Nestlé hit by tough conditions in Europe

Food giant Nestlé today missed profits forecasts after sales were knocked by poor weather and rising crop prices.

The Swiss group, whose range of products includes Nescafé coffee, Kit-Kat and other confectionery favourites, said conditions were particularly tough in its key European market.

But it remained confident of hitting a target of up to 6% organic growth and said the half-year performance showed its efficiency programmes were on track.

Net profits for the six months to June 30 were 2.84 billion Swiss francs (€1.85bn), compared with 2.78 billion Swiss francs (€1.81bn) a year ago. This was lower than the 2.95 billion Swiss francs (€1.9bn) expected by analysts.

Nestlé took over Rowntree’s of York in 1989 and makes products including Rolo and Kit-Kat at its York factory. Its UK head office is in Croydon. Besides confectionery and coffee, Nestlé sells products such as Buitoni pasta and Perrier mineral water.

Chief executive Peter Brabeck-Letmathe said profitability improved by 20% in the first six months of 2004 after stripping out the impact of disposals.

Cost-cutting measures have included 270 job losses at a factory in Halifax which makes chocolate Easter eggs and Quality Street.

This efficiency drive has helped offset the impact of rising energy costs and higher prices for key ingredients such as coffee, milk and sugar.

Total sales rose 2.5% to 42.45 billion Swiss francs (€27.6bn), reflecting a good performance in the Americas, Asia, Oceania and Africa.

The downbeat assessment of the European market offered by Nestlé mirrored comments made by Anglo-Dutch rival Unilever last month.

Nestlé said sales in Europe before acquisitions fell 0.4% – a more resilient performance than Unilever, which saw sales slide 5% in the same period.

Weak demand for ice cream and water were offset to a degree by good performance from its culinary and healthcare nutrition ranges.

Nestlé said a heavier product launch programme in the second half of the year would improve sales in Europe, including the arrival of low-carbohydrate bars of Kit-Kat and Rolo.