VEVEY, Switzerland: Nestle forecast modest organic sales growth this year and reported its weakest gain on record in 2017 on Thursday, giving fresh fuel to investor Daniel Loeb’s campaign to overhaul strategy at the world’s biggest food group.
Shares in the maker of KitKat chocolate bars and Nescafe coffee hit a 10-month low after it said organic growth, which excludes acquisitions and currency moves, was only 2.4 percent in 2017, missing the lowest estimate of 2.6 percent in a Reuters poll of analysts.
Nestle and its rivals have been buying and selling brands to improve performance as sales slow due to a shift in consumer tastes toward healthier foods and independent labels.
Loeb’s hedge fund Third Point took a $3.5 billion Nestle stake last summer and has been pushing to speed up its transformation into a higher-growth, more efficient health food company.
“Work on costs usually kicks in faster than work on growth,” CEO Mark Schneider said at Nestle’s headquarters in Vevey, Switzerland, in part due to the lag between buying a new brand and it contributing to performance.
Nestle also said it had decided not to renew a shareholder agreement with L’Oreal beyond March 21 to maintain “all available options,” but had no intention to increase its 23 percent stake and remained committed to the cosmetics company.
That is likely to fuel speculation about Nestle selling its stake, according to a London-based trader. L’Oreal’s CEO last week said the company was ready to buy back the stake, should Nestle decide to sell.
The sale of the L’Oreal stake, worth nearly €23 billion, figured prominently among Loeb’s demands.
Nestle also said it had decided to explore strategic options including selling its Gerber Life insurance business, which had sales of 840 million Swiss francs last year. It will hold on to Gerber baby food.
“We continue to believe that Nestle has a lot of potential for improvement and a mechanism by which that potential will be realized. But in our view these results don’t advance the argument,” said RBC Capital Markets analysts.
Nestle’s organic sales growth slowed to 1.9 percent in the fourth quarter to Dec. 31, well below the 2.85 percent estimate in the Reuters poll, hit by weak performance in North America and Brazil, particularly in waters and nutrition.
“We expect most of these issues to be transitory in nature,” Schneider said, adding that he expected an improvement this year. Still, he gave a wide target for 2018 growth of 2-4 percent, which will be narrowed as the year progresses.
Net profit in the full year dropped 16 percent to 7.2 billion Swiss francs ($7.8 billion), short of the 9.6 billion average poll estimate, hit by a goodwill impairment in its skin health unit that “was taken to reflect the current prospects of the business,” Nestle said in a statement.
Schneider would not comment on whether Nestle was still committed to the unit, but said portfolio management would continue this year with a focus on small to mid-sized deals. “But we do not rule out anything,” he said.
Growth formula eludes under-fire Nestle
Growth formula eludes under-fire Nestle
US pump prices surge as Iran war upends global energy supply
- Fuel prices jump over 10 percent as oil prices surge
- Analysts predict further price rises due to market conditions
MARIETTA/NEW YORK : US retail gasoline and diesel prices are soaring as the US-Israel war with Iran constrains oil and fuel exports, which could be a political test for President Donald Trump’s Republican Party ahead of midterm elections in November.
Fuel prices jumped more than 10 percent this week as oil rose above $90 a barrel, its highest in years, adding pain at the pump for consumers already strained by inflation.
Trump on Thursday shrugged off higher gasoline prices in an interview with Reuters, saying “if they rise, they rise.”
The president had vowed to lower energy prices and unleash US oil and gas drilling during his second term, but much of his tenure has been marked by volatility and uncertainty amid shifts in policies like tariffs and geopolitical turmoil.
The US is the world’s largest oil producer. It is a major exporter but also imports millions of barrels a day since it is the world’s largest oil consumer.
As of Friday, the national average prices for regular gasoline stood at $3.32 a gallon, up 11 percent from a week ago and the highest since September 2024, according to data from the motorists association AAA. Diesel was at $4.33, up 15 percent from a week ago, surging to the highest since November 2023.
Midwest, south feel the pinch
US motorists in parts of the Midwest and the South, including states that supported Trump, have seen some of the steepest increases in fuel costs since the conflict in Iran started.
In Georgia, a swing state, average retail gasoline prices rose 40.1 cents a gallon over the past week, according to fuel tracking site GasBuddy.
Andrenna McDaniel, a health care insurance worker in South Fulton, Georgia, said she was surprised to see prices skyrocket overnight.
“They jumped up so quickly,” she said on Friday, adding that she does not agree with the war at all.
McDaniel, a Democrat, said that for now she is only driving for the most important things, and feels lucky that she works from home so she does not have to drive as much as other people do. Georgia voted for Donald Trump in the 2024 election.
Trump voter Richard Soule, 69, a US Air Force veteran and a retired firefighter, said a little pain at the pump is worth Trump’s efforts to protect America.
“When President Trump went in there and bombed out their nuclear, and they just thumbed their nose at it, I believe he did the right thing at the right time,” Soule said on Friday as he filled up his Ford F-150 truck in Marietta, Georgia.
Other states, including Indiana and West Virginia have seen prices rise by 44.3 cents and 43.9 cents, respectively.
Prices may rise further
More pain may be on the way, analysts said, as oil prices continue to trend upward. On Friday, US oil futures settled at $90.90 a barrel, up nearly $10 and the biggest single-day rise since April 2020.
“Given current market conditions, the national average price of gasoline could climb toward $3.50 to $3.70 per gallon in the coming days if oil continues rising and supply disruptions persist,” GasBuddy analyst Patrick De Haan said.
The disruptions in the Middle East and the Strait of Hormuz, a key trade conduit, have boosted demand for US oil abroad, which in turn has driven up prices for domestic refiners too.
“The US has weaned itself off of its dependence on Middle Eastern crude, but obviously Asian refineries, and to a lesser extent, European refineries have not,” Denton Cinquegrana, chief oil analyst with OPIS. “That’s what you’re seeing happen in the spot market, because the demand for US exports rise, and so the price rise.”
Seasonal factors could add further pressure. Gasoline prices typically go up in the spring and peak in the summer due to higher gasoline demand and production of summer-blend gasoline, which is more costly to produce. Diesel fuel saw an even more aggressive jump since Iran began retaliating against US and Israeli strikes, significantly disrupting shipping in the Strait of Hormuz.
Global diesel inventories have remained in tight supply due to heavy demand for heating and power generation during a prolonged winter in the US and other parts of the world and a structural tightness of refining capacity. Sticker prices of everything from food to furniture go up when the cost of diesel goes up, as the fuel is mainly used in freight transportation, manufacturing, agriculture, and global shipping, analysts said.
“In a world where buzzword seems to be ‘affordability’, that is certainly not going to help,” Cinquegrana said.
