Swiss food giant Nestlé today (19 October) posted an on-target 9.1% increase in net sales for the first nine-months of the year, however, Nestlé stock fell following the company’s failure to announce a new share buyback programme.
Nestlé, the world’s largest food group, said sales for the first nine-months totalled CHF72.2bn (US$57.3bn), up from CHF66.2bn reported a year ago.
The group said that it had shown strong organic growth in the period, which was up 6.1%, marginally above the company’s 5-6% target.
Peter Brabeck-Letmathe, chairman and CEO of Nestlé, commented: “Our strong growth has continued into the third quarter of 2006.”
Nestlé’s beverages unit reported sales of CHF19.27bn and organic growth of 7.9%, the company said, citing strong bottled water sales and continued growth from instant coffee and Nesquik powdered drinks.
The company said that it was pleased with the performance of frozen busineses in Europe and the Americas, attributing its success to the launch of several new low fat products. Milk products, nutrition and ice cream achieved 5.4% organic growth during the period. While pet care achieved 6.9% organic growth and the Cereal Partners Worldwide JV achieved organic growth of 18%.
However, Nestlé’s chocolate, confectionery and biscuit sales were disappointing, particularly in Western Europe. Organic sales growth was only 1.7% for the division as a whole.
By geographic regions, sales in Europe increased by 2.1% to CHF19.41bn, sales in the Americas were up 6.5% to CHF22.54bn, while in Asia, Oceania and Africa, sales rose 7.4%, with KitKat sales particularly strong in Japan and Milo enjoying double-digit growth.
Despite unstable raw materials and energy costs, the company confirmed previous guidance predicting full year organic sales growth at the top end of its targeted 5% to 6% range and an improvement in constant currency margins for the full year.
“We are still facing volatile raw material and energy prices, but overall, I feel comfortable in reconfirming our reaching the upper end of our long-term organic growth target of between 5 and 6%, combined with an improvement of the EBIT margin in constant currencies for the full year. We have also continued to make progress in our transformation into a nutrition, health and wellness company through our active business portfolio management and the announced changes in our top management,” Brabeck-Letmathe said.
As part of the group’s re-orientation towards health and nutrition, Nestlé also revealed that it has created the role of chief technology officer. Werner Bauer, head of corporate technical, production and research and development will fill this position in February.
However, a notable omission from the day’s announcements was news that the company is planning a new share repurchase scheme, having almost completed a CHF3bn buyback commenced last October. In a conference call, the company said that further buyback announcements will be made at “the appropriate time”.
Shares in the food colossus were down just over 3% at 2.10pm (GMT) today, dropping CHF13.25 to CHF424.50.