Nestlé Sales Down 2.1% in Q1, Confirms Guidance

Nestlé's first-quarter sales performance of 3.8% organic growth, combined with the expected benefits from several initiatives already in progress in the markets and product groups, enables the company to confirm its guidance for 2009.

22/04/09 In the first quarter of 2009, Nestlé achieved organic growth of 3.8%, including 0.3% real internal growth, the company reported. Acquisitions, net of divestitures, had a negative impact of -0.7% on Group sales, as did the currency effect of -5.2% due to the strength of the Swiss franc compared to most other currencies. These two factors resulted in a reduction in Nestlé Group sales of 2.1%, to CHF 25.2 billion.

Paul Bulcke, CEO of Nestlé: "The Group achieved positive organic growth in the first quarter of 2009, despite tough comparisons with Nestlé's near 10% organic growth over the same period last year. Our response to the challenging economic environment in 2009 has been to seize new opportunities, accelerating key initiatives in areas such as product affordability, innovation and renovation, as well as cost efficiencies. The increasing momentum from such initiatives, as well as the strength of our brands and our worldwide geographic presence, enables me to confirm our guidance for 2009 as a whole."

Nestlé's first-quarter sales performance of 3.8% organic growth, combined with the expected benefits from several initiatives already in progress in the markets and product groups, enables the company to confirm its guidance for 2009: organic growth at least approaching 5% together with a further improvement of the EBIT margin in constant currencies. This expected performance is in line with the long-standing Nestlé model.

In the first quarter of 2009, the organic growth of Nestlé's total Food and Beverages business (including the Zones and globally-managed businesses such as Nestlé Waters, Nestlé Nutrition, Nestlé Professional, Nespresso and the Food and Beverages joint ventures) was 3.6%, with 0.7% in Europe, 5.0% in the Americas and 6.5% in Asia, Oceania and Africa.

Zone Europe: sales of CHF 5.2 billion, 0.5% organic growth and -1.3% real internal growth. Consumer demand was subdued in Western Europe, whilst the performance of the Zone as a whole was impacted by the comparison with a strong first quarter in 2008 and the late start to the ice cream season. France and the UK were the strongest performers. In Central and Eastern Europe, pricing due to currency devaluations was the main contributor to organic growth. Overall, soluble coffee and petcare achieved the strongest growth.

Zone Americas: sales of CHF 7.5 billion, 7.1% organic growth and 2.0% real internal growth. Both North and South America achieved good performances with mid single-digit organic growth. In North America, frozen food, ambient dairy, soluble coffee and petcare performed well. In Latin America, ambient culinary products, soluble coffee, ice cream, petcare and biscuits showed strong growth.

Zone Asia, Oceania and Africa: sales of CHF 3.7 billion, 5.8% organic growth and 0.8% real internal growth. The vast majority of the Zone's emerging markets achieved positive organic growth despite lower reported pricing. Amongst the developed markets, there was a strong performance in Oceania, whereas Japan was somewhat softer. Overall, soluble coffee, petcare and confectionery delivered double-digit organic growth.

Nestlé Waters: sales of CHF 2.1 billion, -2.5% organic growth and -4.0% real internal growth. This reflects the continued adverse trend in the bottled water industry, particularly in Western Europe and the home-and-office segment in North America. Nestlé's retail business in North America gained market share. The emerging market business enjoyed double-digit organic growth. Nestlé Pure Life achieved double-digit organic growth with both the emerging markets and North America contributing.

Nestlé Nutrition: sales of CHF 2.4 billion, 0% organic growth and -4.3% real internal growth. This reflects the impact of the comparison with 14.4% organic growth in the first quarter of 2008, as well as weak growth in the European infant nutrition business and softer market conditions in the US, particularly affecting Jenny Craig. However, many emerging markets enjoyed good growth, supported by a strong innovation and renovation pipeline. The European roll-out of the NaturNes range continued to gather pace.

Other Food and Beverages: sales of CHF 2.3 billion, 6.8% organic growth and 3.1% real internal growth. Nespresso again achieved an outstanding double-digit organic growth. Cereal Partners Worldwide continued to perform well. Nestlé Professional was affected by a softer out-of-home market, especially in developed countries.

Powdered and liquid beverages: sales of CHF 4.4 billion, 9.7% organic growth and 4.7% real internal growth. Nescafé continued to benefit from its programme of renovation launched in 2008, as well as the increasing pace of the international roll-out of Nescafé Dolce Gusto. The strong nutritional credentials of Milo and Nesquik continued to drive growth for both their powdered and liquid variants. Nespresso continued its outstanding performance. Overall, the product group achieved double-digit organic growth in the Americas and Asia, Oceania and Africa.

Milk products and ice cream: sales of CHF 4.3 billion, -0.2% organic growth and -3.0% real internal growth. These figures reflect the comparison with 16.0% organic growth in the first quarter of 2008. In the dairy category, currency devaluations in some emerging markets created pricing pressure and impacted demand. However, the category continued to benefit from a multi-tier strategy with products adapted to different affordability levels and nutritional needs. Ice cream was strongly impacted by reduced out-of-home consumption as well as a late start to the season in Europe. In the US, the super-premium brand Häagen Dazs performed well, as did Skinny Cow and Drumstick. Emerging markets benefited from the roll-out of new ice cream offerings for lower income consumers such as Nestlé Sorbets and Ice Buko in the Philippines.

Prepared dishes and cooking aids: sales of CHF 4.1 billion, 1.0% organic growth and -0.5% real internal growth. Maggi culinary products performed well in Asia, Eastern Europe and Latin America. In Europe, there was weaker growth from culinary and frozen prepared meals, but stronger growth from the Wagner and Buitoni pizza businesses as well as Herta in France. In the US, Lean Cuisine had a slow start, but Hot Pockets and Stouffer's family meals maintained their good growth momentum.

Confectionery: sales of CHF 2.7 billion, 4.3% organic growth and -1.1% real internal growth. The emerging markets in Asia, Africa and the Middle East continued to enjoy strong growth. The UK also performed well, particularly KitKat, which achieved double-digit growth. In Eastern Europe, the combination of the economic downturn, the increase in the cocoa price and currency devaluations resulted in reduced demand. In North America, growth continued to be impacted by the resizing of the portfolio. In Latin America, the biscuit business achieved strong double-digit organic growth with brands such as Passatempo in Brazil and Kuky in Chile.

PetCare: sales of CHF 3.2 billion, 11.5% organic growth and 5.0% real internal growth. This excellent performance reflects resilient demand for key premium and super premium Purina brands such as Dog Chow, Beneful, Pro Plan and Cat Chow. The growth of the business was supported by products at different price points as well as the continued success of the 2008 launches. The product category achieved strong organic growth in Europe and double-digit organic growth in the other zones.

Pharmaceutical products: sales of CHF 1.9 billion, 5.4% organic growth and 6.1% real internal growth. Alcon and the joint-venture Galderma contributed to the organic growth.