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Nestlé 1999: accelerating growth after a slow start

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At today's press conference, Nestlé will release Group sales figures for the first quarter of 1999. These amounted to CHF 16.7 billion, a decrease of 2.7 per cent. At comparable structure and at constant exchange rates, they grew by 0.9 per cent.

The main negative influence was the evolution of exchange rates. These reduced Swiss franc sales by 6.3 per cent. The devaluation of Latin American currencies, in particular the Brazilian Real, aggravated the 5.6 per cent negative currency impact registered for the full year 1998.

Real Internal Growth (RIG), measuring the evolution of current year quantities sold at last year's prices, excluding exchange rate effects and the impact of acquisitions and divestitures, was virtually flat, at – 0.5 per cent. One has to bear in mind that the comparable RIG for the first quarter of 1998 had been exceptionally strong, at 7.4 per cent. The good performance in North America, Africa, Oceania and Japan, as well as in mineral water and Alcon, was more than offset by flat sales in Western Europe and by a marked slow-down in Latin America and Eastern Europe, particularly Russia. Several Asian markets, however, are clearly starting to recover.

Net acquisitions – comprising principally Spillers and Borden/Klim – contributed 2.7 per cent to sales growth. As to selling prices and other elements, they accounted for 1.4 per cent.

The Group has stated in the past that the sales comparison for the first half of 1999 would be difficult, in view of the strong growth achieved last year. However, the latest estimates for April suggest an accelerating growth momentum expected to prevail for the rest of the year in most geographic areas. April year-to-date sales are CHF 22.2 billion. This represents a cumulative RIG of + 0.3 per cent. At comparable structure and at constant exchange rates, growth was 1.9 per cent. The negative impact of exchange rates remained constant at 6.3 per cent. Pricing contributed 1.6 per cent, and there was an unchanged effect of acquisitions, net of divestitures, of 2.7 per cent.

For the full year 1999, despite a relatively slow start, Nestlé expects to generate growth in both sales and profits, barring unusually negative events, including those on the exchange rate front.