•  Sales up 2.6%
  •  Net profit up 0.7%
  •  Lowering prices in face of public outcry

Israeli food manufacturer Osem Investments has said it has absorbed rising production costs and cancelled planned pricing action as social unrest over the price of food has mounted in the country.

The company, in which Nestle holds a 58.8% stake, said that sales during the three months to 31 March rose 2.6% to NIS1.02bn (US$263.7m), up from NIS998.9m in the comparable period of last year.

Net profit edged up 0.7%, as mounting pressure on pricing meant that the firm was unable to offset higher input costs, Osem said in a regulatory filing today (28 May). Net profit rose to NIS93.6m from NIS93m in the first quarter of last year.

Osem said it has looked at ways to respond to growing public discontent in Israel over high prices for "basic food items".

"In July, the company cancelled a planned price hike to meet rising prices for inputs," the company said. Osem said that it has subsequently "lowered prices for the company's products found in most Israeli households by up to 10%."

To fund this, Osem reduced its sales, marketing and distribution expenses to 21.1% of sales for the first quarter, from 22% for the corresponding quarter, and reduced its administration and general expenses to 6.7% of sales, from 7.2%.

The company added that it has frozen executive salaries in 2012 and that these savings will be used to benefit low-earning employees.

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