Price increases helped Nestle boost its net profit to a record high in 2005, in line with expectations, allowing it to weather the storm of rising input costs better than some of its rivals.
Net profit at the world's largest food group increased 20.7 per cent to Sfr7.995 billion Swiss francs, the firm said today, after it raised prices by 2 per cent in the year.
High costs of raw materials and energy have made life tough for food firms by increasing the price of food production, transport and packaging. Kraft Foods has said it would cut jobs to offset commodity costs.
The maker of KitKat chocolate wafers and Nescafe coffee reiterated that high oil prices and a volatile political environment could affect business in 2006.
"High crude oil prices will continue to mark energy and packaging costs and there is a clearly more volatile political situation in some parts of the world," said the maker of Purina pet food.
"Also, a negative outcome of the Doha (world trade talks) round might impact trade and the overall economic outlook."
Sales rose to a record Sfr91.075 billion, better than expected and up an underlying 6.2 per cent from a year ago.
That beat the company's own target on underlying sales - Nestle's benchmark that strips out currency movements and acquisitions - of 5 to 6 per cent.
Nestle reiterated that target for 2006 and said it aimed for higher margins of earnings before interest, tax and amortisation in constant currencies.
It also said it had "some modest growth expectations even in Western Europe", where Nestle only had 2 per cent underlying growth in the face of subdued consumer sentiment, high unemployment and cut-throat price competition.