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Nestle reports sales drop in first quarter, blames strong franc

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(Globalpost/GlobalPost)

The world's leading food industry group Nestle saw its sales plunge 5.1 percent in the first quarter, it said on Tuesday, blaming the effect of exchange rates and strength of the Swiss franc.

During the first three months of the year, the maker of Nespresso capsules and baby food and many other products, said it had taken 20.8 billion Swiss francs ($23.6 billion, 17.1 billion euros) in sales.

That number missed the expectations of analysts polled by the AWP financial news agency, who had foreseen sales of 21.1 billion francs for the quarter.

Paul Bulcke, who heads the Swiss company, maintained that currency rates were to blame for the drop and stressed Nestle had seen organic growth of 4.2 percent during the quarter.

"Our organic growth in the first months of the year was in line with expectations and driven by volume rather than price," he said in a statement.

He confirmed the company's outlook that its performance would pick up in the second half of the year and would outperform the overall market, with organic growth of around five percent.

Nestle also expects to see improvements in its margins and in its earnings per share not counting exchange rates.

However, Bulcke acknowledged that the company expects "the continued strengthening of the Swiss franc to have a negative impact on reported sales."

In terms of Nestle's organic growth, emerging markets were once again the driver, surging 8.5 percent during the first three months of the year, while developed markets inched up just 0.6 percent.

Business in the Americas saw 4.1 percent organic growth to 6.0 billion francs during the quarter.

Blistering cold weather in North America at the start of the year impacted sales of Nestle's cold beverages, the company said, stressing that a range of new products like Girl Scout flavours for Coffee-mate had helped keep sales afloat.

In Europe, sales within the company's structure shrank by 0.8 percent to 3.5 billion francs, Nestle said, lamenting "deflationary pressures" on the slowly recovering continent, which had forced it to adjust down prices.

Analysts had expected Nestle's sales to slip during the first three months of the year, due to the cold-front in the United States and the late arrival of Easter this year.

Following the news, the food and beverage giant saw its shares fall 0.22 percent to 66.80 Swiss francs a piece, as the Swiss stock exchange's main SMI index inched up 0.13 percent.

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