Swiss group Nestle trimmed its sales guidance and reported worse-than-expected underlying sales for the first half of 2017, making the world’s largest food company more vulnerable to criticism from activist investor Daniel Loeb. Faced with a trend towards healthier eating, makers of packaged foods are seeking to win back consumers’ favour by reducing sugar, salt and fat in their products and to reassure worried investors by improving efficiency and cutting costs. The maker of Kitkat chocolate bars and Maggi soups revised its guidance downwards, saying it expected 2017 sales growth to be “in the lower half” of its 2 to 4 percent target range and to maintain a stable trading operating margin in constant currency.
Organic sales, which includes volume and price increases, grew by 2.3 percent in the half, the same rate as the first quarter, trailing analyst estimates of 2.8 percent and slowing from the 3.5 percent growth rate a year earlier. Nestle, where new Chief Executive Mark Schneider is expected to reignite growth, came under scrutiny from investor Loeb, whose Third Point fund revealed a $3.5 billion stake last month.
He has urged Nestle to sell its stake in French group L’Oreal and to set a target to improve its margin to 18-20 percent by 2020. Just two days after the Third Point investment became public, Nestle revealed plans to buy back up to 20 billion Swiss francs worth of shares over three years.
Chief Financial Officer François-Xavier Roger declined to comment on interactions with individual shareholders when he spoke to reporters on Thursday. First-half net profit rose 19 percent to 4.9 billion Swiss francs ($5.16 billion), beating a 4.83 billion franc average estimate in a Reuters poll. Shares were indicated down 2 percent in pre-market trading.