Nestle boss announce more deals
Nestle SA Chief Executive Officer Mark Schneider says the world’s largest food and beverage company plans to become more aggressive with acquisitions, identifying areas including metabolic health and nutrition to push sales growth that remains behind the company’s target.
Nestle made more than 50 deals since Schneider took charge in 2017, transforming 12% of the company’s portfolio. The pace will continue, albeit with a stronger focus on acquisitions rather than disposals.
Europe’s largest company by market value is under pressure to weed out underperforming assets like mass-market bottled water and its struggling Chinese brand Yinlu. The company said February 13th that it will need one or two more years to return to annual sales growth of 4% to 6%.
L’Oreal for sale
One major asset at Schneider’s disposal to fund deals is Nestle’s $37 billion stake in French cosmetics maker L’Oreal SA, which Schneider called a financial investment, suggesting it may come into play should he need the funds.
Nestle has owned shares in L’Oreal for more than 40 years and the company has been happy with its position, Schneider said. He also said he wouldn’t speculate on when a sale could happen. Shares I L’Oreal have more than doubled in value in the past six years. Activist investor Dan Loeb has been putting pressure on Nestle to sell the holding to focus on food and beverages.
Under Schneider’s leadership, the group has sought to focus on premium products in fast-growing market segments such as coffee and plant-based foods while retreating from slower-growth areas such as chocolate and processed meat, Schneider writes in press release.
Plant based burgers
Nestle shares, which are trading at high multiples after climbing more than 30% last year on Schneider’s progress, were down 2.8% right after Schneider’s statement. However, Schneider said he remains “bullish” on 2020 and expects acquisitions and trendier products, such as its Starbucks coffee range and plant-based burgers and sausages, to drive growth.
Some areas remain challenging, however, with price pressures in Europe, subdued growth in China - where its Yinlu peanut milk business is struggling - and a weak performance in bottled water, for which a new strategy will be revealed in the first half .of 2020.
Corona hits – but how much – nobody knows
Schneider says it is too early to quantify the financial impact on Nestle from the coronavirus outbreak. Operations in China has resumed at the beginning of the week, albeit at a reduced rate because some staff had been unable to return to work.
Full-year net profit rose 24% to 12.6 billion Swiss francs ($12.89 billion), against a consensus forecast of 12.36 billion francs in a company-supplied analyst poll. Nestle proposed an increased dividend of 2.70 Swiss francs per share.