LONDON: Nestle could benefit from people dining at home rather than eating out as conflict in the Middle East drives inflation, it said on Thursday, but its results statement also cautioned that higher energy and freight would add to distribution costs.
Nestle, the world's biggest packaged food company, which makes Maggi seasonings, Nescafé coffee and KitKat chocolate wafer bars, said it had seen "very little impact" so far on its global business from the war that began at the end of February with U.S.-Israeli airstrikes on Iran.
It maintained its full-year outlook of organic growth between 3% and 4%, and a higher underlying trading operating profit margin than last year.
But CEO Philipp Navratil said consumer behaviour was changing in response to a surge in fuel prices. Shoppers are walking rather than driving to stores, he said, and eating at home rather than in restaurants, especially in emerging markets.
"We are very well set up because we're very well distributed in those countries," Navratil said. "Our portfolio is very well set up for people being more at home - we've done very well in emerging markets."
ORGANIC SALES GROWTH INCREASES
Nestle reported on Thursday that first-quarter emerging market organic sales growth increased by 4.6%.
The Swiss company posted better-than-expected overall first-quarter sales growth as more people bought its coffee and pet food.
Organic sales, which exclude the impact of currency movements and acquisitions, rose 3.5% in the three months ended March. Analysts had on average expected organic sales growth of 2.4%.
The company said its organic growth had taken a roughly 90 basis-point hit due to a recall of infant formula products during the quarter, adding that product availability was now back to normal.
Total reported sales decreased by 5.8% to 21.3 billion Swiss francs ($27.12 billion) meeting analyst estimates. A source close to Nestle told Reuters in February that Navratil is planning a sharper focus on four product categories - coffee, petcare, nutrition and health, and food and snacking - to try to increase sales volumes this year.
The strategy reflects a stronger emphasis on the four areas rather than a major overhaul of the business, the source added.
Nestle's 2.3% first-quarter price increases met the average analyst estimate of 2.3%. Real internal growth - or sales volumes - rose 1.2% versus expectations of a 0.1% increase, driven by coffee, food and snacks.
"Nestlé is showing early signs of reigniting volume growth," Vontobel analyst Jean-Philippe Bertschy said. "This is the kind of reassurance investors were waiting for and it corroborates management's relatively upbeat tone following the full-year 2025 results." - Reuters
