Nestlé feels the chill as ice cream sales melt

Nestlé joined its rival Unilever in blaming cool European weather for poor second-quarter sales, as demand for ice cream melted.

Nestlé joined its rival Unilever in blaming cool European weather for poor second-quarter sales, as demand for ice cream melted.

The Swiss food giant singled out Western Europe as a "very challenging" market and plans to launch more products across Europe this year in an attempt to reverse sliding sales.

Peter Brabeck-Letmathe, the chief executive, said yesterday that "poor weather conditions" hit sales of water and ice cream in the three months to June. Slow sales of products such as Perrier water meant the group missed its organic revenue target. Unilever reported its first fall in sales last month for four years on the back of poor ice cream sales.

Nestlé's underlying sales grew 4.6 per cent in the six months to end-June, which analysts said suggested second-quarter sales were 4 per cent, down from 5.1 per cent in the first three months of the year. It is targeting annual organic sales growth of 5 to 6 per cent.

Analysts said the group's plunging profit margins were even more disappointing given that Nestlé is relying on its cost-cutting programme to drive its bottom line. The group's food margin slipped almost one percentage point. "It says cost savings are still coming through but we see little evidence of this," analysts at Dresdner Kleinwort Wasserstein said.

Wolfgang Reichenberger, the finance director, said Nestlé was halfway towards meeting its annual cost savings goal of Swiss francs 1.1bn (£480,000). It is targeting more than Sfr6bn in savings by 2006.

The group's net profit rose just 2.1 per cent to Sfr2.84bn, which reflected higher raw material prices. Organic sales at its water business rose just 2.4 per cent, despite growth of 10.6 per cent in the US. "[This] growth was offset by a slower performance in Europe, not least due to bad weather," Nestlé said. The group is also preparing to sell its Perrier water business.