Nestlé expects improvement

Related tags Cent Organic growth Nestlé

Nestlé expects to show organic sales growth of around 5-6 per cent
for the year as a whole, twice that of its closest European rival,
Unilever. Nine-month sales were boosted by the hot summer weather,
particularly for ice cream and water, although chocolate sales

Europe's two biggest food companies have this week revealed results which suggest significantly different prospects for growth. Unilever​, the number two European group, said on Monday that its growth was likely to be lower than expected for the year, while rival Nestlé​ has today confirmed it is on track to meet its targets.

The Swiss group, which makes everything from dairy products via bottled water, ready meals and baby food, said that its sales during the first nine months of the year were up 6.8 per cent on a like-for-like basis to SF64.6 billion (€41.8bn), with organic growth reaching 5.4 per cent.

However, although the negative impact of currency translation lessened over the nine months (9.2 per cent compared to 12.6 per cent for the first half), it still took a significant toll on reported results, pushing them down by 2.4 per cent compared to the previous year.

Peter Brabeck, CEO of Nestlé, said that the performance was built on the solid foundations laid down in the first half. "It leaves us well placed to achieve our target of 5 to 6 per cent organic growth, combined with an improved EBITA margin, for the current year,"​ he said.

In Europe, where sales reached SF21.4 billion, the group said that organic growth was 2.3 per cent during the nine months, with Eastern Europe the main contributor with a 10.0 per cent improvement. The more mature Western Europe market showed growth of 1.6 per cent.

The Americas performed even better, with organic sales growth of 5.9 per cent to SF19.8 billion. In Latin America, the strength of the group's brands allowed it to increase prices and preserve margins despite the region's difficult economic conditions, Nestlé said.

In Asia, Oceania and Africa, organic growth was 4.2 per cent, with Chinese sales up 8 per cent despite the SARS outbreak and African sales rising 12.9 per cent as the troubles in the Ivory Coast (a major supplier of cocoa for Nestlé's confectionery arm) receded. The important Japanese market also saw the first signs of a recovery, the group said. Total sales for the region were SF10.6 billion.

The Nestlé Waters unit, whose results are calculated separately from the food business, also fared well in all its key markets around the world, including in the very competitive US market. Total sales from the division, which includes brands such as Perrier and Vittel, as well as a fast-growing water cooler business, reached SF6.4 billion, up 10.9 per cent in organic terms.

Total beverage sales during the nine months were up 5.7 per cent in real terms to SF17.5 billion, Nestlé said, helped by a strong performance from soluble coffee. The milk products arm showed a slight gain (1 per cent), with sales reaching SF17.6 billion, helped by a strong performance from ice cream during the summer heat wave in Europe - a factor which also helped lift water sales during the period.

At the same time, the hot weather had an adverse effect on chocolate sales, with turnover from the confectionery and biscuits arm down 4.1 per cent in real terms to SF7 billion. Price increases earlier in the year, related to a rise in cocoa prices, also impacted sales at this unit.

The prepared foods and cooking aids division showed growth of 2 per cent to SF11.5 billion, helped by a strong showing from frozen foods in particular.

In contrast to Unilever, which recently reduced its growth forecasts from 6 per cent to 3 per cent for the year, Nestlé is confident that its 5-6 per cent growth target will be reached this year, helped by a stabilisation of the currency situation expected in the final quarter.

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