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Nestlé enjoyed strong sales growth during the first three months of this year, confirmed its guidance for 2017 and flagged higher restructuring costs in an effort to drive future profitability.
The Swiss food giant said sales rose by 0.4 per cent on a reported basis to SFr21bn ($21.1bn) in the three months ended March 31, with its best growth coming from prepared dishes and cooking aids, powdered and liquid beverages, and water.
More encouragingly, organic sales growth (that which is not derived from acquisitions) rose by 2.3 per cent in the first quarter, driven by Asia. This was better than the 2 per cent analysts had pencilled in and also fell within the company’s guidance range.
Mark Schneider, the company’s chief executive, said:
The leap year comparison and other seasonal effects made the start of this year particularly challenging. We were encouraged by the growth in Asia and the resilience of consumer spending in Europe. Consumer demand in the Americas remained soft. Our pricing improved moderately. We confirm our 2017 guidance and have made good progress with our growth and efficiency projects to position our company for enhanced value creation.
The company added that sales took a 0.4 per cent hit owing to foreign exchange conversions, as well as the sale of assets.
Nestlé confirmed its full-year guidance, tipping organic growth to come in between 2 per cent and 4 per cent in 2017.
But the company said that in order to drive future profitability, it planned to increase restructuring costs “considerably” this year, which would mean that operating profit margin in constant currency is expected to be stable. Underlying earnings per share in constant currency terms are expected to increase, though.
Nestlé’s Asia, Oceania and sub-Saharan Africa saw organic sales growth of 4.5 per cent, much stronger than what was achieved in the Americas and Europe, Middle East and North Africa markets.
Southeast Asia, India and sub-Saharan Africa were the key regional drivers, the company said, while China’s contribution to growth was negative owing to the timing of the lunar new year holiday in late January. The company noted that North America faced softer consumer demand.
Nestlé’s Waters division saw organic growth of 3.1 per cent, while its Nutrition business grew by 1.1 per cent.