Swiss food giant Nestle SA (NESN.VX) Friday said it expects pressure from high raw materials prices to ease during the second half of 2012, but is sticking to its forecast of low- to mid-single-digit inflation for the year.
The maker of Nescafe instant coffee and Kit Kat chocolate bars is one of the world's biggest buyers of sugar, coffee and milk, spending around 35 billion Swiss francs ($38.4 billion) a year on ingredients and packaging.
Last year it said its bill for ingredients would rise by up to CHF3 billion as the United Nations' Food and Agricultural Food Price Index, which covers meat, dairy, cereals, oils, fats and sugar costs, reached record levels before falling back in the second half of the year.
"We are still seeing an impact on our business from the 2011 raw material pressures," Roddy Child-Villiers, the company's head of investor relations, said on a conference call Friday.
Although spot prices for cocoa, sugar and other materials have declined in recent months, Child-Villiers said there was a time lag of several months and this was reflected in Nestle's business.
"Any benefit from raw materials would be felt more in the second half," Child-Villiers said.
"We still expect lower- to mid-single-digit input cost inflation for the year as a whole."
-By John Revill, Dow Jones Newswires; +41 43 443 8042; firstname.lastname@example.org