MILAN – Nestlé confirmed it expected organic sales growth to exceed 3 percent this year after good momentum in the United States, Brazil and China helped it post better-than-expected sales growth in the first three months.
The maker of Nespresso and Nescafé reported revenue of SFr22.2bn ($21.9bn) in the first quarter, while organic sales growth stood at 3.4 percent. Both measures were ahead of analysts’ expectations for sales of SFr22.1bn and organic growth of 2.8 per cent.
Full-year guidance for 2019 is confirmed, with continued improvement in organic sales growth and underlying trading operating profit margin towards our 2020 targets. Underlying earnings per share in constant currency and capital efficiency are expected to increase.
Group sales
Organic growth reached 3.4% in the first quarter. RIG of 2.2% was resilient. Pricing improved to 1.2%, mainly reflecting increases in Brazil and the United States. Organic growth was 3.2% excluding businesses under strategic review. The growth acceleration was largely supported by Brazil, our fourth largest market.
The United States and China, Nestlé’s two leading markets, maintained good momentum. All product categories saw positive growth. The largest growth contributions came from Purina petcare, dairy and infant nutrition. Organic growth for the Group was 1.2% in developed markets and 6.3% in emerging markets.
Net acquisitions increased sales by 1.2%. The acquisition of the Starbucks license, Atrium Innovations and other transactions more than offset divestments, mainly Gerber Life Insurance and U.S. confectionery. Foreign exchange had a negative impact of 0.3%. Total reported sales increased by 4.3% to CHF 22.2 billion.
Zone Americas (AMS)
Organic growth accelerated to 3.4%, with resilient RIG of 0.9% and a significant pricing contribution of 2.5%. Net acquisitions increased sales by 6.0%, largely related to the acquisition of the Starbucks license. Foreign exchange increased sales by 1.7%. Reported sales in Zone AMS increased by 11.1% to CHF 7.5 billion.
North America maintained good sales development in the first quarter. Pricing increased to reflect cost inflation. The largest contributor to growth was Purina petcare, which saw strong momentum in e-commerce and in premium brands, such as Purina ONE and Tidy Cats litter. North America recorded mid single-digit growth in Nestlé Professional and in the beverages category, comprising Coffee-mate creamers, Starbucks and Nescafé. Frozen food returned to positive growth led by the Hot Pockets and Stouffer’s brands.
Latin America reported mid single-digit growth, with positive contributions in most markets and categories. Brazil posted double-digit growth, supported by both positive pricing and RIG. Mexico saw mid single-digit growth, as strong demand for Nescafé Origins helped to maintain good momentum in coffee. Latin America recorded high single-digit growth for the dairy, confectionery, and Purina petcare categories.
Zone Europe, Middle-East and North Africa (EMENA)
Organic growth was 2.1%, with strong RIG of 3.1%. Pricing declined by 1.0%, as deflationary trends in Western Europe persisted. Net acquisitions had no impact on sales. Foreign exchange negatively impacted sales by 2.8%. Reported sales in Zone EMENA declined by 0.7% to CHF 4.7 billion.
Zone EMENA reported strong RIG despite a low-growth environment in Western Europe. The Purina petcare and infant nutrition categories were the main contributors to growth across the Zone, especially in Central and Eastern Europe, and the Middle East and North Africa. Coffee saw flat RIG with negative pricing resulting from lower green coffee prices. Confectionery posted a good quarter, with double-digit growth for KitKat and strong demand for the recently launched Yes! snack bar. Frozen pizza brands Wagner and Buitoni moved to positive growth, while vegetarian products posted high single-digit growth.
Zone Asia, Oceania and sub-Saharan Africa (AOA)
Organic growth was 3.3%, with RIG of 2.3% and pricing of 1.0%. Net acquisitions and foreign exchange reduced sales by 0.2% and 1.2% respectively. Reported sales in Zone AOA increased by 1.9% to CHF 5.4 billion.
Zone AOA saw solid growth in the first quarter, with a slight slow-down due to Japan and Oceania. China maintained mid single-digit growth, with strong contributions from the illuma organic infant nutrition range, Nescafé ready-to-drink coffee, and culinary, in particular Totole. South-East Asia saw strong growth overall, with double-digit growth in Indonesia and Vietnam, particularly with Bear Brand, NAN and Nescafé. South Asia posted low single-digit growth.
There was strong growth in NAN infant nutrition, Maggi in culinary products and KitKat in confectionery, partly offset by negative sales development in dairy. Sub-Saharan Africa posted mid single-digit growth. Japan had negative RIG due to unfavorable comparables, as well as softness in the coffee category. Oceania saw positive RIG and negative pricing in a deflationary environment. Purina petcare had strong growth in the Zone.
Mark Schneider, Nestlé CEO:
“We are pleased with Nestlé’s solid organic sales growth in the first quarter, building on our full-year 2018 momentum. Our increased speed, innovation for a changing world and execution focus are clearly paying off. We confirm our outlook for the year.”
“In the quarter, we announced the launch of a new range of 24 premium coffee products under the Starbucks brand. The Nestlé and Starbucks teams did an outstanding job and developed these products in just 6 months.”
He added: “The notion of business as a force for good resonates very strongly inside Nestlé. Starting with this report, we will highlight each quarter how Nestlé creates shared value. We will begin by showing how Nespresso delivers on its commitment to quality and sustainability.”
Nespresso
Nespresso maintained mid single-digit organic growth. North America and emerging markets saw double-digit growth, while sales in Europe were flat. Growth continued to be supported by the Vertuo system.
Outlook
Full-year guidance for 2019 confirmed, with continued improvement in organic sales growth and underlying trading operating profit margin towards our 2020 targets. Underlying earnings per share in constant currency and capital efficiency are expected to increase.
