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Nestle keeps 2015 outlook despite Indian noodle scare

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Nestle posted better-than-expected first-half sales growth and stuck to its 2015 outlook despite a recall of Maggi noodles in India, counting on strong pricing to counter tough market conditions.

[ZURICH] Nestle posted better-than-expected first-half sales growth and stuck to its 2015 outlook despite a recall of Maggi noodles in India, counting on strong pricing to counter tough market conditions.

The Swiss company said it still expected annual sales growth of around 5 per cent, at the low end of its long-term model calling for 5 to 6 per cent growth.

Organic growth was 4.5 per cent in the first half, ahead of the 4.3 per cent rate analysts had on average expected in a Reuters poll.

Its shares were indicated more than 2 per cent higher in pre-market trading. "Nestle was able once again to deliver robust results, especially when compared to competition," Vontobel analyst Jean-Philippe Bertschy said in a note, keeping his "buy" rating and 80 Swiss franc price target.

Chief Executive Paul Bulcke said first-half results were in line with expectations thanks to growth across product categories and geographies. "Our investments in the new growth platforms Nestle Health Science and Nestle Skin Health are delivering and complement the good momentum in our food and beverages businesses. This allows us to confirm the outlook for the full year," he said.

The world's largest packaged food company, with brands like Nescafe, KitKat and Perrier, reported sales fell 0.3 per cent to 42.84 billion Swiss francs (S$61.3 billion) in the half year to June versus analysts' expectation for a dip of 0.1 per cent.

Net profit fell 2.5 per cent to 4.52 billion francs, lagging the poll average for a 2.3 per cent rise to 4.74 billion.

Like all consumer goods companies, Nestle has been grappling with slowing sales as once-hot economies like China and Brazil cool and European consumers continue to purchase cautiously.

All consumer goods companies are suffering from sluggish markets worldwide but Nestle's particular problems involve its US frozen foods business where sales are falling amid weak consumer perceptions around the health of frozen food, and a pullback in China.

In addition, Nestle's India unit last month reported a 20 per cent slide in second-quarter sales, after its Maggi noodles were pulled from shelves due to safety concerns. "In India, our withdrawal of Maggi noodles resulted in negative organic growth which will continue into the second half. We are engaging fully with the authorities as we work to relaunch the product," the company said on Thursday.

An Indian court has ruled in favour of Nestle in its appeal challenging Indian food safety regulators' findings that its Maggi instant noodles contained excess lead, television channels reported on Thursday.

REUTERS