Nestlé says its cost-cutting initiatives are progressing faster than previously expected, as it reported its third-quarter results.
Group sales for the period from July to September were CHF 22.25 billion ($22.73 billion) – 0.4% lower than the third quarter of last year.
For the first nine months of 2017, sales decreased by 0.4% on the year before to CHF 65.5 billion ($66.93 billion), reduced by net divestments of 2.6% which were said to be mainly due to the creation of the Froneri joint venture.
In total, organic growth was 0.8% in developed markets and 5.1% in emerging markets.
Sales in the Americas remained subdued in the first mine months, with North America flat in the context of negative category dynamics. Brazil was affected by a difficult trading environment, while Mexico remained resilient and other parts of Latin America were said to deliver good growth.
Nestlé’s Europe, Middle East and North Africa business saw a ‘significant improvement’ in growth compared to the half year results, particularly among the coffee and petcare categories, both areas which CEO Mark Schneider has said the company should be focusing on.
The fastest-growing region for the company during the first nine months was Asia, with steady improvement in China.
Nestlé CEO Mark Schneider
Speaking of the latest figures, Schneider said: “Our sales results for the nine-month period are in line with our expectations communicated in July.
“Organic sales growth continued to benefit from industry-leading volume growth, which illustrates our ability to innovate and meet consumer demand. Pricing remained soft. Zone AOA (Asia, Oceania and sub-Saharan Africa) saw further improvement in organic growth. As expected, Western Europe returned to positive organic growth, with significant contributions from coffee and confectionery.
“Improving our efficiency is a key priority. We have identified further opportunities to accelerate our margin improvement, leading to a further increase in restructuring and related expenses in 2017. Consequently, we now expect our trading operating profit margin to decrease by 40-60 basis points. The development of our underlying trading operating profit margin is fully in line with our expectations for 2017.”
Last month Nestlé updated plans to deliver value growth for its shareholders, aiming for an underlying profit margin of between 17.5% and 18.5% – higher than its previous commitment.
The company has outlined its focus on high-growth categories like coffee, infant nutrition, pet care and bottled water. Between them, they account for more than half of group sales and are growing almost 2% faster than Nestlé’s other categories.
In recent months it has demonstrated its commitment to these areas with deals for plant-based food brand Sweet Earth, coffee chain Blue Bottle, and meal kit firm Freshly.
Nestlé has been under pressure to sell underperforming areas of its business after hedge fund Third Point invested $3.5 billion in the company in June.
In June it said it was considering putting its US confectionery business up for sale, which includes the Butterfinger and BabyRuth brands and generated $924 million in sales last year.
Hershey is reportedly interested in buying the business, which is valued between $2 billion to $2.5 billion.
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