Home >companies >Nestle sales beat estimates on Nescafe, Nespresso coffee

Zurich: Nestle SA, the world’s biggest food company, reported first-quarter sales that beat analysts’ estimates, as Nescafe and Nespresso were boosted by marketing to ward off competitors in coffee.

Sales rose 3.9% on an organic basis, the Vevey, Switzerland-based maker of KitKat bars and Perrier water said in a statement on Thursday. Analysts had expected 3.6%, according to the median estimate in a Bloomberg survey. Nestle expects “further momentum" in the second half, chief financial officer Francois-Xavier Roger said on a call with analysts.

Nestle’s world-leading coffee business faces a fresh challenge from JAB Holding Co., which has spent more than $30 billion acquiring assets like Keurig Green Mountain Inc., the maker of the US’s most popular single-serve coffee system. Nestle’s revenue from powdered and liquid beverages—predominantly the coffee business—rose 6.3%. That was boosted by advertising and promotions, according to Jon Cox, an analyst at Kepler Cheuvreux in Zurich.

“Nestle invested money into marketing in the fourth quarter, which actually dampened group margin in 2015, but is now paying off," Cox said. “It’s taking advantage of the uncertain situation among competitors in coffee amid JAB’s rapid acquisitions of multiple businesses."

The shares rose 0.9% to 71.80 francs as of 9:03am in Zurich. That gives the Vevey, Switzerland-based food processor a market value of about 230 billion francs ($237 billion), making it Europe’s biggest company.

Volume-driven

The first-quarter growth rate is the slowest since 2009. Shipments rose 3%, Nestle said. Pricing boosted sales by 0.9 percentage point.

Maggi regained market share in India after last year’s product recall though the comparison with the year-earlier period was difficult, Nestle said.

The maker of Gerber baby food confirmed its forecasts for 2016. Nestle said in February it expects organic revenue growth to be similar to last year’s 4.2% and below its long-term target because it’s hard to raise prices. Nestle also said at the time it aims to achieve improvements in margins and underlying earnings per share in constant currencies. Bloomberg

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