NESTLÉ S.A. 
VEVEY Switzerland (Reuters) - Nestle (>> Nestle SA) toned down expectations for full-year sales after slower third quarter growth showed the impact of softening demand in Asia and falling prices in Europe on the world's largest food company.
The sales figure was below forecasts and Nestle executives made it clear they expected 2014 growth closer to 4.5 percent than the company's formal 5 percent target. Shares in Nestle, the maker of KitKat chocolate bars and Nescafe coffee, fell more than 3 percent.
Food companies are facing tough conditions as prices in developed markets decline and growth slows in emerging markets.
In response, Nestle has started selling underperforming units to focus on products offering higher returns. These include its Nespresso coffee pods, health foods and skincare products that it hopes will drive future growth.
Underlying organic sales growth, stripping out the effects of currency swings and acquisitions, was 4.5 percent in the first nine months of the year, below an average forecast for 4.7 percent in a Reuters poll.
Growth had been 4.7 percent in the first half of the year, implying a slowdown over the last three months and seemingly putting the stated 5 percent annual target beyond reach.
Chief Executive Paul Bulcke said the precise figure was less important than maintaining progress in tough circumstances.
Asked whether the company expected full-year growth above 4.5 percent in 2014, Bulcke told Reuters: "It depends on how you define 'around' but I'm an ambitious man so yes ... I'm confident we should overdo that."
Nestle's sales shortfall contrasts with yogurt maker Danone's (>> DANONE) better-than-expected underlying rise in third-quarter sales, helped by improving baby food demand in Asia where it is recovering from a health scare.
EBOLA FEARS
Analysts expressed surprise that Nestle had not officially cut its full-year growth target and had not been expecting such a marked slowdown in Asia, Oceania and Africa (AOA).
"Real internal growth in AOA, with weakness in China, seems to have fallen into negative territory in the third quarter, which is a surprise," J.Safra Sarasin analyst Michael Romer said in a note. He has a "Neutral" recommendation on the stock.
Shares in Nestle, which have gained 2.5 percent so far this year, were down 3.1 percent at 1340 GMT.
Nestle shares are trading at 18.3 times forward earnings, at a premium to Danone at 17.4 times and Unilever (>> Unilever plc) (>> UNILEVER) at about 17.3 times. Unilever reports on Oct. 23.
Adding to the economic headwinds are concerns about the impact of the deadly Ebola virus in West Africa. The region is a top grower of cocoa and prices have increased on fears the virus could limit supplies.
Bulcke said the company was on "high alert" over Ebola, although it has not yet spread to Ivory Coast and Ghana where 60 percent of the world's cocoa beans are produced.
Faced with slower growth in emerging markets and Europe's deep-seated problems, Nestle has started to reshape its business.
The company has sold most of its Jenny Craig diet business and its PowerBar energy bars, while investing in areas it considers promising such as the fast-growing skincare market.
Last month, it created a new executive board position to better exposit its size and manage costs.
(1 US dollar = 0.9418 Swiss franc)
(Editing by Keith Weir)
By Joshua Franklin and Silke Koltrowitz
