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Nestlé Reports Slowed Q1 Organic Growth

Attributing its 4.2 percent organic growth during the first quarter of 2014 to product launches and efficient execution, Nestle S.A. CEO Paul Bulcke says full-year expectations remain unchanged. However, the rate of growth is the smallest since 2009.

“We will keep up the pace of innovation, while further strengthening support for our brands,” Bulcke said on the call to investors, noting the company anticipates five percent organic growth, improved margins and performance weighted to the second half.

Led by emerging market growth of 8.5 percent, Q1, Asian, Oceanian and African markets reported a 7.3 percent increase, followed by the Americas with 4.6 percent and 0.3 percent in Europe. Overall, developed markets showed only a 0.6 percent improvement for the quarter.

First-quarter sales were down 5.1 percent to $23.6 billion, slowed by negative foreign exchange and acquisitions.

In confectionery, Q1 sales reached $2.5 billion, down from $2.8 billion the year prior. Both organic growth and real internal growth for the segment dipped by 0.5 percent and 3.3 percent, respectively.

In the Americas, sales reached $6.8 billion, down from $7.5 billion year on year. Bad weather depressed sales in the North American market, although product rollouts including Butterfinger Cups, buoyed performance, according to Nestlé. The South American market was strong in spite of a late Easter season. Organic growth for the region was 4.1 percent; however, real internal growth was 0.9 percent for the quarter.

Organic growth was up 5.3 percent in Asia, Oceania and Africa, achieving sales of $4.9 billion and 2.9 percent real growth, and led by Kit Kat in confectionery. Emerging markets in Africa, the Philippines, Turkey and Pakistan were solid; Chinese, Indian and Malaysian showed increased market share. Developed markets in this region also grew, particularly in Japan.

The late date for Easter and unrest in central Europe and Russia depressed market sales overall, although Spain and Portugal showed early signs of recovery, and confectionery sales in Spain and Russia were strong, Nestlé claims. Organic growth sank 0.8 percent, albeit real growth inched up by 0.7 percent.

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