Nestle overcomes rising overheads

Foods group Nestle today said slower confectionery sales and the highest coffee prices in seven years had failed to knock a “very strong” six months.

The maker of Nescafe coffee and Smarties said net first half profits to June 30 were up 11% to 4.2 billion Swiss francs (€2.65bn) compared with the same period last year.

Sales at the firm also grew by 11% to 47.1 billion Swiss francs (€29.8bn) as it fought rising prices of coffee beans, packaging and sugar.

Nestle has long term contracts with coffee producers and is being affected by the high price as it tries to negotiate fresh deals for the next two years.

The price of robusta coffee beans used to make Nescafe has jumped 50% in the past 12 months.

Prices have risen amid dwindling global supplies and lower exports from Vietnam, the world’s biggest producer of robusta coffee, where heavy rain has disrupted operations.

Nestle said it did not expect price rises to be passed onto the customer in the second half of the year, although it admitted it was an option in the future.

The company said it had managed to counter rising fuel costs by successful hedging and efficiency programmes.

In the UK and Europe, it said Nescafe and milkshake brand Nesquik had enjoyed strong sales, but confectionery had slowed because of product streamlining.