Nestle's strong brands and price increases helped it to boost sales and profits in the first half of the year despite higher raw material costs.
Higher commodities costs limited the improvement in margins at the world's biggest food company, however, and disappointed investors pushed its shares lower after a strong run in recent sessions.
Net profit rose to 3.68 billion Swiss francs from 2.78 billion a year ago, restated to account for a switch to IFRS accounting rules.
Nestle's cost-saving programmes made the firm confident it could reach its 2005 targets.
Underlying sales grew 5.2 per cent, allowing Nestle to meet its own sales target for the first time since the first quarter of 2004. These sales are Nestle's own measure of volume sold and price changes, stripping out currency effects, divestments and acquisitions. Nestle's margin at the level of earnings before interest, tax and amortisation (EBITA) came in at 12 per cent in the first half of the year, just above the restated 11.9 per cent reached in the same period last year, which some dealers said was weighing on sentiment despite the otherwise strong results.
Its strong brands allowed Nestle to raise prices by 1.8 per cent in the first half, which together with the cost savings helped it to fend off high raw materials costs.