Coffee, dairy help Nestle post strongest quarter in a decade

[ZURICH] Nestle on Thursday posted its strongest quarterly sales growth in 10 years, citing stronger demand for coffee, dairy and petcare products.

The world's biggest food group has weathered the Covid-19 pandemic well so far as consumers locked up at home bought more packaged foods for themselves and their pets.

It also expanded e-commerce and its health science portfolio as consumers bought more online and worried about their health.

"Retail sales saw solid growth and out-of-home channels saw signs of improvement. We confirm our guidance for the year and our mid-term outlook for sustained mid single-digit organic growth," chief executive Mark Schneider said in the statement.

The maker of KitKat chocolate bars and Nescafe instant coffee expects an increase in organic sales growth this year versus the 3.6 per cent achieved in 2020.

Organic sales rose 7.7 per cent in the first quarter, versus 4.3 per cent in the year-ago period, Nestle said, easily beating a forecast for 3.3 per cent organic growth in a company-compiled consensus and a 3.3 per cent drop in sales posted by peer Danone this week.

"What a blow out - the strongest quarterly number since 2011," Kepler Cheuvreux analyst Jon Cox said, pointing to a recovery in emerging markets, while Bernstein's Bruno Monteyne spoke of an "amazing beat".

Shares in Nestle, up just over 2 per cent so far this year, were indicated to open 1.7 per cent higher, according to pre-market indications by bank Julius Baer.

Organic growth stood at 7.2 per cent in the Americas, at 4.4 per cent in Europe and at 9.1 per cent in Asia, Nestle said. Asia was in negative territory in the year-ago period as the pandemic hit there first.

In terms of categories, petcare was up 8.7 per cent, powdered and liquid beverages including coffee rose 9.9 per cent, and dairy increased 15.7 per cent. Nutrition and health science fell 0.5 per cent, dragged down by nutrition.

Nestle said it had made further progress on portfolio development as it wants to offer more health and wellness foods and get rid of underperforming businesses.

It recently sold its North American water brands to One Rock Capital Partners for US$4.3 billion and offloaded its Yinlu peanut milk business in China to Food Wise.

Peer Unilever is due to post its first-quarter update on April 29.

REUTERS