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Emerging markets continue to drive Nestlé sales

By Oliver Nieburg+

18-Oct-2012

Food and nutrition giant Nestlé has reported improved sales in its 9-month results driven by growth in emerging markets, but Q3 was a little slower than last year.

Nine-month sales were up 11% on last year to CHF 67.6bn ($73.2bn) and the company reported 6.1% organic growth.

Growth in developing markets was 11.7% compared to 2.4% in developed markets.

The company reaffirmed its 2012 outlook of between 5% and 6% organic growth.

Andrew Wood, senior research analyst at Sanford C. Bernstein, said: “Q3 organic sales growth was exactly the same as Danone’s yesterday: +5.0%. And our reaction is very similar too: we expected a slowdown in growth, but we did not expect things to slow so much.”

Europe was the slowest growth region for Nestlé. Sales grew 2.5% in Europe compared to 6.1% in the Americas and 10.8% in Asia, Oceania and Africa.

China JVs & Japanese growth

Nestlé held its press conference in China and reported strong growth in the market driven by partnerships with Chinese firms Yinlu and Hsu Fu Chi.

The company announced plans for two new R&D centers in China for 2013.

Nestlé food categories: 9-month sales (CHF) & organic growth

Powdered and liquid beverages - 14.4bn - +9.5%
Milk products and ice cream - 14bn - +6.4%
Prepared dishes and cooking aids – 10.4bn - +1%
Nutrition & HealthCare – 7.9bn - +6.7%
Confectionery – 7.2bn - +4.7%
Water - 5.6bn - +5.8%

China and Indonesia contributed to growth in Asia through strong performance in dairy, beverages and the firm’s Shark chocolate brand.

Nestlé also saw growth in the developed Japanese market with, ice cream and Kit Kat performing well.

The company’s Cereal Partners Worldwide joint venture with General Mills was also strong in developing markets.

Slower growth in Europe

Nestlé posted CHF 11.2bn ($12.1bn) sales in Europe during the period with 1.9% organic growth.

“The European market is tough,” said Nestlé during its webcast.

The European economy has troubled progress in the region, but Nestlé still reported growth in some of the worst hit markets, such as Greece.

It flagged-up the UK, France and Switzerland as highlights for the region.

Nestlé Confectionery grew 2.6% in the UK, helped 29.5% sales growth for the firm’s Yorkie bar.

Kit Kat grew in high single digits during the period

Modest growth in Americas

Sales in the Americas during the period stood at CHF 20.9 billion with 5.5% organic growth.

The ice cream category saw some improvement, but the frozen meals and pizza segment continued its decline.

The company saw double digit growth in Latin America with Brazil and Mexico the highlights

Brazil is Nestlé’s largest confectionery market for the region.

Nestle head of investor relations Roddy Child-Villiers, said of the North American market: “Chocolate is a small market share business for us but it’s doing well.”

Category performers

The Kit Kat brand grew in high single digits, helping Nestlé’s overall confectionery segment to grow almost 5% organically, taking category sales to CHF 7.2bn ($7.8bn).

Nestlé’s nutrition business performed well in emerging markets driven by infant formula and cereals.

However, Nestlé added: “Trading conditions were subdued in a number of developed markets due to category contraction.”

Nestlé concluded: “As we expected, the tough trading environment, especially in developed markets, is continuing. Our performance year-to-date is in line with our expectations.”

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