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Nestle sales growth misses expectations, sees tough 2016

VEVEY, Switzerland (Reuters) - Food group Nestle NESN.VX missed forecasts with a 4.2 percent rise in annual underlying sales and predicted a similar outcome this year, saying it was getting harder to raise prices in a tough economic backdrop.

Like rivals, Nestle has had to deal with slower growth and more demanding consumers in emerging markets, notably China, while sales in India have been dented by a recall of its popular Maggi noodles.

The group behind Nescafe instant coffee and Kitkat chocolate bars has been slow to adjust to changing consumer demands in China. It is reformulating some of its recipes to satisfy more health-conscious consumers and is also pushing e-commerce.

It was the third year in a row Nestle fell short of its long-term target of 5-6 percent underlying sales growth, pushing the maker Gerber baby food and Pure Life bottled water to set out more modest expectations for 2016. Underlying, or organic, sales exclude currency moves, acquisitions and divestments.

“We anticipate that our trading environment in 2016 will be similar to previous years with even softer pricing,” the group said in a statement on Thursday.

“As such we expect to deliver organic growth in line with 2015, with improvements in margins and underlying earnings per share in constant currencies, and capital efficiency.”

Its shares were indicated more than 2 percent lower in pre-market trading.

Kepler Cheuvreux analyst Jon Cox said the disappointing outlook, and no share buyback announcement, would weigh on the stock.

“Its comment that pricing will be even softer in 2016 versus 2015 will send a chill through the whole space today and stock is going to take a smack,” he added in a note.

Last month, rival Unilever warned of a difficult year ahead, forecasting sales growth of 3-5 percent.

Nestle’s net profit fell more than expected last year, by over a third, to 9.1 billion Swiss francs ($9.2 billion), partly due to a one-off gain in 2014. Sales of 88.8 billion francs also missed estimates in a Reuters poll.

Nestle raised its dividend as expected to 2.25 francs per share, but did not propose the new share buyback programme some analysts had hoped for.

Editing by Mark Potter

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