Nestle opens door to L’Oreal stake sale as growth slumps
Company’s update on the stake comes as revenue rises 2.4% in 2017 on an organic basis
Nestle opened the door to a possible sale of its L’Oreal stake in a move that would help Chief Executive Officer Mark Schneider sharpen the Swiss giant’s portfolio after the weakest sales growth in more than 20 years.
The Nespresso owner said it won’t increase its 23 per cent investment in the French cosmetics maker and wants to keep all other options open. Nestle said it won’t renew a shareholder pact with the Bettencourt family, which also owns a stake.
“We remain committed to the company that has given us very good returns over the years,” Nestle said, adding it wants to keep constructive relations with the Bettencourts. L’Oreal’s sales growth is stronger than Nestle’s, providing a helpful tailwind amid bleak prospects for mass-market food and beverage brands.
Nestle dropped as much as 2.8 per cent in early Zurich trading, while L’Oreal rose as much as 0.7 per cent in Paris.
Nestle’s update on the stake came as the company said revenue rose 2.4 per cent in 2017 on an organic basis, below analyst expectations.
Schneider is aiming to lift that to as much as 4 per cent this year. Speaking on Bloomberg TV, he said he’s “somewhat” optimistic for pricing and volume growth for 2018 and beyond.
Since taking over about a year ago, the CEO has stepped up merger-and-acquisition activity, buying Canadian dietary supplements maker Atrium Innovations for $2.3 billion (Dh19.4 billion) and jettisoning Nestle’s ailing US chocolate business. Nestle said it plans to continue “active portfolio management” in a disciplined manner.
“The sweet spot is in small to mid-sized deals, but we don’t want to rule out anything,” Schneider told reporters in Vevey, Switzerland.
Schneider also accelerated Nestle’s share buy-back programme in response to activist Dan Loeb taking a $3.5 billion position in the company.