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Nestlé's Overhaul Starts To Pay Off As Growth Accelerates

Published on Feb 14 2019 9:30 AM in A-Brands tagged: Trending Posts / China / Nestlé / North America / Annual Results

Nestlé's Overhaul Starts To Pay Off As Growth Accelerates

Nestlé put its Herta processed meats business on the block on Thursday, accelerating the food group's revamp as it reported an uptick in sales momentum for the first time in seven years.

Improvements in China, North America and in its infant nutrition business last year helped Nestlé to break a run of sluggish growth and to forecast sales improvements of more than 3% in 2019.

Chief executive Mark Schneider said the company would not let up on its turnaround, part of efforts to adjust to a shift in customer preferences away from packaged food towards healthier eating.

'Satisfied With The Results'

"We are satisfied with the results we present today, but we still have ambitious targets. There's no reason to lean back," Schneider told reporters at the company's headquarters in Vevey on Lake Geneva on Thursday.

He said Nestlé was progressing towards its 2020 targets of mid-single digit organic growth and a margin of 17.5%-18.5%.

Organic Sales Growth

Organic sales grew 3.0% in the full year, accelerating to 3.7% the final quarter from a 2.8% rate in the first nine months of the year, the maker of Kitkat chocolate bars and Nespresso coffee said.

The fourth quarter figure beat forecasts for 3.5% growth in a Reuters poll.

The company also exceeded the 2.9% growth reported last month by rival Unilever, which expects 2019 growth at the bottom end of a 3% - 5% forecast range.

Nestlé's net profit jumped 42% to 10.1 billion Swiss francs (€8.89 billion) thanks notably to the divestment of its US confectionery business, while the margin improved to 17.0%.

'A Solid Set Of Figures'

"A solid set of figures with a clear acceleration of organic sales growth in the fourth quarter while it is progressing on margin. Efforts to reboot the company appear to be bearing fruit," Kepler Cheuvreux analyst Jon Cox said.

Nestlé shares, up almost 10% so far this year, rose nearly 3% in early trading to reach their highest ever level.

The Swiss company said it would look at options for its Herta cold cuts and meat-based products business, although it will hang on to the Herta brand dough and vegetarian business. A review of Nestlé's skin health business is expected to be completed by mid-2019.

Changing Consumer Tastes

These reviews are part of Nestlé's efforts to adapt to changing consumer tastes and focus on coffee, pet care, infant nutrition and bottled water as its main growth categories. Schneider said portfolio changes were ongoing and could well exceed 10% of group sales.

The group also increased its dividend to 2.45 francs per share and said it would accelerate its 20 billion share buyback to finish the programme ahead of schedule by the end of 2019.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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