Nestle, the world's biggest food group, reported a forecast-beating 8.9 per cent rise in nine-month underlying sales, helped by emerging markets and premium brands, and raised its full-year outlook.
The Switzerland-based maker of Nescafe coffee, Maggi soup and KitKat chocolate bars raised its forecast on Thursday for 2008 organic growth to "about 8 percent" from a previous target of at least 2007's 7.4 per cent and stuck by its long-term goals.
Nestle shares jumped 4.9 per cent to 45.08 Swiss francs (€30.07) earlier, reversing a steep fall yesterday and outperforming a 3.4 percent firmer Dow Jones European food and beverage index and rival Danone which reported Wednesday.
"Better-than-expected organic growth, increases 2008 guidance and reiterates long term targets," said analyst Jon Cox at Kepler Capital Markets. "We can think of few other places to sit out a global recession than Nestle."
Citi analyst Jeff Stent added, "This confirms our view that Nestle is best placed to weather the storms that lie ahead. The stock remains out top (and only) large cap food buy."
Analysts added that with market nerves building for 2009 due to economic slowdowns and the fear of downtrading to cheaper products, the group has reiterated the Nestle model for the year ahead consisting of 5-6 percent annual underlying growth together with profit margin expansion at constant currencies.
They say Nestle is one of the best-placed of Europe's top food companies to deal with slowing global growth due to its wide geographic and product spread, while it is also helped by falling prices for commodities like milk and coffee.
Nestle said it was positioned for profitable growth in the current environment and in the longer term, demonstrating its "defensive qualities as well as its strong growth credentials".
Underlying sales, which strip out currency effects and acquisitions, rose 8.9 percent, compared with an average forecast of 8.2 percent. Real internal growth, or volume growth, was 3.4 per cent, compared with a forecast of 3.3 per cent.
Overall sales rose to 81.4 billion francs (€54.2 billion), above the 81.1 billion francs analysts forecast in a Reuters poll. The strength of the Swiss franc cut sales by 8 per cent.
Nestle's nine-month underlying growth of 8.9 per cent still lags European food rival Danone which showed 9.2 percent growth reflecting the French group's bigger exposure to faster-growing areas like dairy and babyfoods. Danone shares were up 2.2 per cent at €42.3 euros.
Nestle investor relations head Roddy Child-Villiers added that a number of factors will mean slower fourth-quarter growth such as a slowdown in its economically-sensitive nutrition business and lower dairy costs, mean fewer price rises.
Nestle said it had used the $10.4 billion proceeds of its sale of a stake in eyecare firm Alcon to Novartis AG to cut its exposure to the short-term commercial paper market. It is also continuing a share buyback programme at the faster rate announced in August.
It said net debt would be lower at the end of 2008 than at the end of 2007, when it stood at 21.2 billion francs.
"Nestle enjoys predictable cash flows which, combined with its high credit quality, have positioned it well in recent market conditions, enabling it to continue to make below-market rate debt offerings," it said.
Emerging markets in Latin America, the Middle East, South Asia, and China all achieved double-digit organic growth.
In North America and Europe, the Swiss company said its high-end brands such as Movenpick and Haagen Dazs ice cream, Nespresso coffee and Fancy Feast pet food were top performers.
Sales of shelf-stable dairy products - such as CoffeeMate - "reflected the first effects of falling milk prices but remained double-digit in most markets," it said.
Bottled water took a hit, however, with underlying growth down 1 per cent in the period despite continued growth for key brands Poland Spring and Nestle Pure Life. Nestle said "a combination of economic conditions and perceived environmental issues around bottled water" was at fault.