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Q3 disappoints, FY guidance adjusted downwards
20 Oct 16
Nestle’s 9M update: sales grew organically +3.3% (cons. +3.6%, Q3: +2.9% – a very weak quarter) with real internal growth (RIG) up 2.5% and pricing 0.8%. On reported figures, sales were up +1%. OG by division: the Americas +4.5% (cons. +4.7%, both price and RIG driven), EMENA +2.2% (cons. +2.5%, RIG driven, negative pricing), AOA 2.8% (cons. +2.9%, RIG driven), Waters +4.2% (cons. +3.9%, RIG driven, negative pricing), Nestle Nutrition +1.3% (cons. +1%, RIG driven), Other Businesses +4.6% (cons. 4.7%, RIG driven). In Q3, the Americas and EMENA performed more softly than in Q2; other divisions improved their performance. Emerging markets slowed to 5.1% OG; developed markets remain unchanged. For the FY, Nestle expects organic top-line growth of c. 3.5% (down from around 4%) with an in margins at constant FX and including restructuring charges.
Q2 with weak OG but better margins, expects acceleration in H2
18 Aug 16
Nestlé’s H1 update: organic revenue was up +3.5% (cons. +3.7%, Q2: 3.1%) with RIG +2.8% and pricing of +0.6%. Reported figures were up 0.7% (FX:-2%, net acquisitions: -0.8%). OG by division: the Americas +5.1% (cons. +4%, both price and RIG driven), EMENA +2.6% (cons. +2.9%, RIG driven, negative pricing), AOA 2.3% (cons. +2.1%, RIG driven, negative pricing), Waters +4.2% (cons. 5.4%, RIG driven, negative pricing), Nestle Nutrition +1.3% (cons. +2.8%, RIG driven), Other Businesses +4.2% (cons. 5.1%, RIG driven). Developed markets recorded OG of +1.9% whereas emerging markets grew +5.4%. The trading operating margin for period was up +30bp (cons. +20bp) on the back of an improvement in cost and portfolio management, premiumisation and input tailwinds. All divisions improved their margins with the exception of the Americas. The group maintains its FY guidance: organic growth in line with 2015 (4.2%) with improvements in margins and EPS at constant currencies.
A decent Q1
14 Apr 16
Nestlé released its Q1 trading update. The OG stood at 3.9% (cons. +3.6%) driven strongly by real internal growth (RIG) of 3% whereas pricing stood at 0.9%. The negative FX headwinds were 2.8%. Net acquisitions stood at -1%. OG by division: the Americas +5.5% (cons. +4.2%, price and RIG driven), EMENA +3% (cons. +1.8%, RIG driven), AOA 2.3% (cons. +2.4%, RIG driven), Waters +5.3% (cons. 5.2%, RIG driven), Nestle Nutrition +2.6% (cons. +3.4%, RIG driven), Other Businesses +5.2% (cons. 5%). The developed markets grew 2.5% organically (driven uniquely by +2.9% RIG with some negative pricing). Emerging markets grew +5.6% (both RIG and price driven). The group confirmed its FY outlook (organic growth in line with 2015 with improvements in margins and EPS at constant currencies).
Disappointing FY and bearish guidance
18 Feb 16
Nestle released its FY results. Revenue grew organically by 4.2% (in line with consensus, RIG: +2.2% and pricing: +2%). On reported figures, sales were down 3.1% (FX: -7.4%). Net acquisitions stood at 0.1%. Sales OG by zone: AMS +5.5%, EMENA +3.7%, AOA +0.5%, Nestle Waters: +6.7%, Nestle Nutrition +3.1% and Others +5.3%. The operating margin was up 10bp on organic basis and down 20bp (15.1%) on a reported basis due to the strong Swiss franc. Net profit was down to CHF9.1bn due to the lower income from JVs as well as other operating expenses linked to rebate adjustments in Nestlé Skin Health in the US. The proposed dividend is CHF2.25. In Q4, sales grew organically by 4.2% (with RIG: +2.8% and pricing: 1.4%). Q4 OG by zone: AMS +4.6%, EMENA +2.5%, AOA +3.5%, Nestle Waters: +6.4%, Nestle Nutrition +2.2% and Others +4.7%. For 2016, Nestle expects a similar trading environment to FY15's with even softer pricing. The group expects to deliver organic growth in line with 2015 with improvements in margins and EPS at constant currencies.
Nestlé publishes disappointing Q3 numbers and lowers and its FY guidance
16 Oct 15
Nestle released its 9M trading statement. Organic growth stood at 4.2% (cons. at 4.7%, 3.6% in Q3) with pricing at 2.2% and RIG at 2% (cons. at 2.1%). FX impacted by -6.7% whereas net acquisitions added 0.4% to sales. On a reported basis, sales were down -2.1% for 9M and -5.7% in Q3. Organic growth by operating segment in Q3: Zone AMS +7%, Zone EMENA +4.7%, Zone AOA -3.1%, Nestlé Waters +9.8%, Nestlé Nutrition +2.4% (tough comparable coupled with slightly lower growth on a global basis) and Other (Nestlé professional, Nespresso, Nestlé Skin Science & health) +0.3%. The weaker than expected results are linked to AOA's poor performance in Q3 (withdrawal of Maggie Noodles and slower pace of recovery in China) as well as a one-off charge linked to a more conservative approach to the Nestlé Skin Health prescription drug rebate policy in the US. The company revised downward its full-year guidance to 4.5% OG (around 5% previously vs. 4.5% in FY14).
