February 14, 2019 / 6:52 AM / in 5 days

Nestle's overhaul starts to pay off as growth accelerates

VEVEY, Switzerland (Reuters) - Nestle 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.

FILE PHOTO: A Nestle logo is pictured on a coffee factory in Orbe, Switzerland May 31, 2018. REUTERS/Denis Balibouse/File Photo

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

“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 Nestle was progressing towards its 2020 targets of mid-single digit organic growth and a margin of 17.5-18.5 percent.

Organic sales grew 3.0 percent in the full year, accelerating to 3.7 percent the final quarter from a 2.8 percent 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 percent growth in a Reuters poll.

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

Nestle’s net profit jumped 42 percent to 10.1 billion Swiss francs ($10.02 billion) thanks notably to the divestment of its U.S. confectionery business, while the margin improved to 17.0 percent.

“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.

Nestle shares, up almost 10 percent so far this year, rose nearly 3 percent 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 Nestle’s skin health business is expected to be completed by mid-2019.

These reviews are part of Nestle’s efforts to adapt to changing consumer tastes and focus on coffee, petcare, infant nutrition and bottled water as its main growth categories. Schneider said portfolio changes were ongoing and could well exceed 10 percent 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.

Reporting by Silke Koltrowitz, editing by John Revill and Jane Merriman

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