Nestle maintains modest growth forecast despite weak demand

Swiss food giant Nestle maintained its modest 2-4 per cent growth target for underlying sales this year, slightly less than Anglo-Dutch rival Unilever, after growth in the first quarter was hit by weak consumer demand for packaged foods in North America and weaker prices in western Europe.

Comparable or organic sales growth at the maker of Buitoni pasta and Maggi soups slowed as expected to 2.3 per cent in the first quarter, from 3.9 per cent in the same period last year, when there was one more trading day and an earlier Easter, the company said in a statement on Thursday.

It also reaffirmed new chief executive Mark Schneider’s forecast given in February of 2-4 per cent organic sales growth, a stable operating profit margin and an increase in underlying earnings per share in constant currencies this year. Earlier on Thursday

China

Unilever reported underlying first-quarter sales growth of 2.9 per cent, helped by some higher prices, and said it aimed for 3-5 per cent growth this year.

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Volume growth at Nestle decelerated to 1.3 per cent, from 3 per cent a year ago, hit by soft demand in North America and China, while the overall increase in prices edged higher to 1 per cent, from 0.9 per cent. Underlying sales by the company's confectionery business declined 2.9 per cent, due to the later Easter holiday and weaker demand for chocolate, and its Yinlu drinks business dragged down its performance in China.

Nestle said pricing was still negative in western Europe, but the trend was improving thanks to increases in prices for the group’s flagship Nescafe products. Nestle’s overall sales increased to 21 billion Swiss francs ($21.1 billion) from 20.9 billion last time, just short of the average of analysts’ forecasts of 21.2 billion francs given in a Reuters poll.

Analysts said Nestle's quarterly growth was the lowest in more than a decade but they expected the situation to get better, with Kepler Cheuvreux analyst Jon Cox pointing to an improvement in Europe and Asia.

Helvea Baader analyst Andreas von Arx said the pricing trend was good news and should help the share price, which was up 1.1 per cent at 76 francs earlier, when London-listed shares in Unilever were up 1.4 percent at 3,994 pence.

(Reuters)