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Nestle beats gloom again
VEVEY, Switzerland (Reuters) -- Nestle SA said on Thursday 2002 net income rose 13 percent to a record 7.56 billion Swiss francs ($5.57 billion), and the world's biggest food group said it expected improved performance in 2003. Core growth at Nestle, whose porfolio of brands includes Nescafe coffee, KitKat chocolate bars and Perrier water, came in at 3.4 percent, below its own four percent target but in line with expectations. Nestle was not expected to reach its four percent annual target for real internal growth -- its own performance measure that strips out the effect of price changes, acquisitions and currency movements -- as a result of weak Latin American markets and soft pet food sales. Sales rose 5.3 percent to 89.16 billion -- underlining the company's recession resistant status -- and the firm proposed increasing its dividend to seven francs from 6.40 francs in 2001. Earnings before interest tax and amortisation rose 9.5 percent to 10.94 billion and a margin of 12.3 percent. "Just looking at the valuation of the stock it is the cheapest in our universe. If you don't buy Nestle at these levels when are you going to buy it?'' Veronique Adam, analyst at JP Morgan. Nestle stock has tended to peform in line with European peers in the last 12 months after a year punctuated by its failure with Cadbury Schweppes to take over U.S. choclate icon Hershey. The stock closed 2.9 percent lower on Wednesday at 268 francs. Nestle's $10 billion acquisiton of U.S. pet food group Ralston Purina as well as the sale of a minority stake in its eye care unit Alcon, which contribute around 3.9 billion Swiss francs to its bottom line helped its result. According to a Multex consensus of analysts, 2002 sales were slated to come in at 89.8 billion francs and net income was expected of 7.5 billion. ONE OFFSLast year was seen as one of consolidation for the food giant as it digested its pet food purchase and concentrated on various efficiency programmes, designed to save 5.5 billion francs by 2006. But the firm is acquisitive. It has made a number of buys in the ice cream market and is still waiting for U.S. regulatory approval for its takeover of Dreyer's Grand Ice Cream. It also announced the purchase of Hutchison Whampoa's European water business for 560 million euros earlier this month. While it was seen as a solid strategic fit, investors were concerned about a deal stretching Nestle's balance sheet as well as the risk to its coveted triple A rating, which makes borrowing cheaper than lower rated peers. As well as ice cream and water, the firm has said it sees functional food -- food that provides beneficial properties -- as a key strategic area.
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