Berliner Boersenzeitung - Nestle share slump adds pressure on new boss

Chief executive Laurent Freixe took over in September in a surprise change at the top of the Swiss group, whose brands include everything from Nespresso coffee capsules to Purina dog food and Maggi stock cubes.

A company veteran who headed the Latin America division before his promotion, Freixe was given the task of reviving Nestle sales, which have yet to fully recover from a wave of inflation that prompted consumers to slash spending.

Sales totalled 93 billion Swiss francs ($102 billions at current rates) in 2023, falling 1.5 percent from the previous year.

The group has also faced scandals in Switzerland and France over the use of banned filtering systems for its mineral waters, and the deaths of two children who had consumed Buitoni pizzas suspected of being contaminated with E.coli.

In November, Freixe unveiled a plan combining new cost-cutting measures, increased advertising spending with a focus on the brand's top-selling products, and a reshuffle of its water business.

Despite these measures, the share price continued to fall, shedding nearly a quarter of its value in 2024.

As a result, Nestle lost its leading position on the Swiss stock exchange, dropping to third place behind pharmaceutical giants Roche and Novartis.

At the start of February, shares were trading at around 77 and 78 Swiss francs, a significant drop from its peak of nearly 130 francs at the end of 2021.

In Switzerland, the NZZ daily newspaper warned that many Swiss citizens were affected given Nestle's weight in pension fund investment.

For daily newspaper Tages-Anzeiger, the stock can no longer be considered a "Grossmutter-Aktie" (German for grandmother stock), referring to stable, long-term investment stock suitable for risk-averse investors.

The newspaper also reported that shareholders could end up calling Nestle's board to account.

- Too early -

"Nestle is owned by a large number of pension funds and private individuals in Switzerland," said Jean-Philippe Bertschy, an analyst at Vontobel.

"Sentiment around the stock has rarely been worse as investors are rightly disappointed with the share price performance," Bertschy wrote in a recent study.

Several factors have contributed to the stock's plunge, he said, including repeated changes in management, downward revisions of sales forecasts, and the pizza and water scandals in France.

But "numerous opportunities remain to restore sales growth and generate cash" given the extent of Nestle's portfolio, Bertschy wrote, adding that the turnaround of underperforming businesses or brands "will take time."

- "Marques milliardaires" -

Shortly after taking over, Freixe said he wanted to focus on Nestle's highest-potential products, including the company's "31 billionaire brands", or those with annual sales exceeding one billion francs, such as Nespresso, KitKat or Purina One.

He also initiated a reorganisation of Nestle's water business, which was regrouped into a separate entity at the beginning of January.

Many analysts interpreted the move as a sign that Nestle could either partially divest through a partnership -- as the group had already done in 2016 with its ice cream operations -- or sell.

Andreas von Arx, analyst at Baader Helvea, expects investors to focus on forecasts when Freixe presents the annual results on Thursday.

"It is too early to see progress on the topline," von Arx said.

Freixe has remained vague about his expectations for 2025.

Last year, the Nestle chief executive had said he expected organic sales growth of around two percent, followed by an "improvement" in 2025, without providing more specific figures.

(U.Gruber--BBZ)