Nestle takes comprehensive review of operations
June 29, 2017
by Eric Schroeder
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Plan includes strategic growth priorities and supporting capital structure.
VEVEY, SWITZERLAND — Nestle SA said it has taken another step forward in the implementation of its comprehensive value creation model, announcing on June 27 that a comprehensive review of its operations has determined that capital spending will be focused on advancing high-growth food and beverage categories such as coffee, pet care, infant nutrition and bottled water. The Vevey-based company also plans to expand its presence in high-growth geographic markets.
The forthcoming changes followed a comprehensive review of Nestle’s capital structure and priorities conducted earlier this year by the company’s management and board of directors. The review is part of a regular strategy undertaken by Nestle to revisit its capital structure to reflect changing market conditions and strategic priorities. The company said its financial strategy aims at “striking the right balance between growth in earnings per share, competitive shareholder returns, flexibility for external growth and access to financial markets.”
Nestle said it also has decided to pursue growth opportunities in consumer health care, a strategy that fits with its focus on nutrition, health and wellness. The company said it plans to only prioritize external growth opportunities that fit within targeted categories and geographies, deliver attractive returns, and build on the company’s leadership position in fast growing food and beverage categories.
Earlier this month, Nestle said it would explore strategic options for its US confectionery business. That decision, Nestle said, is consistent with its overall approach, and the company indicated it plans to continue to adjust its portfolio in line with its strategy and growth objectives.
Nestle said it also plans to continue to assess opportunities for margin improvement through targeted efficiency programs that do not undermine the company’s performance in attractive long-term growth categories.
As a result of its review, the board of directors approved a share buyback program of up to 20 billion Swiss francs, which is expected to be completed by the end of June 2020. The program is set to start on July 4, and should any sizeable acquisitions take place between now and June 2020, the share buyback program will be adapted accordingly, Nestle said.
“The volume of monthly share buybacks will depend on market conditions but is likely to be backloaded in 2019 and 2020 to allow the pursuit of value-creating acquisition opportunities,” Nestle said. “Based on current projections, the company expects a net debt to EBITDA ratio of circa 1.5 in 2020.”