Nestle Announces $8.8bn Share Buyback After Posting Lower Profit

Nestle, the world's biggest food group by sales, proposes to spend 8bn Swiss francs on a share buyback programme against the backdrop of lower first-half earnings.

The 8bn Swiss franc ($8.8bn, €6.6bn) equity repurchase programme will commence this year and run through 2015, the company said in a statement announcing its first-half results.

Nestle on 7 August reported a near 10% drop in first-half earnings.

Net profit, for the six months to 30 June, dropped 9.6% to 4.63bn Swiss francs from 5.12bn francs a year ago, the statement said. The first-half figure missed analyst forecasts of 4.99bn francs.

However, Nestle confirmed its 2014 outlook.

The firm's stock was trading 3.13% higher at 1112 CEST in Zurich.

Nestle CEO Paul Bulcke said in the statement: "We delivered solid, broad-based organic growth, driven by real internal growth and pricing in what is still a very volatile trading environment..."

"The performance in the first half allows us to confirm our outlook for the full year: organic growth around 5% and improvements in margins, underlying earnings per share in constant currencies and capital efficiency."

Bank Vontobel analyst Jean-Philippe Bertschy said in a note to clients: "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."

M&A

Nestle is returning cash to shareholders after selling part of its stake in L'Oreal back to the French cosmetics firm for $8bn.

In May, the Swiss food major, behind brands like KitKat chocolate bars and Nescafe coffee, strengthened its skincare business with the purchase of rights to several treatments for wrinkles and facial lines from Valeant Pharmaceutical International.

Nestle acquired those rights, allowing it to commercialise several key dermatology products in the US and Canada, in a $1.4bn all cash deal with Valeant, the Swiss firm said in a statement on 28 May.

In 2011, Nestle completed a 10bn franc share buyback initiated in 2010.