* H1 organic growth 6.6 pct vs 6.3 pct forecast
* H1 sales 44.1 bln Sfr vs 43.5 bln Sfr forecast
* Confirms outlook for organic growth of 5-6 pct
* Shares up 3.3 percent
By Emma Thomasson
ZURICH, Aug 9 Nestle expects pressure
from the rising price of ingredients for its products such as
chocolate bars, coffee and soup to ease, helping it meet its
target for increasing sales despite tough markets.
The world's biggest food group on Thursday beat forecasts
with a 6.6 percent rise in underlying first-half sales as volume
growth ticked up, unlike many of its rivals.
Global food prices are near record highs, in part because of
soaring grain futures. But many of Nestle's most important
ingredients, such as coffee, sugar and dairy products, are less
affected than cereals.
Nestle's sales growth was driven by strong demand from
emerging markets and price increases, as the company managed to
pass on the cost of its raw materials to consumers.
The Vevey-based company also reported solid performance in
Europe, despite its weak economy, as it sold more affordable
goods like its Nescafe 3-in-1 soluble coffee, KitKat chocolate
bars and new peelable banana ice cream.
Analysts had on average forecast 6.3 percent sales
"A very solid set of numbers for what is a class act in the
space," said Jon Cox, analyst at Kepler Capital Markets.
Nestle said the rising cost of its ingredients resulted in
an increase of 0.5 percent in the cost of goods sold.
The worst U.S. drought in over half a century has pushed up
grain prices sharply. The United Nations food agency said on
Thursday world food prices surged in July and could rise
EUROPE HOLDS UP
Nestle said it expected price rises for its ingredients of
only in the low to mid-single digits for the rest of the year,
in line with its earlier forecasts and keeping it on track for
its target of underlying sales growth of 5-6 percent this year.
While cocoa prices are surging, coffee prices are well below
two-year highs on expectations of a good harvest in top producer
Brazil. Sugar prices are also down on expectations of a good
harvest and milk prices have been falling.
Nestle's first-half sales grew 12.9 percent in emerging
markets, compared with just 2.6 percent in developed markets.
Volume growth in Europe was practically flat although the
company still saw some expansion in the continent's troubled
Strong emerging markets also helped Unilever
avoid the recent profit warnings by its French and U.S.
peers Danone and Procter & Gamble, although it
did warn of tougher times ahead due to difficult economies and
volatile input costs.
Nestle shares rose 3.3 percent to 61.16 francs by 1319 GMT,
compared with a 1.2 percent increase for the European food and
Analysts contrasted Nestle's performance in Europe, where it
saw 2.4 percent organic growth, with Unilever's fall in sales in
the region of 2.2 percent in the second quarter.
"All businesses/regions beat expectations but perhaps most
impressive was the growth seen in Europe in-line with Q1 despite
the current economic woes," said Bernstein analyst Andrew Wood.
Growth in Europe came despite a slow start to summer sales
for ice cream and bottled water due to poor weather.
Net profit rose 8.9 percent to 5.1 billion Swiss francs
($5.25 billion) on sales of 44.1 billion francs, up 7.5 percent
year-on-year, with 3.7 percentage points of the rise in
underlying sales coming from price increases.
Analysts surveyed by Reuters had forecast on average a net
profit of 4.9 billion francs and sales of 43.8 billion francs.
($1 = 0.9721 Swiss francs)
(Reporting by Emma Thomasson; Additional reporting by Katharina
Bart, and David Brough in London.; Editing by Erica Billingham)