UPDATE 4-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 0.8 pct, vs 0.5 pct weaker sector

(Adds details from news conference, updates 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
costs, 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.

“These were strong results, broad based and across all
categories,” Chief Executive Paul Bulcke told a results
conference in New York, adding that the group’s first half
growth momentum had continued unabated in the third quarter.

The group added that it would only give a 2011 outlook at
its annual 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 close down 0.8 percent at 52.65 Swiss francs
compared to a 0.5 percent drop in the STOXX European food and
beverage index (.SX3P: ), with analysts saying the dip reflected
Nestle highlighting tough comparisons in the fourth quarter.

“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 costs 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 2-3 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.

Food and beverages now account for virtually 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) ((Zurich Newsroom,
[email protected], +41 58 306 7336))

UPDATE 4-Nestle keeps strong pace of growth with price hikes