Nestle cuts full-year outlook after sales miss

• Nine-month organic growth slows to 4.2%
• Cuts 2015 organic growth outlook to around 4.5% from 5%

Nestle Chief Executive Paul Bulcke arrives for a news conference at the company headquarters in Vevey, Switzerland, 16 October

VEVEY, Switzerland (Reuters): Nestle, the world’s largest packaged food company, lowered its full-year outlook on Friday, as a Maggi noodle recall in India knocked sales and under calculated US Skin Health rebates weighed on the Swiss company’s profits.

Sales dropped 2.1% to 64.9 billion Swiss francs ($ 68 billion) in the nine months through September, missing analysts’ average forecast of 65.9 billion in a Reuters poll.

Organic or underlying growth, adjusted for currency swings, acquisitions and divestitures, slowed to 4.2% in the period from 4.5% in the first half, sliding further behind its 5% target for 2015.

The company cut its 2015 outlook to around 4.5%, below its long-term model calling for 5 to 6% growth.

The shortfall comes from pricing, as Nestle does not seem to have been able to pursue its pricing actions as hoped, and more importantly the issue seems to be again the Asia, Oceania, Australia region, with sales down in the third quarter,” Barclays analysts wrote in a note. Chief Executive Paul Bulcke said: “After a good performance in the first half of the year, we were impacted in the third quarter by exceptional events, with Maggi noodles in India and a rebate adjustment in Nestle Skin Health.”

Maggi noodles were subject to a recall in India over safety concerns.

In the United States, frozen food sales began improving after a revamp of Nestle’s Lean Cuisine brand, but this contrasted with lagging sales in China, which showed a slower sales recovery, Bulcke said.

India’s Maggi noodle recall continued to have a significant impact on growth in the South Asia Region, Nestle said.

In its Skin Health division, Nestle’s US prescription drug rebates exceeded what it had set aside for this purpose, resulting in an additional one-off charge in the third quarter.

Despite prospects that Europe’s hot summer would have consumers grabbing ice cream out of freezers, sales at the group’s milk products and ice cream unit fell 350 million francs year-on-year to 11 billion. Water, however, achieved 7.1 organic growth through September, second only to confectionery at 7.8%.

Nestle earlier this month confirmed it was in advanced talks to merge its international ice cream business with R&R Ice Cream, in its latest effort to refocus on other, higher-performing brands and advance its goal of becoming a ‘nutrition, health and wellness’ company.

Unilever, the global number one in ice cream, on Thursday posted third-quarter underlying sales up 5.7%, thanks in part to a strong summer. But the Anglo-Dutch group said it expected sluggish global markets to keep weighing on performance.

Nestle’s India unit say new tests find Maggi noodles safe

MUMBAI (Reuters): Nestle SA, the world’s largest packaged food company, hopes to have its Maggi noodles back on Indian shelves soon, after court-mandated test results found them to be safe, with levels of lead present well below permissible limits.

The fresh test results are set to bolster the Swiss food giant’s prospects in India, a fast-growing consumer goods market where Nestle has been grappling with its worst public relations crisis following a nationwide ban on its Maggi instant noodles.

The ban was imposed after local regulators reported in May that some packets of the noodles contained unsafe levels of lead. The firm had to order a recall of the product a month later, which cost it about 66 million Swiss francs ($ 67 million).

In August, an Indian court ruled in favour of Nestle in its battle to overturn the ban, but demanded that the popular snack be tested again for safety before it can go on sale again.

Nestle’s India unit said in a statement on Friday

It had received test results from all three of the laboratories, mandated by the Bombay High Court, and all 90 samples, covering six varieties, were safe to eat.

Nestle India will start making and selling the noodles after the newly manufactured products are also cleared by these three laboratories, it said.

Nestle SA’s Chief Financial Officer Francois-Xavier Roger said in Vevey, Switzerland on Friday the company was doing all it could to put the noodles back on sale in India.

The company said it was hopeful it could return Maggi noodles to shelves in India sooner rather than later.

The parent company cited the Indian noodle recall as one of the factors as it lowered its full-year outlook on Friday.

Nestle India Ltd. said in July it had slipped to a second-quarter loss as sales plunged after the Maggi noodles were removed from sale. The challenge for Nestle now will be to rebuild the Maggi brand in India. “A ban is not only financial damage but also a damage to the brand,” Arvind Singhal, chairman of retail consultant Technopak, said. “Nestle’s challenges are three-fold – to start production, distribution and communication with consumers.”