Nestlé announced the sale of a large part of its water division, which includes over 30 brands including the Italian S.Pellegrino e Cream and the French Perrier, to the Californian private equity firm Platinum Equity for 3 billion euros in cash. The agreement will create a a joint venture equal rights called Peranel, with an enterprise value of 4,9 billion euros, as announced in a press release.
The Swiss food giant is thus also getting rid of a sector that has seen growth in volumes in the first half of the year which disappointed investors who had instead bet on a comeback with the arrival of the CEO Philipp Navratil last September. His predecessor had been ousted because of an undeclared romantic relationship with an employee. Nestlé's new president, Pablo Island, took office on October 1st. A few months after taking office, they had to withdraw infant formula from the market in over 60 countries after finding the presence of a toxin in some products. In recent years, Nestlé's water sector has gone through a difficult period, penalised by demand and by investigations and lawsuits after contamination of some Perrier wells which made new filtration and treatment methods necessary.
Navratil now, not only has to rebuild the trust in governance, but must also demonstrate that Nestlé can increase sales volumes while reducing costs and selling off less profitable businessesLast April, the company had announced the sale of the chain of Blue Bottle Coffee cafes and is also evaluating the sale of its vitamin division, in difficulty, and of the remaining activity in the ice cream sector.
But real domestic growth, a key indicator of volumes, stood at 1,5% in first semester. Organic sales in quarter Excluding exchange rate effects and acquisitions, sales for the six months ended June 30 increased 3,7%, the group said. Analysts had averaged 3,6% organic sales growth.
Nestlé's price increases of 1,9% were higher than analysts' average estimate of 1,8%. Real domestic growth, or sales volume, increased by 1,8% in the quarter, in line with expectations.
This morning actions lost as much as 7,3%, the worst drop since 2020. In late morning trading, it lost 6,5% to 80,58 Swiss francs.
Less water and more coffee
Nestlé's strategy is now to focus on its top brands. What shines in Nestlé's accounts is the coffee sector which recorded organic sales growth of 7,5%, driven by Nescafé, while growth in the food and snacks sector was driven by brands such as Maggi e KitKat.
Navratil He emphasized that the sale of the water business helps the company streamline its portfolio to focus on coffee, pet products, nutrition, and food and snacks. "At the same time, we are creating a global leader dedicated to the water sector."
Nestlé said its underlying operating profit margin second semester will be higher to that of the first semester thanks to the cost reduction of the coffee and cocoa. Instead, he found "some higher costs di transportation ed energy arising from the conflict in Middle East"The areas most affected by the conflict in the Middle East are those in which we operate in Asia, Oceania, and Africa," Chief Financial Officer Anna Manz told reporters. "We have not yet quantified the impact of the conflict in the Middle East for the second half of the year," she added.
La nutrition division recorded a decline in organic growth in the first half of the year, due to product recalls that reduced sales by approximately 0,9 percentage points in the first quarter and 0,3 percentage points in the second. The company expects to regain market share by the end of the year.
