Nestle S.A.

The stable outlook reflects our expectation that Nestlé will maintain its leading position in the packaged food industry while slowly increasing the weight of faster-growing business, consistent with its nutrition, health care, and wellness strategy. We assume that the gradual shift in the product portfolio will translate into an improvement in margins in the medium term, although we believe that--in the short term--the costs related to restructuring could outweigh these benefits. We also assume that Nestlé will maintain its commitment to a stable debt leverage ratio, with adjusted debt to EBITDA staying at about 2x after the company's planned CHF20 billion debt increase. If the debt leverage ratio stays permanently above 2x, we could consider a downgrade. This could happen

...NestlT is reorganizing its portfolio to increase the exposure to high-growth businesses.Similar to other peers starting from 2014, NestlT has faced a slowdown in organic growth. The group relies on a very large portfolio of brands and currently, not all of them seem to be strategic and consistent with the target to maintain organic growth in the mid-single digits. NestlT has started to address the slow-down in organic growth by enlarging its presence in high-growth businesses and reducing its exposure to those expanding more slowly and where the company does not have a leading position. We believe that NestlT's portfolio repositioning is an important step to maintain its global leadership in the food and beverage branded industry in the long term. In our view, the lack of balanced organic growth and the reliance on external opportunities could expose companies to potential future volatility in sales and operating performances. The external environment offers several challenges.Consumers...

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