Nestle beats analysts' forecasts
Nestle beat forecasts with a 7.4 percent rise in first-quarter underlying sales but said profit growth would slow as it would not be able to fully pass on increases in the costs of raw materials.
The world's largest food company posted an overall 6.4 percent increase in January-March sales to 24.25 billion Swiss francs ($20.1 billion) as demand rose, especially in emerging markets and in Nestle's pharmaceutical division.
The Swiss group attributed the sales surge in part to forward purchasing a one-off boost in orders from wholesalers anticipating price hikes and pointed to a slower pace of growth in its operating profit margin due to higher input costs especially from coffee, cocoa, grains and milk.
"It's clear that we will not be able to (fully) compensate for these cost increases through prices," said Head of Investor Relations Roddy Child-Villiers.
Nestle's single biggest food input product, milk, has grown vastly more expensive over the past year, he said.
"We are going to lag these very significant increases (in milk costs). We need to play catchup," Child-Villiers said, indicating that some price increases would have to be introduced.
Chairman and Chief Executive Officer Peter Brabeck said the group's pricing power will allow it to meet its sales and margin targets, although its price hikes would likely dampen demand.
"Input costs remain high, but our strong brands enable us to continue to adjust prices. We therefore expect the group to reach its objective," he said.
Agencies
(China Daily 04/24/2007 page16)
