Nestle Posts Solid Profit Increase For Fourth Quarter (PINK: NSRGF)
Nestle SA posted a solid increase in profits in 2011 as sales rose strongly. The company, based in Vevey, Switzerland, managed to brush aside the impact of a soaring domestic currency to reach a net profit of 9.5 billion Swiss francs ($10.35 billion) for 2011, an 8% increase. Much of the profit increase was attributed to strong sales in developing countries.
Nestle’s sales growth of 7.5% in its continuing sales during the year was better than many analysts had expected. Analysts had predicted growth of about 7%. Overall sales fell to 83.6 billion francs ($91.11 billion) for 2011 from nearly 110 billion francs the previous year. The decline was largely due to changes in currency rates and the impact of asset disposals. The company expects organic sales growth in the next year to come in lower but still meet its target of 5%-6%.
Nestle’s full-year statement was accompanied with a warning that tough times lie ahead. The company is grappling with volatile markets, rising commodity prices, and the strength of the Swiss franc. The Swiss National Bank has intervened in the markets to try to stem the rise of the franc to protect many companies from significant losses.
Chief Executive Paul Bulcke said, “It was a challenging year, and we do not expect 2012 to be any easier. We’re really living in a new reality.” He referred to the world’s financial crises and political upheavals over the past year as “tectonic shifts” in which wealth was moving to developing nations and where governments were failing to solve big problems. “That lowers consumer confidence,” he said.
Nestle revealed that it was continuing to grow in all world regions, with 5% growth in Europe and 6.4% growth in the Americas. Sales increased 13.1% in Asia, Oceania, and Africa and some of the best growth appeared in India, Pakistan, North Africa, Central West Africa, and Egypt.
Nestle is the world’s biggest food and drinks maker, with the Nescafe, Perrier, Jenny Craig and Haagen Dazs brands under its control. Nestle has 280,000 employees worldwide and factories or operations in almost every country in the world. The company is a major buyer of food commodities such as wheat, sugar, milk, and coffee.