Nestlé SA, the Swiss multinational food and beverage conglomerate, has reiterated its commitment to refocus on market execution following the announcement of a CEO change. The company’s chairman, Paul Bulcke, emphasized the need to get back to basics after several years of portfolio restructuring under outgoing CEO Mark Schneider.
Laurent Freixe, who takes over as CEO on September 1, emphasized the need for more investments to strengthen the company’s market share and support brands, innovation and growth platforms.
Freixe also indicated that these investments would be financed through improved productivity and cost-efficiency programs.
The company aims to create a model where investments lead to market share gains, which in turn drives organic sales growth. This growth, combined with savings, is expected to result in improved margins and enable further reinvestment.
Nestlé has taken a “Nestlé way” approach to productivity, favoring the avoidance of major and potentially disruptive restructuring programs.
UBS noted in its commentary that Nestlé’s profitability is closely linked to consumer income and confidence. As an international entity, the company’s financial results are affected by exchange rates.
It also identified key risks, including a potential long-term weakness in the pet care and coffee categories, which could negatively impact the group’s organic growth and operating margin.
UBS’s 12-month price target for Nestlé shares remains at CHF 95.00, based on a Discounted Cash Flow (DCF) model with a weighted average cost of capital (WACC) of 7.4%. This valuation takes into account an equity risk premium of 6%, a risk-free interest rate of 3% and a terminal growth rate of 2%. The current rating is neutral. The bank has set a target price for the share of CHF95.
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