Nestle settles for modest sales growth target after first-quarter slowdown

ZURICH (Reuters) - Swiss food giant Nestle maintained its modest 2-4 percent growth target for underlying sales this year, slightly less than Anglo-Dutch rival Unilever ULVR.L, after growth in the first quarter was hit by weak consumer demand for packaged foods in North America and weaker prices in western Europe.

A bird flies past the logo at the headquarters of world food giant Nestle in Vevey October 16, 2014. REUTERS/Denis Balibouse

Comparable or organic sales growth at the maker of Buitoni pasta and Maggi soups slowed as expected to 2.3 percent in the first quarter, from 3.9 percent in the same period last year, when there was one more trading day and an earlier Easter, the company said in a statement on Thursday.

It also reaffirmed new Chief Executive Mark Schneider’s forecast given in February of 2-4 percent organic sales growth, a stable operating profit margin and an increase in underlying earnings per share in constant currencies this year.

Earlier on Thursday Unilever UNc.AS reported underlying first-quarter sales growth of 2.9 percent, helped by some higher prices, and said it aimed for 3-5 percent growth this year.[L8N1HS16N]

Volume growth at Nestle decelerated to 1.3 percent, from 3 percent a year ago, hit by soft demand in North America and China, while the overall increase in prices edged higher to 1 percent, from 0.9 percent.

Underlying sales by the company’s confectionery business declined 2.9 percent, due to the later Easter holiday and weaker demand for chocolate, and its Yinlu drinks business dragged down its performance in China.

Nestle said pricing was still negative in western Europe, but the trend was improving thanks to increases in prices for the group’s flagship Nescafe products.

Nestle’s overall sales increased to 21 billion Swiss francs ($21.1 billion) from 20.9 billion last time, just short of the average of analysts’ forecasts of 21.2 billion francs given in a Reuters poll.

Analysts said Nestle’s quarterly growth was the lowest in more than a decade but they expected the situation to get better, with Kepler Cheuvreux analyst Jon Cox pointing to an improvement in Europe and Asia.

Helvea Baader analyst Andreas von Arx said the pricing trend was good news and should help the share price, which was up 1.1 percent at 76 francs by 0730 GMT, when London-listed shares in Unilever were up 1.4 percent at 3,994 pence.

Editing by Greg Mahlich