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(Bloomberg) -- Nestle SA forecast 2017 sales and profitability below the world’s largest food company’s long-term targets as new Chief Executive Officer Mark Schneider steps up efforts to restructure the company and reignite growth.
The company expects revenue to rise 2 percent to 4 percent on an organic basis and the trading operating margin to be stable excluding currency swings, the maker of Nespresso coffee and Gerber baby food said Thursday. Nestle has a long-term target for 5 percent to 6 percent average annual sales growth and improvement in the margin. Revenue growth was 3.2 percent in 2016, missing analysts’ estimates for 3.4 percent and the slowest rate in at least a decade.
Schneider said he targets mid-single digit organic growth by 2020. Nestle, like other consumer-goods makers, has grappled with deflation across Europe for several years, crippling the company’s ability to raise prices. In addition, stricter rules in China for foreign infant formula have weighed on baby-food sales. Those are just a few on the new CEO’s laundry list of challenges, which includes inflation in Brazil and Russia, and stagnating sales at the Stouffer’s and Lean Cuisine convenience-meal brands.
“In order to drive future profitability, we plan to increase restructuring costs considerably in 2017,” Nestle said, adding it expects “significant” cost savings by 2020.
The KitKat maker said pricing improved in the second half of 2016 and is expected to continue to improve in 2017.
Nestle also reported full-year trading operating profit of 13.7 billion francs ($13.7 billion), trailing the 13.9 billion francs analysts estimated. Total sales rose to 89.5 billion francs.
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