The world's biggest food group Nestle have announced that first-half organic growth was a better-than-expected 5.5 per cent and predicted that it would hold around that rate for 2003, helped by higher prices in coffee and water.
Organic growth is Nestle's own benchmark that strips out the effects of exchange rates and acquisitions.
On an underlying basis, net profit rose by 4.9 per cent and by 19.1 per cent if currency effects are stripped out, reflecting the impact of the strong Swiss franc on earnings.
Nestle shares are broadly in line with peers like Cadbury this year despite concerns about delays to cost-cutting programmes, but have beaten those of big rival Unilever which issued a sales warning in June.
First-half net profit halved to 2.78 billion Swiss francs, hurt by a strong comparison figure a year ago, when the result was boosted by non-trading items including the partial stock offering of its ALCON eye care unit.
Sales fell 6.3 per cent to 41.44 billion francs. In constant currencies, sales rose 6.3 per cent, with coffee, chilled culinary food and water showing progress, Nestle said, partly offset by soft chocolate, confectionary and petcare.
Reflecting Nestle's focus on margin improvement, its earnings before interest tax and amortisation margin rose by 30 basis points to 12.2 percent, for operating income of 5.05 billion francs, down from 5.28 billion a year ago.
Nestle's food and drinks business tends to be resistant to economic recession and it shares have fallen some two per cent in 2003 as investors seek out more cyclical stocks set to benefit from an anticipated upturn later this year.