Nestle sales on track in 2011

by Josh Sosland
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VEVEY, SWITZERLAND — Nestle S.A. is solidly on track toward beating long-term organic sales growth targets, though total nine-month figures were off sharply from a year ago because of the effects of currency shifts and the divestiture of the company’s Alcon business.

In results announced Oct. 20, Nestle said organic growth in the nine months ended Sept. 30 was 7.3%, which included 4.1% of real internal growth and 3.2% of growth derived from pricing. More than eating up the growth, though was the effect of divestitures (net of acquisitions), which reduced sales growth by 5.7 percentage points and the effects of foreign exchange rates, which lowered sales by 15.1 percentage points.

Overall, Nestle sales in January-September were 60,889 million Swiss francs ($68,092 million), down 14% from 70,409 million in the same period in 2010.

The value of the Swiss franc has been extremely volatile over the course of 2011. While recent quotes of about $1.12 are nearly unchanged from early in the year, the currency in recent months traded as high as $1.4089.

Paul Bulcke, chief executive officer of Nestle, was upbeat about the company’s year-to-date performance.

“In a tough environment, we continued to build our capabilities and positions for the future while maintaining strong growth across regions and categories,” he said. “The constant renovation of our existing product portfolio together with our strong pipeline of game-changing innovations resulted in many market share gains. A high rate of innovation also requires significant consumer-facing marketing support. For the year as a whole, in spite of input cost pressures, we expect to slightly over-perform against our long-term organic growth range of 5-6% and continue to strive for a margin improvement in constant currencies.”

With sales of 19.1 billion Swiss francs ($21.25 billion), Zone America sales were up 5.6% in the first nine months of 2011. Real internal growth was 0.8%.

In North America, Nestle said consumption in several categories was down, buffeted by difficult economic conditions and higher pricing.

“But new lines like DiGiorno Pizza Combos, Lean Cuisine snacks and Dreyer’s Smoothies helped mitigate the effects of the slowdown,” the company said.

Growth was strong in Latin America, the company said.

Outside of the Americas, Nestle enjoyed rapid growth in Zone Asia, Oceania, Africa, with organic sales growth of 11.7% and real internal growth of 8.2%. In Zone Europe, organic growth was 3.8% and real internal growth was 2.2%.

In a breakdown of sales companywide by product line, milk products and ice cream enjoyed organic growth of 8.1% and real internal growth of 3.2%; nutrition and healthcare were up 7.9% and 6%, respectively; confectionery was up 4.4% and 2%; water was up 4.7% and 3.2%; and powdered and liquid beverages were up 12.5% and 7.8%.

“For the year as a whole, in spite of input cost pressures, we expect to slightly over-perform against our long-term organic growth range of 5-6%, and we continue to strive for a margin improvement in constant currencies,” Nestle said.
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