Nestle sales rise on demand from emerging markets

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By JOHN HEILPRIN, Associated Press

GENEVA (AP) — Swiss food and drinks giant Nestle SA forecast Friday that 2012 will be a challenging year but reported that first-quarter sales rose a healthy 5.6 percent from a year earlier, fueled by strong growth in emerging markets and higher retail prices.

The maker of Nescafe, Haagen Dazs and Jenny Craig said sales amounted to 21.39 billion Swiss francs ($23.34 billion), though demand in developed markets was subdued amid global financial uncertainty in the United States — its biggest market — and Europe.

Sales in developed countries grew 3.1 percent, compared with a 13 percent rise in emerging markets.

"As anticipated, 2012 is already confirming itself to be a challenging year," CEO Paul Bulcke said in a sales update statement.

"In many developed markets where consumer confidence is low, the trading environment is subdued whilst in most emerging markets, conditions remain dynamic and rich in growth opportunities," he said. "Our past and present investments, and continuing innovation, have enabled us to deliver good growth in the first quarter."

The results of the Vevey, Switzerland-based company generally met or exceeded analysts' forecasts. No profit figures were disclosed.

Europe's food makers have been hurt by the continent's sovereign debt crisis, which has forced governments to cut spending, seen a spike in unemployment and made consumers wary of spending. Meanwhile, higher commodity prices have made retail food prices more expensive.

Nestle results showed it managed the tricky market situation relatively well.

Andrew Wood of the Sanford C. Bernstein research firm said he had anticipated that Nestle would have a "fairly strong top-line start to the year." However, he does not believe it would be enough to get its stock "moving again, particularly given current lofty valuations."

Nestle shares were trading 0.5 percent lower at 56.90 francs ($62.10).

Bulcke said a combination of retail price hikes and a predicted drop in the cost of raw materials in the second half of the year has enabled the company to confirm the full-year outlook "of delivering 5 to 6 percent organic growth" and higher earnings for shareholders.

On Thursday, Nestle held its annual general meeting in Lausanne where shareholders approved a dividend of 1.95 francs ($2.13) per share.

Like many Swiss companies, Nestle has had to cope with the strength of the Swiss franc against other currencies, but since last summer Switzerland's central bank has moved aggressively to weaken the franc and improve the outlook for Swiss exports.

The world's biggest food and beverage maker said its organic sales growth was a robust 7.2 percent, while real internal growth was 2.8 percent.

Nestle said organic growth was 6.2 percent in the Americas, 2.3 percent in Europe and 11.4 percent in Asia, Oceania and Africa.

The company had posted sales of 22.34 billion francs ($24.38 billion) in the first quarter of 2010.

Nestle did not comment on its bid to buy Pfizer Inc.'s infant-nutrition business for a reported $9 billion, a deal that would help the Swiss-based company to boost growth in China and maintain its position as one of the world's largest sellers of infant formula.

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