Nestle first-quarter sales beat estimates as consumers hoard pet food, coffee

Nestle (S:NESN) reported a 4.3% rise in organic sales growth for the first quarter, the food giant said on Friday, as consumers filled cupboards with Purina pet food and Nescafe coffee to prepare for lockdowns caused by the coronavirus pandemic.

Nestle said it is launching a 500 million Swiss franc ($511.77 million) program to help the cafes and restaurants it supplies during the new coronavirus crisis, by extending payment terms and suspending rental fees for coffee machines.

The KitKat chocolate and Nescafe coffee maker also said it was keeping its outlook for the year, which targets continued improvement in organic sales growth – a measure which strips out currency and acquisition effects – and a higher underlying operating profit margin.

Analysts on average were expecting a 3.0% increase in first-quarter underlying sales growth, according to company-supplied estimates.

Total sales for the three months to the end of March fell 6.2% to 20.8 billion Swiss francs ($21.30 billion) mainly due to divestitures of its Skin Health and U.S. ice-cream business last year.

The Vevey, Switzerland- based company also said it was launching a strategic review of its struggling Yinlu peanut milk and canned rice porridge businesses in China. The businesses generated sales of 700 million Swiss francs last year.

Increased at-home consumption and stockpiling in North America in March because of government-imposed lockdowns lifted demand for Purina Pet care and Hot Pockets frozen food, Nestle said.

In Europe, Middle East and North Africa (EMENA), more consumers reached for Maggi noodles and plant-based products from its Garden Gourmet brand. Both regions posted organic sales growth above 7%.

In contrast, underlying sales in Asia fell 4.6% as customers in China held off restaurant visits and shopping trips during much of the quarter.

Peer Unilever (L:ULVR) (AS:UNA) reported flat underlying sales growth in the first quarter and ditched its full-year sales targets on Thursday, as the coronavirus outbreak knocked consumption in its emerging markets.

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