UK coffee sales boost Nestlé's results

UK coffee sales have proved one of the few highlights for food giant Nestlé in its first quarter (Q1) results for 2013, which failed to meet analysts' expectations.

The world's largest food company reported underlying sales growth of 4.3% to CHF21.9bn (£15.35bn)  ̶  below the 4.7% figure, widely expected by analysts.

Europe contributed CHF3.7bn, representing 1.5% organic growth and 1.7% real internal growth. In western Europe, the UK and Benelux had a good start to the year, said Nestlé.

Coffee performed well, particularly in two of Nestlé's biggest markets: the UK and Russia, with Nescafé Dolce Gusto and Nescafé Gold cited as highlights.

'Lacklustre'

However, city analyst Martin Deboo of Investec described the overall results as "lacklustre", echoing the downbeat reception others gave the Q1 results.

Part of the reason was the effect of the recent cold weather on sales of Nestlé's bottled water, said Deboo. However, a slowdown in sales growth within Nestlé's Asian, Oceania and Africa markets was a bigger concern, he added.

According to the Q1 results, within western Europe, France had a slow start following a strong performance last year and Germany began to build momentum. Greece and Portugal achieved good performances despite the tough trading environment.

The group's frozen and pizza categories had a weak start to the year, while ice cream was impacted by the late arrival of spring, said the firm. Nestlé's Nesquik and confectionery products, however, both started the year well.

Its Waters business reported sales of CHF1.6bn (1.8% organic growth, 0.1% real internal growth), with the late arrival of spring affecting developed markets. In Europe, Perrier continued to be a highlight, as was the UK where Nestlé inaugurated its new water plant in Buxton in March.

Volatility to continue

Nestlé expects some volatility to continue throughout the year but repeated its expectation of delivering organic growth of between 5% and 6% together with an improved trading operating profit margin and underlying earnings per share in constant currency, as well as improvement in its capital efficiency.

"The start to the year reflects the caution we expressed in February," said chief executive Paul Bulcke. "We continue to expect some volatility throughout 2013 but reconfirm our expectation to deliver on our commitments for the year: top line, bottom line and capital efficiency."

Bulcke added: "We are outperforming the market in Europe where consumer sentiment remains low. We are seeing progress in our North American business and we expect to see stronger momentum in key emerging markets."