ZURICH AFP) – Swiss food giant Nestle reported slimmer sales than expected in the first quarter on Thursday, weighed down by weak demand for frozen pizza and snacks in North America.
Shares in the group fell following the publication of its earnings, which come as Nestle has recently faced scrutiny over the quality of its Perrier water and sugar levels in baby food sold in poorer countries.
Total sales fell 5.9 per cent to CHF22.1 billion (USD24.2 billion) in the first three months of the year at the group, whose brands range from Purina pet food to Nespresso coffee, KitKat chocolate bars and Gerber baby products.
Analysts surveyed by Swiss news agency AWP had expected sales totalling CHF22.3 billion.Its organic sales growth – which excludes currency fluctuations and acquisitions – reached 1.4 per cent.
The group’s real internal growth (RIG), which takes into account both sales volume and product value, slumped two per cent – deeper than the 0.7 per cent fall expected by analysts.
The company said in a statement that sales performance was “impacted by soft consumer demand, particularly in North America, and the temporary supply constraints for vitamins, minerals and supplements”.
Europe and emerging markets “more than offset” the decline in North America, it added.
“We had expected a slow start and see a strong rebound in RIG in the second quarter with reliable delivery for the remainder of the year,” Nestle chief executive Mark Schneider said.
“A wide range of growth initiatives across the group are now starting to deliver,” he said, noting that Nestle has “stepped up” commercial activity in North America, primarily in frozen food, which “lost ground” in the first quarter.
Nestle’s RIG in North America was down 5.8 per cent, said chief financial officer Anna Manz.
“Weakness in the US centered around frozen pizza and snacks, where we saw a combination of soft consumer demand, intense price competition and a reduction in retailer inventories in the quarter,” Manz said.
Shares in the group ended 2.0 percent down on the Swiss stock exchange in afternoon deals.
“We will reach a turning point in the second quarter,” Schneider said in a conference call.
“We are taking the right steps to accelerate growth and expect a much stronger performance starting from the second quarter,” he added.
