Nestlé has updated its plans to deliver value growth for its shareholders, aiming for an underlying profit margin of between 17.5% and 18.5% – higher than its previous commitment – and confirming a ‘mid-single digit organic growth target’ by 2020.
The Swiss company has also reaffirmed food and beverages as its core categories, saying that consumer healthcare will only serve as additional markets.
The update, presented at Nestlé’s investor seminar in London, follows the details given earlier in the year about Nestlé’s model for growth, and comes three months after hedge fund Third Point revealed a $3.5 billion stake in the company.
Third Point has declined to comment on the details of Nestlé’s latest strategy announcement.
Nestlé CEO Mark Schneider said: “Nestlé has a strong foundation, a clear path forward and a bright future. We have a proven track record of delivering sustainable, industry-leading performance. In line with today’s accelerating pace of change, we are intensifying our focus on innovation, operational efficiency, and portfolio management. We will grow by remaining at the forefront of consumer trends and offering the brands and products to meet people’s changing needs, especially their demand for a better, healthier life.”
Nestlé will continue to pursue a value creation model that balances growth in earnings per share, competitive shareholder returns, flexibility for external growth, and access to financial markets. It had already promised to prioritise high-growth categories like coffee, infant nutrition and bottled water, as well as building on its position in emerging markets and pursuing sideline growth in consumer healthcare.
Nestlé will pursue external growth opportunities that fit within targeted categories and geographies, deliver attractive returns, and build on the company’s leadership positions, it said. The company said it was “actively adjusting its product portfolio in line with this strategy”, as demonstrated by recent investments in Blue Bottle Coffee, Sweet Earth, and Freshly, as well as the decision to explore a sale of its US confectionery business.
In June, as part of the previous value creation update, the company announced its intention to make an additional CHF 20 billion ($20.6 billion) available for M&A activity and share buybacks over the next three years.
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