Swiss food and drinks giant Nestle SA posted an 8.9 percent rise in first-half profits and strong sales that showed it was taking the rising costs for many of its ingredients in stride. But the company predicted the remainder of 2012 will be challenging as it warned of a slowdown in its key U.S. market.

Helped by price increases and strong demand from emerging markets, Nestle beat expectations with a net profit of 5.12 billion Swiss francs ($5.27 billion) in the January to June period, up from 4.7 billion francs in the same six months of 2011.

Based in Vevey, Switzerland, the maker of dozens of household name brands such as Nescafe and Haagen Dazs said it expects pressure from higher costs of ingredients to ease and reaffirmed a strong growth outlook for the rest of the year.

Faced with high global food prices and higher grain prices driven in part by a severe U.S. drought, Nestle passed on the cost of its raw materials to customers. It said the price of its ingredients is expected to rise by only low to mid-single digits for the rest of the year.

In North America, its biggest market, Nestle reported that consumer confidence remained weak. Competition from rivals has increased, with sales of several food categories under pressure.


Infant nutrition, frozen pizza and ice cream were among the products not faring as well as hoped with U.S. consumers, said the chief financial officer, Wan Ling Martello.

The lagging U.S. sales reflect the predicament of food companies trying to pitch to consumers who have cut back spending due to tight household budgets and high unemployment. PD

—From AP Newsfinder