Nestlé reports 8.9% increase in H1 profit

Swiss food company Nestlé has reported an 8.9% increase in profit to CHF5.1bn ($5.2bn) for the first half of 2012, compared to CHF4.7bn ($4.8bn) in 2011, helped by higher pricing and strong demand from emerging markets.

Sales increased 7.5% to CHF44.1bn ($45.2bn), compared to CHF41bn ($42.1bn) in 2011.

Nestlé CEO Paul Bulcke said the company is making efforts to reach emerging consumers and is using new media to increase its direct engagement with customers and return on brand investment.

"This approach has delivered profitable growth in both emerging and developed markets," Bulcke added.

Organic sales growth, which excludes the effect of acquisitions, divestments and currency swings, increased 6.6%, compared to 7.5% in 2011.

During the first half of the year, Nestlé shifted the cost of raw materials to its customers, as it faced high global food prices that were partly caused due to severe drought in the US.

In North America and Latin America, the company reported sales of CHF13.4bn ($13.76bn), representing an organic growth of 5.7%, though sales in North America were affected by weak consumer confidence and the popularity of supermarket home brands.

Nestlé reported sales of CHF7.4bn ($7.59bn) in Europe, with organic growth of 2.4%, though sales were affected due to challenging market environment and low demand.

Sales in the emerging markets grew 12.9%, compared with just 2.6% in developed markets, driven by strong performance in China, Africa, the Middle East and India.

The company noted that it expects the cost of ingredients to increase by only low to mid-single digits for the rest of 2012, but forecast that the period would be challenging due to slowdown in the US.

Nestlé reaffirmed a strong growth outlook for the rest of the year, with organic growth of 5% to 6%, improved margin and underlying earnings per share in constant currencies.

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Image: Nestlé shifted the high cost of raw materials to its customers during the first half of fiscal 2012. Photo: Nestlé.