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NESTLE – First quarter organic sales rise 4.2%, full-year outlook confirmed

VEVEY, Switzerland – Nestle, the world’s leading food industry group, saw its sales slide 5.1 percent in the first quarter from the same period in 2013, the Swiss-based company said on Tuesday, blaming the effect of exchange rates and strength of the franc.

The maker of Nespresso capsules and Nescafe instant coffee reported a slowdown in two of its three geographic regions, but confirmed its full-year outlook.

Highlights:

  • Sales totalled CHF 20.8 billion, organic growth of 4.2%, real internal growth of 2.6%
  • Growth in developed markets 0.6%, emerging markets 8.5%
  • Full-year outlook unchanged: organic growth around 5% and improvements in margins, underlying earnings per share in constant currencies and capital efficiency

Paul Bulcke, Nestlé CEO: “Our organic growth in the first months of the year was in line with expectations and driven by volume rather than price. The continued roll-out of new products, along with good execution, sustained this growth in difficult market conditions.

We will keep up the pace of innovation, while further strengthening support for our brands. We confirm our outlook for the full year: performance weighted to the second half, outperforming the market, with organic growth around 5% and improvements in margins, underlying earnings per share in constant currencies and capital efficiency.

We expect the continued strengthening of the Swiss Franc to have a negative impact on reported sales.”

Business Review

In the first quarter organic growth was 4.2%, composed of 2.6% real internal growth and 1.6% pricing. Sales were CHF 20.8 billion, impacted by substantial negative foreign exchange of 8.6%, and acquisitions, net of divestitures, further reduced sales growth by 0.7%. As a result the total evolution of sales was -5.1%.

Nestle continued to grow in all geographies: 4.6% in the Americas, 0.3% in Europe and 7.3% in Asia, Oceania and Africa. The developed markets grew 0.6% and the emerging markets 8.5%.

Zone Americas

Sales of CHF 6.0 billion, 4.1% organic growth, 0.9% real internal growth

In North America the market remained subdued and the severe weather conditions had an impact across the categories.

With consumer spending low, new product launches drove performance including DiGiorno Pizzeria, California Pizza Kitchen Thin and Crispy, Girl Scout flavours for Coffee-mate, Lean Cuisine Stuffed Pretzels, and in confectionery, Butterfinger Cups. In petcare the rollout of Lightweight and Glade cat litters supported growth, as did the re-introduction of Waggin’ Train.

Overall Latin America performed well with growth in Brazil in most categories despite the effect of the late Easter. Soluble coffee was the highlight in Mexico, and petcare continued its strong momentum in the region, with Dog Chow and Pro Plan driving market share improvements.

Zone Europe

Sales of CHF 3.5 billion, -0.8% organic growth, 0.7% real internal growth

The Zone achieved positive volume growth in a flat retail environment, deflationary pressures kept pricing negative.

Innovation ensured Nestle met the expectations of consumers from popularly positioned products to super premium.

Nescafé Dolce Gusto gained market share with strong double-digit growth, the successful roll-out of Papyrus cooking papers continued and ice cream, particularly Mövenpick, had a good start to the year.

Confectionery was affected by the late Easter although Russia and Spain had strong performances. Petcare continued its momentum, with Felix and Purina ONE Dry Cat delivering strong growth.

In Western Europe Spain and Portugal showed encouraging early signs of a recovery, while France, Germany and the UK had a slower start to the year.

In Central and Eastern Europe while Russia continued to grow strongly the current instability and uncertainties affected the rest of the region.

Zone Asia, Oceania and Africa

Sales of CHF 4.4 billion, 5.3% organic growth, 2.9% real internal growth

In what remains a mixed and volatile economic environment across the Zone, Nestle leveraged its deep and long-standing presence in different markets and launched new products.

Nescafé 3 in 1 delivered double-digit growth for soluble coffee, as did Milo for powdered and liquid beverages and KitKat for confectionery. Nescafé Dolce Gusto also grew double-digit.

In the emerging markets growth was solid. Africa, the Philippines, Pakistan and Turkey were highlights. In the markets with weaker trading conditions like China, India and Malaysia the company gained market share in many of our categories.

Developed markets in the Zone also grew, especially Japan where KitKat and Nescafé continued to perform strongly.