Nestle Net Profit Declines; Won't Renew L'Oreal Shareholder Pact -- Earnings Review

   By Anthony Shevlin 
 

Nestle SA (NESN.EB) said Thursday its 2017 earnings were hit by an impairment charge. Organic sales growth slowed, particularly in the fourth quarter. The company is keeping its options open regarding its L'Oreal SA (OR.FR) stake, ending a pact with the French company's largest shareholder.

SALES: Nestle posted a 0.4% rise in sales to 89.8 billion Swiss francs ($96.3 billion), below analyst expectations of CHF90.02 billion. Nestle said North America and Brazil markets were challenging environments and hampered sales growth.

EARNINGS: Nestle's net profit was CHF7.2 billion compared with CHF8.53 billion a year earlier, and well under consensus of CHF9.72 billion. The Swiss company said net profit was hit by a charge mainly related to a goodwill impairment for its skin-health business.

WHAT WE WATCHED

GROWTH: Nestle's organic sales growth of 2.4% was below the 2.6% increase expected by analysts. Bernstein says the slowdown in sales during the fourth quarter doesn't bode well for early 2018. Last year, Nestle posted organic sales growth of 3.2%.

L'OREAL: Nestle said it wouldn't renew a shareholders' agreement for its 23.12% stake in L'Oreal with the Bettencourt family "in order to maintain all available options for the benefit of Nestle shareholders." Analysts at Investec believe this decision gives Nestle greater flexibility if and when it decides to sell in the future, but doesn't expect changes in the short term.

PORTFOLIO: Nestle said it is exploring strategic options, including a potential sale, for its Gerber Life Insurance business, but remains committed to keeping and developing its Gerber Baby Food business.

Write to Anthony Shevlin at [e-mail]

(END) Dow Jones Newswires

February 15, 2018 05:06 ET (10:06 GMT)

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