March 6, 2018 / 6:20 AM / 2 years ago

Lindt expects U.S. business to weigh on 2018 sales growth

ZURICH (Reuters) - Swiss chocolate maker Lindt & Spruengli (LISP.S)(LISN.S) expects sales growth of about 5 percent this year, below its mid-term target, as difficulties persist in its U.S. business.

CEO Dieter Weisskopf of Swiss chocolatier Lindt & Spruengli addresses the annual news conference in Kilchberg, Switzerland March 6, 2018. REUTERS/Arnd Wiegmann

Confectionery companies have been facing a tough time as consumers turn increasingly toward healthier snacks, but Lindt has fared better than some mass-market rivals thanks to its high-margin premium products and retail network.

Its U.S. business, however, is facing difficulties in a changing retail environment and repositioning of the Russell Stover business Lindt bought in 2014.

“The over $1 billion (acquisition) has not delivered for shareholders, in our view,” Baader Helvea analyst Andreas von Arx said in a note, also questioning the validity of Lindt’s mid-term growth target.

Chief Executive Dieter Weisskopf said he expected organic sales growth in North America and Mexico to accelerate to 4-5 percent this year from a small decline last year, helped by improved point-of-sale presentation and increased advertising.

Overall growth was pegged at about 5 percent for this year, against a mid-term target for 6-8 percent. He saw Russell Stover brand sales rising only next year, with improved profitability to follow.

Weisskopf said he stood by the longer-term growth target and was betting on markets such as China, Russia, Brazil, Japan and South Africa to drive growth.

“We expect double-digit growth in these markets,” he told reporters at Lindt’s headquarters in Kilchberg on Lake Zurich after the company reported full-year results.

The share of group sales in markets outside Europe and North America are expected to increase by about a percentage point (from 12.8 percent last year) each year, Weisskopf added.

Lindt, known for gold foil-wrapped Easter bunnies, also announced a share buyback program of up to 500 million Swiss francs ($532.9 million).

Net profit rose 8 percent to 452.5 million Swiss francs last year. That prompted the company to propose a 6 percent dividend increase, vowing to maintain its payout policy.

It had already reported a 3.7 percent rise in 2017 organic sales in January, its lowest level since 2009.

Shares in Lindt were down 1 percent at 1115 GMT.

Editing by Amrutha Gayathri and David Goodman

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