Thursday, October 20, 2011

Price hikes bolster Nestle 9-mth underlying growth

ZURICH:'' Food giant Nestle may raise its full-year guidance on Thursday, Oct 20 as price hikes and strong demand for its products in emerging markets should help it post solid underlying sales growth during the first nine months of 2011.

Markets will scrutinise Nestle's statement for an update on the current trading environment, a forecast on raw material price developments, potential further price hikes and M&A plans.

Chief Executive Paul Bulcke told Reuters on Tuesday that he expected raw material prices, which have come down somewhat on fears of a global recession, to stay quite high.

Analysts in a Reuters poll expect Nestle's underlying sales, which strip out acquisitions and currencies, to have risen 7.1 percent between January and September, slightly less than the 7.5 percent growth seen in the first half.

Prices for the group's branded foods and drinks are expected to rise 3.1 percent. "We expect to see further progress in terms of pricing," Jon Cox at Kepler Capital Markets said.

The maker of KitKat chocolate bars and Nespresso portioned coffee said in July it expected underlying sales to grow at the top end of a 5-6 percent range, a forecast analysts now see as conservative.

"A 6 percent increase in full year 2011 would imply a slowdown in organic sales growth to less than 3 percent in the last quarter, which is not realistic," Vontobel analyst Jean-Philippe Bertschy said.

A moderate slowdown in growth in developed markets is, however, likely, Bertschy said. "We do not rule out that the U.S. will report negative volume growth in the third quarter."

French yoghurt maker Danone on Tuesday reported slower sales growth in its dairy division in the third quarter, but it gave a confident outlook for 2012.

Nestle, which is sitting on a pile of cash since it sold its remaining stake in eyecare firm Alcon to Novartis , has recently stepped up the pace of acquisitions, taking stakes in two Chinese food groups to boost emerging market growth.

"We anticipate a pick-up in bolt-on M&A and whilst the immediate return will not be high, the medium term return from building scale, via strong brand equities, in growth markets, makes this an attractive use of capital," UBS analyst Alan Erskine said in a note. - Reuters

No comments:

Post a Comment