Nestle SA, (NESN) the world’s biggest food company, has a shortlist of businesses it is looking to sell after identifying laggards that it cannot fix, Chief Executive Officer Paul Bulcke told investors today.
The maker of Nescafe coffee has completed a review of 97 percent of its 1,800 distinct business units, Bulcke said at an investor seminar at Nestle headquarters in Vevey, Switzerland. There is a “slightly longer list” of units that the company will try to improve, he said, as it seeks to rebound after posting its weakest quarterly revenue growth in four years.
“We are going to have some divestitures,” Bulcke said, without disclosing any further details or timing. “We have allowed underperformers to underperform for too long. That is not the case anymore. We will go after them. We want to be in business, not agony.”
Analysts have cited Jenny Craig diet centers, PowerBar energy snacks and Lean Cuisine frozen meals as possible candidates to be jettisoned. In a presentation yesterday in Vevey, Luis Cantarell, head of Nestle’s 10.7 billion-Swiss franc ($11.8 billion) nutrition and healthcare businesses, said that both Jenny Craig and PowerBar were in “suffering” categories.
Bulcke also said he plans to limit spending on capital like factories to between 4 percent and 5 percent of sales next year. In August, Nestle said 2013 capital spending would be “slightly lower” than its forecast of about 5.7 percent of sales.
“Over the last three or four years we have increased our capex quite extensively,” Bulcke said, in order to expand in emerging markets. “We now want to sweat those assets.”
Nestle fell 0.6 percent to 62.90 francs at 2:24 p.m. in Switzerland after declining as much as 1.5 percent earlier, hurt by Unilever’s announcement yesterday that worsening conditions in emerging markets like India would crimp its third-quarter underlying sales growth to no more than 3.5 percent.
In some cases, a slowdown in emerging markets could be “healthy,” Bulcke said at the seminar. “When China or another country grows 15 percent for several years in a row, that overheats the engine,” he said, adding that emerging markets are growing “a little bit slower than before.”
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