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'Depressed Europe' Adds to Nestle Challenges in 2013: CEO

Thursday, 14 Feb 2013 | 4:46 AM ET
Nestle's CEO Paul Bulcke speaks during the general meeting of one of the world's leading food and beverage company, Nestle Group, in Lausanne, Switzerland.
Jean-Christophe Bott
Nestle's CEO Paul Bulcke speaks during the general meeting of one of the world's leading food and beverage company, Nestle Group, in Lausanne, Switzerland.

Low consumer confidence in Europe will remain a drag on profits for Nestle , chief executive Paul Bulcke told CNBC on Thursday after the world's biggest food group said it expected 2013 to be as challenging as 2012.

"Europe is depressed, it's going to take time, years [to recover]. We have two dimensions in Europe and the southern part of Europe is really hard hit and it will take longer [to recover] so confidence is low and growth is reflecting that," Bulcke told CNBC.

Underlying sales growth at the maker of KitKat chocolate bars and Maggi soup came in at 5.9 percent for the year, meeting average analyst expectations, and implying a slight recovery from just 5 percent third-quarter growth.

Despite the earnings being at the upper-end of its own guidance the figures reveal the slowest annual sales growth in three years. Shares have dropped 2.1 percent since the figures were released.

Nestle CEO: Confident Despite Slow Growth
Paul Bulcke, CEO of Nestle, tells CNBC that he is confident of building on a 'broad base' of growth, despite Nestle reporting their slowest annual growth rate in three years on Thursday.

Growth in Asia, Oceania and Africa, which accounted for about one fifth of sales, came in at 8.4 percent. Third-quarter sales in the region took a surprise hit from one-off events such as typhoons in the Philippines, social unrest in Egypt and business disruptions due to sanctions on Iran.

Sales growth in Europe was lower that the Americas or Asia with an increase of 1.8 percent.

Bulcke added that weakening pricing power had affected sales.

"It's lower than the last two or three years because the pricing has come down, but we're seeing volume growth coming back which is what actually drives the solid base of our organic growth...The developing markets are developing further," he added.

Despite challenges in 2013, Bulcke said Nestle still expects to meet its standard outlook for 5-6 percent underlying sales growth this year as well as improved margin and underlying earnings per share in constant currencies.

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