Business

Nestle says it can cope with rising raw material prices

Nestle products
Image caption Nestle's food brands include KitKat, Nescafe and Perrier

Swiss food giant Nestle has said it is well-placed to cope with higher raw material costs.

Nestle, which makes KitKats and Nescafe coffee, said it had already seen a "significant uptick" and it expected costs to rise by up to 10% this year.

It made the comments as it revealed a net profit for 2010 of 34.2bn Swiss francs ($35.6bn; £22.1bn), up from 10.4bn Swiss francs in 2009.

Profits were boosted by the sale of a stake in eyecare specialist Alcon.

That sale to healthcare firm Novartis was worth 24.5bn Swiss francs. Stripping out the effect of the Alcon sale, Nestle's net profit fell 7% to 9.7bn Swiss francs.

'Uncertainties'

"We saw a significant uptick in raw material prices in the second half," said chief financial officer Jim Singh at the company's results conference.

"We expect 2.5 to 3bn Swiss francs in additional costs in 2011," he said. This would represent an 8 to 10% increase on Nestle's costs of about 30bn Swiss francs.

But the company stressed in its statement that it was well-placed to cope with economic "uncertainties" ahead, including rising raw material prices.

Mr Singh said the impact on prices would vary.

"I cannot tell you what the pricing will be, that depends on the different markets," Mr Singh said.

Chief executive Paul Bulcke also said he hoped the political crisis in Ivory Coast - the world's biggest cocoa exporter - would soon be resolved.

"If the situation persists, we risk suffering... dramatic consequences," he said.

'Outlook reassuring'

Nestle said it expected sales to continue to grow this year.

Excluding acquisitions, disposals and currency moves, it predicts growth rates of between 5% and 6% in 2011.

The firm also said it would increase the dividend to shareholders from 1.60 to 1.85 Swiss francs per share.

"A very strong set of figures with underlying earnings... on the back of stronger-than-expected top-line growth driven by emerging markets and Asia. Its outlook statement is reassuring," said analyst Jon Cox at Kepler Research.

Nestle shares were up 1% at lunchtime at 52.85 francs on the SIX Swiss exchange.

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