Nestlé outperforms in Q1
14.1 per cent to CHF22.8bn (€14.5bn), beating analyst expectations
and reconfirming its full-year target of a five to six per cent
The firm cited strong organic growth of 6.8 per cent across all regions and activities as key to its stable performance, with Nestlé Waters and the global food business driving growth.
Total food and beverage sales for the quarter ending 31 March 2006 was CHF21bn, up 4.4 per cent on 2005's Q1 result of CHF18.6bn.
And the appreciation of the Swiss Franc which added 7.6 per cent to sales, coupled with a 1.9 per cent contribution from price increases across the quarter, meant the company was able to comfortably beat analyst estimates.
CEO Peter Brabeck-Letmathe said: "Nestlé had a strong start to the year. Our food and beverage business was once again the driver of our growth, with every region contributing."
But he added that increased input costs in its key food categories put pressure on the firm, necessitating price hikes.
In Europe, organic growth amounted to 2.8 per cent, helped by Western European positive market growth. But sales in the UK and Germany were flat against a strong first quarter last year.
Russia delivered double-digit growth, after a successful reorganisation of its confectionery business.
The Americas performed well, delivering an organic growth of 6.6 per cent, bolstered by an eight per cent growth rate in the smaller Latin American countries.
But Nestlé Waters delivered the real success of the quarter, recording a 10.5 per cent rise in market share globally, propped up by double-digit growth in the US and emerging markets.
Nestlé Nutrition recorded 5.2 per cent organic growth rate, but infant formula sales in Greater China recovered slowly, after contaminated supplies affected sales.
Nestlé's Other Food and Beverage division, home to the Nespresso brand, the global cereal and beverage businesses, achieved a huge organic growth of 20.3 per cent.
Brabeck-Letmathe said the outlook for the3 rest of the year is positive.
"Given our higher pricing and the fact that we will be up against a stronger base for the balance of the year, I am able to confirm our guidance for 2006 of organic growth between five and six per cent, as well as a continued improvement of the EBITA margin in constant currencies," he said.