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Nestlé confirms FY'18 guidance as Q3 sales increase 2.9% YOY

Nestlé SA on Oct. 18 reaffirmed its full-year guidance for 2018 as it reported a 2.9% increase in total sales in the third quarter of the fiscal year, driven by strong organic growth in North America and by infant nutrition globally.

For the nine months to the end of September, the Swiss food and beverage giant's sales came in at CHF66.42 billion, up 2% from CHF65.12 billion in the same period a year ago. Organic sales grew 2.8%, with 2.3% real internal growth and a 0.5% increase in pricing.

Nestlé said the costs from its $2.3 billion acquisition of Canadian vitamin manufacturer Atrium Innovations Inc., the $7.15 billion Starbucks Corp. license and other transactions in recent months were offset by divestments, particularly the $2.8 billion sale of its U.S. confectionery business to Nutella-maker Ferrero SpA earlier this year.

Nestlé also reached an agreement in July to sell its confectionery business in New Zealand.

Meanwhile, unfavorable foreign exchange rates continued to weigh on the company's sales with a negative impact of 0.9%.

Reported sales in the Americas for the nine-month period fell 2.9% to CHF21.9 billion from CHF22.6 billion in the year-ago period, with Nestlé noting that the company's net acquisitions reduced sales in the region by 1.1%. The maker of KitKat chocolate bars posted a 1.4% increase in organic growth in the region as real internal growth went up 0.8% and pricing was up 0.6%.

Pricing increased in North America in the third quarter, reflecting inflation in commodity and freight costs. "We saw continued solid growth in Purina pet care, Coffee-mate creamers and coffee, particularly in e-commerce," the company said.

Despite the challenging trading environment in Brazil, the country returned to positive growth in the third quarter, Nestlé said.

In Europe, the Middle East and North Africa, organic growth ticked up 1.6% as the 0.7% decline in pricing was offset by a 2.3% rise in real internal growth. Deflationary trends in Western Europe dragged down pricing, but total sales for the nine-month period in the EMEA region reached CHF13.7 billion, slightly higher than the CHF13.2 billion reported in the same period in 2017.

In Asia, Oceania and sub-Saharan Africa, organic growth was also up 4.4% as real internal growth was 3.7% and pricing was slightly up by 0.7%. Nestlé recorded CHF15.8 billion in sales in the region, an increase of 3.1% from CHF15.3 billion in the first nine months of 2017.

"China saw mid-single-digit growth, driven by innovations in infant nutrition, coffee and culinary," the company said.

Meanwhile, the company's bottled water division, Nestlé Waters, saw flat revenue growth in the nine-month period at CHF6.1 billion. Real internal growth was down 0.2%, while pricing was up 2.3%. In the U.S., prices increased in June due to significant inflation in packaging and distribution costs.

For 2018, Nestlé expects organic sales to grow 3% and underlying trading operating margin improvement in line with its 2020 target. The company said restructuring costs could be worth approximately CHF700 million throughout the year, while underlying EPS in constant currency and capital efficiency are expected to increase.

In a separate announcement made the same day, Nestlé said Wan Ling Martello, CEO of the company's Asia, Oceania and sub-Saharan Africa, or AOA, division decided to step down from the company's executive board, effective Dec. 31, "to explore new horizons." Martello joined Nestlé in 2011 as CFO and was appointed CEO of the AOA division in 2015.

The company named Chris Johnson, head of human resources and business services, to replace Martello on the executive board and to succeed her as CEO of AOA, effective Jan. 1, 2019. Johnson was appointed country manager of Nestlé Taiwan in 1998 and became the market head in Japan in 2007. Johnson was appointed head of the Americas in January 2011 and head of Nestlé Business Excellence in 2014 before taking on his current role in August 2018.

Johnson will be replaced by Béatrice Guillaume-Grabisch, CEO of Nestlé Germany AG, as head of human resources and business services, also effective Jan. 1, 2019.