Temat: Euro consumer groups under pressure to trim targets -...

Euro consumer groups under pressure to trim targets - Alibaba.com

LONDON, Nov 11 - Europe's big consumer goods groups are under pressure to trim their forecasts as the consumer downturn deepens, with France's Danone and Germany's Henkel the first to cut their financial targets last week.

The slowdown in world economies and downtrading to cheaper brands are set to put other large groups such as Nestle, Unilever and Reckitt Benckiser under pressure, after smaller British group Dairy Crest warned on profits and saw grim times ahead.

Food giant Danone cut its 2009 growth outlook while detergents to glues group Henkel downgraded its 2008 forecast, calling 2009 "challenging", as both big-brand companies saw the first signs of pain from the high street.

"They are still being too optimistic on sales and margins if we get the depth of a recession that everyone is talking about," said analyst David Liston at Barclays Capital.

He argued all groups, including Danone and Henkel, were painting too rosy a picture, prompting him towards a cautious view for some of Europe's largest companies.

Danone, the Activia yoghurt and Evian bottled water group, last week warned its like-for-like sales in 2009 would be "a few points" below its medium-term guidance of between 8 and 10 percent, sending its shares down 6 percent on the day.

Collins Stewart's Rob Mann said the Paris-based group was facing up to tough times but it will be stretching for 2009 like-for-like sales growth, which he sees as low as 4.5 percent, to produce targeted earnings growth of over 10 percent.

Morgan Stanley analyst Michael Steib said, "We are not convinced that the company can achieve its double-digit EPS growth target....Equally, we view the 8-10 percent medium-term sales growth target as aspirational and would prefer the company to drop it altogether."

VULNERABLE TARGETS

Henkel's targets also looks vulnerable after it was the first group to cut its 2008 forecast as the Persil detergents and Loctite glue group saw its third-quarter earnings come in below forecasts.

Henkel's new Danish Chief Executive Kasper Rorsted has set new ambitious margin targets under a new four-year plan, but analysts said the Duesseldorf-based group has never hit any of its published targets in recent years.

It expects to grow earnings more than 10 percent a year up to 2012 and reach margins of 14 percent by 2012 after 2007's 10.5 percent, but many would have preferred it not to make specific targets but look to generally improve margins.

"Frankly, we would have no more confidence in the achievement of those targets if the time frame was 2102, rather than 2012," said Collins Stewart's Mann.

Britain's Dairy Crest highlighted the deteriorating trading environment on Monday with its profit warning as the milk, cheese and yoghurt group said it was running more price cutting promotions simply to hold on to sales.

Danone too has had problems with its milk-based products with third-quarter dairy sales volumes in decline and West European water volumes down.

Henkel also makes a big proportion of its adhesive sales to the cyclical, and struggling, automotive and construction industries.

DELAYED REACTION

Among the other groups, Unilever Plc/NV and Reckitt Benckiser currently say they will not give guidance on 2009 until February while the world's biggest food group Nestle will stick to its medium-term target.

Reckitt, the maker of Finish dishwasher products and Cillit Bang cleaner, and the sector's star performer over the last decade with margins of over 20 percent, may come under pressure from downtrading even through Chief Executive Bart Becht has driven sales and margins impressively over recent years.

Reckitt raised its 2008 outlook only last month, seeing annual underlying sales growing 9 percent in 2008 compared with 7-8 percent previously.

Unilever, maker of Knorr soup and Dove soaps, has reiterated its medium-term target of underlying sales growth of 3 to 5 percent and an underlying improvement in 2008 operating margins.

Meanwhile, Nestle raised its underlying sales outlook for 2008 to about 8 percent from 2007's 7.4 percent in October and stuck to its Nestle "model" of medium-term targets for 2009 for 5 to 6 percent sales growth and margin expansion.

Barclays' Liston favours Nestle due to its strong position against private label products, and also Unilever, helped by the appointment of ex-Nestle executive Paul Polman, who will become chief executive later this year.

Nestle shares trade on 14.2 times forecast 2009 consensus earnings, slowly closing the gap on Danone's 14.5, but still ahead of Unilever on 13.3 and Henkel on 9.6. Reckitt trades on 16.6 times.

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