VEVEY (dpa-AFX) - The food group Nestle is expecting slightly lower growth and earnings per share this year than previously. The reason for this is that price increases are no longer likely to be as high as previously assumed. In the first half of the year, the world's largest food manufacturer grew thanks to higher prices and increased sales, although not as strongly as experts had hoped. The strong franc, however, had a negative impact on the result. The lowered forecast was not well received on the stock market. The share price fell significantly and was one of the weakest European blue chips on Thursday.

In the morning, the share price fell by five percent to 88.94 francs, its lowest level since the coronavirus crash in March 2020. Nestle is one of the most valuable European companies with a market capitalization of 236 billion Swiss francs (242 billion euros). The Swiss group is just ahead of the German software manufacturer SAP, which was recently valued at around 235 billion euros.

Although the experts at Swiss bank Vontobel praised the development in the first half of the year, they were also surprised by the lowered forecast. The figures were quite convincing in terms of volume growth, profitability and free cash flow, they said in a study. However, the lowered forecast is a "cold shower" and is unlikely to appease the bears. In view of the current difficult and volatile environment, however, it was a wise move to issue "a more realistic forecast" that was also in line with market expectations.

From January to the end of June, Nestle's turnover amounted to 45 billion Swiss francs (46.7 billion euros), 2.7 percent less than a year ago. According to the company, negative exchange rate effects depressed sales by 4.4 percent. However, Nestle grew organically - i.e. adjusted for currency effects and acquisitions and disposals - by 2.1 percent. The company thus missed analysts' expectations. On average, they had expected organic growth of 2.4 percent.

The reason for the slower growth was that price increases weakened considerably. Nestle raised prices by an average of 2.0 percent in the first half of the year. In the first quarter, the increases had still amounted to 3.4 percent. Nestle will now also increase prices less strongly than previously expected for the year as a whole. The company is therefore lowering its expectations for organic growth from "around 4 percent" to "at least 3 percent".

However, while the company had felt the reluctance of consumers at the start of the year - also thanks to the price increases - they increasingly turned to Nestle products such as Cini Minis cereals, Kitkat chocolate bars and Hirz yogurt in the second quarter of the year. Volume growth (real internal growth, RIG) amounted to 2.2 percent in the second quarter, compared to minus 2.0 percent in the first quarter of the year. It was therefore the highest since the first quarter of 2022.

Operating profit (EBIT) from January to June fell slightly to 7.8 billion Swiss francs. Experts had expected a profit of this magnitude. Meanwhile, the underlying operating margin as a measure of profitability increased by 0.3 percentage points to 17.4 percent. On balance, Nestle achieved a net profit of around 5.6 billion Swiss francs, as in the previous year.

Apart from the slightly lower growth expectations, Nestle is also lowering its outlook for the full year in terms of adjusted earnings per share. This is expected to increase "in the mid-single-digit range". Previously, the company had expected an increase of 6 to 10 percent. The expectations for the underlying operating margin remain at a "moderate" increase. In 2023, this had stood at 17.3 percent./tv/tt/AWP/zb/jha/