Nestle SA, the world’s largest food company, reported the slowest sales growth in three years on decelerating revenue in emerging markets and weak consumption in Europe.
Weakening pricing power has dented sales growth in emerging markets just as the maker of Nescafe soluble coffee and Maggi bouillon nears its target for that region to contribute 45 percent of total revenue. While volume growth improved in the fourth quarter in emerging markets that had been struggling with business disruptions, pricing hasn’t, according to Roddy Child- Villiers, head of investor relations.
The results were “certainly not the strong outperformance we have come to expect from Nestle over many years,” Andrew Wood, an analyst at Sanford C. Bernstein, wrote in a note to investors.
The shares traded 2 percent lower at 63.20 Swiss francs at 9:08 a.m. in Zurich. Nestle has gained 17 percent in the past year and closed at a record 64.50 francs yesterday. Unilever shares have gained 14 percent and Danone SA 1.9 percent in the past 12 months.
Nestle’s sales advanced 8.4 percent on a so-called organic basis in the Asia, Oceania and Africa region in the full year, slowing from the 9.4 percent pace in the first nine months. Analysts had expected a rebound after Nestle said in October the third quarter was weighed down by one-time factors such as flooding in the Philippines.
“The expected bounce-back” in that region “didn’t seem to materialize,” said Warren Ackerman, an analyst at Societe Generale.
Nestle Chief Executive Officer Paul Bulcke said the company is confident about reaching its long-term target of 5 percent to 6 percent annual sales growth this year, despite the “many challenges 2013 will no doubt bring.” The Nespresso capsule maker beat the goal in 2010 and 2011.
Net income rose 12 percent to 10.61 billion francs ($12 billion), more than the 10.4 billion-franc average estimate.
The trading operating margin widened 0.2 percentage point to 15.2 percent in 2012. Analysts expected 15.3 percent, according to the survey.
Revenue from Nestle’s Europe business increased 1.8 percent on an organic basis, boosted by demand for Nescafe Dolce Gusto coffee and Maggi cooking products. Revenue from the emerging markets rose 11 percent and reached 43 percent of total sales. The company has a goal of that proportion reaching 45 percent in 2020.
Nestle said it plans to raise its dividend 5.1 percent to 2.05 francs a share this year. That’s less than a Bloomberg forecast of 2.10 francs.