Shares in Nestle (NESN) rose 3.5% to 81 Swiss francs after the company delivered forecast-beating organic growth for Q4. The KitKat maker also said it is in advanced talks to sell its remaining ice cream business.
| Share price: 81 CHF | PE: 19.2x |
| Market cap: 202bn CHF | Yield: 4% |
Under new CEO Philipp Navratil, the Swiss food and drink conglomerate is streamlining its sprawling business.
This follows years of underwhelming operational performance and stock price performance. The shares have lagged rivals Unilever (ULVR) and Danone (BN) over one and five years.
Nestle plans to sell its remaining ice cream business to Haagen-Dazs owner Froneri, a joint venture between Nestle and private equity firm PAI Partners.
Sharpening the focus
Vevey-based Nestle had long been one of the world’s largest ice cream makers until Froneri took over most of the business. Nestle still sells ice cream in some local markets that are not part of Froneri.
The company is determined to focus its portfolio on four businesses where it has its strongest brands: coffee, petcare, nutrition, and food & snacks, as it integrates the nutrition and health-science divisions into one business.
Nestle has also started the process of selling its water business, where brands include Henniez and Perrier.
Forecasting-beating quarter
The Nespresso maker served up 4% organic growth for Q4, topping the 3.6% analysts were looking for.
While organic growth accelerated to 3.5% in FY25, up from 2.2% in FY24, underlying profits fell 8.4% to 14.4 billion Swiss francs.
This partly reflected the impact of baby formula recalls that have also hurt Danone.
Navratil has taken the bull by the horns at Nestle, selling off non-core businesses and lowering net debt levels.
For FY26, Nestle expects robust organic growth of 3% to 4% along with an improvement in operating profit margins.
‘While there is more to be done, we are confident that our faster execution of a more focused strategy will deliver sustained improvement through 2026 and beyond,’ insists the CEO.
A turnaround is clearly in train at Nestle. But with the company still grappling with an infant formula contamination crisis alongside, risk-averse investors should probably sit on the sidelines for now.
Read the press release here: https://www.nestle.com/investors/pressreleases
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