Nestle income rises 18%, announces share buyback

by Staff
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VEVEY, SWITZERLAND — Strong demand, higher prices and cost controls helped boost first half earnings at Nestle S.A. Net profit in the first half of fiscal 2007 was 4.916 billion Swiss francs, ($4.03 billion), up 18% from the first half of 2006. Sales were 51.114 billion Swiss francs ($41.95 billion), up 8% from the previous year.

"These results are due to the strong performance of the food and beverages business and Nestle’s ongoing transformation into the world’s leading nutrition, health and wellness company," said Peter Brabeck-Letmathe, chairman and chief executive officer. "In spite of increasing input cost pressures, I am confident of Nestle achieving above-target organic growth for 2007, as well as a sustainable margin improvement."

In Zone Americas, sales were 15.3 billion Swiss francs ($12.56 billion), with the ice cream business performing well in the zone.

The company said first-half results were driven by strong volume growth in addition to the positive impact of price increases ahead of higher input costs. The company expects above-target organic growth as well as further sustainable improvements in margins for the full-year despite the likelihood that higher prices will slow volume growth and raw material costs will increase pressure on EBIT margins.

Mr. Brabeck-Letmathe also announced a three-year share buyback program of 25 billion Swiss francs (about $21 million).

"This reflects our commitment to an efficient capital structure and our continued confidence in the business," Mr. Brabeck-Letmathe said.

Fitch Ratings downgraded Nestle’s long-term issue default rating and senior unsecured rating to AA+ from AAA. The outlook is stable.

Fitch said the downgrade follows the announcement of the share buyback program and statements that the company is no longer affirming a financial policy that supports the previous rating.

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