestlé said.
Organic growth in North America was flat, the company said, citing soft consumer demand, with a decline in sales volumes particularly in confectionery and ice cream. Roger said he still expected the sale of Nestlé’s US confectionery business by the end of 2017.
Nestlé shares, which have risen almost 15% so far in 2017, were indicated to open 0.4% lower, according to pre-market indications.© BusinessLIVE MMXVII
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