Food giant Nestle reports better-than-expected revenue growth

Swiss maker of KitKat bars and Perrier water emerges from economic slump

Nestle products. Photograph: Bryan O’Brien/Irish Times

Nestle products. Photograph: Bryan O’Brien/Irish Times

 

Nestle, the world’s biggest food maker, reported first-quarter revenue growth that exceeded analyst estimates as price increases offset weak sales of convenience meals in North America.

Sales rose 4.4 per cent on an organic basis, with pricing up 2.5 per cent, the Swiss maker of KitKat bars and Perrier water said.

Analysts expected organic growth of 4.2 per cent. Unilever and Danone have also topped first-quarter predictions as business in Europe starts to improve after an economic slump.

The rebound in the company’s home region comes as it faces a sluggish Chinese market and seeks to revive the ailing Lean Cuisine frozen-food brand in North America.

Nestle said Friday it expects measures it has taken to improve business in that market to “gain traction” throughout 2015. “The beat to expectations was slightly less compelling than that of Unilever given it was driven more by price,” Andrew Wood, an analyst at Sanford Bernstein, said in a note. The stock rose 0.5 per cent to 77 francs earlier, giving the Maggi bouillon maker a market value of 248 billion francs (€240 billion).

Nestle is the second-biggest company in Europe by that criteria, outranked only by drugmaker Novartis. Sales rose 3.7 per cent at Nestle’s Americas unit and 5.3 per cent at the Europe-Middle-East-North Africa business.

Revenue in Asia-Oceania-Africa declined 0.2 per cent, mainly due to China.

“The big negative is Asia, Oceania and Africa,” said Jean-Philippe Bertschy, an analyst at Bank Vontobel in Zurich. “That’s going really poorly.”

Chairman Peter Brabeck-Letmathe said the Nespresso maker needs to speed up its portfolio adjustments as industry mergers and acquisitions threaten to heighten competition.

Kraft Foods announced plans last month to merge with HJ Heinz, while Mondelez International is combining its coffee unit with the maker of Douwe Egberts. In a quest to revamp its portfolio to revive sales, Nestle has jettisoned brands like Jenny Craig diet foods and PowerBar snacks.

It is also in talks to sell its European frozen-food business Davigel to Bain Capital’s Brakes Group as it aims to fix such brands in North America. “We shall see how Nestle’s frozen-food initiatives turn out, but if it doesn’t improve by the end of the year, I think it’s possible Nestle could sell parts of the business or even the whole block of it in a monster deal,” Mr Bertschy said.

Bloomberg