Sluggish sales, divestments skim the cream from Nestle profit

Nestle has added its name to the growing list of international suppliers whose supermarket sales in Australia have taken a turn for the worse. The Swiss group reported a 44 per cent drop in profit to $107.87 million for the year ending December 31.

The profit decline was partly driven by the impact of the sale of its Peters Ice Cream business and gourmet foods division CDS.

Nestle Australia, chaired by former ANZ executive and Perpetual director Elizabeth Proust, also cited weak trading conditions across the consumer discretionary sector, and in particular its business with Woolworths and Coles.

But it said it was encouraged by the growing popularity of its Nespresso range of coffee machines and capsules, as well as its Purina pet food products and its chain of Jenny Craig weight-loss centres.

Documents lodged with the Australian Securities and Investments Commission show Nestle Australia reported a profit of $107.87 million for the previous year, down from $193.67 million in 2011.

Revenue was almost unchanged at $2092 million.

"The company's financial performance was impacted by the losses on ice-cream and CDS divestments, and the challenging trading conditions in Australia," the directors of Nestle Australia said in the latest financial report.

A spokeswoman for the company said it had been stung by the softer economic environment and difficult trading conditions in the supermarket channel.

"But careful management of expenditure helped us reduce the impact on profit," she said.

Other international suppliers have also witnessed shrinking bottom lines at their Australian subsidiaries, driven by several factors, including declining consumer confidence and tougher terms from the big supermarkets, which are clamping down on supply-chain costs.

Shoppers have also warmed to private label brands at the supermarket checkout. Last week, BusinessDay reported that Unilever booked a fall of nearly 50 per cent in full-year profits.

The directors said the company would focus on optimising its portfolio of brands and slashing administration and overhead costs.

Nestle upgraded its Purina factory recently, investing $31 million in regional NSW, and its health sciences factory in regional Victoria, which involved an investment of $17 million.