Nestle Deals With Slow-Growth Pressures

Image source: Nestle investor relations.

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Swiss food giant Nestle (NASDAQOTH: NSRGY) plays a key role in its industry both in the U.S. and worldwide. With products ranging from chocolate to frozen food, Nestle is a well-diversified company that caters to the needs and wants of people across the globe. Yet coming into Thursday's release of its first-half results for 2016, Nestle investors were prepared to see more evidence that the company has struggled to maintain its pricing power as a result of deflationary environment across many developed-market economies in which it has a major presence. Nestle did manage to grow its sales and adjusted earnings, but the pace of that growth was fairly slow, showing that the food specialist has more work to do in order to regain its past momentum. Let's take a closer look at how Nestle has done and what it wants to accomplish to get back on track.

Nestle produces lukewarm results

Nestle's first-half results were solid if somewhat uninspiring. The company reported revenue of 43.2 billion Swiss francs, which was up less than 1% from the previous year's first half. In dollar terms, that translated into a sales decline of nearly 3% to $44 billion thanks to the strengthening in the U.S. dollar. Even though organic sales growth worked out to 3.5%, investors had expected slightly faster growth rates. A one-time tax impact hit profit hard, resulting in a decline of 9% in local-currency terms and working out to $4.18 billion. Yet after adjusting for the charge, adjusted earnings in constant currencies rose by 5.7%, and that was slightly better than the consensus forecast among those following the stock.

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