Nestle disappoints with results
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Nestles makes Nescafe coffee, Maggi sauces and Perrier water.
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VEVEY, Switzerland (Reuters) -- Nestle, the world's biggest food group, met its own target on Thursday with a 5.1 percent rise in underlying sales last year and forecast a better 2004, but investors expected more and sold its stock.
The 5.1 percent rise in underlying growth met the Swiss firm's own target of five to six percent annually but fell short of the 5.3 percent expected by 11 analysts in a Reuters poll.
"Overall it is under our and consensus expectations,'' said Claude Zehnder, Zuercher Kantonalbank market analyst."The outlook is not that spectacular. Nestle has gained in the last few days and you see some profit taking,'' he added.
Nestle got a boost from a heatwave in Europe last summer as consumers guzzled its ice cream and water, raising expectations among investors for the full-year result.
The company also shifted its focus to improving margins and used the strength of its brands to raise prices, but it made less of a gain in 2003 profit margins than expected.
Net profit at the maker of Nescafe coffee, Maggi sauces and Perrier water came in at 6.21 billion Swiss francs ($5 billion), down 18 percent, but this was due to a one-off boost in 2002 from the partial spin-off of eye care unit Alcon.
"The fourth quarter for organic (underlying) growth was somewhat difficult,'' Chief Executive Peter Brabeck said in an interview with Reuters, adding this was due to the dampening effect of Nestle's policy of increasing prices early in 2003.
Nestle stock fell 3.0 percent to 335.50 francs by 1102 GMT, underperforming a 0.5 percent decline of the Swiss market.
Brabeck said he expected a better year in 2004 driven by "excellent'' U.S. conditions and improvement in Latin America and Asia, particularly China. The trading environment as well as new products -- such as a relaunch of the world-leading Nescafe brand in Europe -- will lead to higher volume growth, he said.
"The result was short of expectations, but it was still a solid result,'' said Coutts Bank Switzerland fund manager Rudi Buxtorf. "Nestle reports in francs and that hurts. Nestle has a strong competitive position.''
Underlying sales measures growth in volume and price by stripping out currency effects, acquisitions and divestments. Volume rose 2.2 percent in 2003 and prices rose 2.9 percent.
Overall group sales fell slightly to 87.98 billion francs because of a soft dollar, which makes dollar-denominated revenues look lower in franc terms. Adjusted for currency effects, sales grew 6.3 percent.
The soluble coffee, chilled culinary, nutrition, ice cream, chocolate and breakfast cereal product areas all delivered good underlying growth during the year, Nestle said.
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