* Q1 sales 21.4 bln Sfr, meets forecast
* Q1 organic growth 7.2 pct vs 6.6 pct forecast
* Reiterates 2012 forecast for 5-6 pct organic growth
* Emerging markets see 13 pct growth
* Best quarter for bottled water since 2007
By Emma Thomasson
ZURICH, April 20 Nestle, the world's
biggest food group, warned 2012 would be a tough year due to
sluggish growth in the developed world as emerging market demand
and price rises helped first-quarter underlying sales growth
hold up better than expected.
The Vevey-based maker of Nescafe coffee, KitKat chocolate
bars and Maggi soup reported a slight deceleration in quarterly
organic sales growth that still beat forecasts as price hikes
contributed more to growth than analysts expected.
"As anticipated, 2012 is already confirming itself to be a
challenging year," said Chief Executive Paul Bulcke.
"In many developed markets where consumer confidence is low,
the trading environment is subdued while in most emerging
markets, conditions remain dynamic and rich in growth
Emerging markets - which already make up more than 40
percent of Nestle sales - grew 13 percent compared with just 3.1
percent for developed countries, with volume growth down 0.4
percent in the Americas and only rising 0.2 percent in Europe.
"A strong set of figures although we see the outlook
statement as somewhat subdued and expect organic growth to
decelerate through the remainder of the year," said Kepler
analyst Jon Cox.
Nestle shares fell 0.5 percent to 56.90 francs at 0920 GMT
compared with European food and beverage index 0.1
They had hit an all-time high of 57.50 francs on Thursday in
anticipation of good results after French rival Danone
posted strong sales.
Liberum Capital analyst Pablo Zuanic said deceleration in
the Americas and Europe was "somewhat of a concern".
RAW MATERIALS PRICING IMPROVING
Nestle said high commodity prices were still a headwind for
the first half of the year but predicted a "likely improved raw
material environment" in the second half, allowing it to confirm
a full year outlook of 5-6 percent organic growth.
That meant Nestle's forecast for improved margins in
constant currencies would be more weighted to the second half of
the year, investor relations head Roddy Child-Villiers told an
Organic sales growth for the first quarter slipped to 7.2
percent from 7.5 percent in 2011, exceeding the 6.6 percent
forecast in a Reuters poll of analysts.
Sales including foreign exchange fluctuations rose 5.6
percent to 21.4 billion Swiss francs ($23.40 billion).
Nestle said price increases contributed 4.4 percent to
underlying sales growth, compared with analyst forecasts for 3.7
percent, while volume growth of 2.8 percent was as expected.
Danone reported better-than-expected underlying sales growth
of 6.9 percent for the first three months as its key Russian and
U.S. markets returned to growth.
But Danone, which is the most exposed among big food groups
to the euro zone debt crisis with around 40 percent of sales in
the region, warned that deteriorating market conditions in Spain
would hit the full year.
Bernstein analyst Andrew Wood noted that Nestle grew faster
than Danone for the third consecutive quarter but was more
cautious for the rest of the year than its peers.
Nestle said the North American market continued to be hit by
weak consumer sentiment, with growth falling in several
categories where it hiked prices, including frozen food.
But it maintained growth in most of western Europe including
Britain, France, Italy, the Iberian peninsula and Switzerland as
Nescafe and pet food sold well, while Russian sales were hit by
the poor economy and a realignment of distribution networks.
Nestle bottled water had its best quarter in almost five
years, with underlying sales growth up to 8 percent from 5.2
percent in 2011, with a strong performance in North America and
double-digit growth of its emerging market Pure Life brand.
The world's biggest bottled water company with brands like
Perrier and San Pellegrino has seen sales suffer in recent years
as hard-pressed consumers have switched to tap water and amid
environmental campaigns against the business.
Nespresso, Nestle's fastest-growing big brand which said on
Thursday it had won a patent battle with rivals, delivered
underlying sales growth of around 20 percent, with demand
growing around the world.
Child-Villiers said the European patent ruling should help
Nespresso as it pursues court cases in individual countries.
Nestle did not comment on a deal it is expected to seal this
month to buy Pfizer's infant nutrition business for up
to $10 billion to boost its business in China and extend its
lead in the world of formula milk for babies.