Nestle sees faster growth after weak start to year

Nestle expects sales growth to pick up in the next few quarters after slowing to 4.2 per cent in local currencies in the first, when unusually cold weather hit sales in North America and cost-conscious Europeans continued to opt for cheaper brands.

The world’s biggest food company said it expected a continued strengthening of the Swiss franc to drag on its reported sales this year.

But it said a roll-out of new products was helping to sustain growth in difficult market conditions and it would keep innovating and supporting its brands.

Sales in local currency terms in the first quarter rose to 20.8 billion Swiss francs ($23.66 billion). Sales fell 5.1 per cent in Swiss franc terms, hit by the relative strength of the Swiss currency.

The first quarter’s organic growth of 4.2 per cent, which strips out currency moves and acquisitions, was just ahead of the 4.1 per cent forecast in the poll, but below 4.3 per cent in the same year-ago period and 4.6 per cent for the whole of 2013.

“We confirm our full-year outlook: performance will be weighted to the second half, outperforming the market, with organic growth around 5 per cent,” Nestle said in a statement.

Sales were hit by several one-off events, including the extreme cold in the US which made people shop less. Chocolate sales were also weaker in the first quarter because Easter holidays this year fall in April instead of March, which drove consumers to postpone purchases.

Nestle generates a quarter of its sales in the US. In the Americas, sales were up 4.6 per cent, helped by strong demand for soluble coffee and pet food in Latin America. Sales in Europe rose only 0.3 per cent, as prices continued to fall, while Asia, Oceania and Africa (AOA) grew 7.3 per cent.

Nestle said its Nespresso portioned coffee business continued to see strong growth momentum in all markets. It is facing increased competition from rival systems and copycat capsules made by peer Mondelez and others. To fuel growth, it recently launched a large-cup coffee maker for North America.

Like some of its peers, Nestle is reviewing its portfolio to get rid of underperforming brands that has already led to the divestiture of the bulk of its Jenny Craig weight management business and its PowerBar energy bars.

Nestle shares, which have gained 2.5 per cent so far this year, are trading at around 19 times forward earnings, in line with rivals Danone and Unilever.

Reuters