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Nestle 3-month sales up at $21.6 bn despite global slowdown

14 April 2016

Food giant Nestle has reported three-month sales of CHF 20.9 billion ($21.6 billion), at the end of March 2016, on the back of a 3.9 per cent organic growth and 3.0 per cent real internal growth, despite a (-) 2.8 per cent negative impact on foreign exchange earnings.

Nestle said organic growth in the developed markets was lower at 2.5 per cent against 5.6 per cent growth in emerging markets.

For the full year, the company said, organic growth should be in line with 2015, with improvements in margins and underlying earnings per share in constant currencies, and capital efficiency

''As anticipated, the first quarter continued the positive momentum in real internal growth, with softer pricing. We gained market share in the majority of our categories and businesses. The strongest performances were in Europe, in South East Asia and in Africa as well as for Nescafé, Nespresso and petcare. Our US frozen food business is progressing well. The trends seen over the last few quarters show the relevance of our investments and allow us to confirm our outlook for the year,'' Nestlé CEO Paul Bulcke stated in a release.

The net result of acquisitions and divestitures was a 1.0 per cent reduction in sales growth, according to the company.

Nestle said, there was continued strength even in developed markets with organic growth of 2.5 per cent (real internal growth of 2.9 per cent) and in emerging markets with 5.6 per cent (real internal growth of 3.2 per cent).

Nestle, however, is facing slower growth and more demanding consumers in emerging markets, notably China, but said it managed to gain market share in most of its categories and businesses.

"As anticipated, the first quarter continued the positive momentum in real internal growth, with softer pricing," the maker of Nescafe instant coffee and Pure Life bottled water said in a statement.

Pricing, as anticipated, was low as a result of deflation in the developed markets and soft commodity prices.

Sales in the group's Asia, Oceania and Africa (AOA) zone accelerated to 2.1 per cent, from 0.5 per cent in 2015, recovering from a Maggi noodle recall in India last year.

"Asia zone swings positive for the first time in a couple of a quarters reflecting a quicker than expected rebound in Maggi in India as well as coffee and ongoing signs that China is on the mend," Kepler Cheuvreux analyst Jon Cox said in an emailed comment.

"Overall, Nestle has printed a decent number and consensus should nudge up. Given the disappointments of the last couple of quarters this is extremely encouraging," he said.

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