Virus Stockpiling, Divestment Boosts Nestle Results

Swiss food giant Nestle said Friday that its core sales surged in the first three months of 2020 as people stocked up on pet food and coffee amid the coronavirus crisis.

The sale of its US ice cream business in January also boosted its bottom line, offsetting a sharp drop in demand from China, a statement said.

Nestle said overall organic sales grew by 4.3 percent from the same period a year earlier, driven by strong sales in North America and Europe, with Purina PetCare products seeing the most growth, and sales of prepared dishes and coffee products also surging.

Organic growth excludes the impact of recent acquisitions or divestments to focus on a company's core operations.

With the pandemic raging, Nestle's Health Science division posted double-digit growth, which the company said reflected "elevated demand for consumer and medical nutrition products".

Meanwhile, online sales surged by 29.4 percent and exceeded 10 percent of Nestle's total sales for the first time.

At the same time however, the company said the value of its sales declined by 6.2 percent to 20.8 billion Swiss francs ($21.3 billion, 19.7 billion euros), mainly due to the strength of the Swiss franc -- seen as a safe haven for investors during the crisis -- against other currencies.

Nestle highlighted the impact of divestitures, including the shedding of its US ice cream business to Froneri, which was completed on January 31 for $4.0 billion.

The sales increase in North America and Europe in March, Nestle said, was "partially supported by consumer stockpiling" linked to the novel coronavirus pandemic, which has claimed more than 190,000 lives worldwide.

At the same time, China, where the virus first began spreading late last year, posted a double-digit decline in organic growth, mainly "due to movement restrictions in place for almost the full quarter, limited consumer stockpiling and relatively higher exposure to out-of-home channels," Nestle said.

That was a reference to sales to various outlets such as restaurants.

Nestle, which owns KitKat, Nespresso, and Maggi among other brands, said it had been able to minimise the impact of the global crisis, and continue serving retail partners and consumers, despite some local supply chain disruptions and temporary staffing shortages.

The company acknowledged that its "out-of-home and food service customers" had been severely affected by the crisis, and said it had set up a system to help them extend payment terms, suspend rental fees for coffee machines and offer free products.

Following the news, the company saw its share price rise nearly three percent in mid-afternoon trading, as the Swiss stock exchange's main SMI index inched up 0.2 percent.