Nestle Organic Sales Rise, Reaffirms Outlook

Nestle, the world's biggest food group, reported a slowdown in core sales growth in the first quarter as a strong Swiss franc weighed, but reiterated its full year target despite the global slowdown.

Nestle said it still expects 2009 organic sales growth of "at least approaching 5 percent" compared to its long-term target of 5-6 percent.

Organic sales growth, which strips out currency effects and acquisitions, was 3.8 percent in the first quarter, the company said on Wednesday.

Total sales slipped 2.1 percent to 25.2 billion Swiss francs ($21.5 billion) from 25.7 billion a year ago as the strong Swiss currency had a negative impact of 5.2 percent.

A Reuters poll of 11 analysts had on average forecast on total sales rising 1.2 percent to 26 billion Swiss francs and a 3.7 percent rise in underlying or organic sales.

Chief Executive Paul Bulcke said the 3.8 percent underlying growth figure was an achievement given tough comparisons with the near 10 percent rise in the year-ago quarter.

Nestle shares were indicated to open down 1.2 percent according to pre-market data from Clariden Leu.

All business units recorded positive organic growth in the first quarter apart from the bottled water division, where sales fell 2.5 percent, which Nestle said was due to ongoing weakness in the industry, particularly in western Europe.

Nestle Nutrition recorded flat organic growth due to weak growth in the European baby formula business and for the U.S. Jenny Craig diet food range.

Nestle also said ice cream sales were hit as consumers cut back on eating out.

Riding out the Recession?

Analysts have said the maker of Nescafe coffee, KitKat chocolate bars and Maggi soup was well positioned to ride out the recession compared to its rivals due to its range of products and wide geographical presence.

French food group Danone stuck to its 2009 earnings growth targets earlier this month after demand for its baby food and medical nutrition products helped lift first-quarter like-for-like sales by 1 percent.

Shares in Nestle are trading at about 12 times 2010 earnings, at a slight discount to Cadbury on 12.5 but at a premium to about 11.4 for Danone and 10.3 for Anglo-Dutch Unilever Plc/NV.

In its statement, Nestle did not mention its plans for its stake in the world's biggest cosmetics company L'Oreal after a shareholder pact expires on April 29.

Both Nestle and France's Bettencourt family own roughly 30 percent stakes in L'Oreal and speculation has been rife over whether Nestle might seek a full takeover or consider selling its stake when the shareholder pact expires.

Earlier this month, Nestle and the Bettencourt family said they would continue to work together even after April 29.

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