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Nestlé see Q1 slowdown, but predicts growth in following quarters

By Nathan Gray+

15-Apr-2014

Nestlé has reported its slowest first quarter growth since 2009, but predicts sales growth to pick up on the back of new product roll-outs.

The world’s largest food company reported sales of €17.1 billion (CHF 20.8bn) for its first quarter, with organic growth at 4.2% and real internal growth of 2.6%.

Unusual weather, a late Easter, and cost-conscious Europeans contributed to the poor performance, said the company - with a drop off in growth from emerging markets no longer making up for weak sales in the developed economies that account for most of its business.

Currency impacts, especially the growing strength of the Swiss Franc, also contributed to ‘headwinds’ said the firm – confirming a -8.6% impact on sales attributed to the strength of the Swiss currency.

However, Nestlé said a roll-out of new products will help to sustain growth in difficult market conditions, adding that it will continue to innovate and supporting its brands.

“We confirm our outlook for the full year: performance weighted to the second half, outperforming the market, with organic growth around 5%,” said Paul Bulcke, Nestlé CEO.

Andrew Wood, senior research analyst for European food & HPC at Sanford C. Bernstein said the firm had expected a ‘soft start’ to 2014 – adding that it was ‘pleasing’ to see that Q1 organic growth (+4.2%) “was slightly ahead of consensus expectations (+4.0%) albeit slightly below our expectations (+4.4%).”

“In fact, this is the first quarter since Q2 2012 that Nestlé has beaten quarterly sales consensus expectations,” he commented, adding that the balance of growth was also broadly in-line with expectations, with pricing (+1.6%) and RIG (+2.6%) both contributing well.

“It must be noted that most of the good performance came from Nestlé Waters … as most other regions/segments slightly under-delivered. But, of course, this is the power of Nestlé’s portfolio,” he said.

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