Nestle SA share price down, nine-month results fail to reach analysts’ estimates

Nestlé SA reported on Thursday a fall in sales for the nine months of this year, forecasting a challenging fourth quarter as the company continues to face weak worldwide demand.

The worlds largest food company stated 66.2 billion francs of revenue for the nine months ended September 30, 3.1% less compared to a year earlier when sales stood at 68.35 million francs, and missed the analysts forecast of 66.75 billion francs.

Earlier this year Nestlé reported a 4.7% sales increase for the half-year, which is an indication for a slowdown in the third quarter.

Andrew Wood, an analyst at Bernstein, wrote: “Third quarter organic growth was some way below our expectations and consensus. This was driven by exceptional weakness on volume, which was the lowest level seen since the depths of the recession in the second quarter of 2009. Overall the results were quite disappointing and surprising.”

CEO Paul Bulcke said that the Vevey, Switzerland-based Nestlé is still expected to finish the year with around 5% organic growth.

However, Patrik Lang, an analyst at Julius Baer Group Ltd. in Zurich, questioned this statement and said the company will probably miss its yearly forecast due to troubled regions. “Nestlé has a structural problem in Asia, especially in China,” Mr. Lang said.

Revenue in Asia, Oceania and Africa increased to 13.4 billion francs, 3.5% organic, 0.7% real internal growth, the company reported, and remained confident in the long-term prospect, despite political disruptions in several countries that caused a significant impact on performance.

Sales in Europe went up, 1.0% organic, 2.0% real internal growth and accounted for 11.1 million francs, where businesses face slow economic recovery and due to deflation, supermarkets asked food companies to cut their prices.

In the Americas revenue reached 19.3 billion francs, 4.8% organic, 1.1% real internal growth. Nestlés new items in pizzas, growth in coffee creamers and confectionery were the companys star players and helped to overcome the decline in frozen-food category in North America. Meanwhile in Latin America, a fall in prices and changes in Mexicos legislation were challenging to deal with. Petcare products continued to perform exceptionally well.

Overall the powdered and liquid beverages scored the biggest numbers of sales in the first nine months of the year and gained 5.2% organic growth.

Nestlé SA lost 1.47% on Wednesday in Zurich and fell 3.06% by 12:00 GMT on Thursday to trade at CHF64.90, marking a 4.68% one-year increase. The company is valued at CHF215.90 billion. According to the Financial Times, the 23 analysts offering 12-month price targets for Nestlé SA have a median target of CHF71.00, with a high estimate of CHF80.00 and a low estimate of CHF63.00. The median estimate represents a 6.05% increase from the last close price of CHF66.95.