Nestle, the world's largest food company, raised its growth outlook in a surprise statement on Thursday, saying it expected underlying sales to rise about 7.4 percent in 2008 after a strong start to the year.
The company said it had already pushed through price increases to its customers in 2007 and now stood to benefit in 2008 as price pressures for commodities such as grains and sugar are expected to abate in the second half.
The unexpected announcement is likely to support Nestle shares, which have already benefited from its expansion program into healthy foods and early price increases in anticipation of input cost pressures, said Landsbanki Kepler analyst Jon Cox said.
"Certainly it's positive," Cox said. "Pretty strong comments; I'd expect the stock to react favorably."
"Nestle expects organic growth for the full year 2008 to be close to the previous year's level and clearly above the long-term trend target of between 5 and 6 percent," the company said. Underlying sales growth was 7.4 percent in 2007.
"The Group's organic growth is off to a very strong start in 2008," outgoing Chief Executive Peter Brabeck said in a statement.
Nestle said it expected raw material cost pressures to ease somewhat during 2008, and foresaw price increases trending lower in the second half of 2008.
The company plans to publish detailed first-quarter results on April 21. A spokesman declined to give further details on first quarter figures.
Nestle shares closed 6.2 percent higher.