Nestle: reports «excellent» H1/2008

Vevey / CH. (nag) The world´s largest food company Nestle posted a top of the range six percent rise in first-half profit as it gave a slightly more upbeat forecast for this year and accelerated its share buyback programme. The Swiss-based maker of Nescafe coffee, KitKat chocolate bars and Maggi soups is battling higher commodity costs like its rivals, and has pushed up prices to offset these effects but it is seeing some slowdown in volume growth in its second-quarter.

Net profit rose to 5,2 billion CHF in the first six months, slightly ahead of average analyst expectations for 5, 05 billion CHF and at the top of a 5,05 billion CHF to 5,21 billion CHF range. Underlying or «organic» sales, which strips out currency effects and acquisitions, rose 8.9 percent, in line with forecasts. But pricing accounted for a higher than expected 5,4 percentage points and volume was 3,5 percent and below the first-quarter´s 4,5 percent.

Nestle shares fell over two percent on concern over the volume growth and as the strong Swiss franc weighed on sales, but pared losses to be 0,6 percent lower at 46,86 CHF, in line with the DJ Stoxx European food and beverage index. Key facts first half 2008:

• Sales of 53,1 billion CHF, plus two billion CHF, 8,9 percent organic growth, 3,5 percent real internal growth
• EBIT of 7,3 billion CHF (plus 6,1 percent), margin plus 60 basis points in constant currencies, plus 30 basis points reported, to 13,8 percent
• Results driven by Food and Beverages: 8,9 percent organic growth, 3,2 percent real internal growth, EBIT margin plus 50 basis points in constant currencies, plus 30 basis points reported
• Net profit of 5,2 billion CHF (plus 6,1 percent), margin plus 20 basis points to 9,8 percent, total EPS 1,39 CHF (plus 8,6 percent)
• Acceleration of share buyback programme, 13 billion CHF to be completed by year end
• Full-year outlook: organic growth at least at 2007 level with improved EBIT margins

Nestle-CEO Paul Bulcke: «These figures build on the strong momentum gathered from last year’s milestone results. Nestle´s drive to become the world´s recognised leader in nutrition, health and wellness, its strong billionaire brands and its focus on speed and discipline in execution have allowed the company to further accelerate its performance under difficult economic conditions. I am therefore confident that 2008 will be another year of delivering the Nestle model, with organic growth at least at the 2007 level and a further improvement in EBIT margins. Our Food and Beverages business will be the key driver of this profitable growth» (press release).