UN Unilever NV

Swiss food and beverages giant Nestle SA (NESN.VX) Wednesday reported a 7.5% rise in first half net profit and reiterated its full-year target but warned that the business climate in the second half will be more challenging.

The Vevey, Switzerland-based company that owns brands such as ice tea Nestea, bottled mineral water San Pellegrino and pet food Dog Chow, said net profit rose to 5.45 billion Swiss francs, or about $5 billion, from CHF5.07 billion in the year earlier period.

The rise came despite sharply higher raw materials prices for coffee, powdered milk, cocoa and wheat since the start of the year.

"We have increased investment in our brands, people and capabilities and have prepared the company for a more challenging second half," said Chief Executive Officer Paul Bulcke.

He added that Nestle was on track to reach its organic growth target of 5% in 2010. In the first half, the organic growth rate--which strips out the foreign exchange and acquisition impact but includes price changes--stood at 6.1%, in line with analyst views.

Bulcke's relatively cautious outlook in part echoes recent comments from Danone Chairman and CEO Franck Riboud, who said earlier this year that retail markets will remain under pressure over the next few years. Unilever also warned in August that business will be hampered by slowing demand, especially in developed markets such as the U.S. and Europe.

Still Nestle, which is the world's largest food and beverages maker by sales, said revenue increased 5.9% to CHF55.34 billion from CHF52.27 billion a year earlier as the company benefited from strong demand for its pet food products and its Nescafe coffee system.

-By Goran Mijuk, Dow Jones Newswires, +41 43 443 80 47; goran.mijuk@dowjones.com

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