Nestle Profits Up 70%

Company is targeting organic growth of 5% in 2009

The world's biggest food company Nestle posted a surge in net profits to 18 billion Swiss francs in 2008. The profits, US$15 billion, were up 69.4% from 2007's 10.6 billion francs. Sales reached 109.9 billion francs last year, up 2.2% compared to 2007.

The earnings were significantly boosted by the sale of a quarter of its stake in eyecare company Alcon to Novartis, leading to a profit of $9.2 billion on the disposal.

But the group warned that the global economic downturn "could further impact consumer demand."

"It is clear that in the prevailing market conditions, we will grow slower in 2009 than the high levels in 2008," said Jim Singh, CFO. Nevertheless, the group is targeting organic growth of around 5% this year, said chief executive Paul Bulcke. "We believe that the group will once again be one of the industry's fastest growing companies in 2009," he said.

Singh said the group would seek to drive growth through cost reductions in 2009 but warned that raw material prices would rise in 2009 along with inflation.

But as consumers hit by the economic crisis turn to cheaper essentials rather than lavish meals in restaurants, Singh said there were opportunities for the group, which makes food products ranging from pasta sauces to ice cream, chocolate drinks, mineral water and milk sold under well-known brands.

European consumers would take a "cautious approach to spending" this year, but the food group would benefit as consumers have coffee at home, rather than in cafes or restaurants, said Singh. Nestle is one of the biggest instant coffee makers. The trend was borne out in the U.S., where frozen food sales accelerated in the second half of last year.

In Asia, government policies to boost domestic consumption could lift the group's sales, said Singh.

Copyright Agence France-Presse, 2009

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