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Nestle undershoots revenue expectations, as chocolate sales fall

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Swiss food giant Nestle reported falling sales in its chocolate business, leaving group sales slightly behind analyst expectations.

But the company maintained a forecast for 2 to 4% growth in sales this year, as prices trends in the company's flagship Nescafe coffee business remain positive.

Nestle's overall sales increased to CHF21.0bn in the first three months of 2017, but fell just short of analysts' forecasts of CHF21.2bn.

Weak consumer demand

Nestle's growth over the first three months of 2017 was hit by weak consumer demand for packaged foods in the groups North American segment, with revenues in Europe hit by weaker prices.

The growth in volumes fell to 1.3% in the first three months of 2017, compared to 3.0% a year earlier.

But revenues were supported by recovering prices across the company, which rose by 1.0%, compared to 0.9% at the same time last year.

Strong beverage sales

Nestle said pricing was still negative in western Europe, but the trend was improving thanks to increases in prices for the group's flagship Nescafe products.

Across the company, the beverage segment grew by 3.5%.

"Nescafé soluble coffee remains positive in terms of growth," the company's chief financial officer, Fran├žois-Xavier Roger told investors.

"We had good results from innovation, and more specifically with Nescafé Gold and Azera."

"And finally, Nespresso and Nescafé Dolce Gusto grew well."

Chocolate demand eases

But sales in the company's confectionary segment fell by 2.9%, with Chinese chocolate demand hit by an earlier-than-usual Chinese New Year, while Brazil saw a "difficult year".

"Our large confectionary category was impacted stronger than others by the early timing of the Chinese New Year and the late timing of Easter," said Nestle Chief Executive Officer Ulf Mark Schneider.

Nestle shares were up 0.5% in afternoon deals in Zurich, at CHF75.60.

By William Clarke

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