Organic growth for Nestlé

Nestlé expects organic growth for the full year 2008 to be close to the previous year's level and clearly above the long-term trend target of between 5 and 6%.

During 2007 and in the current year, commodity markets have been characterised by sharp upward movements and increased volatility. This reflects strong global demand for food, accelerating usage of food raw materials for biofuels and the decisive presence in the market of non-traditional speculative players.
 
Consequently, the Group was forced to advance price increases for finished goods in order to partially absorb the higher input costs. Combined with the pricing effects in place at the end of last year, this accounts for a strong pricing element in organic growth for the first two months of 2008. At the same time, the company accelerated its real internal growth momentum and had a successful early Easter season as well as an additional sales day in February. Together, these factors have resulted in an outstanding organic growth rate for the first two months, and this will be reflected in the first quarter sales which will be published on 21 April 2008.
 
The other elements influencing sales — foreign exchange as well as acquisitions and divestitures — are evolving as expected. Currencies, mainly as a result of the strength of the Swiss franc relative to the US dollar, but also to the Euro and other currencies, will weigh on consolidated sales, whereas acquisitions net of divestitures, mainly due to Novartis Medical Nutrition and Gerber, will boost sales growth.
 
Peter Brabeck-Letmathe, chairman and CEO of Nestlé, said: "The Group's organic growth is off to a very strong start in 2008. This demonstrates the benefits of Nestlé's strategic reorientation to nutrition, health and wellness , reflected in the strong underlying momentum in our business, but also our strategy to respond immediately to exceptional cost evolutions in the commodity markets. We expect our raw material cost pressures to abate somewhat in the course of the year, and foresee price increases to trend lower in the second half of 2008, resulting in a full-year organic growth rate close to the level reached in 2007, clearly above our long-term target. As for full-year 2008 results, we maintain our commitment to the Nestlé model, delivering once again an improvement in the EBIT margin in constant currencies."