Nestle '08 Sales Growth Beats Goal

Nestle just beat forecasts with underlying sales growth of 8.3 percent in 2008, although sales and net profit slightly undershot, and it was cautiously upbeat for 2009.

The world's biggest food group also said it did not need to act when a shareholder pact with L'Oreal expires in April. Speculation that Nestle might up its 29 percent stake in the world's biggest cosmetics firm have weighed on its shares.

Nestle reported that net profit rose 69 percent to 18 billion Swiss francs ($15.35 billion), compared with average analyst forecasts for 20 billion francs, helped by a big book gain from the sale of part of U.S. eyecare firm Alcon .

The Vevey-based maker of Nescafe coffee, KitKat chocolate bars and Maggi soup said sales rose 2.2 percent to 109.9 billion francs, compared with 110.5 billion francs forecast in a Reuters poll, as a strong Swiss currency dampened volume growth.

Analysts had expected closely-watched organic or underlying sales growth of 8.2 percent, after an 8.9 percent rise for the first nine months of the year.

For 2009, Nestle said it expected the economic downturn to continue to hit consumer demand but it wanted organic growth "at least approaching 5 percent" compared with a long-term goal for 5 percent to 6 percent underlying growth, and reiterated its goal of profit margin improvement at constant currencies.

Analysts expect organic sales growth of 4.5 percent in 2009.

Shares of Nestle closed 5.2 percent higher. The stock was down 11 percent since the start of the year before the open, underperforming the Dow Jones European food and beverage index.

"We believe that the group will once again be one of the industry's fastest growing companies in 2009," Chief Executive Paul Bulcke said in a statement. "Nestle's ability to capitalise on a wide variety of market conditions across the world remains one of its decisive competitive advantages."

Rivals Under Pressure

Big rivals like Procter & Gamble and Kraft have recently cut their targets due to the consumer slowdown and retailer destocking, while Unilever said it could not give a specific 2009 outlook.

Underlying its confidence for 2009, Nestle proposed a dividend increase of 14.8 percent to 1.40 francs per share and said it would buy back around 4 billion francs of shares.

Nestle shares have underperformed of late due to concern it might launch an expensive takeover of L'Oreal. A shareholder lock-up expires on April 29.

The announcement of the sale of its stake in Alcon last April fired speculation it might want to use the proceeds to buy more of L'Oreal, but most analysts do not expect a move soon.

On Thursday, Nestle noted its agreement with L'Oreal was that it would not increase its stake until six months after the death of Liliane Bettencourt, the 86-year-old billionaire daughter of the group's founder who owns 30 percent.

"This is a commitment which Nestle will honour whatever the circumstances. Consequently, Nestle does not need to take any action or decision regarding its stake in L'Oreal next April," it said in a statement.

But it said the board was considering Nestle's involvement in L'Oreal within the context of its "nutrition, health and wellness" strategy and said it would continue to "take a long-term strategic view in shareholders' best interest."

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