Sales reached CHF 25.7 billion in the three month and beat analyst expectations.

21 April 2008

VEVEY - Nestle SA, the world's biggest food and drink company, on Monday reported a 6 percent increase in sales in the first quarter thanks to strong organic growth and acquisitions.

The world's biggest food and drink company said sales reached CHF 25.7 billion in the three months ending 31 March, up from CHF 24.25 billion during the period in 2007.

That beat analyst expectations of CHF 25.37 billion. Sales were boosted by acquisitions in 2007, particularly of Novartis' Gerber baby food unit and its medical nutrition business, the company said.

Sales also increased thanks to strong organic growth - an industry yardstick comprising volume growth and price increases, Nestle said.

The company, which reports profit figures only for the half year and full year, said organic growth rose 9.8 percent from 7.4 percent.

Nestle said the sales growth was slightly slowed by the strength of the Swiss franc compared with other currencies.

''On the basis of this high-quality growth, with a good balance between real internal growth and pricing, I am confident that we will achieve our 2008 targets,'' said chief executive officer Paul Bulcke.

Shares in Nestle were down 2.34 percent at CHF 501.50 in Zurich.

The company said it expects organic growth for the full year to be similar to last year's 7.4 percent, and improvement in the operating margin.

Analysts said they expect the company to improve its margin by around 30 basis points in 2008.

Nestle said it is comfortable with this view.

''We are happy with the consensus,'' said Roddy Child-Villiers, head of investor relations, in a conference call.

Nestle in 2007 had a margin of 12.6 percent.

Andrew Wood of Bernstein Research said Nestle has fulfilled market expectations despite a disappointing negative growth in the water division. He said it was positive that the company reiterated its growth guidance and that commodity cost pressure would somewhat decrease during the year.

[AP / Expatica]