Nestle posts 3.7 percent rise in first-half profit

Nestle posts 3.7 percent in first-half profit despite challenge of 'value-conscious' consumers

Associated Press
Nestle cautions on challenge of slowing sales
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FILE - This Nov. 24, 1999 file photo shows the logo of Nestle SA, the world's largest food company, at their headquarters in Vevey, Switzerland. Swiss food and drinks giant Nestle SA posted a 3.7 percent rise in first-half profits Thursday Aug. 8, 2013, despite what it described as the challenges of slowing markets around the world and "value-conscious" consumers. (AP Photo/Keystone, Laurent Gillieron, File)

GENEVA (AP) -- Swiss food and drinks giant Nestle SA posted a 3.7 percent rise in first-half profits Thursday despite what it described as the challenges of slowing markets around the world and "value-conscious" consumers.

But the world's biggest food and drink company by revenue said it still expects underlying sales growth of around 5 percent for the remainder of the year even as it contends with cash-strapped consumers, both in Europe and emerging markets.

Nestle reported Thursday that it had first-half profits of 5.1 billion Swiss francs ($5.5 billion) in the January to June period, up from a restated 4.9 billion francs in the same period last year.

It also said its sales rose 5.3 percent to 45.2 billion francs, up from a restated 42.9 billion francs in the comparable period a year ago.

Based in Vevey, Switzerland, Nestle is the maker of dozens of household name brands such as Nescafe, Haagen Dazs, Jenny Craig and KitKat. It also is a major buyer of food commodities, and its results can serve as an indicator of the entire food industry, worldwide consumer demand and health of the global economy.

Nestle expects first-half growth momentum to continue in the second half, making for around 5 percent underlying sales growth. That would be an improvement from its so-called organic growth of 4.1 percent for the first six months of the year, which has fallen from 6.6 percent the year before.

Growth in developing markets slowed to 8.2 percent, down from 12.9 percent during the comparable period a year ago, while growth in developed markets fell to 1 percent, down from 2.6 percent last year.

"It's not going to be easy. It's going to be a stretch," Chief Financial Officer Wan Ling Martello told a webcast teleconference with investors and journalists.

Investors were less sure the company would hit its sales and profits targets for the year, sending shares down 2.1 percent to 63.55 francs in morning trading on the Zurich stock exchange.

Chief Executive Paul Bulcke said the first half shows "a balanced performance, both top and bottom line, in an environment of lower growth and lower input costs."

The underlying sales growth, he said, was "somewhat muted, reflecting lower pricing by our markets, as we leveraged softer input costs to meet the expectations of today's more value-conscious consumers.".

Nestle's prices have been adjusted downward in many countries to make its products more attractive for cash-strapped consumers, said Martello. Prices are set by local managers, not by global headquarters in Switzerland, she added, describing the process as the company "doing the right thing for our consumers, and therefore doing the right thing for our business."

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