* Q1 organic sales growth 4.3 pct vs 4.8 pct in poll
* Emerging markets growth slows
* Bombing of Syria factory hits supply chain
* Confirms 2013 guidance for lower end of 5-6 pct sales
By Silke Koltrowitz
ZURICH, April 18 Nestle's first
quarter sales growth undershot rival Danone's after
some retailers in Asia cut inventories back to match poor
demand, and the destruction of a key Middle East factory in
Syria slowed supplies.
In Europe, a cold spring hit consumption of bottled water
and ice-cream, while a horse meat scandal and pizza and
chocolate egg recalls in the region turned off consumers already
counting pennies in austere conditions.
"Organic growth (is) likely (to) come in at the lower end of
our 5-6 percent guidance," investor relations head Roddy
Child-Villiers told a conference call.
Sales at the world's largest food company rose 4.3 percent
to 21.9 billion Swiss francs ($23.52 billion), below an average
estimate of 22.6 billion in a Reuters poll.
Sales growth in Asia, Oceania (Australia and New Zealand)
and Africa (AOA) slowed to 4.4 percent overall, from 8.4 percent
in full-year 2012. They were slowed further by shortages in Nido
milk powder, Maggi bouillons and Crelac infant cereals after a
mortar shell destroyed a major production plant in Syria.
"The most immediate impact of the slowdown has been on our
downstream distributors who have found themselves with too much
stock," Child-Villiers said, adding this stock had to be
dispersed before order levels could normalise.
He said India and the Philippines had a slow start to the
year. Even China slowed but still saw double-digit growth.
Bernstein analyst Andrew Wood said the AOA zone was the
biggest disappointment: "We feel management has still not been
able to adequately explain how a business that had been growing
11-12 percent for six quarters ... suddenly dropped to 5 percent
in Q3 (2012) and has stayed in mid-single digits since."
Across the group as a whole, pricing recovered a bit versus
the fourth quarter but growth from volume and product mix fell
to its weakest in over three years, he added.
Child-Villiers said pricing was down from last year
reflecting the "rather different raw material cost environment",
but would not give details of input costs and profitability. He
also said rising global milk prices could affect demand for
dairy products among lower income consumers in coming quarters.
Kepler Capital Market analyst Jon Cox said the figures
looked disappointing, particularly compared to Danone, which
earlier this week reported quarterly sales growth of 5.6 percent
on strong demand for baby food in Asia - a category Nestle
boosted with its recent Pfizer baby food buy
, but which is not yet included in its underlying
Nestle shares, which have risen about 8 percent this year,
recovered from an early dip to be up 0.5 percent at 64.60 euros
by 1237 GMT, in line with the European food sector index
They trade at about 17.6 times estimated earnings for the
next twelve months, at a premium to Danone at about 17.2 but at
a discount to Unilever at over 18 times.
Unilever reports first-quarter results on April 25, and
Mondelez International on May 7.
Nestle, which makes Kitkat chocolate bars and Nespresso
coffee pods, said consumer sentiment remained subdued in Europe,
where volume growth was partly offset by falling prices. Sales
in the region grew 1.5 percent to 3.7 billion francs.
Nestle's bottled water business grew only 1.8 percent, hit
by the late arrival of spring that also weighed on ice-cream.
ZKB analyst Patrik Schwendimann said 4.4 percent growth in
the coffee and chocolate beverage category was disappointing.
Nestle is facing increasing competition in its fast-growing
portioned coffee business, through copycat versions of its
Nespresso capsules and rival coffee brewing systems.
It will also have to compete with the global hot drinks
empire created by the $9.8 billion acquisition of D.E. Master
Blenders, maker of Douwe Egberts coffee and the Senseo
coffee system, by German investor Joh A Benckiser that already
owns Caribou Coffee and Peet's Coffee & Tea.
However, Child-Villiers said, Nestle was gaining market
share in Europe thanks to products like its petcare brands
Gourmet and Felix.
Business in North America is improving as the pizza category
returned to growth and soluble coffee brand Nescafe performed
well, the group said. Overall sales in the Americas increased
5.3 percent to 6.6 billion francs.
Child-Villiers confirmed Nestle aimed to increase its
dividend each year.