Nestle Nine-Month Sales Increase as KitKat Maker Raises Prices
Nestle Nine-Month Sales Increase
Jason Adlen/Bloomberg
Total revenue rose 4.1 percent to 82.8 billion Swiss francs ($85.6 billion) from 79.55 billion francs a year earlier.
Total revenue rose 4.1 percent to 82.8 billion Swiss francs ($85.6 billion) from 79.55 billion francs a year earlier. Photographer: Jason Adlen/Bloomberg
Nestle SA, the world’s largest food company, reported nine-month sales growth that beat analysts’ estimates, helped by price rises and gains in emerging markets.
Revenue excluding acquisitions, divestments and currency shifts rose 6.1 percent, the maker of KitKat chocolate bars and Purina pet food said today. The median of 10 analysts’ estimates gathered by Bloomberg News was 5.6 percent.
The Vevey, Switzerland-based company maintained its full- year goals, despite a strong end to 2009 making comparative growth more challenging in the fourth quarter. Higher prices added 1.6 percentage points to nine-month sales growth, Nestle said. Emerging markets such as China and Russia led the gain, posting an 11 percent increase on a so-called organic basis.
“Nestle remains the epitome of strength and consistency,” Andrew Wood, an analyst at Sanford C. Bernstein, said in a note. “Any concerns that Nestle’s strong momentum from the first half would subside have been shown to be unfounded.”
The shares lost 40 centimes, or 0.8 percent, to 52.65 francs, while the Swiss Market Index fell 0.5 percent.
Nestle said it expects organic sales growth at its food and beverage business of about 5 percent this year, and forecast an improvement in its operating margin at constant currencies.
The Swiss company gets about half its sales from retail channels which normally don’t offer discounts, such as specialty pet stores and direct distribution in emerging markets, Marco Gulpers, an analyst at ING Wholesale Banking, estimates. Unilever and Groupe Danone SA get about a third, he said.
‘Challenging Comparatives’
“Although we see input cost pressures picking up, we expect Nestle to be able to pass on these higher costs in most regions and in most categories,” Gulpers said before the results. He has a “buy” rating on the stock.
Total revenue rose 4.1 percent to 82.8 billion Swiss francs ($85.4 billion) from 79.5 billion francs a year earlier. That compares with the 82.1 billion-franc median estimate.
“The first half’s growth momentum continued unabated in the third quarter, providing a good base for the full year as we face challenging comparatives in the final quarter,” Chief Executive Officer Paul Bulcke said in the statement. The CEO repeated that he expects an increase in the earnings before interest and tax margin in 2010 at constant currency rates.
Volume rose 4.5 percent in the first nine months of the year, Nestle said. Analysts expected 4.1 percent growth, according to the median of five estimates.
Franc Strength
The strength of the Swiss franc against currencies such as the euro cut 2.7 percentage points from sales growth, Nestle said. The euro was on average 7.2 percent lower against the Swiss currency in the first nine months of the year, compared with the year-earlier period. The dollar was 3.7 percent lower.
“The strength of the Swiss franc in the third quarter was much worse than consensus,” said Warren Ackerman, an analyst at Evolution Securities in London.
Acquisitions, net of divestitures, added 0.7 percentage points to sales. The Swiss company has announced at least seven purchases this year, including the frozen pizza business of Kraft, Waggin’ Train, a maker of snacks for dogs, and Vitaflo, a British maker of nutrition products for metabolic disorders.
By region, sales excluding acquisitions, divestments and currency shifts rose 5.7 percent in the Americas, 2 percent in Europe and 9.2 percent in the Asia, Oceania and Africa region.
Organic sales at the food and beverage unit, where more than half of revenue comes from Europe and the Americas, advanced 5.7 percent. Volume increased 4.2 percent.
Bottled Water
Bottled water sales rose 4.3 percent on the same basis, helped by growth of at least 10 percent in emerging markets, while nutrition sales increased 6.8 percent. Both categories accelerated in the third quarter, Jean-Philippe Bertschy, an analyst at Bank Vontobel AG in Zurich, said by e-mail.
Nine-month sales at the other food and beverages unit gained 9.5 percent, led by Nespresso, which surged more than 20 percent, excluding acquisitions, divestments and currency shifts, the company said. Nespresso will have more than 220 boutiques around the world by the end of the year, Nestle said.
Petcare sales rose 4 percent on the same basis, the company said. North American sales of these products will improve in the fourth quarter, Roddy Child-Villiers, head of investor relations, said on a conference call.
Nestle’s share buyback plans are unchanged, Child-Villiers also said. After repurchasing 5 billion francs of shares in the first half of this year, Nestle will buy back another 5 billion francs-worth in the second half and at least 5 billion francs of shares in 2011, he said.
To contact the reporters on this story: Tom Mulier in Geneva at tmulier@bloomberg.net; Andrew Roberts in Paris at aroberts36@bloomberg.net
To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net.
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