Bad weather and higher costs hurt Nestlé figures

Bottled water sales were hit by the weather. Nestlé

The world’s number one food company, Nestlé, has reported that net profit for the first half rose by 2.1 per cent, slightly below market expectations.

The company, whose products range from chocolate KitKat bars to Friskies pet food, said it had been hit by higher raw material costs and poor weather in Europe.

But Nestlé announced on Wednesday a record operating cash flow of SFr3.347 billion ($2.69 billion) and confirmed a positive outlook for the year as a whole.

Net profit came in at SFr2.838 billion or 2.1 per cent higher than for the same period last year, on sales of SFr42.454 billion, which were up by 2.5 per cent.

Analysts had forecast an average net profit of closer to SFr3 billion.

“Nestlé’s results for the first half of 2004 are resilient in the face of higher raw material prices, poor weather conditions and continued challenging trading conditions in western Europe,” commented chief executive Peter Brabeck-Letmathe in a statement.

“Optimistic”

“I expect a further acceleration of real internal growth in the second half of the year and remain optimistic that organic growth between five and six per cent will be achieved for the full year,” he added.

The company said this year’s poor weather, which contrasted sharply with the heatwave of 2003, had hit sales of ice cream and water in particular.

Higher prices for milk, coffee, sugar, energy and packaging materials also dragged down profit, it commented.

The group painted a different picture of its activities outside Europe. Trading conditions in Asia, Oceania and Latin America had improved, and a more positive market sentiment was expected in North America in the second half of the year.

Nestlé said it continued to benefit from “an exceptionally healthy financial position”, with net indebtedness falling from just over SFr21 billion to SFr15.4 billion at the end of June.

In its comments on strategy, Nestlé reported that the first half saw substantial disposals of non-strategic businesses in areas such as distribution and cocoa processing.

This, it added, was in line with the policy to focus on high value-added research and development-driven food and beverage products.

swissinfo with agencies

Key facts

Second-half figures:

Net profit: SFr2.838 billion (+2.1 per cent over comparable period in 2003)
Sales: SFr42.454 billion (+2.5 per cent)
Operating cash flow: SFr3.347 billion
Real internal growth: 2.8 per cent
Organic growth: 4.6 per cent