Nestle Says Sales Growth to Accelerate as Advertising Increases
Nestle SA, the world's largest maker of coffee, bottled water and pet food, said sales growth will accelerate in 2010 after advertising increased last year.
So-called organic revenue from food and beverages will rise more than 2009's 3.9 percent, the Vevey, Switzerland-based company said in a statement today.
Nestle boosted media spending by 10 percent in 2009 as advertising rates declined. The company has about 30 brands, including Nespresso and Nescafe, with more than 1 billion Swiss francs ($918 million) of revenue. Nestle expects "continued economic uncertainty in 2010, especially in developed countries."
"With their very strong brands, they are indeed pushing them very smartly in the marketing campaigns and this seems to be working," said Philippe Gijsels, a senior structured-equity strategist at Fortis Bank Global Markets in Brussels. "They're well positioned to take advantage of emerging market growth."
Nestle rose 30 centimes, or 0.6 percent, to 51.75 Swiss francs at 9:03 a.m. in Zurich trading. The shares have gained 33 percent in the past year, compared with a 43 percent gain in Unilever, which said Feb. 4 fourth-quarter sales growth slowed.
Nestle also said it expects its operating margin to widen this year, based on constant exchange rates. The company didn't say organic sales growth would meet its long-term target of 5 percent to 6 percent, which it has said in past years when announcing full-year results, such as in 2008.
Eoin Treacy's view
Nestle now occupies approximately 23% of the Swiss
Market Index and has contributed considerably to the Index's relative outperformance
compared to most other European markets. The SMI held the progression of higher
reaction lows on the recent pullback, and broke upwards to new recovery highs
today. It is a little overbought in the short-term having rallied on consecutive
days but a sustained move below 6200 would be required to question scope for
further higher to lateral ranging.
Nestle
remains a strong relative and absolute performer when compared both to the domestic
and European markets. Moreover, the foods sector consists of generally strong
performers in what is a cash-flow positive, global growth business. Nestle remains
in a consistent uptrend and also broke upwards from the most recent range today.
CHF55 might offer an area of temporary resistance since it marks the 2007 high,
but the progression of higher reaction lows, currently near CHF47, would need
to be taken out to question the consistency of the overall advance.
The food
sector is ideally placed to benefit from the increased disposable income of
hundreds of millions of new middle class consumers in the world's large population
centres. Food related companies share a high degree of commonality with most
in consistent uptrends and a number breaking to new recovery and all time highs
this week. Here is a list of 82 of the world's largest food related companies
sorted by 3-month performance
and here is the same list filtered for companies making new highs
and lows.
Some
of these companies have become somewhat overextended relative to their moving
averages, making a reversionary move more likely. However, a number were early
leaders. They have also shown considerable relative strength compared to the
wider market. The fact that so many are now testing their highs is a further
indication of the sector's relative strength. These attributes make the sector
a major candidate to continue to lead in this cycle.
Uniliever
continues to trend steadily higher, sustaining the progression of higher reaction
lows which would need to be taken out to question the broad consistency of the
move.
Danone
has been slow to rally but posted a new 12-month high this week. A downward
dynamic would be required to question potential for a successful upside break.
Wilmar
paused above SG$6 from July and has reverted to the mean. If it is going to
reassert the uptrend, it will need to rally relatively quickly from here.
General
Mills posted a new closing high this week and while it remains relatively
overextended to the mean, a sustained move below the recent reaction low at
$68 would be required to question medium-term potential for further upside.
Associated
British Foods is a UK leader and is currently testing the 2007 high near
950p. It is somewhat overextended in the short-term but a downward dynamic would
be required to check momentum beyond a brief pause.
China
Mengniu Dairy has pulled back to the MA while sustaining the progression
of higher lows and a sustained move below HK$21.50 would be required to question
scope for further higher to lateral ranging.
Inner Mongolia Yili
Industrial
has lost some momentum in the region of the 2007 high but would require a sustained
move below CNY25 to question the consistency of the medium-term uptrend.
Tiger
Brands remains in a relatively consistent uptrend and a sustained move back
below ZAR16,000 would be required to check the integrity of the advance.
Grupo
Bimbo also posted a new all-time high this week, is not particularly overextended
and would require a sustained move below MXN80 to question room for further
upside.
Heinz,
ConAgra Foods, Tyson
Foods, Sara Lee, Kerry
Group and Nestle India among others
are also worthy of mention.