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Nestle FY18 Profit Surges; To Explore Options For Herta Charcuterie Business

Swiss nutrition, health and wellness giant Nestle SA (NSRGY,NSTR.L) reported that its net profit for fiscal year 2018 attributable to shareholders of the parent grew by 41.6 percent to 10.14 billion Swiss francs from 7.16 billion francs last year. Earnings per share increased 45.5 percent to 3.36 francs from 2.31 francs a year ago.

Net profit benefited from several large one-off items, including income from the disposal of businesses. The increase was also supported by the improved operating performance.

Underlying earnings per share increased by 13.9 percent in constant currency and by 13.1% on a reported basis 4.02 francs. Nestlé's share buyback program contributed 2.0 percent to the underlying earnings per share increase, net of finance costs.

Total reported sales increased by 2.1 percent to 91.44 billion francs from 89.59 billion francs last year. Organic growth was 3.0 percent, with continued strong real internal growth or RIG of 2.5 percent and pricing of 0.5 percent.

As of December 31, 2018, the Group had implemented 10.3 billion francs, or 52 percent of Nestlé's 20 billion francs share buyback program announced in 2017. In light of strong free cash flow generation, Nestlé intends to complete the share buyback program six months ahead of schedule by the end of December 2019.

Further, Nestlé said its board has decided to explore strategic options for the Herta charcuterie business, including a potential sale.

The strategic review, expected to be completed by the end of 2019, covers Herta charcuterie (cold cuts and meat-based products) in France, Germany, Belgium, Luxembourg, the United Kingdom and Ireland, with 2018 sales of about 680 million francs. Nestlé will retain and develop its existing Herta branded dough and vegetarian businesses.

At the Annual General Meeting on April 11, 2019, the company's board of directors will propose a dividend of 2.45 francs per share, an increase of 10 centimes. The net dividend will be payable as from April 17, 2019.

Nestlé also said it proposes Dick Boer, former President and CEO of Ahold Delhaize, and Dinesh Paliwal, President and CEO of Harman International, for election to its Board of Directors.

For fiscal 2019, Nestle expects continued improvement in organic sales growth and underlying trading operating profit margin towards its 2020 targets. The company expects restructuring costs of around 700 million francs, while underlying earnings per share in constant currency and capital efficiency are also expected to increase.

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