Nestle SA’s share price up, plans $8.8-billion share buyback as H1 sales beat estimates

The biggest food company by sales in the world – Nestle SA revealed in an official statement today that it intends to spend 8 billion Swiss francs ($8.8 billion) in a share buyback as it posted upbeat first-half revenue growth.

According to Nestle SAs statement, the companys organic revenue (excluding acquisitions, divestments and currency shifts) increased by 4.7% in the first six months of the year. This result was higher in comparison with the average 4.5% increase that was projected by analysts.

However, the companys profit fell by 9.6% from 5.12 billion Swiss francs over the same period a year ago to 4.63 billion Swiss francs, short of analysts forecasts for 4.99 billion francs profit. The revenue of Nestle SA fell by 4.8% from 45.17 billion to 42.98 billion Swiss francs.

Nestle SA plans to return cash to its investors for the first time in three years, after LOreal bought back part of its own stake held by Nestle in a deal estimated to 6 billion euros ($8 billion).

The food companies have been facing some hard times recently, taking into account the fact that the demand in emerging markets has been declining, and the developed markets were pressed by economic conditions.

As reported by the Wall Street Journal, Mr. Paul Bulcke, who is the current Chief Executive Officer of Nestle SA, said that the company was dealing with “very volatile trading environment”, especially considering the fact that developed markets are facing some difficulties.

Mr. Jean-Philippe Bertschy, who is one of the analysts working at Vontobel commented in a research note that was cited by Reuters: “Nestle is one of the very few players in the consumer goods sector not to disappoint the market in the first half, and not giving a profit warning for the full year.”

Nestle SA was up 3.2% for the day to trade at 69.25 Swiss francs per share by 9:10 GMT, marking a one year change of +7.03%. According to the information published on the Financial Times, the 26 analysts offering 12-month price targets for Nestle SA have a median target of 70.50 Swiss francs, with a high estimate of 80.00 Swiss francs and a low estimate of 59.00 Swiss francs. The median estimate represents a 5.22% increase from the last price of 67.00 Swiss francs.