Nestlé SA on Thursday said first-half sales fell slightly but profit jumped, as the packaged-food giant navigates changing consumer tastes and stepped-up pressure from investors to boost profitability.
In a sign of the difficult environment the company faces, it also said organic growth, which strips out the effects of currency changes, acquisitions and divestments, was just 2.3%, missing analyst forecasts for 2.7% growth. Nestlé also warned that organic growth would likely be in the "lower half" of the 2-4% range this year.
The company blamed warm summer temperatures that weakened spending on some product categories such as pizza, while spending on water didn't provide the same offset it has in the past. The company also continued to face difficulty raising prices in key markets.
Chief Financial Officer Francois-Xavier Roger said the company had "seen some signs of improvement in western countries," with fewer negative prices, but that the pricing environment was still tough.
Overall, Nestlé reported first-half revenue of 43 billion Swiss francs ($45.2 billion), compared with 43.2 billion francs in the same period last year, slightly below analysts' forecasts of 43.8 billion francs.
Net profit came in at 4.9 billion francs, up 19% on the year, although the sharp rise was partly because of a one-off tax adjustment last year. Analysts had expected profit at 4.8 billion francs.
Nestlé had an unusually active first half of the year under new Chief Executive Mark Schneider, who assumed the post in January. His first big move, in February, was to drop Nestlé's longstanding organic growth target of 5% to 6%, which it has missed for four-straight years.
Last month, Nestlé put its U.S. confectionery business, which includes Butterfinger and Crunch candy bars, up for sale. Though candy makes up a small slice of Nestlé's U.S. sales, the decision underscored the company's focus on its more profitable divisions like coffee and water.
In late June, it also announced a 20 billion franc share buyback program and said it would orient its capital spending toward high-growth parts of its business including pet care, infant nutrition, coffee and bottled water.
The buyback announcement came days after billionaire activist investor Daniel Loeb's Third Point LLC said it had taken a $3.5 billion stake in Nestlé, or about 1.25% of shares.
Third Point also outlined steps it thought Nestlé should take including selling noncore assets such as its stake in L'Oréal.
Write to Brian Blackstone at firstname.lastname@example.org
(END) Dow Jones Newswires
July 27, 2017 03:05 ET (07:05 GMT)