Nestle pegged back by Swiss currency hit
KitKat maker Nestle saw first quarter sales boosted by an early Easter but growth was dented by currency changes after the Swiss central bank’s shock decision to lift a cap on the franc.
The consumer goods giant, which is based in Switzerland, saw total sales rise 0.5% to CHF20.9bn (€20.34bn) as it enjoyed a strong period in most of western Europe but had a slow start to the year in America.
Organic sales growth was much higher at 4.4%, while acquisitions added a further 0.6%, but the increase was pegged back by a 4.5% hit from currency movements.
Nestle’s Europe, Middle East and North Africa (EMENA) region was worst affected, with a 12.7% impact from foreign exchange.
It comes after a surprise move in January to lift a cap which had fixed the Swiss franc’s value at no more than €1.20.
Removal of the peg sent the franc soaring against the single currency – which for Swiss-based firms reduced the value of sales made in euros. It would make their products less attractive should they need to raise euro prices to compensate.
Nestle chief executive Paul Bulcke said: “Our three-month sales growth was in line with expectations and driven by both real internal growth and pricing.”
The company said it had a tough start to the year in North America, with frozen meals remaining “challenged”, especially its Lean Cuisine brand.
In the EMENA area including western Europe, cat food brand Felix and coffee Nescafe Dolce Gusto grew well, while confectionery was helped by the early timing of Easter. The group said most markets in western Europe did well though Switzerland and Greece had a slower start to the year.
Across Nestle’s markets, bottled water brands Perrier and S. Pellegrino continued “good growth momentum” while local brands including Buxton in the UK also did well, the group said.
It follows an upbeat update from consumer goods rival Unilever yesterday, with the Flora and Magnum ice cream maker saying it was benefiting from “more tailwinds than headwinds” as underlying sales grew by 2.8%.
