Nestlé, the world’s largest food company, plans to spend 8 billion Swiss francs ($8.8 billion) in its first share buyback in three years after reporting revenue growth that exceeded analysts’ estimates.
Revenue gained 4.7 per cent excluding acquisitions, divestments and currency shifts in the first half, the Vevey, Switzerland-based maker of KitKat bars and Nespresso coffee said today. That compares with the 4.5 per cent median of 14 analysts’ estimates compiled by Bloomberg News. Nestlé said the stock repurchases will start this year and run into 2015. The shares rose as much as 3.4 per cent, the biggest intraday gain in nine months.
Nestlé outperformed its main European rivals Unilever and Danone in first-half sales growth and is increasing its distance from them by returning cash to shareholders through repurchases. Nestle is funding the buyback from the sale of part of its stake in French cosmetics company L’Oréal, which will boost second-half profit by 7.4 billion francs. That leaves the Gerber baby-food maker with enough resources for acquisitions, said Jean-Philippe Bertschy, an analyst at Bank Vontobel.
“The 8 billion-franc buyback has to be put in the context of M&A activities,” Bertschy wrote in an e-mail. “Nestle would have the ability to do a bigger buyback of 10 billion francs to as much as 20 billion francs.”
Bloomberg News edited by ESM
