Nestle stands by 2015 forecast after sales beat

By Brenna Hughes Neghaiwi and Martinne Geller

ZURICH/LONDON (Reuters) - Nestle, the world's biggest packaged food company, posted better than expected first-half sales growth and stuck to its 2015 forecast, despite a recall of Maggi noodles in India, helped by higher prices in some key product areas.

The maker of Nescafe coffee and KitKat chocolate said on Thursday organic sales, which exclude acquisitions, divestments and currency moves, rose 4.5 percent in the six months to June. That beat analysts' average forecast of 4.3 percent in a Reuters poll and 4.4 percent in the first quarter.

The result put the Swiss company second only to Reckitt Benckiser for sales growth among 11 top consumer staples companies that have reported results, said analysts at RBC Capital Markets.

 

"Nestle has faster and more resilient organic growth than the rest of sector, an under appreciated feature in our opinion," RBC said in a note.

Nestle's shares rose 3.5 percent to 74.70 Swiss francs.

Chief Executive Paul Bulcke said performance was in line with expectations thanks to growth across product categories and geographies. Analysts highlighted strength in coffee and ice cream, which was helped by particularly hot weather in Europe.

Confectionery was boosted by price increases taken to offset rising cocoa prices, while some coffee prices also rose.

Six weeks into the job as chief financial officer, Francois-Xavier Roger affirmed Nestle's annual sales growth target of around 5 percent but declined to say whether the second half would top the first. Executives said 4.5 percent would be "at the low end" of the target for growth "around 5 percent".

All consumer goods makers are suffering from sluggish markets worldwide but Nestle's particular problems involve its U.S. frozen foods where sales are hurt by weak perceptions around the health of frozen food, and a pullback in China. Both businesses are showing improvement, Nestle said.

In addition, Nestle India saw a 20 percent 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.

It said the recall cost it 66 million Swiss francs ($67 million) in the first half and shaved off 10 to 20 basis points of sales growth at a group level.

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.

Reported sales fell 0.3 percent to 42.84 billion francs in the first half versus analysts' expectation for a dip of 0.1 percent. Net profit fell 2.5 percent to 4.52 billion francs, lagging the poll average for a 2.3 percent rise.

($1 = 0.9789 Swiss francs)

(Additional reporting by Michael Shields; Editing by Jason Neely and Mark Potter)