Nestlé raises full-year outlook

Nestlé raised its full-year outlook after strong demand for its brands in emerging markets helped it post a 7.5% rise in underlying first-half sales, even growing in European and North American markets.

The group has managed to keep margins and net profits largely stable despite high raw material costs and a record-high Swiss franc. Chief executive Paul Bulcke says that Nestlé made good progress in a period characterised by political and economic instability, natural disasters, rising raw material prices and a strong Swiss franc.

These factors as well as subdued consumer demand in mature markets will make the rest of 2011 equally challenging, Nestlé said, but momentum was strong, particularly in emerging markets, and pricing should help more in the second half.

The company decided not to launch a new share buyback programme, which had been expected by many analysts, partly due to the tough economic environment and also to keep cash available for possible bolt-on acquisitions.

Its net profit fell 13.7% to 4.7 billion francs compared with a year ago. The group’s operating profit margin rose 0.2 points to 15.1 percent. Matrix analyst Chris Wickham comments, “Nestle delivered figures ahead of market expectations. Better-than-expected pricing largely explains the scale of Nestlé’s outperformance. Nestlé continues to benefit from its strong performance in emerging markets and exposure to vital categories and, in common with the other two European large cap food operators, Danone and Unilever, continues to benefit from both exposure to emerging markets and a commitment to vitality.”