Nestle, the world’s largest food group, has raised its organic growth outlook for 2008, citing strong global demand and price increases.
The company expects organic growth for the full year 2008 to be close to the previous year’s level and clearly above the long-term trend target of between 5-6%.
In a statement, Nestle said price increases to absorb higher input costs, a “successful” early Easter season and accelerated internal growth momentum, all contributed to an “outstanding” organic growth rate for the first two months of the year.
The other elements influencing sales – foreign exchange as well as acquisitions and divestitures – are evolving as expected, Nestle said. Currencies, mainly as a result of the strength of the Swiss franc relative to the US dollar, but also to the Euro and other currencies, will weigh on consolidated sales, whereas acquisitions net of divestitures, mainly due to Novartis Medical Nutrition and Gerber, will boost sales growth, a statement said.
“We expect our raw material cost pressures to abate somewhat in the course of the year, and foresee price increases to trend lower in the second half of 2008, resulting in a full year organic growth rate close to the level reached in 2007, clearly above our long-term target,” said Peter Brabeck-Letmathe, chairman and CEO of Nestlé.
During 2007 and in the current year, commodity markets have been characterised by sharp upward movements and increased volatility. This reflects strong global demand for food, accelerating usage of food raw materials for biofuels and the decisive presence in the market of non-traditional speculative players, the company noted.