VEVEY. Switzerland – As Nestlé continues to review its strategy, respond to shifts in appetites and explore the sale of its US confectionery business, the pressure to change is heating up for the Swiss Group. And now it has outlined a “future value creation model” which includes its strategic growth priorities and supporting capital structure.
This follows a move earlier this year when Nestlé, with its Board of Directors, began a comprehensive review of the company’s structure and focus for the future in order to better reflect changing market conditions and strategic priorities.
Nestlé’s 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.
Coffee, Infant Nutrition, Bottled Water and Petcare
As a result of this review, Nestlé says that capital spending will be focused particularly on advancing high-growth food and beverage categories such as coffee, petcare, infant nutrition and bottled water, as well as expanding its presence in high-growth geographic markets.
In line with the company’s nutrition, health and wellness strategy, it will also pursue growth opportunities in consumer healthcare.
And in terms of potential future acquisitions, the Group says that it will only consider deals 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.”
Buyback Share Program
Nestlé will also 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.
In the context of low interest rates and strong cash flow generation, share buybacks offer a viable option to create shareholder value, it says.
The Board of Directors has approved a share buyback program of up to CHF 20 billion, to be completed by the end of June 2020. Should any sizeable acquisitions take place during this period, the share buyback program will be adapted accordingly.
The program is scheduled to start on 4 July 2017. 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.
Based on current projections, the company expects a net debt to EBITDA ratio of circa 1.5 in 2020.
