Nestlé holds steady despite downturn

Nestle CEO Peter Brabeck says acquisitions are already paying off Keystone

Net profit at the world's biggest food group, Nestlé, soared 79 per cent to SFr5,656 billion ($3,788 billion) in the first half.

But the bottom line was boosted mainly by disposals and the company’s partial flotation of its eye care unit, Alcon.

While net profit was above analysts’ forecasts, first-half sales were at the lower end of expectations. Sales rose 7.2 per cent to SFr44.2 billion, helped along by last year’s $10 billion acquisition of United States pet food firm, Ralston Purina.

Chief executive officer Peter Brabeck said the company’s performance needed to be seen in light of the downturn and recent acquisitions.

“Our… policies have allowed us to further increase profit margins and to grow… As a result we have obtained leading profitable positions in businesses hitherto considered as developing areas, such as pet care, water and ice cream.”

Real growth

Real internal growth, which strips out the effects of acquisitions and currency movements, increased by 3.5 per cent, below the company’s four per cent target.

Operating profit rose by 13.5 per cent to SFr5.2 billion in the first half, slightly lower than expected.

Nestlé, which is based in Vevey, has been on a buying spree recently – its latest acquisition, announced this month, was Chef America for $2.6 billion.

The company is also expected to bid for the US’s largest confectionary maker, Hershey Foods, which is valued at around $12 billion. Other possible acquisitions include Pfizer’s Adams unit and the functional foods division of Swiss healthcare company Novartis.

Analysts say Nestlé could buy the lot and still have cash to spare. But it’s thought that the firm may be reluctant to snap up too many new acquisitions because it would risk jeopardising its top credit rating, which enables it to borrow money more cheaply than lower-rated rivals.

swissinfo with agencies