Difficult European trading hits Nestlé

Kit Kat-to-Perrier group Nestlé recorded flat profits today as sales continued to suffer in the difficult European market.

The group, whose products also include Rolos, Nescafé coffee and Vittel mineral water, maintained profits of 64.6 billion Swiss francs (€42bn), exactly reflecting figures for this time last year.

Results showed total 2.9% real internal growth and 4.5% organic growth, but showed a weak performance in Europe, where sales have been hampered by poor weather and rising prices.

Good sales growth in the US and emerging markets saw America record 8.3% organic growth and Asia, Oceania and Africa 6.7%.

But Europe was still down at -0.3% – an improvement of 0.1% on the half-year figure.

The group put this down to the “competitive situation” in Europe during the first nine months, in which their rivals Unilever have also suffered.

Chief executive Peter Brabeck-Letmathe said: “Achieving 4.5% organic growth in spite of the competitive situation in Europe for the first nine months demonstrates the unmatched defensive qualities of Nestlé.

“These are due to a unique combination of geographic spread and leadership positions in faster growth food categories.”

A lack of demand for ice cream and water due to bad weather saw Nestlé’s sales in Europe fall 0.4% in the first half of the year.

In the same period, sales at Unilever, whose products include Magnum ice creams, fell by a more significant 5%.

Nestlé set a target of 6% organic growth at the beginning of the year.

But the results show the group has lost the six billion Swiss franc (€3.9bn) increase on last year’s net profits it posted two months ago.

Executives were still anticipating continued growth in the last quarter.

Mr Brabeck-Letmathe said: “The acceleration of real internal growth in the third quarter is the dividend from Nestlé’s increased investment in its brands during the first half of the year.

“This benefit will continue through the final quarter.”

However, Barclays Bank analysts fear price cuts and increased marketing spend could put profit margins under pressure.

The chances of the group meeting its full year profit forecast of a 5% increase in sales were now in doubt, they said.

Nestlé is based in Vevey, Switzerland.

The group, which took over Rowntree’s of York in 1989, is particularly known for producing Rolos and Kit Kat, low-carbohydrate versions of which were launched earlier this year.

It also makes other products, including Ski yoghurt, Buitoni pasta and Polo mints.