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Nestle First-Quarter Sales Rise Ahead of Expectations

Reuters
Monday, 23 Apr 2007 | 11:38 AM ET

Nestle, the world's largest food company, posted a 6.4% increase in sales for the first quarter to 24.25 billion Swiss francs ($20.11 billion), ahead of expectations.

The group posted organic growth of 7.4%, also stronger than expected, as demand rose, especially in emerging markets and in Nestle's pharmaceutical division.

"Input costs remain high, but our strong brands enable us to continue to adjust prices. We therefore expect the group to reach its objective," Chairman and Chief Executive Officer Peter Brabeck said in a statement.

The maker of KitKat chocolate bars and bottler of Perrier water said it expected to improve its earnings before interest, tax, and amortization margin at constant currencies this year and reach organic growth of 5% to 6% -- repeating its previously stated outlook.

According to a poll of 15 analysts conducted by Reuters, Nestle was expected to post a 5% increase in sales to 23.97 billion francs and organic sales growth of 5.6% for the period.

Organic, or underlying, growth measures volume and price changes but strips out currency effects and divestments and acquisitions.

Currency movements cut net sales by 1.5%, the company said.

Emerging Markets

The strong pace of growth in emerging markets at 10.3% and in the group's pharmaceutical division – which contains eye-care company Alcon -- at 12.1% helped compensate for sluggish growth in Europe at 1.9%.

Growth in the Americas was 7.2%.

Nestle has been able in recent quarters to fend off volatility in currencies and commodities to post hefty increases in profit, sales and organic growth.

The company has put its nutrition division -- which produces medical, diet and baby foods -- at the center of its growth plans, building it up with a string of acquisitions.

Nestle shares have outperformed the DJ Stoxx European food and beverage index over the last 12 months, rising 25% compared to 19.6% for the sector.

The shares trade at 18 times forecast 2007 earnings, below Groupe Danone's 22 due to the French group's faster growth and lingering takeover talk but in line with Unilever at 18 and the sector average of 18.

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