Dairy price hike keeps Nestlé sales on track

- Last updated on GMT

Related tags: Cent, Milk, Nestlé

Nestlé, the world's biggest food and drink manufacturer, has
announced a modest increase in Q1 profits after successfully
offsetting rising raw material costs with price increases across
the UK and Continental Europe, Tom Armitage reports.

According to the Vevey, Switzerland-based company, also manufacturers of the KitKat confectionery, Ski yoghurt and Nescafé coffee brands, sales had increased by 0.3 per cent to CHF20.46 billion (€13.3 billion), compared to CHF20.41 billion (€13.24 billion) during the same period the previous year.

Conversely, organic, or underlying, sales - which take into account volume and price changes but exclude currency effects, divestments and acquisitions - increased by 4.6 per cent, in line with most analysts' expectations.

The company noted that divestments involving its drinks distribution activities had sheared 1 per cent off its quarterly turnover growth, while currency effects adversely impacted the group's overall turnover by 3.3 per cent.

"Our satisfactory first quarter growth is in line with our expectations. It allows me to confirm our full-year organic growth target of between 5 and 6 per cent,"​ commented Peter Brabeck-Letmathe, Nestlé's joint chairman and CEO.

The company added that a 1.6 per cent price increase across UK and Continental Europe had helped it to achieve organic growth of 0.7 per cent, although a positive performance across the UK and Germany was hampered by a sales slow-down in France.

Throughout its collective sales regions, Nestlé has managed to raise prices by around 2 per cent.

Nestlé's board deemed the increase to be necessary after the company said in October last year that the rising price of commodities, including milk, cocoa and sugar, had contributed to flat profits in the first nine months, compared to the previous year.

Earlier this year, Anlgo-Dutch rival Unilever said it had experienced similar trading conditions and slashed its six year earnings forecast accordingly - from an increase of 4 to 2 per cent.

Nestlé has since said, however, that its margins would improve, adding that it was confident of an imminent fall in raw material costs - particularly referring to oil.

Nestlé's European sales increased to CHF6.95 billion (€4.5 billion) from CHF6.89 billion (€4.47 billion) last year.

Meanwhile, Nestlé's sales of milk products, nutrition (which includes its infant milk formulas) and ice cream, collectively achieved a 4.1 per cent organic growth increase, with the US singled out as a particularly strong performer in the ice cream category.

Chilled dairy sales, however, declined across France (Nestlé's second biggest market overall) and Spain - although the company noted that elsewhere in Europe, sales had "performed in line with the industry as a whole".

The company added that it was readying itself for what it called the "decisive"​ summer months and said it would soon be rolling out its new season's ice cream products.

Related topics: Manufacturers, Pricing Pressures

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