Zurich: Swiss food giant Nestle raised its full-year outlook, striking a more optimistic note than its peers after buoyant demand for its strong brands in emerging markets boosted sales in the first half.
The world’s biggest food group said on Wednesday its food and beverages business should show underlying sales growth of around 5%. So far, the group had only said growth should beat last year’s 3.9%.
“This is an excellent set of figures and a clear raise in guidance despite talk of reconfirmation. The company’s portfolio means it can raise prices while others are cutting theirs,” said Jon Cox, an analyst at Kepler Capital Markets.
Underlying or organic growth -- which strips out currency effects and acquisitions -- at Nestle’s food and beverages unit stood at 5.7% in the first half, compared to a company-compiled analysts’ forecast of 5.9%. “We have increased investment in our brands, people and capabilities and have prepared the company for a more challenging second half,” chief executive Paul Bulcke said in a statement.
Anglo-Dutch rival Unilever warned last week the second half would be tougher due to increased competition and higher raw material costs while French group Danone said European consumers were still cautious.
“Organic growth (at Nestle) is slightly below expectations, but there was a strong margin improvement thanks to substantial improvements in the Nutrition and Other Food and Beverages divisions,” Jean-Philippe Bertschy at Vontobel said.
“When compared to the competitors, the margin development is state of the art,” he said.
Nestle’s food and beverages margin on an earnings before interest and taxes level increased by 60 basis points to 13.0% in the first half.
The maker of Nescafe coffee, Kitkat chocolate bars, Perrier water and Buitoni sauces confirmed that it aimed to improve profitability in the full year.
Nestle shares -- which have gained 2.6% so far this year, underperforming a 6.5% rise in the STOXX European food and beverage index -- were indicated to open slightly higher in a market set to fall.
Nestle’s stock is trading at 14.7 times estimated 2011 earnings, at a premium to Unilever and Danone.