Nestle posts strong H1 profit but outlook is tough

Associated Press Modified: August 9, 2012 at 3:32 pm •  Published: August 9, 2012
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GENEVA (AP) — Swiss food and drinks giant Nestle SA posted an 8.9 percent rise in first-half profits Thursday and strong sales that showed it was taking the rising costs for many of its ingredients in stride.

But the company predicted the remainder of 2012 will be challenging as it warned of a slowdown in its key U.S. market.

Helped by price increases and strong demand from emerging markets, Nestle beat expectations with a net profit of 5.120 billion Swiss francs ($5.27 billion) in the January to June period, up from 4.703 billion francs in the same six months of 2011.

The world's biggest food and drink company's sales rose 7.5 percent to 44.1 billion Swiss francs ($45.37 billion), up from last year's comparable 41 billion francs.

Based in Vevey, Switzerland, the maker of dozens of household name brands such as Nescafe, Haagen Daz and Jenny Craig said it expects pressure from higher costs of ingredients to ease and reaffirmed a strong growth outlook for the rest of the year.

And despite what it called a "tough trading environment, especially in developed markets," Nestle said it expects underlying sales growth of 5 to 6 percent for the remainder of the year due to its strong first half.

Shares of Nestle jumped 2.35 percent Thursday to close at 61.05 francs ($62.73) on the Zurich exchange. Investors have bid up shares of the Vevey, Switzerland-based company 13.79 percent since the start of the year.

Faced with high global food prices and higher grain prices driven in part by a severe U.S. drought, Nestle passed on the cost of its raw materials to customers. It said it expects the price of its ingredients to rise by only low to mid-single digits for the rest of the year.



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