Nestle sales grow on back of price increases

Swiss food group Nestle on Tuesday reported better-than-expected sales in the first three months of the year, helped by price increases to offset inflation and demand for its staple products.

Nestle, which makes Nespresso capsules, Maggi bouillons, KitKat chocolate bars and Purina pet food, reported an increase in sales of 5.6 percent to 23.5 billion Swiss francs (23.9 billion euros).

Organic sales -- excluding currency movements or mergers or acquisitions -- rose 9.3 percent, higher than analyst expectations of 7.3 percent.

The group's pet food was the biggest contributor to organic growth, Nestle said, alongside double-digit growth in confectionary products including KitKat bars.

Nestle CEO Mark Schneider said the group had "delivered strong organic growth in the first quarter, as our teams worked diligently to protect volume and ensure resilient mix."

"Portfolio optimization efforts and responsible pricing helped to offset the ongoing pressures from two years of cost inflation," he said.

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Nestle is targeting a full-year sales increase of between six and eight percent.

Jean-Philippe Bertschy, an analyst at investment manager Vontobel, said that quarterly report "once again demonstrates Nestle's strong pricing power and the attractiveness of its brands."

Sales volumes, however, fell by 0.5 percent, due to "capacity constraints" and "portfolio optimization actions" the group said. This was still a smaller drop than analysts had forecast.

The group also said Tuesday it was setting up a joint venture for its frozen pizza business in Europe with private equity firm PAI Partners, subject to the approval of regulators. Nestle will retain a minority stake in the joint venture.

It comes after Nestle last month suspended work at a French plant where frozen pizzas were suspected to be behind deadly food poisonings in children last year.

Source: AFP