Nestle, Unilever post sales growth despite price hike

Bloomberg

Europe’s consumer-goods giants are showing new signs of life by selling more food and cleaning supplies, even at higher prices.
Nestle SA and Unilever surprised investors with strong starts to the year, reporting first-quarter sales growth that handily topped analysts’ estimates. The Swiss maker of KitKat bars and the Anglo-Dutch owner of Dove soap each cited a combination of improved pricing and higher volumes.
The companies delivered a counterpoint to the cost-cut-driven performance of US rival Kraft Heinz Co., which has slumped since a profit warning and asset write-down in February — about two years after it made an unsuccessful approach to take over Unilever. Instead, the European multinationals joined US peers like PepsiCo Inc. in selling more of their products. The companies also successfully passed higher raw-materials costs on to consumers.
At Nestle, for example, the pricing gain of 1.2 percent was the biggest in 10 quarters. The businesses most hit by inflation included bottled water, with higher oil prices making plastic and transport more expensive. Unilever also noted higher costs of petrochemicals such as linear alkylbenzene, an ingredient in biodegradable detergents, along with increased prices for raw materials in the food sector. Danone SA forecast milk-price inflation in high single digits this year, plus more expensive sugar and fruit. While sugar prices have risen over the past year, other commodities such as cocoa and coffee have fallen.
“What companies like ourselves face is the impact of the input-costs increases and commodity-driven gains on the ground,” Unilever Chief Financial Officer Graeme Pitkethly said by phone.