Earnings: Nestle | CBS | Toll Brothers

Nestle Profit Hits Record In 2005

VEVEY, Switzerland, Feb 23 (Reuters) - Price increases and booming sales of Nespresso coffee helped Nestle boost its net profit to a record in 2005, weathering the storm of rising input costs better than some of its rivals.

Net profit at the world's largest food group increased 20.7 percent to 7.995 billion Swiss francs ($6.11 billion), the firm said on Thursday, in line with expectations, after strong brands allowed it to raise prices by an expected 2 percent 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 Inc (KFT) has said it would cut jobs to offset commodity costs.

"You can't argue with that. They are raising prices in a largely-commoditised business," a Zurich-based trader said. "But the margins did not surprise on the upside and show that they do indeed also take the pinch from raw materials."

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."

STRONG NESPRESSO

Sales of Nespresso coffee, an example of Nestle's effort to focus on high-margin products, rose an underlying 36.2 percent. Nespresso single-serving capsules fit into coffee machines designed for home and office use.

Group sales climbed to a record 91.075 billion francs, better than expected and up an underlying 6.2 percent.

That beat the company's own target on underlying sales — Nestle's benchmark that strips out currency movements and acquisitions — of 5 to 6 percent.

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 percent underlying growth in the face of subdued consumer sentiment, high unemployment and cut-throat price competition.

Sales in the higher-margin Americas overtook those in Europe, highlighting Nestle's efforts to focus on higher-growth areas as Europe is stifled by fierce retailer rivalry and a slowdown in consumer spending and high unemployment.

The company joined the long line of firms increasing cash returns to shareholders, saying it would raise its 2005 dividend payout by one franc per share to 9.00 francs and return more than 6 billion francs to shareholders this year.

Nestle launched its first-ever share buyback for 1 billion francs last year and another programme for 3 billion francs is currently running.

"This is a solid set of results," said Kepler analyst Jon Cox. "The EBITA margin is excellent in particular because of higher commodities costs. You have others going on about that all the time ... but Nestle has delivered."

Nestle shares, which had a strong run-up to the results, fell by 1.6 percent to 393.00 francs by 0826 GMT, below its sector rivals, as investors fretted about the outlook.

Currency swings — in particular a stronger dollar and Latin American currencies — helped Nestle's sales by 1.8 percent this year, the first positive effect in five years.

Switzerland's largest company by sales said the margin on earnings before interest, tax and amortisation rose to 12.9 percent in 2005 from 12.7 percent in 2004, restated for discontinued business and share-based payments.

An average of 19 analysts in a Reuters poll had expected Nestle's net profit to be 7.99 billion francs on sales of 92.1 billion francs.

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CBS Loss Narrows

NEW YORK (Reuters) - Television network and radio station owner CBS Corp. (CBS) Thursday posted a narrower loss in its first earnings report since the spin-off from Viacom Inc. (VIA) helped by higher advertising sales.

The company, split from the cable and movie studios group in January, said its loss narrowed to $9.14 billion, or $6.00 a share, from $18.44 billion, or $10.99 per share, a year earlier.

The results include a $9.5 billion charge in 2005 and an $18 billion charge in 2004 to write down the value of its television and radio assets.

Excluding the charges and assuming the separation occurred at the beginning of 2005, the company posted a profit of 41 cents a share, compared with the average Wall Street estimate of 40 cents a share, as compiled by Reuters Estimates.

Toll Brothers Posts Higher Profit

NEW YORK(Reuters) - Toll Brothers Inc.(TOL), the largest U.S. luxury home builder, Thursday posted a stronger-than-expected 49 percent rise in quarterly profit, sending its shares higher.

However, Toll is seen as a bellwether for the U.S. housing market, and the company's sharp drop in new home orders in the quarter may indicate overall demand is slowing.

Chief Executive Robert Tollsaid in a statement that speculative buying had propelled demand for new homes to unsustainable levels in many markets last year.

"We are now on the other side of that slope," he said. "Speculative demand has ceased, and speculators are now putting their homes back on the market. The result has been more supply than demand in some regions."

Net income rose to $163.9 million, or 98 cents a share, in the first quarter ended Jan. 31, compared with $110.2 million or 66 cents per share, a year earlier. That was 6 cents higher than analysts had expected, according to Reuters Estimates.

Revenue rose 35 percent to $1.34 billion, topping the analysts' average estimate of $1.33 billion. Given that Toll homes take an average 11 months from order to completion, the revenue figure reflects orders from early last year.

As reported earlier this month, first-quarter new orders fell 29 percent to 2,209, including unconsolidated entities, while the value of the contracts fell 21 percent.

Toll said it expected fiscal 2006 net income of $4.77 to $5.26 a share. The midpoint of that range is slightly above the $4.98 analysts had projected after revising down an earlier forecast of $5.17.

Earlier in February, Toll slashed its sales forecast for the second time in three months. It said it saw fiscal 2006 sales of between 9,200 and 9,900 homes, down from the previously lowered view of 9,500 to 10,200.

The Horsham, Pennsylvania-based company also affirmed it ended the quarter with a backlog of 8,635 homes contracted and awaiting construction at a value of $5.95 billion, up 22 percent.

Robert Toll said the company remained open to stock repurchases and other opportunities to increase shareholder value.

Shares of Toll Brothers rose 51 cents, or 1.6 percent, to $33 on the Inet electronic brokerage system in trading before the market opened.

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