Panmure Research - Consumer Staples 11-09-15
11 Sep 15
The consumer staples sector continues to trade on well above average historic and market average multiples despite a lack of earnings growth over 2014-15. This has been due to being perceived as ‘low risk' and cash generative with the ability to continue to pay and grow dividends. However cashflow cover of dividends has declined, and a further round of emerging market currency devaluations could have a severe impact on the ability to grow dividends unless they can grow earnings in the developed world. In the short term the performance of the sector is likely to be overshadowed by the potential interest rate increase in the US. We would have an in-line weighting in the UK consumer staples sector. Within that we remain positive on the tobacco subsector and Hilton Foods Group and retain the Sell rating on Associated British Foods. We move PZ Cussons from Sell to Hold
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STABER acquisition strengthens engineering IP
26 Oct 16
Carr’s Group has acquired STABER GmbH for a net consideration of €6.75m (£6.0m). This brings key IP used in the Engineering division’s remote handling products in house. We make minor adjustments to our FY18 PBT and EPS estimates and reiterate our indicative valuation of 161p.
Panmure Morning Note 19-09-2016
19 Sep 16
FIF has delivered FY16 results slightly ahead of expectations. The results attest to FIF’s evolution, over the seven years of the current executive management team’s tenure, into the UK’s leading speciality baked goods manufacturer achieved through a consistent and unrelenting focus around: (1) customer/ consumer needs; (2) new product innovation; and (3) investment in a high quality asset base to drive low cost/efficiency and support operational excellence. The shares have been very strong recently (c.10% in the last month, thereby delivering +20% outperformance relative to the wider stockmarket over the past year) and have pushed beyond our 127p TP. Combining this with the lack of an upgrade to our FY17E PBTA, the shares may therefore pause for breath. We remain however very positive on FIF given: (1) its dominant scale to capture the available long-term growth opportunities; (2) its valuation discount (c.15%) to its small/mid cap peers; and (3) the likely M&A momentum/ optionality as an added investment attraction. We therefore raise our TP to 150p (from 127p), thereby retaining our BUY.
VSA Agri Monthly: July 2015
31 Jul 15
With Australian cattle prices reaching all-time highs and the country agreeing health protocols for the export of live cattle to China, there has been a rash of recent deals in the Australian cattle sector. Has this made it more likely that MP Evans (MPE LN) will finally dispose of its 34.37% stake in the 200,000 head North Australian Pastoral Company (NAPCo)? This month saw Chinese billionaire Xingfa Ma acquire two cattle stations in Australian’s Northern Territory with a combined 40,000 head of cattle in a A$47m deal. This would suggest an adjusted read-across valuation of approximately A$80m for MPE’s NAPCo stake. Although no transaction has yet been announced, the price range for the rumoured acquisition of the 185,000-head S Kidman & Co business, mooted in April, valued MPE’s NAPCo stake on an adjusted read-across basis of up to A$70m.
VSA Agri Monthly
28 Jun 16
VSA Agri Thought for the Month It is hard to forecast the precise impact on UK farming from the recent Brexit vote but we would highlight a few areas: Subsidies: Annual subsides of c£3bn are currently paid to UK farmers. Farming Minister George Eustice has previously said that support would be maintained following a Brexit vote. Farmers will be anxious to see this happen. However, money may be saved through a cap on the maximum payout for the largest farms. Regulation: How will regulations change as we exit the EU Common Agricultural Policy? Farmers will look for regulations to be simplified and more tailored to the UK. Exports: A weaker currency should increase the attractiveness of UK farming exports, offset by any increased cost from raw material imports and any newly imposed trade tariffs. Labour: UK farming is heavily reliant on seasonal agricultural workers, many from other EU states. The UK government has previously looked to encourage the employment of more UK workers on-farm but how will things change for those bringing in workers from abroad?
VSA Agri Monthly
28 Jul 16
VSA Agri Thought for the Month Leading Brexiteer Andrea Leadsom was appointed Secretary of State for the Department of Environment, Food and Rural Affairs (DEFRA) this month. Perhaps one of the most unenviable jobs in the new UK government, given the importance of EU subsidies to the country’s farming sector. Agra Europe estimated last year that up to 90% of UK farms would not survive without them. Given that the EU Common Agricultural Policy has long been criticised by environmentalists and free-market proponents alike, leaving the scheme is likely to be viewed positively by many. But what comes next? We believe we are likely to see some sort of reduction of subsidies (particularly for the largest farms and most uneconomic activities) as well as greater exposure to foreign imports through additional free trade agreements. We feel a focus on technology and a push for “efficiency” will also be high on the agenda, which could provide a boost to AgTech companies developing products in this area.