Nestle CEO: L'Oreal Stake Sale is "One Option"


Nestle said on Thursday a sale of its stake in French cosmetics group L'Oreal was one option to be considered after a lock-up agreement with the controlling family expires in 2009.

Chief Executive Peter Brabeck told a news conference that he will look, among others, at the company's shareholding in L'Oreal of around 28 percent and consider different scenarios when he becomes non-executive Chairman next year.

When asked if a sale was one scenario, he replied: "This is one of the scenarios which I have to consider."

Brabeck also said it was fair to say that since a partial flotation of US eyecare company Alcon , "Nestle does not need Alcon and Alcon does not need Nestle." The food group has an approximately 77 percent stake in Alcon.

9-Month Sales in Line

Nestle, the world's largest food group, on Thursday matched forecasts with a 7.2 percent rise in 9-month underlying sales and confirmed its 2007 outlook with annual sales set to rise nearly 7 percent.

The Swiss-based maker of Nescafe coffee, KitKat chocolate bars and Perrier water said it was raising prices to offset the sharp rise in commodity costs such as milk, coffee and wheat and saw only a small slowdown from 7.4 percent first half growth.

The group warned that markets for agricultural commodities will remain tough into 2008 and it expects to continue to raise prices to pass on the higher costs to its customers.

Chief Executive Peter Brabeck said he was confident 2007 underlying sales, which strip out acquisitions and currency movements, will grow more than its long-term 5 to 6 percent target and approach 7 percent for the full year, and the group will see a sustainable improvement in margins for 2007.

The firm said its Chief Financial Officer Paul Polman will become head of its biggest region, the Americas, in February after he lost the race for the chief executive job with Brabeck stepping down next April, although he continues as chairman.

James Singh, currently head of acquisitions and business development, will take over from Polman in January, in a series of moves prompted by last month's announcement that Paul Bulcke, current head of the Americas region, will replace Brabeck.

Analysts said the nine-month sale performance was solid and it was positive the well-respected Polman was staying, and the shares were up 0.2 percent at 518 Swiss francs.

Shares in Nestle have slightly underperformed the DJ Stoxx European food and beverage index from the start of the year.

Nestle shares currently trade at around 17.10 times forecast 2008 earnings, in line with the European sector.

Overall group nine-month sales rose 9 percent to 78.7 billion Swiss francs ($66.64 billion), underlying sales growth was 7.2 percent for the January-September period while internal growth which also strips out inflation was 4.5 percent.

"A strong set of figures with accelerating growth in Europe which is positive. The company has heavy exposure to health and wellness categories, the strongest growing part of the market," said Jon Cox, an analyst at Landsbanki Kepler.

French rival Danone reported nine-month underlying sales rose 7 percent as it saw a third-quarter slowdown to 3.9 percent, while Unilever which reports its third-quarter on Nov 1. saw a 5.8 percent first-half rise.

Raising Prices

Nestle, whose brands include Buitoni pasta, Maggi soaps and Friskies cat food, has been successful this year in using its muscle to raise prices and overcome soaring input costs. It described the raw material environment as "tough, as expected."

This summer, Nestle launched a $21 billion share buyback program and said it would shun major acquisitions in favor of smaller bolt-on purchases after making a number of large purchases recently like the nutrition division and Gerber baby foods units of fellow Swiss group Novartis.

Analysts polled by Reuters had on average forecast nine-month sales of 78.47 billion, underlying sales growth of 7.1 percent and real internal growth of 4.9 percent.

Nestle does not report profits at the 9-month stage.