Nestle prepares for tough 2012

Nestle prepares for tough 2012

The world's biggest food company Nestle on Thursday posted forecast-beating 2011 net profit of 9.5 billion francs ($10.26 billion), but warned that 2012 would be tough.

The earnings were up 8.1 percent from a year ago, and better than analysts’ forecast of 9.2 billion francs.

However, sales reached just 83.6 billion francs, down sharply from a year ago when the firm generated 104.6 billion francs in revenues.

A negative foreign exchange rate had an impact of 13.4 percent on sales, while divestitures, including the sale of eyecare giant Alcon took another 4.2 percent off, said the food giant that makes Nespresso coffee and Perrier mineral water.

Nestle chief executive Paul Bulcke said the company “delivered a good performance, top and bottom line, in both emerging and developed markets in 2011.”

“It was a challenging year and we do not expect 2012 to be any easier.”

Despite uncertainties and continuing economic volatility the group said growth excluding currency fluctuations and acquisitions were up five percent in Europe, 6.4 percent in the Americas and 13.1 percent in Asia, Oceania and Africa.

Business grew 13.3 percent in emerging markets and 4.3 percent in developed markets, the company said.

In Portugal, Italy, Greece and Spain, it advanced its growth to 3.7 percent despite financial difficulties in those countries.

Nestle chief financial officer Jim Singh added that sales in China are now approaching 5 billion Swiss francs.

China was therefore a key area of investment for the company, said Bulcke, pointing out that “wealth creation is moving from west to east.”

“We continue to make capital investments on a global basis” said Singh despite global political turmoil and natural disasters such as conflict in Ivory Coast and a massive earthquake and tsunami in Japan.

Growth in emerging markets was particularly driven by sales of Nestle Waters (mineral waters), which exceeded one billion francs.

Nespresso coffee had a year of “solid” 20 percent growth based on sales in excess of 3 billion francs.

For 2012, Nestle forecast a “positive outlook”.

According to Bulcke, the group is well positioned “to achieve … organic growth between 5 percent and 6 percent and an improved margin and recurring earnings per share at constant exchange rates.”

The group said that at its annual general meeting on April 19th, it will propose to shareholders a dividend of 1.95 Swiss francs per share, up 5.4 percent.

The board will also propose the cancellation of shares repurchased under the share repurchase programme of 10 billion Swiss francs completed in 2011.

On the Swiss Exchange, Nestle shares were up 0.8 percent at 0849 GMT.

Vontobel analysts noted the “phenomenal last quarter of Nestle with strong growth in volumes and prices, driven by emerging markets.”

Helvea analysts described the results as “excellent” and”ahead of our consensus”.

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