Nestle fell short of earnings expectations for 2017, citing “challenging environments” in their North American and Brazilian markets.
The Swiss food giant posted net income of 7.2 billion Swiss francs ($7.76 billion), versus 9.652 billion francs expected by analysts in a Reuters poll. Sales were reported at 89.8 billion Swiss francs, a 0.4 percent increase on 2016, but below expectations in a Reuters poll of 90.097 billion francs. Shares sank by 2.7 percent as European markets opened Thursday.
The numbers came just short of company targets, mainly due to weaker sales at the end of the year, Nestle CEO Mark Schneider told CNBC Thursday.
“We were somewhat surprised with the fourth quarter, that came in a little softer than anticipated, mainly due to North America and the market in Brazil, geographically speaking,” Schneider said. In terms of product areas, he named Nestle Waters and the Nestle nutrition businesses as having finished the year weaker than anticipated.
Still, the CEO expressed confidence that there was reason to be optimistic about North American and Brazilian markets for 2018 and beyond.
“I regard these issues as transitory, and feel that we can do better than that,” he said.
The Swiss food giant saw organic growth of 2.4 percent for the year, at the “low end” of expectations, due to a slower growth of 1.9 percent in their fourth quarter, according to the company’s press release. It forecasts growth of between 2 and 4 percent in 2018.
Schneider meanwhile described sales growth in Europe and Asia as “encouraging,” and saw much to be gained from the current global growth picture. Sales in China saw modest improvement on the previous year, while all categories reported positive growth, led by coffee, petcare and Nestle Health Science.
“From a macro point of view, we’re seeing a benign environment right now,” he described.
“Europe has recovered very nicely over last one or two years, we’re seeing positive signs in North America, continued strength in Asia Pacific, and most emerging markets are doing well or on the mend.”
In the U.S., Schneider noted a “longer-than-usual time delay” for the positive macroeconomic data to feed into consumer spending. Nestle posted a gain of $850 million from U.S. corporate tax cuts, and projects to save $300 million a year in taxes.
The company also issued a statement indicating it would not renew a shareholder agreement with L’Oreal, in which is has a 23 percent stake, beyond March 21 of this year. Schneider avoided offering details on the future of the stake, except to say that there was no intention of increasing it.