Swiss franc hits Nestle profits

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Nestle100 Reuters. A pack of Nestle Pure Life bottled water is pictured in a showroom at the company headquarters in Vevey February 13, 2014.

Zurich - The world's leading food industry group Nestle on Thursday posted slumping earnings and sales for the first half of the year, blaming the effect of a strong Swiss franc.

During the first six months of the year, the maker of Nespresso capsules and baby food among many other products, said it had made a net profit of 4.6 billion Swiss francs (R55 billion).

That marked a drop of about 9.5-percent from the figure for the same period last year, and missed the expectations of analysts polled by AWP, who had anticipated a 4.9-billion-franc net profit.

The company's sales meanwhile shrank 4.8 percent to 43 billion francs from a year ago.

But Nestle stressed that “the strong Swiss Franc continued to have a substantial negative impact,” emphasising that the strengthened currency had eroded its sales figure by 8.8 percent.

The company's organic growth, considered a key indicator of its performance, had expanded 4.7 percent during the six-month period, it pointed out.

That number was based on 2.9 percent real internal growth, with the remaining 1.8 percent attributable to pricing, Nestle said.

“We delivered solid, broad-based organic growth, driven by real internal growth and pricing in what is still a very volatile trading environment,” company chief Paul Bulcke said in the earnings statement.

The food and beverages giant also maintained its outlook for the full year, forecasting organic growth of around 5.0 percent and improvements in its margins and its earnings per share, not counting currency fluctuations.

Nestle also announced an 8.0-billion-franc share buy-back programme that will start this year and continue into 2015.

Following the news, the company saw its shares jump 2.98 percent to 69.10 Swiss francs a piece in morning trading, as the Swiss stock exchange's main SMI index inched up 0.2 percent. - Sapa-AFP

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