30 August 2006

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Business Today

Nestlé posts very strong performance in first half 2006

In the first six months of 2006, consolidated sales of the Nestlé Group amounted to CHF 47 138 million, an increase of 11.0% over January-June 2005. Earnings before interest and tax (EBIT) increased by 14.5% to CHF 6,054 million, resulting in an improved oper-ating margin of 12.8%, up 40 basis points. Net profit grew 11.4%, to CHF 4,151 million plus earnings per share rose to CHF 10.73, an increase of 11.9%. This confirms Nestlé’s position as the largest food company in the world.
Peter Brabeck-Letmathe, Chairman and Chief Executive Officer of Nestlé S.A.: “During the first half of 2006 the Group delivered excellent levels of growth and profit margin. This was made possible by the strong performance of our food, beverage and nutrition business which generated 6% organic growth and 30 basis points margin improvement. Continued input cost pressures were outweighed by cost and working capital discipline, as well as the effectiveness of our efficiency programs, re-flecting our ability to improve our margins even in tough economic conditions. The outstanding first-half results demonstrate that the Nestlé model of combining strong top-line growth with improved operational performance enhances value for our shareholders. On the strength of these results, I am confident in Nestlé achieving, for the full year, organic growth at the higher end of the target range as well as a margin improvement in constant currencies. “
There was strong growth in the Americas and in Asia, Oceania and Africa whilst improvement in the overall economic climate during the first half in Western Europe was reflected in higher consumer confi-dence and an acceleration of Nestlé’s real internal growth to a level not seen since 2002.
The Group had again to contend with high raw material and energy prices. Their impact on the results was cushioned by the economies of scale resulting from the strong volume growth, Nestlé’s operational efficiency program “Operation Excellence 2007”, and by successful hedging which combined to reduce the cost of goods sold by 40 basis points.
The strong start to the year allows the Group to confirm its overall positive outlook. Nestlé is confident that it can once again achieve its stated targets. Thus, the Group expects to achieve an organic growth at the higher end of the target range of 5-6% as well as a margin improvement in constant currencies for the full year.

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