European food manufacturers fare well

Nestle’s filing of its half-year numbers last this week meant that all of Europe’s largest food makers had provided an update on how their businesses are faring amid the worst recession for decades.

The global food sector has proved relatively more resilient to the downturn than other sectors. The figures issued by Nestle and companies such as Unilever, Danone and Cadbury suggest that some food manufacturers are navigating the downturn better than others. Chocolate giant Cadbury is one company that, according to industry watchers, is sitting comfortably. The UK firm booked a 19% jump in profits in July, a result that enabled the group to lift its margin targets. The Trident gum maker has some challenges to deal with, not least a stagnant US gum market, but analysts have been impressed with the company’s performance. Nestle’s half-year results sent its stock downwards however CFO Jim Singh insists he believes the parts of Nestle’s business that had been under pressure, most notably in Europe, will improve. Danone regained some momentum in its key dairy division during the second quarter with price cuts and the launch of some value products helping the business. The market’s view of Danone may have been clouded by the company’s EUR3bn (US$4.26bn) rights issue earlier this year. Economists the world over seem divided on the prospects for the global economy in the back half of 2009 but, on balance, the latter half of the year may see some of the pressure weighing on food makers ease. There are signs that commodity costs are easing and, with France and Germany seeing national income rise in the last quarter, perhaps consumer confidence is returning. However, the economic waters remain choppy and Europe’s food manufacturers need to remain vigilant.

Source: www.just-food.com

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