Swiss firm Nestle, the world's biggest food company, has reported a 12.7% increase in profits for the first half of the year.

Analysts had been expecting growth, but the scale of the increase beat most forecasts, which averaged 7%.

The firm said it expected full-year 2001 profit and sales to be higher than last year.

The group's benchmark real internal growth rate was 4.6%, up from 4.5% a year ago, and above its own long-term target of 4%.

First-half net income rose to 3.15bn Swiss francs (�1.3bn; $1.9bn), from 2.8bn francs a year ago.

The firm said that its $10bn takeover of US pet food producer Ralston Purina was on track to close before the end of this year.

The company said that its profit margin, at 10.5%, was a shade lower than last year's.

The main reason was the one-off impact of an accounting change, and the cost of implementing the firm's GLOBE operational efficiency and performance programme.

GLOBE will cost 250m francs a year until 2005, and will yield benefits that will reach 3bn francs by 2006, the firm said.

Marketing spend also rose as a result of investment in brands and the launch of new products.

The company's main areas of growth were Asia, Oceania and Africa, where the firm achieved more than 7% internal growth.

In the developed markets of Europe and the US, growth was below 3%.