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Nestlé enjoys strong organic growth

By James Knowles , 19-Oct-2006

Nestlé today said sales are up 9.1 per cent to CHF72.2bn (€45.4bn) in the first eight months of this year compared to the same period in 2005.

The company reported real internal growth of 4.6 per cent once acquisitions, pricing increases and the effects of currency rate fluctuations are removed from the mix. Pricing increases added 1.5 per cent to the sales growth. Favourable foreign exchange rates contributed 2.8 per cent to reported sales, while acquisitions, net of divestitures, had a net effect of an additional 0.2 per cent.

"Our strong growth has continued into the third quarter of 2006. We are still facing volatile raw material and energy prices, but overall, I feel comfortable in reconfirming our reaching the upper end of our long term organic growth target of between five and six percent combined with an improvement of the EBIT margin in constant currencies for the full year," said Peter Brabeck-Letmathe, chairman and CEO of Nestlé.

Based on the period's results Nestle is on track to achieve its aim of reaching the upper end of its organic growth target of six per cent and achieving constant currency margins for the full year, he said.

The company's beverages unit achieved 7.9 per cent organic growth, boosted by good sales performance in waters, soluble coffee and powdered beverages. The company's Milo brand continued its strong performance in Asia, Nestle reports. Nespresso has also performed well, enjoying double digit growth.

Organic sales of the company's milk products, nutrition and ice cream products were boosted by 5.4 per cent. Organic growth strips out the effects of acquisitions.

Sales of the company's prepared dishes and cooking aide products also achieved five per cent organic growth. Maggi performed well in emerging markets, though Europe was more challenging. Frozen foods and culinary products were particularly successful in the North American market, the company reported.

The period saw 1.7 per cent organic growth in chocolate, confectionary and biscuits. Chocolate, the main category, reported two per cent organic growth. Performance was good in most markets, except for the bigger markets of Western Europe.

In Europe Nestlé and Nesquick have enjoyed strong growth. Despite unusually poor weather in August ice-cream sales still accelerated due to the success of low-fat product launches and the relaunch in Switzerland of Mövenpick. Nestlé claim that in Eastern European countries that have a strong Nescafé presence, initial sales of CoffeeMate launches have been promising,

The US saw strong organic growth in sales of frozen food, pet care, and in culinary products such as Stouffers Lean Cuisine and Buitoni brands, products tailored to Hispanic consumers and CoffeMate. Latin America has also enjoyed strong organic growth above the group average.

Nestlé's growth in Zone Asia, Oceana and Africa has also performed well with Milo enjoying double digit growth, Kit-Kat performing well in Japan, and Maggi Culinary products being particularly successful. Nescafé and milk products also showed good results.

Nestlé Waters's good organic growth came largely from North America and emerging markets which provided double digit growth. Organic growth was also strong in Europe. Nestlé Nutrition's achieved organic growth of eight per cent, apart from China where recovering sales of infant formula milk caused an impact.

Nestlé's other food and beverage activities, mainly Cereal Partners Worldwide, Beverage Partners Worldwide and Nespresso had organic sales growth of 18 per cent.

The company's petcare division achieved 6.9 per cent organic growth. Strategic brands such as Bakers, ONE, Gourmet and Beneful performed well in Europe. Growth in Northern America continues to accelerate with the humanization of pet food to include natural ranges for dogs and restaurant inspired treats for cats.

Nestlé's pharma activities, primarily Alcon enjoyed 11 per cent organic growth.

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