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Nestle rolling in dough

Stephen Beard Aug 15, 2007

TEXT OF STORY

Doug Krizner: Sales and profits for the world’s biggest food company, Nestle, are up nicely. The company’s planning a massive billion-dollar buyback of its stock as well. From London, Stephen Beard reports.


Stephen Beard: Nestle says it is planning no major acquisitions. It’s still digesting the health and baby food firms it bought earlier this year.

The company therefore would like to strengthen its balance sheet, buying back $21 billion worth of its own shares.

Nestle seems in good financial shape. Sales are up 8 percent. Earnings before tax have done even better. They’re up 14 percent. And this at a time when its raw materials — milk, sugar and coffee are more expensive.

The key, says analyst Justin Urquart-Stewart, is that Nestle has been able to push up its prices.

Justin Urquart-Stewart: What has been remarkable about Nestle has been how they have been able to improve margins even though the base cost of the raw materials of their commodities, has been rising. They’ve been able to do that by very effective marketing indeed, using their brands and making greater profits.

The company has even managed to raise the price of its ice cream and other dairy products by as much as 10 percent.

In London, this is Stephen Beard for Marketplace.

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