Nestle Says Boost From Higher Prices to Weaken in 1H

Nestle SA, the world’s largest food company, said the benefits it has derived from price increases will start to diminish in the first half.

“The pricing action that was taken in the last 18 months will start to dissipate,” Chief Financial Officer Wan Ling Martello said at a meeting with analysts in London available via the company’s website. The Vevey, Switzerland-based company made similar comments when it reported full-year results, she said.

Higher prices boosted Nestle’s sales by 2.8 percentage points in 2012 and 3.6 percentage points in 2011. The Nespresso capsule maker last month reported the slowest sales growth in three years and said it expects 2013 to be as challenging as last year. Even so, the company said it was confident of meeting its target for organic sales growth of 5 percent to 6 percent.

“We will deliver the Nestle model in 2013,” Martello said today, although “there will be some lumpiness, some volatility when it comes to phasing” of sales growth.

Nestle faces more testing comparisons in the first quarter, which a year ago had stronger pricing benefits and an additional day due to a leap year, Martello said.

The shares pared gains and were up 0.3 percent at 68.35 Swiss francs at 11:10 a.m. after rising as much as 1 percent.

The company defines organic growth as sales growth excluding acquisitions, disposals and currency shifts.