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Nestlé Q1 Sales Growth Driven By Prices, Emerging Markets

4/20/2012 3:00 AM ET

Nestlé S.A. (NSRGY.PK) on Friday confirmed its 2012 sales growth forecast after reporting a 5.6 percent increase in first-quarter sales, boosted mainly by higher prices and improved emerging market performance.

The Swiss food giant's CEO Paul Bulcke said, "As anticipated, 2012 is already confirming itself to be a challenging year. In many developed markets where consumer confidence is low, the trading environment is subdued whilst in most emerging markets, conditions remain dynamic and rich in growth opportunities."

In the first quarter, total sales increased to 21.39 billion Swiss francs from last year's 20.26 billion francs. Acquisitions, net of divestitures, added 3 percent to sales, while foreign exchange had a negative impact of 4.6 percent.

On an organic basis, excluding acquisitions, the increase was 7.2 percent including 2.8 percent real internal growth and pricing contribution of 4.4 percent.

The company attributed the sales growth to all three of its geographies of the Americas, Europe and Asia, Oceania and Africa. Organic sales growth was 3.1 percent in developed markets and 13 percent in emerging markets.

"This performance reflects the contrasting market conditions in the developed and emerging worlds: the trading environment in many developed markets with low consumer confidence is sluggish whilst conditions in most emerging markets remain dynamic and rich in growth opportunities," the company said in a statement.

In the Americas, sales grew 6.2 percent organically to 6.54 billion francs, driven by improved sales of soluble coffee, its strongest category, as well as good performances in both Brazil and Mexico. Meanwhile, the North American market was hurt by weak consumer sentiment mainly in higher pricing categories.

In Europe, sales increased 2.3 percent organically to 3.58 billion francs, driven by good growth in most markets of Western Europe and Eastern Europe.

In the Asia, Oceania and Africa region, organic sales growth was the highest, with a 11.4 percent increase to 4.59 billion francs.

Looking ahead, for fiscal 2012, Nestlé continues to expect organic sales growth of 5 to 6 percent as well as an improved margin and underlying earnings per share in constant currencies.

The confirmation reflected higher first-quarter sales, the pricing effect for the rest of the year and a likely improved raw material environment in the second half, the company noted.

In Zurich, Nestlé shares closed Thursday's trading at 57.20 francs, up 0.55 francs or 0.97 percent on a volume of 8 million shares.

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by RTT Staff Writer

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