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August 13, 2009

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Nestle profit sours in first half

NESTLE SA, the world's biggest food and drink maker, reported yesterday a 2 percent fall in first-half net profit as the recession hurt consumer demand and divestments and a stronger Swiss franc weighed on sales.

The maker of popular brands such as Nescafe, Perrier and Haagen Dazs said it earned 5.1 billion Swiss francs (US$4.7 billion) in the first six months of the year, down slightly from 5.2 billion francs in the same period last year.

The first-half result bettered market expectations, although some analysts noted that the company had dropped its full-year growth target.

Chief Executive Paul Bulcke said he was pleased that Nestle "delivered a combination of growth and increased profitability in the first half of the year, and this in a very challenging business environment."

Nestle reports sales each quarter, but earnings only on the half-year and full-year. The Swiss company said sales through June fell 1.5 percent to 52.3 billion francs.

Food and beverages sales fell by 2.0 percent to 48.3 billion francs. Sales stagnated in the Americas, its biggest market, but fell 7.5 percent in Asia and Africa and 21.6 percent in Europe.

Nestle's bottled water was the big loser as sales fell 4.7 percent on lower demand in Western Europe and North America.

The company's nutrition unit also reported a 3.5 percent decline in sales, even though its infant nutrition business showed some signs of gaining momentum in Europe and the United States.

It said its cereals business and Nespresso coffee continued to perform well.

Nestle said the strength of the Swiss franc against other currencies brought overall sales down 4.3 percent from what they otherwise would have been.

Bulcke said the company's 3.5 percent organic growth would likely improve in the second half of the year.


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