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Nestlé gains momentum as Schneider’s revamps spur growth

Ulf Mark Schneider, chief executive officer of Nestle SA, speaks during the company's annual shareholders meeting at the Nestle headquarters in Vevey, Switzerland, on Thursday, April 6, 2017. Schneider said many food and beverage companies are focused so much on cutting costs that they will undermine their growth prospects, challenging a recent mantra that's been driven by companies such as Kraft Heinz Co. and Anheuser-Busch InBev NV. Photographer: Michele Limina/Bloomberg

By BLOOMBERG

ZURICH • Nestlé SA’s sales and profitability gained momentum as CEO Mark Schneider (picture) responds to activist investors’ pressure to turn the company into a more agile consumer giant.

Sales grew faster than analysts expected in the first six months of the year and the company forecast improvement in the second half (2H) as the US and China rebound. The stock rose as much as 1.1% in early trading.

“The engine is starting to rev up,” wrote Jean-Philippe Bertschy, an analyst at Bank Vontobel AG. “We expect further disposals of underperformers in the near term.”

The CEO is turning the page after Nestlé had its weakest sales growth in more than two decades last year. Facing demands from Third Point, the activist fund run by Dan Loeb, to sell assets, Nestlé said it will complete its strategic review of its Gerber life insurance business by the end of the year.

In his second year, Schneider has announced plans to cut hundreds of jobs across Europe and announced a US$7.2 billion (RM29.23 billion) deal to market Starbucks-branded coffee beans and capsules. Nestlé also revamped its board, adding figures from faster-moving consumer-goods companies, including Adidas AG CEO Kasper Rorsted and Inditex SA chairman Pablo Isla.

China helped boost organic growth in the Asia-Pacific and Africa region to 4.4% in the 1H, as the company sold more products online and consumers snapped up more of its coffee products.

Volume in the US and Canada improved, and growth was boosted by Purina pet-care products and Hot Pockets convenience meals. That offset lost revenue from a nationwide trucker strike in Brazil in May.

Last week, Unilever reported second-quarter sales growth below analysts’ estimates as the Brazilian protests snarled shipments.

Nestlé said its underlying trading operating profit margin will improve in the 2H, benefitting from efficiency programmes and more favourable commodity prices.