"Cheaper Coffee and Cocoa Help Nestle Profit Rise 35%"
Vevey, Switzerland--Nestle S.A., the world’s largest food company, said Wednesday that its first-half profit jumped 35 percent as the company cut spending and as cheaper coffee and cocoa made its Nescafe, KitKat and other brands more profitable.
Nestle, which also sells Perrier and other major water brands, said that profit rose to 2.8 billion Swiss francs (1.6 billion dollars) from 2.08 billion francs in the year-ago period. Sales rose 10 percent to 38.8 billion francs, in line with expectations, as demand in South America, Asia and Eastern Europe recovered.
Chief Executive Peter Brabeck, who took over in 1997, has closed plants, sold laggard units and focused on best-selling brands, helping to drive operating profit as a precentage of sales up to 11.1 percent form 9.8 percent. The net profit margin was 7.2 perdent, compared wiht 5.9 percent in the first half of 1999.
"The management is doing better in cost management, and it’s reflected in these higher margins," said Pascal Franc, a fund manager with Mirabaud & Cie. "I’m very pleased with the results."
Nestle, which buys about 12 percent of the world’s cocoa and coffee, benefited as prices for coffee fell 37 percent and cocoa by 26 percent over the past year. That offset higher prices for packaging.
In Zurich, Nestle shares closed up 156 Swiss francs at 3,730 francs.