Nestlé said it is going to return $20.2 billion to its shareholders over the next three years as it continues a turnaround to become more profitable and focus on its businesses that work.
The company just completed a sale of its skin health business, and buybacks are a sign that the company’s new strategy, by CEO Mark Schneider, to raise sales and grow profit margins is in full swing at Nestlé, according to a report by the Financial Times.
The company said skin health is no longer a central part of its strategy moving forward, and it’s going to continue to get out of businesses that customers aren’t as interested in, like its Herta cold cuts products.
Nestlé said it wants to keep up with customer trends as well as capitalize on customers’ growing propensity for online shopping.
“We need to get faster into growing categories, and trade out of areas that aren’t good opportunities,” Schneider said. “Expect more in [the] future to happen.”
He said the company may be looking into making more mergers and acquisitions as a “repertoire to drive organic growth.”
“We have always been a fairly prolific buyer and seller of businesses to keep in tune with consumer desires,” he said.
Nestlé has given itself the option of reconfiguring its buyback plan if it does “any sizeable acquisitions” during the next few years, and the company said that it wants to pursue “value-creating investments to expand the company’s core food, beverage and nutritional health products business.”
The company has promoted the head of its acquisitions and business development department, Sanjay Bahadur, to a new executive post that leans toward “identifying internal and external growth opportunities.”
The company’s shares are up this year to the tune of 31 percent, and it has performed so well that some analysts said it may have peaked.
“While we read the update as solid and reassuring, the context is one of a consensual long and an exalted valuation,” said Martin Deboo, an analyst at Jefferies.