Nestlé S.A.

The stable outlook reflects our view that Nestlé will maintain its leading global market positions in key categories, execute well its portfolio reshaping toward higher-growth categories and emerging markets, and implementing its cost savings program. We believe that the strong portfolio of brands and innovation capabilities will enable the group to offset potential volatile commodity costs and high price pressure from competitors and retailers. To maintain the rating, we see Nestlé maintaining adjusted debt to EBITDA at about 2x, considering the very strong free cash flow generation, upcoming large cash proceeds from disposals (such as skin health and Herta), and focus on small-to-midsize acquisitions while calibrating shareholder remuneration, which has increased since 2017. We could lower the rating if adjusted

...Active portfolio reshaping and operating cost cuts support earnings growth.S&P Global Ratings believes that NestlT S.A.'s strategy to focus on categories like pet care, coffee, or infant nutrition, water, and health science, which have growth prospects of 4%-5% annually is credit supportive. We think NestlT, thanks to its well-known brands, large marketing, and R&D means, and its established global leading positions should benefit from the growth potential in emerging markets, notably Asia. We also view positively the efforts to make the operating cost base leaner as the group moves to a more digital production and distribution asset base. Still, we believe it could make sense to strengthen the product offering in plant-based food and beverages, which fits with health and wellness credentials. Asset disposals are not really affecting the business' high diversity. NestlT has a uniquely diversified product portfolio within the food and beverages industry. We think the group's strong ambitions...

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