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Nestle prepares for tough 2012

The world's biggest food company Nestle on Thursday posted forecast-beating 2011 net profit of 9.5 billion francs ($10.26 billion), but warned that 2012 would be tough.

Nestle prepares for tough 2012
Nestle

The earnings were up 8.1 percent from a year ago, and better than analysts’ forecast of 9.2 billion francs.

However, sales reached just 83.6 billion francs, down sharply from a year ago when the firm generated 104.6 billion francs in revenues.

A negative foreign exchange rate had an impact of 13.4 percent on sales, while divestitures, including the sale of eyecare giant Alcon took another 4.2 percent off, said the food giant that makes Nespresso coffee and Perrier mineral water.

Nestle chief executive Paul Bulcke said the company “delivered a good performance, top and bottom line, in both emerging and developed markets in 2011.”

“It was a challenging year and we do not expect 2012 to be any easier.”

Despite uncertainties and continuing economic volatility the group said growth excluding currency fluctuations and acquisitions were up five percent in Europe, 6.4 percent in the Americas and 13.1 percent in Asia, Oceania and Africa.

Business grew 13.3 percent in emerging markets and 4.3 percent in developed markets, the company said.

In Portugal, Italy, Greece and Spain, it advanced its growth to 3.7 percent despite financial difficulties in those countries.

Nestle chief financial officer Jim Singh added that sales in China are now approaching 5 billion Swiss francs.

China was therefore a key area of investment for the company, said Bulcke, pointing out that “wealth creation is moving from west to east.”

“We continue to make capital investments on a global basis” said Singh despite global political turmoil and natural disasters such as conflict in Ivory Coast and a massive earthquake and tsunami in Japan.

Growth in emerging markets was particularly driven by sales of Nestle Waters (mineral waters), which exceeded one billion francs.

Nespresso coffee had a year of “solid” 20 percent growth based on sales in excess of 3 billion francs.

For 2012, Nestle forecast a “positive outlook”.

According to Bulcke, the group is well positioned “to achieve … organic growth between 5 percent and 6 percent and an improved margin and recurring earnings per share at constant exchange rates.”

The group said that at its annual general meeting on April 19th, it will propose to shareholders a dividend of 1.95 Swiss francs per share, up 5.4 percent.

The board will also propose the cancellation of shares repurchased under the share repurchase programme of 10 billion Swiss francs completed in 2011.

On the Swiss Exchange, Nestle shares were up 0.8 percent at 0849 GMT.

Vontobel analysts noted the “phenomenal last quarter of Nestle with strong growth in volumes and prices, driven by emerging markets.”

Helvea analysts described the results as “excellent” and”ahead of our consensus”.

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NESTLE

‘Unlimited resources’: Switzerland’s Nestle goes vegan

Swiss food giant Nestle, which has made billions with dairy products, said Monday it will host start-ups that want to develop vegetarian alternatives.

'Unlimited resources': Switzerland's Nestle goes vegan
Photo: SEBASTIEN BOZON / AFP

Nestle could thus find itself at the forefront of a sector that has strong growth potential, an analyst commented.

It plans to open its research and development (R&D) centre in Konolfingen, Switzerland to “start-ups, students and scientists” a statement said.

In addition to testing sustainable dairy products, the group plans to encourage work on plant-based dairy alternatives, it added.

Chief executive Mark Schneider was quoted as saying that “innovation in milk products and plant-based dairy alternatives is core to Nestle's portfolio strategy.”

The group unveiled a vegetable-based milk that had already been developed with the process, and technical director Stefan Palzer told AFP it planned to focus on 100-200 such projects a year.

Jon Cox, an analyst at Kepler Cheuvreux, noted that while Nestle had missed some consumer trends in the past, it has now “taken something of a lead in the plant-based alternative market for food”.

And “given its pretty much unlimited resources, Nestle is going to come out one of the winners in the space,” Cox forecast in an e-mail.

Nestle said that “internal, external and mixed teams” would work at the R&D centre over six-month periods.

Nestle would provide “expertise and key equipment such as small to medium-scale production equipment to facilitate the rapid upscaling of products for a test launch in a retail environment,” it added.

The Swiss food giant has long been known for its dairy products, but faced a boycott in the 1970s for allegedly discouraging mothers in developing countries from breastfeeding even though it was cheaper and more nutritious than powdered formula.

On Monday, the group's statement also underscored that the research initiative was part of its commitment to help fight global warming.

“As a company, we have set ambitious climate goals. This is part of our promise to develop products that are good for you and good for the planet,” it said.

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