Nestle SA (ADR) (OTCMKTS:NSRGY) Aims for 5% Organic Growth

January 3, 2017

CEO Henry Beukema III of Guyasuta Investment Advisors says Nestle SA (ADR) (OTCMKTS:NSRGY) is looking to increase its organic growth profile while also focusing on healthier product offerings.

Already, Nestle has around 3% to 3.5% organic growth trajectory, but their stated goal is to be closer to 5% or 5.5%. We think that this is a company with a very good balance sheet and with the ability to focus on increasing operating margins and having a reasonable valuation as well as having an over 3% dividend yield. This is attractive in the current environment.

We think that Nestle has focused as a packaged food and beverage company but also has a strong focus on nutrition and health and wellness. And as we know, sugar continues to be a focus area for nutritionists and for consumers, who are seeking healthier choices, but ones that still taste reasonably well. In other words, we don’t want to give up the idea of having tasty snacks, but we seek the ones that hopefully have less negative health effects.

Nestle’s reformulation or potential for a lower-impact sugar derivative could be very helpful in the long-term strategy of trying to continue to offer healthy but tasty food as well as, you know, focus on potential areas where they could sell that to other companies for their snack and confectionery divisions.

So we think this could be interesting going forward. The history of different sweeteners has been somewhat mixed, and so we’re not counting on this to be necessarily a strong catalyst. We think that the most significant catalyst is just the ability for them to bring up their operating margins over the medium and long term, but we think it’s very positive that they are focusing on ways to make healthier but still tasty snacks.

Henry S. Beukema III