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article imageNestle net profit drops unexpectedly

By Nathalie Olofs-Ors (AFP)     Feb 13, 2014 in Business

The world's leading food industry group Nestle said Thursday its net profit shrank 2 percent in 2013, blaming a soft economic environment, and cautioned that 2014 will also be difficult.

"Last year was challenging and 2014 will likely be the same," Nestle chief executive Paul Bulcke acknowledged in the earnings statement.

In 2013, the Swiss company saw its net profit tick in at 10 billion Swiss francs ($11.2 billion, 8.1 billion euros), down from 10.2 billion a year earlier.

The figure was below the expectations of analysts polled by financial news agency AWP, who on average had anticipated the group to rake in 10.6 billion Swiss francs in 2013.

Nestle meanwhile saw its sales figure swell 2.7 percent to 92.2 billion francs, the company said, stressing though that the negative impact of exchange rates had sliced 3.7 percent out of its sales figure.

A handout image released by Nestle UK and Ireland on January 16  2014 shows a vintage Smarties label
A handout image released by Nestle UK and Ireland on January 16, 2014 shows a vintage Smarties label
, Nestle UK & Ireland/AFP

The maker of Nespresso capsules and baby food, among many other things, said it had recorded organic growth, which does not count currency fluctuations or acquisitions, of 4.6 percent.

"The macro-environment in 2013 was one of soft growth, minimal in the developed world and below recent levels in the emerging markets," Bulcke pointed out.

The group saw its growth slow compared to 2012 to just one percent in developed countries, where sales stood at 51.4 billion francs last year, and to 9.3 percent in emerging economies, where it booked 40.8 billion in sales.

Going forward, Bulcke said performance in 2014 was expected "to be similar to last year," of about five percent -- at the low end of Nestle's standing target of achieving between five and six percent organic growth each year.

Bulcke acknowledged to reporters that it was "not realistic" to expect more than five percent growth at a time when the market was facing such difficult economic conditions.

"We never had an environment like that in 20 years. We can all dream but we need to be realistic," he said.

He nonetheless said he expected to see improvements in Nestle's margins and earnings per share in constant currencies, as well as in its capital efficiency.

The Nestle board meanwhile proposed dishing out a dividend of 2.15 Swiss francs per share, up from 2.05 francs a year earlier.

Vontobel analyst Jean-Philippe Bertschy described the dividend increase of just five percent as "disappointing", especially since Nestle saw its earnings per share swell 11 percent during 2013.

Following the news, Nestle saw its share price fall two percent to 65.75 francs in early afternoon trading, as the Swiss stock exchange's main index shed 0.63 percent.

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