Swiss food concern Nestlé has had to deal with considerably lower turnover growths last year, mainly as a result of lower demand in China. There was a huge profit growth though, because the company has sold its stake in L'Oréal.
Turnover growth pressurized
The world's largest food group's turnover grew 4.5 %, autonomously (excluding divestments and exchange rate fluctuations), to 91.6 billion Swiss francs, which is around 85 billion euro. That is the company's lowest turnover growth since 2009, its Belgian CEO Paul Bulcke admitted.
On top of that, these numbers mean that Nestlé has missed its own long-term goal of a yearly 5 % turnover growth for the second year running. The food industry is facing a highly challenging worldwide market, due to the extremely volatile and highly competitive Western market, economic issues in Russia and Ukraine, unrest in the Middle-East and changing Chinese consumer behaviour.
Growth slowed down the most in the Asia-Africa region, down from a 5.6 % growth in 2013 to 2.6 % in 2014. "Slower growth in that region mainly comes down to our largest market, China", the company based out of Swiss Vevey said. Turnover in the American region grew 5 % and 1.5 % in Europe, both organically.
Looking at its separate branches, Nutrition experienced the biggest growth (+ 8.7 %), followed by Petcare (+ 5.6 %), Powdered and Liquid Beverages (+ 5.4 %) and Milk Products and Ice Cream (+ 3.4 %). Prepared Dishes and Cooking Aids was the only division to experience negative growth (- 0.1 %).
Sizable profit growth
The company, which owns brands like KitKat, Maggi, Nespresso, Nescafe, did manage a huge profit growth in 2014, thanks to the sale of its stake in L'Oréal. Net profit reached 14.5 billion Swiss francs (nearly 13.5 billion euro), a 45 % increase compared to 2013 and way better than analysts' predictions of 10.3 billion francs.
All in all, Paul Bulcke is satisfied with the company's performance: "These are strong results, building on the good growth of past years and delivered in a soft trading environment. They demonstrate the intrinsic strengths of Nestlé: the commitment of our people, our global footprint, the strength of our portfolio and the quality of our innovation."
He expects "2015 to be similar to 2014" and aims to "achieve organic growth of around 5% with improvements in margins, underlying earnings per share in constant currencies and capital efficiency."