Nestlé Beats Negative Expectations but Expects A Tough Year

Nestlé CEO Paul Bulcke addressing the company’s general meeting in Lausanne, Switzerland, on Thursday. Emerging markets — which already make up more than 40 per cent of Nestlé sales — grew 13 per cent compared with just 3.1 per cent for developed countries.

Zurich Nestlé, the world’s biggest food group, warned 2012 would be a tough year due to sluggish growth in the developed world as emerging market demand and price rises helped first-quarter underlying sales growth hold up better than expected.

The maker of Nescafé coffee, KitKat chocolate bars and Maggi soup reported a slight deceleration in quarterly organic sales growth that still beat forecasts as price hikes contributed more to growth than analysts expected.

“As anticipated, 2012 is already confirming itself to be a challenging year,” said Chief Executive Paul Bulcke, to Reuters

“In many developed markets where consumer confidence is low, the trading environment is subdued while in most emerging markets, conditions remain dynamic and rich in growth opportunities.”

Emerging markets — which already make up more than 40 per cent of Nestlé sales — grew 13 per cent compared with just 3.1 per cent for developed countries, with volume growth down 0.4 per cent in the Americas and only rising 0.2 per cent in Europe.

“A strong set of figures although we see the outlook statement as somewhat subdued and expect organic growth to decelerate through the remainder of the year,” said Kepler analyst Jon Cox.

Nestlé shares fell 0.5 per cent to 56.90 francs at 0920 GMT compared with European food and beverage index 0.1 per cent lower.

They had hit an all-time high of 57.50 francs on Thursday in anticipation of good results after French rival Danone posted strong sales.

Liberum Capital analyst Pablo Zuanic said deceleration in the Americas and Europe was “somewhat of a concern”.

Nestlé said high commodity prices were still a headwind for the first half of the year but predicted a “likely improved raw material environment” in the second half, allowing it to confirm a full year outlook of 5-6 per cent organic growth.

 

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