ZURICH (April 18): Nestle posted higher-than-expected sales growth in the first three months of the year after good momentum in the United States and China, putting it on track to meet its goal of more than 3% organic growth this year.
The world's biggest food group, with brands such as Maggi soup and KitKat bars, said its biggest markets, the United States and China, had shown a strong trend in the quarter, with the largest contributions from pet care, dairy and infant nutrition.
Nestle and its peers are trying to buck a consumer trend towards fresh, locally produced foods, which has hit sales of packaged goods, by focusing on fast-growing categories like infant formula and coffee.
The company based in Vevey in western Switzerland said organic or self-generated sales growth accelerated to 3.4% in the first quarter, ahead of the average 2.8% in an Infront Data poll of analysts and 2.8% a year ago.
"Our increased speed, innovation for a changing world and execution focus are clearly paying off," Chief Executive Mark Schneider said in a statement on Thursday. "We confirm our outlook for the year."
Nestle also said efforts to gear its portfolio more towards health and wellness, and fix or dispose of underperforming brands, were on track. It expects strategic reviews of its skin health and Herta meats businesses to be completed by mid- and late-2019 respectively.
Sales volume growth held up well in the quarter and pricing improved, thanks to price increases in Brazil and the United States, Nestle said. China maintained mid single-digit growth thanks notably to premium infant formula and Nescafe.
Acquisitions of a license to sell Starbucks coffee and of Atrium Innovations, which are not included in organic growth, helped increase overall sales to 22.2 billion Swiss francs (US$22 billion).
Vontobel analyst Jean-Philippe Bertschy said the statement had shown measures taken last year were starting to pay off, and said growth expectations would go up. He renewed his "buy" recommendation on the stock.
Nestle shares, which have already gained over 19% this year, were indicated to open 1.4% higher, according to Julius Baer pre-market data.
French yogurt maker Danone posted underlying quarterly sales growth of 0.8% on Wednesday, hit by setbacks in China and Morocco, but said it expected sales growth to accelerate from the second quarter.
Anglo-Dutch Unilever said on Thursday underlying sales grew 3.1% in the first quarter.
Johan Utterman, who manages a fund for Lombard Odier IM, said he thought Schneider was doing a good job.
"Divesting lower-growth, lower-margin, lower-return-on- invested-capital businesses and buying higher ones. So I think it's all heading in the right direction," Utterman said.
(US$1 = 1.0096 Swiss francs)