Bumper profits to be invested in company stock rather than acquisitions, chairman announces.
Swiss food producer Nestlé Group is planning to buy-back CHF 25 billion (US$20.7 billion) worth of its shares over the next three years in order to increase flexibility. The move follows a year of bumper profits at Nestlé, which has benefited from strong dairy prices.
Nestlé's growth was particularly strong growth during first half of 2007, despite rising costs of essential raw materials. The company's sales increased by 8.4% to reach CHF 51.1 billion (US$42.4 billion) compared to the same period in 2006.
This increase was mainly driven by organic growth of 7.4%, consisting of real internal growth of 5.3% and price increases of 2.1%. Foreign exchange also pushed sales up by 0.5%, while acquisitions added another 0.5%. Net profit grew 18.4% to CHF 4.9 billion (US$4.07 billion), resulting in a net margin of 9.6%, up 80 basis points compared with the same period last year.
Peter Brabeck-Letmathe, chairman and CEO, Nestlé, said: "The group again achieved both strong growth and improved margins, the hallmark of the Nestlé model. These results are due to the strong performance of the food and beverages business and Nestlé's ongoing transformation into the world's leading nutrition, health and wellness company.
"In spite of increasing input cost pressures, I am confident of Nestlé achieving above-target organic growth for 2007, as well as a sustainable margin improvement," he added. "Finally, the board has approved a new, three-year CHF 25 billion share buyback programme. This reflects our commitment to an efficient capital structure and our continued confidence in the business."For all the latest retail news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.