Fri, Oct 18, 2019 - Page 10 News List

Nestle to return US$20 billion to investors by 2022

BUYBACK:Flush with cash after selling its dermatology unit, the Swiss food giant plans to initiate a share buyback and pay special dividends over three years


Packaging made from recycled or natural products are pictured during a media visit for the inauguration of the Nestle Institute of Packaging Sciences in Lausanne, Switzerland, on Sept. 12.

Photo: Reuters

Nestle SA plans to return 20 billion Swiss francs (US$20.1 billion) to shareholders by 2022 and indicated an appetite for acquisitions to help chief executive officer Mark Schneider sustain faster growth and better profit margins.

Flush with cash after the US$10 billion sale of a dermatology unit earlier this month, the Swiss food giant yesterday said that it would start a new share buyback program in January and might complement it with special dividend payments over the next three years.

The size of each depends on market conditions and whether Nestle makes any big takeovers.

Nestle also signaled it was sharpening its focus on mergers and acquisitions, as it unveiled a new management group that would seek out growth opportunities and acquisitions, to be led by Sanjay Badahur.

That came as Nestle reported sales growth of 3.7 percent in the first nine months of the year, accelerating in line with analysts’ estimates, helped by products such as Starbucks-branded coffee for its Nespresso machines.

Nestle said it would prefer to make investments to expand its main businesses, and it might scale down the SF20 billion target if any sizable acquisitions take place in the coming years.

The company also said it was restructuring its bottled water unit, which would no longer run as a separate business, and it named a new head for Nespresso, Guillaume Le Cunff, as Jean-Marc Duvoisin joins the unit managing partnerships, joint ventures and brand licensing.

Strong demand for coffee and pet food in the US boosted sales. The Starbucks-branded capsules that went on sale in February have been giving Nestle’s coffee business a lift, providing the company with a weapon to fight knockoff pods with its own versions in supermarkets for the first time.

Water is still a weak point, with volume declining as mass-market local brands struggle to grow and gain share amid tough competition.

Exiting the category seems implausible, leaving Nestle with little other choice than to tough it out, Jefferies analyst Martin Deboo said.

Rival Unilever’s growth fell just short of estimates last quarter on disappointing sales of ice cream in Europe and black tea across the developed world.

The 2.9 percent third-quarter gain in underlying sales growth at the owner of Lipton tea and Ben & Jerry’s ice cream compared with a 3 percent consensus forecast.

Europe was the only region where underlying sales growth stalled. The continent struggled against tough comparisons after hot weather last year boosted ice cream sales.

In the third quarter, Unilever’s sales edged down 0.1 percent in developed markets, highlighting the challenge the world’s biggest brands face as shoppers increasingly favor locally made labels with more artisanal cachet.

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