Nestlé reports a strong start to the year

Nestlé is the world's largest food company Keystone

Swiss food giant Nestlé has posted healthy first-half year results, with profit jumping 11.4 per cent to SFr4.15 billion ($3.36 billion).

The world’s largest food company said on Wednesday results were largely due to good performances in its food, beverage and nutrition businesses, which grew by six per cent over the first six months.

Nestlé said that sales had risen by 11 per cent to SFr47.138 billion as a result of growth in these particular sectors.

“The outstanding results demonstrate that the Nestlé model of combining strong top-line growth with improved operational performance enhances value for our shareholders,” said Peter Brabeck, Nestlé’s Chief Executive Officer.

The company said that growth had been strongest in the Americas, Asia, Oceania and Africa. An improved economic climate in Europe had resulted in higher consumer confidence and an acceleration of internal growth to a level not seen since 2002.

While the group had faced higher prices for commodities, such as coffee and sugar, as well as near-record oil prices, their impact on the results was mainly cushioned by the economies of scale resulting from the strong volume growth and internal efficiency.

“It’s the first time in the past few quarters Nestlé has clearly surpassed consensus estimates in terms of organic growth and operating margin,” Zurich Cantonal Bank analyst Patrik Schwendimann told the Associated Press.

Economies

Cost-savings have been made by selling food-processing businesses in slow-growth markets such as Germany and closing less-efficient facilities; Nestlé has closed 220 factories since 1997, saving an estimated SFr1.2 billion.

“An excellent set of figures with the company’s cost savings and hedging strategy offsetting higher input costs. The US and Asia were strong while Europe is obviously experiencing a recovery,” said Kepler Equities analyst Jon Cox.

The strong first-half results bode well for the remainder of the year said the company, which predicts organic growth to come in at “the higher end of its five-six per cent target range”.

“Our costs for the full year of 2006 are already fixed and there should be no surprises,” Brabeck told CNBC television.

swissinfo with agencies

In brief

Nestlé, the leading food business ahead of Unilever, Kraft and Danone, is among the biggest 30 companies in the world in terms of capital.

It employs around 250,000 people in five continents. In 2005 its sales totalled SFr91 billion and its net profit was SFr7.9 billion.

The giant is moving into the cosmetic and pharmaceutical industries, and now owns L’Oreal and a stake in US eye-care company, Alcon.

Key facts

First-half 2006 net profit: SFr4.15 billion (+ 11.4%)
Sales: SFr47.138 billion (+11%)
Operating profit (EBITA): SFr6 billion (14.5%)