VEVEY, SWITZERLAND — While net profit increased 19% in the first half of the year, Nestle S.A. is seeking to offset rising distribution costs through price increases for certain products, especially those in Nestle Waters.

Six-month net profit increased to 5,825 million Swiss francs ($6,021 million) from 4,897 million Swiss francs during the same time of the previous year. Earnings per share on the common stock increased 21% to 1.92 Swiss francs ($1.98) from 1.58 Swiss francs ($1.59). The increase was mainly the result of income from the disposal of businesses, lower taxes and improved operating performance.

Total sales increased by 2.3% to 43,920 million Swiss francs ($45,397 million) from 42,926 million Swiss francs. Organic growth was 2.8%, but foreign exchange reduced sales by 0.5%. Divesting the U.S. confectionery business contributed to organic growth.

“Our organic growth continued to be broad-based, with all categories positive,” said Francois-Xavier Roger, chief financial officer and executive vice-president of finance and control, in a July 26 earnings call. “Our key growth categories of pet care, coffee, nutrition, water and the consumer health platforms, when taken together, grew about twice as fast as the others, reinforcing their position as growth drivers, which is fully in line with our focused strategy.”

Organic growth in Nestle Waters was 1% in the first half, but net sales were down 0.5% to 3,967 million Swiss francs. Underlying trading operating profit of 398 million Swiss francs was down 21%. Underlying trading operating profit margin decreased by 270 basis points to 10% following higher commodity and distribution costs.

S. Pellegrino water, Nestle“Let me just say specifically on waters that we fully recognize the margin for the first six months now does not look pretty, but this is exactly the worst moment in time where you see the full impact coming from PET price increases and also that significant increase in distribution costs over the winter and spring,” said Ulf Mark Schneider, chief executive officer of Nestle S.A. “And yet, that has not been rolled forward yet in the form of price increases.”

Nestle Waters implemented a price increase in the United States in June to reflect inflation in packaging and distribution costs. Mr. Rogers said rising freight costs have affected Nestle Waters in the United States significantly.

“We will soften the impact, obviously, on the bottom line because of these price increases that we have put through for water in the U.S., which are in the range of mid-single digit,” he said. “So freight is … We are feeling the pressure, I would say, everywhere in the world, but it's more significant in the U.S. because there is a combination of two factors: oil prices moving up as well as a shortage of transportation capabilities in the U.S. Once again, we don't see that declining in the second part of the year.”

Nestle S.A. companywide has internal projects underway designed to reduce commodity costs in 2019 and 2020, Mr. Schneider said.

“I think we're doing a lot of work in the purchasing area to become less single-sourced reliant and to have more competition among our suppliers,” he said.

Coffee-Mate 2 Go coffee creamer, NestleIn Nestle’s Zone Americas, organic sales growth was 1%, but net sales fell 4% to 14,153 million Swiss francs. Underlying trading operating profit of 2,680 million Swiss francs was down 2%.

In North America, growth came in Purina pet care, Coffee-mate creamers and coffee, particularly in e-commerce. Hot Pockets and pizza, particularly the DiGiorno brand, contributed, too. In Brazil, a truckers’ strike in May disrupted operations and distribution, which reduced Zone Americas growth by about 80 basis points in the second quarter.

Pet care, coffee and nutrition were the main contributors in Zone Europe, Middle East and North Africa. Net sales increased 6% to 9,303 million Swiss francs. Underlying trading operating profit was up 10% to 1,758 million Swiss francs.

In Zone Asia, Oceania and sub-Saharan Africa, net sales rose 3.5% to 10,634 million Swiss francs with organic growth at 4.4%. Underlying trading operating profit was up 2.5% to 2,435 million Swiss francs.

In Other Businesses, Nespresso maintained mid-single-digit organic growth, Nestle Health Science delivered mid-single-digit organic growth and Nestle Skin Health had mid-single-digit growth. Net sales of 5,863 million Swiss francs were up 12%. Underlying trading operating profit of 960 million Swiss francs was up 24%.