Nestle predicts calmer acquisition outlook
for the foreseeable future following a hectic twelve month period
of expansion.
A spokesperson for the company told DairyReporter.com today that the group had come to the end of its current strategic initiative to refocus its operations towards health and nutrition and was not expecting any further large-scale acquisitions as a result. Like a number of its rivals, Nestle has moved to expand it focus towards health and nutrition in a bid to dominate the growing market for added-value products through the acquisition of a number of specialist health and nutrition groups. In April this year, the company announced a deal to acquire nutrition group Gerber worth $5.5bn (€4bn), following on from the purchase of the Australian cereal business Uncle Toby's, and Novartis Medical Nutrition since 2006. While the spokesperson added that health and wellness was a key focus for the company, particularly in more industrialised countries, emerging and developing markets would continue to ensure profitability for its traditional products like dairy and beverages. "Consumers will continue to need calories and proteins in their diets," the spokesperson said. "This will ensure that the market for our traditional products remains profitable for decades to come." However, the expansion drive has not been without its problems for the group, which has been forced to sell part of its European assets linked to the Novartis acquisition, due to EU concerns over competitiveness. "There have been slight anti-trust issues regarding the Novartis acquisition," stated the spokesperson. The company will therefore move to sell off Novartis' operations in Spain and France. The comments follow a web cast earlier this week by Paul Polman, the group's chief financial officer, who suggested the company would like towards lower key purchases in the future. "We will look at bolt-ons," Polman said, as quoted in Indian business publication, The Economc Times. He added that there may be some attractive expansion targets that wouldn't require large divestments. Despuite these claims, Nestle refused to commit to any long-term plans regarding its share in L'Oreal. The group claims its quarter stake in the world's largest cosmetics company continues to be a 'very good investment'. When asked whether L'Oreal was 'financially strategic' at Nestle's half-year roadshow, Polman stated that the company had been a very good investment, and that he expected this to continue. However, the chief financial officer would not make a long-term commitment to L'Oreal and said it had plenty of time to think about its future with the cosmetic giant. In its current position, Nestle has remained on the track for continued profitability throughout its operations. Sales for the group were up by eight per cent to CHF51.1bn (€31.2bn) for the first fiscal half of this year, on the back of its food and beverage brands. Operating profit rose 13 per cent with margins up by 0.7 percentage points to 16.7 per cent. The group also announced it would begin a three-year CHF25bn ($20.5bn) share buyback plan to further lift potential profitability.
