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Nestlé announces another record year

Flying high: Nestlé has announced another record profit

(Keystone)

Net profit at Swiss food giant Nestlé rose by 13.8 per cent to a record-high SFr9.2 billion ($7.4 billion) in 2006, the company said on Thursday.

Nestlé, based in Vevey, said the result had been boosted by its food and beverages businesses. It expects its winning streak to continue into 2007.

Analysts had expected the world's largest food group to report a 12 per cent rise in net income to SFr9 billion, according to a poll by Reuters. The 2005 profit of SFr8,1 billion was also a record.

"The results were excellent and the prospects very good despite the rise of soft commodity prices," said analyst Rob Mann at London-based broker Collins Stewart.

For 2006, sales roles 8.1 per cent to SFr98.5 billion, while organic growth was 6.2 per cent. Both were above expectations.

The Swiss group, which is shifting its strategic focus towards health and nutrition, bought Novartis' medical nutrition business last year for $2.5 billion and is widely expected to bid for the pharmaceutical company's Gerber baby food division.

"We are seeing the benefits of the Group's transformation into a nutrition, health and wellness company, with stronger innovation and branding, as well as improved efficiency," said Peter Brabeck-Letmathe, Nestlé's chairman and CEO, in a statement.

"Our competitiveness was further boosted by higher spending on marketing and R&D, the roll-out of GLOBE and shared services, as well as our strong commitment to savings programmes. This drove profitability to record levels while maintaining top-line growth."

The company said no share buyback was likely in the short term, but did intend to increase its dividend to SFr10.4 a share.

"The dividend increase was a positive surprise while the absence of another share buyback was a disappointment," said Bernstein Research analyst Andrew Wood.

In 2006, Nestle bought back shares worth SFr3 billion and analysts had hoped the company would follow this with a SFr4 billion buyback this year.

As for this year, Nestlé, whose 8,500 brands include Perrier water. Buitoni pasta and Smarties chocolate, said it expected the good results to continue, despite strong input cost pressure, especially in agricultural raw materials.

"For 2007, despite the tough input cost environment, we again plan to deliver organic growth of between five and six per cent as well as an EBIT margin improvement," said Brabeck.

swissinfo with agencies

Key facts

Nestlé 2006 figures
Sales: SFr98.5 billion
Organic growth: 6.2 per cent
Net profit: SFr9.2 billion

end of infobox

In brief

Nestlé, the leading food business ahead of Unilever, Kraft and Danone, is among the first 30 companies in the world in terms of capital.

It employs around 250,000 people in five continents.

The giant is moving towards the health and wellbeing sectors, and has been intensifying its research.

end of infobox

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