August 9, 2012 - 15:51 AMT
PanARMENIAN.Net - Swiss food and drinks giant Nestle SA posted an 8.9 percent rise in first-half profits Thursday, August 9 but predicted that the remainder of 2012 will be challenging and warned of a slowdown in its key U.S. market, AP said.
Helped by strong demand from emerging markets, price rises and cost-cutting, the world's biggest food and beverage maker said net profit rose to 5.120 billion Swiss francs ($5.27 billion) in the January to June period, from 4.703 billion francs in the same six months of 2011.
Sales rose 7.5 percent to 44.1 billion Swiss francs ($45.37 billion) from last year's 41 billion francs.
Based in Vevey, Switzerland, the maker of dozens of household name brands such as Nescafe, Haagen Daz and Jenny Craig reaffirmed its outlook for the rest of the year despite what it called a "tough trading environment, especially in developed markets."
Nestle expects underlying sales growth of 5 to 6 percent for the remainder of the year due to its strong first half.
Chief Executive Paul Bulcke said the first half shows the company is "making the right choices at the right time" and its strategic roadmap is working.
"We are continually opening new routes-to-market to reach emerging consumers, and using new media to increase both our direct engagement with consumers and our return on brand investment," he said. "This approach has delivered profitable growth in both emerging and developed markets."
In North America, its biggest market, Nestle reported that consumer confidence remained weak. Competition from rivals, such as supermarkets selling their own brands, had increased, with sales of several food categories under pressure.
In particular, sales of Jenny Craig weight loss products, infant nutrition, frozen pizza and ice cream were not faring as well as hoped with U.S. consumers, said the chief financial officer, Wan Ling Martello.
The lagging U.S. sales reflect the predicament of food companies trying to pitch to consumers who have cut back spending due to tight household budgets and high unemployment.
In Europe, where demand has lessened with the financial crisis, the "trading environment has deteriorated," Martello noted, though at least sales had not decelerated. Coffee sales were strong in Britain and Russia, where chocolate and pet food also were in demand, she added.
On the Zurich exchange, shares of Nestle rose 1.8 percent to 60.75 francs ($62.50) soon after trading opened. Shares have climbed 12.8 percent since the start of the year.