New CEO at Nestle Changes Sales Forecast Following Miss

The new CEO of Nestle has changed the long-standing sales goal of the food company after it posted disappointing results for the year on Thursday. He adopted a tone that was much more cautious in an environment much more uncertain.

The Nescafe coffee and Kitkat candy bar maker is looking to have growth in underlying sales of 2% to 4% in 2017, which is below estimates by analysts and the long-time Nestle Model of 5% to 6% growth.

In his first appearance in public since becoming the Nestle CEO to start 2017, Ulf Mark Schneider a newcomer in the food industry said that the lower target was a reflection of today’s economic uncertainty.

This is both a somewhat deflationary and volatile market, the CEO told reporters at Nestle headquarters in Vevey. He added that the company felt the change was both prudent and wise.

Nestles’ earnings are the most recent in a number of weaker than expected results from companies in the consumer goods industry, which blamed the weakness in their emerging markets that previously were fueling growth.

Unilever cited problems with its results in Brazil and India’s demonetization, while Danone pointed its finger at the tougher that normal conditions across China.

In 2016, net profit for Nestle was down and sales increased less than what was expected, hit by a slowdown in its emerging markets and from deflation.

Shares of the company were off by 1.1% in early morning trading in Europe after results were announced.

Schneider changed the long time “Nestle Model,” which the company has not reached for four consecutive years, with a goal that was described as slightly vaguer of organic growth in the mid-single digit and significant cost savings before 2020.

He is expecting pricing will improve during 2017 and is planning to use both cost-cutting as well as portfolio management as ways to help reach his targets.

The company, makers of Perrier water and Gerber baby food, forecasted a trading profit margin that was stable for this year, due to an increase that is expected for restructuring costs of close to 500 million Swiss francs or $498 million.

Nestle, the largest packaged food company in the world, posted sales for 2016 of 89.4 billion Swiss francs, which represented an increase of 3.2%. That fell short of the 4.2% growth for 2015 and is the fourth time the company missed its growth model of 5% to 6%.

Net profit reached 8.5 billion francs which was down from the same period one year ago and far short of estimates of 9.58 billion francs.

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