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Nestle half-year net profit down on franc's rise

Nestle half-year net profit down on franc's rise

August 10th, 2011 in News

GENEVA (AP) - Swiss food and drink giant Nestle SA posted a drop in half-year earnings Wednesday, blaming volatile markets, rising commodity prices and particularly the strength of the Swiss franc for dragging down profits.

The Vevey-based company said it earned 4.7 billion francs ($6.48 billion) during the first six months of the year. Illustrating the impact of the franc's surge, the results represented a 24 percent drop when measured in francs, but a rise of almost 30 percent in dollar terms.

The maker of Nescafe, Jenny Craig and Haagen-Dazs said underlying sales during the first six months grew 7.5 percent in constant currencies.

Chief executive Paul Bulcke said the first half of the year had been "a period characterized by political and economic instability, natural disasters, rising raw material prices and, yes, a strong Swiss franc."

He maintained the company would end the year with organic growth at the top end of its target of 5-6 percent.

Wednesday's results squarely met analyst expectations.

Sales reached 40.9 billion francs, down from 47.1 billion the previous year again reflecting the strength of the franc, which hit a new record high against the dollar and the euro Tuesday.

In the Americas region, sales totaled 12.8 billion francs. The Asia, Oceania and Africa region matched European sales of 7.5 billion francs. Nestle's water and baby foods businesses both expanded, and sales of the company's Nespresso capsules rose by a double-digit percentage.