City snapshot: Nestlé to spin off bottled water and cut costs by another £2.2bn as part of new action plan

Top story

Nestlé will spin-off its bottled water business as part of new plans for turning around the ailing food giant revealed ahead of today’s Capital Markets Day for investors and analysts.

As part of the strategy, named ‘Accelerating Nestlé’, the waters and premium beverages business will become a global standalone business on 1 January.

The new management, led by current head of Nestlé Waters Europe Muriel Lienau, will explore “partnership opportunities to enable Nestlé’s iconic brands and growth platforms to achieve their full potential”.

Nestlé will also step up investment in advertising and marketing to 9% of sales by the end of 2025 to support growth.

And it aims to make cost savings of at least CHF 2.5bn (£2.2bn) above existing initiatives by end 2027 to fund increased investments.

Nestlé set its medium-term organic growth target at 4% plus in a normal operating environment, with an underlying trading operating profit margin of 17% plus. It represents a lowering of the margin target of 17.5% to 18.5% goal set by former CEO Mark Schneider.

The KitKat and Nescafe owner said the today’s presentations outlined “a clear action plan to drive the performance and transformation of Nestlé and to shape its long-term future”.

The action plan follows a downgrade to growth expectations for the year in October on the back of disappointing third-quarter trading.

Laurent Freixe CEO said: “Nestlé is a strong company with global reach, exceptional demand generation and in-market capabilities. We have a diverse and strategically well-positioned product portfolio.

“Our iconic brands and innovative products connect with people every day, at every stage of their lives. These strengths give us a unique advantage and position us to win in the marketplace. We will now invest further in our brands and growth platforms to unlock the full potential of our products for our consumers and our customers.

“Our action plan will also improve the way we operate, making us more efficient, responsive and agile. This will allow us to deliver value for all our stakeholders.

“I am confident that we can deliver superior, sustainable and profitable growth and gain market share, while transforming Nestlé for long-term success.”

Shares were boosted 0.8% to CHF 78.86 as markets opened this morning.

Morning update

Profits have grown at tobacco giant Imperial Brands as the group benefitted from its investment in next generation products.

Revenues in the year to 30 September remained flat at £32.4bn as tobacco volumes declined 4%. However, NGP sales jumped 26.4% to £335m thanks to growth across all regions.

Group adjusted operating profits rose 4.6% in the year, driven by by improved profitability in tobacco, NGP and distribution.

CEO Stefan Bomhard said: “As we enter the final year of our current strategy, the investment we have made in consumer capabilities, cultural transformation and agile ways of working has supported another year of accelerated financial delivery and growing capital returns.

“These results demonstrate how we are fulfilling our role as an effective challenger for the industry, able to deliver consistently against operational and financial expectations.”

Shares in the group climbed 2.3% to 2,457p this morning.