Nestle, the world's biggest food group, said on Thursday it had no plans for a big acquisition with cash from its Alcon stake sale, despite long-term speculation linking it with L'Oreal.
We do not have any plans for any big acquisitions this year and next year, Chief Financial Officer Jim Singh told an investor roadshow in London on Thursday.
Singh added the Swiss maker of Nescafe coffee and Maggi soups had no need to buy a big business as it saw more stability in the general economic environment and encouraging signs of recovery in some of its emerging markets.
He expected the company would improve on its first-half underlying sales growth of 3.5 percent in the second half. The group disappointed investors on Wednesday as its half-year results showed growth came below consensus of 3.9 percent.
Nestle had a big influx of cash last year from selling a 25 percent stake in Alcon, the world's biggest eyecare group, for $10.4 billion to Swiss drugmaker Novartis.
Novartis also has an option to buy Nestle's remaining 52 percent stake between January 2010 and July 2011, at a price of no more than $28 billion.
Nestle is currently is the midst of a 25 billion Swiss franc share buyback program with the second stage of 10 billion francs due to start Thursday and is expected to be completed by end-2010 as it looks to return the Alcon cash back to shareholders rather than spend it on acquisitions.
Nestle's intentions toward the world's biggest cosmetic group L'Oreal have been the subject of much speculation as the Swiss group and France's Bettencourt family own rough 30 percent each, and the two shareholders recently agreed to work together after a shareholder pact expired earlier this year.
Under the old deal, Nestle could not acquire more L'Oreal shares until six months after the death of Liliane Bettencourt, the 86-year-old billionaire daughter of the firm's founder, and had the right of first refusal if the family wanted to sell up.
Nestle's shareholding dates back to 1974, but some analysts say L'Oreal is unappealing after recent sales warnings.
Singh added that he expected a more stable environment for commodity prices over the next six to eight months and said the company had seen signs of recovery in some of its emerging markets. Overall, these markets make up 35 percent of its business and generated underlying sales growth of 7 percent in the first half of this year.
He said India and China showed double-digit percentage volumes sales growth in the first half, while Africa and the Middle East were strong. Overall, Nestle's food and beverage business only saw a 0.1 percent rise in volumes as it relied on higher prices to push up its overall sales growth.
We see a better volume performance in the next six months, Singh told the investor meeting.
Its 3.5 percent first-half underlying sales growth compared with steadily improving growth over the last three years, with 2006 up 6.1 percent, 2007 7.4 percent and 2008 8.3 percent, he added.
(Reporting by David Jones, editing by Will Waterman)