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Nestle weathers commodities storm, sales rise 7%

By staff reporter , 19-Oct-2007

Nestle yesterday reported organic sales rose by seven per cent in the first nine months of this year, with the company successfully managing to offset rising raw material costs by hiking prices.

During the period the company reported sales of CHF78.7bn (€47.1bn), a nine per cent increase over the same period last year.

 

 

 

Taking out the effects of currency exchange and acquisition and sales of units, the growth translated into a 7.2 per cent gain. The gain was mainly the result of a 4.5 percentage point increase in real internal sales growth - that is, the company sold more product.

 

 

 

Pricing added another 2.7 percentage points to the gains.

 

 

 

"The strength of Nestle's brands allowed to group to raise prices to offset rising raw material costs," the company stated. "These price increases, together with the resulting slight dip in real internal growth, reflect the group's commitment to profitable growth regardless of market circumstances."

 

 

The company also reported it has started a new globally managed business, branded Nestle Professional, dedicated to the food services sector. The unit is an expansion of its already existing business in the sector.

 

 

 

Nestle said management's outlook for 2007 as a whole remains unchanged -- above-target organic growth as well as a "sustainable margin improvement".

 

 

 

In terms of regions, the Asia, Oceania and Africa section saw the largest growth in revenues over the first nine months of 2007, and in terms of organic growth sales increased 9.5 per cent. Sales also increased in the Americas by 8.3 per cent, and Europe by 3.8 per cent.

 

 

 

Confectionery sales rose 5.4 per cent in terms of organic growth, and hit the CHF8.4bn (€5) mark. The company attributed this growth to the growing trend for premium dark chocolate bars such as Nestle Noir and Perugina Nero.

 

 

 

"In geographical terms, Western Europe, especially the UK, Latin America and Asia experienced the strongest levels of organic growth," the company said.

 

 

 

Strong coffee sales helped boost revenues from powdered and liquid beverages, which grew by 10 per cent in terms of organic growth to hit CHF12.8m. Brands that were particularly popular include Nescafe Dolce Gusto, Nescafe Protect and Milo.

 

 

 

In terms of bottled water, sales experienced organic growth of 6.9 per cent, despite slower sales in several European markets.

 

 

 

Dairy sales increased in 2007, despite the strongest price increases needed to mitigate increased costs, and growth was driven by products containing added probiotics and branded active benefits (BABs).

 

 

 

"Across all categories, sales of products containing BABs grew by 18 per cent," Nestle said.

 

 

 

The company said it was pleased with the performance of Nestle Nutrition products, particularly in terms of sales for infant formula, which helped boost revenues by 9.7 per cent.

 

 

 

Sales in the prepared dishes and cooking aids category did not go up quite as much, however organic growth was still posted at 3.4 per cent, "driven in particular by popularly positioned products (PPPS) such as the reformulated, single portion Maggi Noodles in India".

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