So-called organic sales rose 6.2 percent, the Vevey, Switzerland-based company said today, compared with the 5.4 percent average estimate of eight analysts. Nestle said it’s “confident” revenue will rise 5 percent to 6 percent in 2011, excluding acquisitions, disposals and currency shifts, and also forecast improved operating margins at constant exchange rates.
Nestle have had a cracking fourth quarter,” wrote Warren Ackerman, an analyst at Evolution Securities with a “neutral” rating on the stock. “We can barely find a negative.”
Nestle said it is “well-placed to face uncertainties” including increased commodity costs. Higher prices boosted revenue growth last year by 1.6 percentage points, the maker of KitKat bars and Lean Cuisine meals indicated. Chief Financial Officer Jim Singh said the company may make “smaller” acquisitions in areas such as nutrition and health, after spending 5.6 billion francs on purchases in 2010.
Nestle rose 85 centimes, or 1.6 percent, to 53.30 francs at 10:20 a.m. in Zurich trading. The shares have gained 4.3 percent in the past year, valuing the company at about 185 billion francs. Nestle ranks as Europe’s third-largest company by market value after HSBC Holdings Plc and Royal Dutch Shell Plc.
‘Reassuring’
“It’s clearly a better-than-expected result when many had expected fourth-quarter numbers to decelerate,” said Jon Cox, an analyst at Kepler Capital Markets with a “buy” rating on the stock. “The outlook statement is reassuring.”
Profit last year more than tripled to 34.2 billion Swiss francs from 10.4 billion francs in 2009, boosted by a one-time gain from selling a stake in Alcon Inc., the company reported.
The margin for earnings before interest and tax from continuing businesses was 13.4 percent in 2010, less than the 13.5 percent consensus analyst estimate compiled by Nestle.
“The margin seems slightly hit by raw-material prices,” said Joerg de Vries-Hippen, who helps manage about 16 billion euros ($22 billion) at Allianz Global Investors in Frankfurt.
Nestle sees raw-material costs increasing by 2.5 billion Swiss francs ($2.6 billion) to 3 billion francs in 2011, Singh said on a conference call. The company expects to reduce costs by about 1.5 billion francs this year, he said.
Billionaire Brands
Arabica coffee futures have soared 96 percent in the past year, while wheat has gained 71 percent. Kraft Foods Inc., the world’s second-largest food company, on Feb. 10 lowered its full-year earnings forecast because of rising commodity costs, while Unilever said increasing costs of raw materials would hit profitability in 2011.
Nestle gets about three-quarters of revenue from brands that have sales exceeding 1 billion francs, giving it more power than smaller rivals to pass higher commodity costs on to consumers, according to Marco Gulpers, an analyst at ING Financial Markets.
A new share buyback program will be considered once an existing program is completed in the first half of this year, Singh said. The company has less than 5 billion francs of stock left to repurchase in the current program, he said.
Nestle aims for a “gradual” increase in its annual dividend after proposing a 16 percent increase in the 2010 payment to 1.85 francs a share, Singh said.
Dolce Gusto
Nespresso’s 2010 organic sales growth exceeded 20 percent and total revenue was more than 3 billion francs. Nestle’s sales growth from encapsulated coffee has spurred competitors ranging from Sara Lee Corp., which is selling capsules that are compatible with Nespresso machines, to United Coffee, a Geneva- based company that’s making an alternative system.
Nestle said Nestle Dolce Gusto coffee capsules had more than 50 percent organic sales growth in 2010 and total revenue exceeded 450 million francs.
Nine of the 29 brands that have sales exceeding 1 billion francs increased their revenue by more than 10 percent, the company said. These included Nestle Pure Life bottled water, Gerber baby food and Nestea drinks. For the latest updates PRESS CTR + D or visit Stock Market news Today
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