Volume Growth Increases as Nestle Confirms Outlook

Food giant Nestle has confirmed its guidance for the full year after its organic sales growth increased to over 2.8% during its 2018 first quarter, helped by increased volumes.

Nestle is amongst the packaged food businesses taking action following a decline in sales as many consumers shift to fresh foods, reacting through cutting costs, the divesting of its underperforming businesses and the increased efforts to innovate through new products.

The KitKat chocolate bar and Maggi soups maker confirmed Thursday a target of organic sales growth of between 2% and 4% in 2018 and improvement in trading operating margin. Nestle added that it was on track to return to growth in organic sales in the mid-single digits by 2020.

It confirmed as well restructuring costs of approximately 700 million francs equal to $723 million in 2018.

Organic growth for the quarter of 2.8%, which eliminated swings in currency and changes to the portfolio, was ahead of an average analyst estimates of 2.5% and up from its 2017 fourth quarter of 1.9%.

Volume growth increased from 1.2% in the 2017 final quarter to 2.6%, but prices increased by just 0.2%, Nestle announced. Price pressures were underscored by a price row with retailers in Europe.

On Wednesday, Danone the maker yogurt posted a rise of 4.9% in underlying sales for the first quarter, helped by solid demand for its baby formula products within China.

Unilever the Anglo-Dutch company reported sales for the first-quarter that met expectations, helped by gains in volumes, and maintained its outlook for the full-year.

Nestle said growth in its Americas unit increased to 1.2% and in Asia by 4.7%, which was better than its previous quarter. In its EMENA or Europe, the Middle East and North Africa slowed 2.2%, as it was it by declining prices.

One analyst said that sales figures were much better than estimated highlighting its improvement across the U.S.

Deflationary pressures across Europe and Brazil led to weaker pricing, but the figures that came back were slighter better than had been expected which should help with market sentiment.

Shares, which have fallen by 10% of their value in 2018, were set to open higher by 1.1%, according to indications by analysts prior to the market opening.

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