UPDATE 3-Nestle keeps strong pace of growth with price hikes

* Underlying food, beverage sales growth ahead of forecasts

* Reaffirms full year sales and margin forecasts

* Maintains guidance on raw material prices

* Shares fall 0.2 pct, outperforms 0.4 pct weaker sector

(Adds details from conference call, shares)

By Silke Koltrowitz

ZURICH, Oct 22 (BestGrowthStock) – Nestle (NESN.VX: ), the world’s
biggest food group, beat forecasts with a 5.7 percent rise in
nine-month underlying sales thanks to strong demand in emerging
markets, price rises and a thriving Nespresso coffee business.

The Swiss group said on Friday it pushed up prices at its
largely emerging markets dairy business to offset higher milk
prices, while its waters unit gained from good summer weather
and babyfood saw strong growth in Russia, Brazil and China.

This enabled the maker of KitKat chocolate bars and Maggi
soups to confirm its 2010 sales growth and margin outlook for
2010 despite worries about higher commodity prices and the
impact of European austerity plans on consumption levels.

“The first half’s growth momentum continued unabated in the
third quarter, providing a good base for the full year,” Chief
Executive Paul Bulcke said in a statement. The group added it
would only give a 2011 outlook at its results in February.

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For a comparison graphic with global peers see

http://r.reuters.com/fah79p
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French rival and another big milk user Danone (DANO.PA: )
warned on Thursday that economic upheaval would continue to hit
consumption in Europe, but still showed a forecast-beating rise
in third-quarter sales [ID:nLDE69J0Y6].

At Nestle, relatively weak growth in Europe was compensated
by good performances elsewhere at its Perrier and Pure Life
waters unit, its Gerber babyfood nutrition business and at its
fast-growing Nespresso premium coffee capsules.

Nestle shares fell 0.2 percent at 52.95 francs at 0935 GMT,
outperforming a 0.4 percent drop in the STOXX European food and
beverage index (.SX3P: ).

“Nestle has maintained excellent third-quarter growth
despite tough comparisons. We are particularly pleased by the
performance in water, nutrition and in zone Asia, Oceania and
Africa,” said analyst Warren Ackerman at Evolution Securities.

The Vevey-based group said higher prices contributed 1.5
percentage points to underlying sales growth as it looked to
pass on higher prices for commodities such as milk, coffee,
cocoa and grains to consumers.

“The pricing environment varies from country to country, of
course, but overall it continues to be tough,” Roddy
Child-Villiers, head of investor relations, said at a conference
call, also confirming guidance of 3 percent raw material price
inflation for 2010.

CURRENCY WEIGHS

The underlying sales growth for food and beverages in the
first nine months of 5.7 percent was above the 5.4 percent
forecast in a poll of analysts compiled by Nestle, and in line
with the 5.7 percent reported for the first half of 2010.

Overall sales at the maker of Nescafe coffee and Haagen Dazs
ice creams rose 4.5 percent to 77 billion Swiss francs in the
first nine months, in line with forecasts in a Reuters poll as
the strong Swiss franc and weak dollar took their toll.
[ID:nLDE69I14A]

Food and beverages now account for almost all of the group’s
revenue after it completed the sale of its remaining 52 percent
stake in eyecare group Alcon Inc (ACL.N: ) to Novartis AG
(NOVN.VX: ) on Aug. 25 for $28.3 billion.

Nestle shares have been trading at 15.2 times estimated 2011
earnings, at a slight premium to Danone and Anglo-Dutch Unilever
(ULVR.L: ) (UNc.AS: ). Unilever is due to post results on Nov. 4.

For a fund view on consumer stocks and emerging markets,
click on [ID:nLDE69J1M8]
(Editing by Greg Mahlich and David Jones)

UPDATE 3-Nestle keeps strong pace of growth with price hikes