Nestle reports 2% organic growth to US$66.7b in nine-month sales report

USA – Nestle, a Swiss transnational food and drink company, has reported a 2% increase in sales to US$66.69 billion in its nine-month sales report, with an organic growth of 2.8%.

According to the company, the total reported sales increased by 2.0% to US$66.69 billion (from US$65.39 billion in 2017), and the net acquisitions had a positive impact of 0.1% and foreign exchange reduced sales by 0.9%.

The company added that further progress was made in positioning the portfolio towards attractive high-growth categories, as it had acquired the global perpetual license of Starbucks consumer packaged goods and foodservice products.

Organic growth was 2.8%, reaching 2.9% in the third quarter despite high comparables.

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RIG was 2.3% and continued to be at the high end of the food and beverage industry, while pricing increased by 0.5% with improvements in the Americas.

In the third quarter, organic growth continued to improve in North America and for infant nutrition globally.

Growth in China remained at a mid single-digit pace, while Zone EMENA saw slower growth, largely due to high comparables.

All categories had positive growth led by coffee, Purina petcare, infant nutrition and Nestlé Health Science.

Net acquisitions increased sales by 0.1% as the acquisition of Atrium Innovations, the Starbucks license and other transactions were offset by divestments, mainly the U.S. confectionery business.

Foreign exchange had a negative impact of 0.9%, largely due to the devaluation of several emerging market currencies against the Swiss Franc. Total reported sales increased by 2.0% to CHF 66.4 billion.

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“We are encouraged by the progress on our path of accelerated value creation. The nine-month sales show solid growth across most geographies and product categories.

We are starting to see improved momentum in North America and in our infant nutrition category globally. Our business in China continued to grow at a mid single-digit pace.

Our growth was supported by disciplined execution and faster innovation. We have reached significant milestones in portfolio management and are particularly pleased with the early closing of the Starbucks transaction.

We have also made good progress on our various cost reduction programs. Our growth and efficiency initiatives put us on track to meet our full-year 2018 guidance and 2020 targets,” said Mark Schneider, Nestlé CEO.

In the Zone Americas (AMS), the organic growth was 1.4%, with RIG of 0.8% and pricing of 0.6%, with net acquisitions reduced sales by 1.1%, largely related to the divestment of the U.S. confectionery business.

Foreign exchange had a further negative impact on sales of 3.2%, and reported sales in Zone AMS decreased by 2.9% to US$22 billion.

North America had positive organic growth in the nine-month period, while pricing increased in the third quarter, reflecting inflation in commodity and freight costs.

Latin America saw positive organic growth and accelerated to a mid single-digit pace in the third quarter.

Despite the challenging trading environment, Brazil returned to positive growth in the third quarter.

Mexico saw mid single-digit organic growth, with contributions from most categories, in particular Nescafé, with a continued strong momentum for Purina petcare, confectionery and professional across the region.

The company reported that in the Zone Europe, Middle-East and North Africa (EMENA), the organic growth was 1.6%, with solid RIG of 2.3%.

Pricing declined by 0.7% as deflationary trends in Western Europe persisted, net acquisitions reduced sales by 0.1% and foreign exchange increased sales by 2.2%. Reported sales in Zone EMENA rose by 3.7% to US$13.76 billion.

Zone Asia, Oceania and sub-Saharan Africa (AOA), the organic growth was 4.4%, with RIG of 3.7% and pricing of 0.7%.

There was no impact on sales from acquisitions and divestments, foreign exchange reduced sales by 1.3%, while reported sales in Zone AOA increased by 3.1% to US$15.87 billion.

Nestlé Waters had an organic growth of 2.1%, reaching 4.1% in the third quarter. Pricing increased by 2.3% and RIG declined by 0.2%, net acquisitions and foreign exchange reduced sales by 0.8% and 0.7%, respectively and reported sales in Nestlé Waters increased by 0.6% to US$6.1 billion.

In the United States, price increases were implemented in June to reflect significant inflation in packaging and distribution costs.

The recently launched sparkling range under our regional spring water brands continued to see encouraging consumer demand, particularly for Poland Spring, Ice Mountain and Ozarka.

The company also reached an agreement for the sale of Gerber Life Insurance Co. and has started to explore strategic options for Nestlé Skin Health.

Full-year guidance for 2018 confirmed, with organic sales growth expected to be around 3%; underlying trading operating profit margin improvement in line with our 2020 target.

Restructuring costs are expected to be around US$703 million, with underlying earnings per share in constant currency and capital efficiency expected to increase.

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