SWITZ: Nestlé bucks downturn with strong earnings growth
Global food and beverage giant Nestlé has shrugged off surging energy and commodity costs to post strong sales and earnings growth in the first half.
Group sales rose by 3.8%, increasing to CHF53.97bn (US$50.3bn) while operating profit was up 6.1% to CHF7.34bn. Net earnings also rose 6.1% to CHF5.21bn.
Currency exchange weighed on sales gains, which were down more than 8% due to the strength of the Swiss franc.
Despite a 1.9% increase in the cost of goods sold, Nestlé managed to increase its first-half margins to 42.8% of sales.
Operating profit margin climbed by 0.3% to 13.8%. However, at constant exchange rates, operating margin would have increased 0.6%. Net profit margins were up 0.2% to 9.8%.
Nestlé's core foods and beverages activities booked organic growth of 8.9% in the half. Acquisitions, notably the Novartis acquisition, also contributed 3.2% to core revenues, which increased to CHF49.3bn.
"Nestlé'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," said Paul Bulcke, the group's new chief executive.
The only decline came from the company's waters business, where sales saw a 1.1% decline to CHF5bn.
The performance reflects a slowdown in the bottled water category in large markets such as Western Europe and North America due to a combination of difficult economic conditions and perceived environmental issues around bottled water.
Nevertheless, Nestlé issued a bullish outlook for the rest of the year, predicting a continued faster-than-expected rise in sales and margins. Nestlé had targeted long-term organic growth of 5-6%. However, the group outperformed this prediction last year when growth totalled 7.4%. Nestlé said it expected this year to continue in a similar vein.
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