Nestle expected to release record sales results
ZURICH , Switzerland Despite rising costs for such ingredients as flour and milk, Nestle is expected to break sales records when it releases results on Thursday. Markets will be seeking assurances that a push by the world’s largest food group, into healthy foods and strong name brands will pay off, as global economic growth cools, but food inflation stays hot.
“Nestle has a well-balanced portfolio where its brand diversity means that there is no major reliance on a few key categories and slower-performing brands are offset by strong performers,” Bear Stearns analysts said in a note. “We expect Nestle’s high brand density to continue to increase going forward due to the strength and growth profile of its big brands.”
Nestle, which makes Nescafe coffee and KitKat chocolate bars, has managed to increase profits and profitability despite record prices for key food inputs such milk and cocoa.
Nestle’s strong brands, which include Buitoni pasta, Maggi soups and Friskies cat food, are expected to command loyalty from consumers in rich countries. But rising prices for food in developing markets may be approaching the point where some consumers retreat, experts say.
Investors will also look for any indications Nestle aims to sell its 75 percent stake in U.S. contact lens company Alcon or its 29 percent stake in French cosmetics group L’Oreal. The Alcon stake has a market value of about $34 billion, and the L’Oreal stake about $22 billion.
Nestle is seen posting an 11 percent increase in net profit to 10.22 billion Swiss francs ($9.33 billion), according to the average of a Reuters poll of 14 analysts. It is also expected to break the 100-billion-franc barrier for the first time with annual sales of 107 billion, the poll showed.
Nestle chief executive officer Peter Brabeck has said the group will reach its organic sales growth target of 5 to 6 percent in 2008.
Brabeck, who will pass the chief executive officer baton to Paul Bulcke later this year and remain as chairman, has said the group has the wherewithal to weather an economic slowdown in the United States, where Nestle generates around 30 percent of its profit.
Analysts see food groups’ pricing power—their ability to raise prices without killing demand—as perhaps the single best indicator of how they will fare in an environment of unprecedented food inflation.
In general, the weaker the brand name and customer loyalty to that brand, the more difficult it is to raise prices.
Heinz anticipates strong third quarter results driven by innovation and marketing
PITTSBURGH H. J. Heinz Co. stated today that it expects to report continued strong sales and profit momentum when it releases third-quarter results Feb. 26. Preliminary results include sales growth of approximately 14 percent and operating income growth of approximately 8 percent. The company is optimistic that it will achieve full-year EPS growth of 9 percent to 10 percent compared with last year.
Heinz expects third-quarter organic sales growth (volume plus price) of between 8 percent and 9 percent, driven by a volume increase of roughly 5 percent, and net pricing of more than 3 percent. The very strong organic results were led by the strength of the Heinz brand, with organic sales up more than 9 percent. The anticipated organic sales figures in the third quarter represent the continuation of the Company’s strong organic sales growth over the past two years. For the quarter, foreign exchange is expected to contribute roughly 5 percent of growth.
Heinz operating income is expected to increase 8 percent for the quarter, driven by continuing momentum in North American Consumer Products, Europe, Asia/Pacific and the rest of the world, partially offset by the U.S. foodservice business. The company said it generates 60 percent of its sales outside the United States.
The company anticipates third-quarter EPS of $0.67 to $0.68, reflecting a higher tax rate in the quarter of 31.5 percent to 32.5 percent, compared with the previous year rate of 26 percent. These results put Heinz on track to achieve its full-year targets including its plans to continue investing in commercial innovation and capability-building initiatives. The company has narrowed its expected full-year EPS forecast to the top end of its previously announced range to $2.60 to $2.62, a 9 percent to 10 percent increase over last year.
The fiscal third quarter for Heinz ended on Jan. 30, 2008.
Heinz is a global family of leading branded products, including Heinz ketchup, sauces, soups, beans, pasta and infant foods (representing over one-third of Heinz’s total sales), Ore-Ida potato products, Weight Watchers Smart Ones entrees, Boston Market meals, T.G.I. Friday’s snacks, and Plasmon infant nutrition. Heinz is famous for its iconic brands on five continents, showcased by Heinz ketchup.
Healthy foods and accessories feed pet industry
SAN DIEGO The annual Global Pet Expo opened in San Diego Feb. 14 with thousands of new products debuting to feed the growing pet industry. Show sponsor the American Pet Product Manufacturer’s Association estimates pet product sales jumped 5 percent in 2007 to $40.8 billion and are expected to increase again in 2008.
On the floor of the San Diego Convention Center, more than 750 exhibitors—along with dozens of dogs, cats and the occasional eagle and owl—are showcasing new products with pet accessories and healthy foods two of the hottest categories.
Cott Beverages is making its first foray into the pet business with its FortiFido water for dogs. The water comes in four flavors with a unique blend of vitamins and supplements for dogs with different needs.
“We’re making our big national launch right now in pet specialty stores, grocers and mass merchants,” said Cott director of innovation Charles Calise.
Sales of healthy foods have thrived since the tainted food scare last fall that forced suppliers to recall hundreds of products made in China.
“We saw our sales rocket after that incident,” said Norman Levitz of Wagatha’s, a Vermont company that makes organic biscuits for dogs.
Pet clothing is another growing category. Jakks Pacific Pets unveiled its new line of Doggie Disguises to dress pets for Halloween. And Gramercy Distributors showcased its new Cool Vest, a light vest with a waterproof lining that keeps dogs cool in hot weather.
The Global Pet Expo—the largest gathering of pet suppliers and retailers in the U.S.—will end Feb. 16. The show is moving from San Diego to Orlando in 2009.