Nestlé remains strong and the PPI gives hope to the Swiss economy

Nestlé published its results today. No major information came out of it. The results were better than expected, with an organic growth as high as 3.9%, above what analysts were expecting (3.6%) and a Revenue Internal Growth (3%) (i.e. a sales growth adjusted for takeovers, disinvestments, price fluctuations and currency) was also higher than the consensus (2.5%). The only negative point comes from the Asia, Oceania and Africa region which posted a lower-than-expected performance. The rest of the world performed strongly and above consensus. We could still see some price improvement in the share, thanks to these first results, even during the session today. All in all, the Swiss giant is on track for another very strong year. During the next 12 months, we could see the price evolving around the 76 CHF, which will drive the EV/EBITDA higher than 14, which would be industry consensus.

On another note, Switzerland’s Producer & Import Price Index came out today, still weak, but much better than expected. The YoY figure came out at -4.7% vs -5% expected and the MoM at 0% vs -0.2% expected, which shows that the short term momentum is positive. This gives hope for the future of the Swiss economy. In fact, we can expect this to support a short-term upside in the Swiss inflation. This will, in turn, provide a relief to the SNB and to the interest rates which were under pressure these past years. If the index continues to strengthen, we can expect some turbulences on the stock and bond markets, which would be beneficial for the economy but less for market participants. Therefore, the next figures should be watched closely.

LAURENT BAKHTIARI
IG Bank Premium Client Manager (Apr 2014 -July 2016)