Nestle’s sales growth beats analysts’ estimates

Nestle, the world's biggest packaged food company, posted better than expected first-half sales growth and stuck to its 2015 forecast, despite a recall of Maggi noodles in India, helped by higher prices in some key product areas.

The maker of Nescafe coffee and KitKat chocolate said on Thursday organic sales, which exclude acquisitions, divestments and currency moves, rose 4.5 per cent in the six months to June. That beat analysts’ average forecast of 4.3 per cent in a Reuters poll and 4.4 per cent in the first quarter.

The result put the Swiss company second only to Reckitt Benckiser for sales growth among 11 top consumer staples companies that have reported results, said analysts at RBC Capital Markets.

“Nestle has faster and more resilient organic growth than the rest of sector, an under appreciated feature in our opinion,” RBC said in a note.

Nestle’s shares rose 3.5 per cent to 74.70 Swiss francs.

Chief executive Paul Bulcke said performance was in line with expectations thanks to growth across product categories and geographies. Analysts highlighted strength in coffee and ice-cream, which was helped by particularly hot weather in Europe.

Confectionery was boosted by price increases taken to offset rising cocoa prices, while some coffee prices also rose.

Six weeks into the job as chief financial officer, Francois-Xavier Roger affirmed Nestle’s annual sales growth target of about 5 per cent but declined to say whether the second half would top the first. Executives said 4.5 per cent would be “at the low end” of the target for growth “around 5 per cent”.

All consumer goods makers are suffering from sluggish markets worldwide but Nestle's particular problems involve its US frozen foods where sales are hurt by weak perceptions around the health of frozen food, and a pullback in China. Both businesses are showing improvement, Nestle said.

In addition, Nestle India saw a 20 per cent slide in second-quarter sales, after its Maggi noodles were pulled from shelves due to safety concerns.

– (Bloomberg)