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Middle East factory blow for Nestle

Zurich, April 19, 2013

 

Nestle's first quarter sales growth undershot rival Danone's after some retailers in Asia cut inventories back to match poor demand, and the destruction of a key Middle East factory in Syria slowed supplies.
 
In Europe, a cold spring hit consumption of bottled water and ice-cream, while a horse meat scandal and pizza and chocolate egg recalls in the region turned off consumers already counting pennies in austere conditions. "Organic growth (is) likely (to) come in at the lower end of our five to six per cent guidance," investor relations head Roddy Child-Villiers said.
 
Sales at the world's largest food company rose 4.3pc to $23.52 billion. Sales growth in Asia, Oceania (Australia and New Zealand) and Africa (AOA) slowed to 4.4pc overall, from 8.4pc in full-year 2012. They were slowed further by shortages in Nido milk powder, Maggi bouillons and Cerelac infant cereals after a mortar shell destroyed a production plant in Syria.
 
"The most immediate impact of the slowdown has been on our downstream distributors who have found themselves with too much stock," Child-Villiers said, adding this stock had to be dispersed before order levels could normalise.
 
He said India and the Philippines had a slow start to the year. Even China slowed but still saw double-digit growth.
 
Bernstein analyst Andrew Wood said the AOA zone was the biggest disappointment: "We feel management has still not been able to adequately explain how a business that had been growing 11-12pc for six quarters ... suddenly dropped to 5pc in third quarter (2012) and has stayed in mid-single digits since."
 
Across the group as a whole, pricing recovered a bit versus the fourth quarter but growth from volume and product mix fell to its weakest in over three years, he added.
 
Kepler Capital Market analyst Jon Cox said the figures looked disappointing, compared to Danone, which earlier this week reported quarterly sales growth of 5.6pc on strong demand for baby food in Asia.-Reuters



Tags: Middle East | nestle |

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