Activist Investor Pushes for More Changes at Nestlé -- WSJ

By Saabira Chaudhuri 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 21, 2017).

Activist investor Daniel Loeb on Friday praised Nestlé SA's recent moves to raise shareholder value but indicated he will continue to push the packaged foods giant to make further changes.

In a letter to investors, the Third Point LLC hedge fund founder said he was "pleased" with Nestlé Chief Executive Mark Schneider's "overall shift in tone, particularly indicated by the willingness to give a specific margin target and commit to selling assets."

In recent months Mr. Loeb has become one of Nestlé's biggest shareholders, building up a 1.3% stake in the maker of KitKat chocolate and Nescafe coffee. He pushed for four big changes of which Nestlé has already begun executing three: driving growth through shuffling its portfolio, raising leverage to return capital to shareholders and setting a formal profit margin target.

However, Mr. Schneider has resisted Mr. Loeb's call for the company to sell its 23.29% stake in L'Oréal SA, saying the investment remains a good one.

On Friday, Mr. Loeb indicated he won't back down from urging Nestlé to do more.

"We believe there is much more opportunity to unlock value, particularly by further optimizing capital allocation and carefully evaluating the L'Oréal stake as part of a comprehensive portfolio review," he said.

Nestlé didn't immediately respond to a request for comment on Mr. Loeb's remarks.

Mr. Loeb, the Third Point LLC hedge fund founder who flew to London last month to attend Nestlé's investor day said he had been impressed by Mr. Schneider's "strong presentation" at the event. He said the company's new target of a 17.5% to 18.5% profit margin by 2020 and its $20.8 billion share buyback "imply a return to double digit EPS growth through 2020 after five years of essentially zero growth."

"Meeting these goals alone would create enormous value for shareholders, " said Mr. Loeb.

His largely bullish remarks give Nestlé some breathing room as the company struggles to jump-start sales growth.

Earlier this year Nestlé ditched a longstanding goal of achieving 5% to 6% organic sales growth after it missed the target for four straight years through 2016. The Swiss consumer giant on Thursday reported sales growth of 2.6% for the first nine months of the year. It said it was on track to post 2.6% growth for the full year, too, compared with 3.2% last year.

Write to Saabira Chaudhuri at [e-mail]

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October 21, 2017 02:47 ET (06:47 GMT)

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