FT : Nestlé sets profit targets for the first time

Nestlé sets profit targets for the first time

Nestlé has for the first time set a target for profit margin growth, marking a significant shift from its traditional sales-focused model as the Swiss group reacts to competitive pressures facing the world’s biggest consumer goods groups.

The world’s largest food and drinks company said it would aim for trading operating profit margins of between 17.5 per cent and 18.5 per cent by 2020 – up from 16 per cent last year.

The announcement is a strategic change for Nestlé which has historically relied on leveraging its size to power sales growth. It is part of a strategic update unveiled in London, by Mark Schneider, the former head of German healthcare group Fresenius who became chief executive in January.

Nestlé also reconfirmed its target for mid-single digit organic sales growth by 2020.

In June, Daniel Loeb, founder and chief executive of Third Point, the US activist hedge fund, disclosed he had taken a 1.25 per cent stake in Nestlé, worth $3.5bn and called on the Swiss group to shake up “its old ways”.

Nestlé also said it would accelerate a share buyback programme worth up to SFr20bn, which it announced in June.

Like other consumer goods companies, Nestlé has faced a backlash against “big food” and processed products and a slowdown in emerging markets on which it depends for 42 per cent of sales.

Revenue growth of the 50 biggest consumer goods companies has fallen steadily over the past five years from 7 per cent to minus 1 per cent last year, according to data from OC&C, the consultancy. Instead, small, insurgent brands offering consumers novelty and variety have been growing fast.

Nestlé’s own organic sales growth slowed from 6 per cent in 2012 to 3.2 per cent last year – its slowest rate in two decades. Nestlé’s product range includes Kitkat chocolate bars, Nescafé and Nespresso coffee, and Perrier water.

The Swiss group said it would “increasingly focus capital spending on advancing the high-growth food and beverage categories of coffee, petcare, infant nutrition and bottled water. It will also build on its strong position in emerging markets and pursue growth opportunities in consumer healthcare.”

Mr Schneider said:

In line with today’s accelerating pace of change, we are intensifying our focus on innovation, operational efficiency, and portfolio management. We will grow by remaining at the forefront of consumer trends and offering the brands and products to meet people’s changing needs, especially their demand for a better, healthier life.

adweek.com : Instagram Now Has 2 Million Advertisers Following Explosive Growth

Instagram Now Has 2 Million Advertisers Following Explosive Growth During the Last 18 Months
Its customer list has grown 900% since early 2016

For over a year, Instagram has been pushing the idea that small businesses represent a big potential growth area for its advertising business. For instance, that was the thrust of the message conveyed by former Instagram global head of business and brand development James Quarles (who since has moved on to lead Strava) at Cannes 2016.

Well, today, all that talk certainly doesn’t seems like malarkey. Timed to Advertising Week, which kicks off today, the Facebook-owned app is revealing that it now has two million monthly advertisers, growing from 1 million as recently as March, which represents a massive jump of 900 percent since February of last year, when it had 200,000 advertisers.

In a blog post today, Instagram didn’t explain how it’s been able to increase advertisers so quickly. But it stands to reason that Facebook’s existing, massive customer base of brands big and small is taking more and more notice of Instagram’s ad opportunities.

While marketers like Michael Kors are increasingly utilizing Instagram video ads, local players are getting into the game. For instance, New York politicians for the Sept. 12 primary elections consistently bought Instagram ads, including Democratic city council hopeful Justin Brannan (seen above), who won his party’s nomination in Brooklyn’s 43rd district.

>>> What to look today - 26th of Sept. 2017

Dow -0.24% S&P -0.22% Nasdaq -0.88% Russell +0.08%
US Market start the last week of Q3 on a negative note, pushed by tech names. Wall Street rotated out of the S&P 500's technology sector, which has led the stock market's 2017 campaign, in favor of some groups that have struggled so far this year, such as energy (+1.5%), consumer staples (+0.7%), telecom services (+0.9%), and real estate (+0.3%). We noticed also a market-cap rotation on Monday, evidenced by the S&P MidCap 400 (+0.2%) and the small-cap Russell 2000 (+0.1%), both of which finished ahead of the broader market. The Russell 2000 also settled at a new all-time high. US After Hours ASNA +15%, SNX +9%, RHT +4% following earnings/guidance, GHL +13% on leveraged recapitalization plans. Asian MArket opened mostly to the downside as tension on the Korean peninsula brought back risk aversion and a flow to safe haven assets. Commodities continue to rise being led by copper. yuan declined to the lowest level against its currency basket in nearly 4-weeks as the PBOC weakens the daily fix. In an SCMP piece it is noted that China could be heading towards a free-floating currency after a group of economists, including officials from PBoC suggested the time was ripe for such a move.

Nikkei -0.39% Hang Seng -0.14% CSI -0.09% Shanghai -0.06% Shenzen -0.25%

Eur$ 1.1840 CNH 6.6146 CNY 6.6195 JPY 111.55 GBP 1.3476 CHF 0.9679 RUB 57.4281 WTI$ 52.20 -0.04%

S&P -0.11% EuroStoxx -0.17% Dax -0.22% FTSE -0.11% SMI -0.34%

Macro :
- Oil Service ‘Capitulation’ Is Over, Credit Suisse Says Go Long

Keep an eye on :
- ALO FP : Siemens, Alstom Are Said to Finalize Rail-Unit Merger Details, Poupart-Lafarge Is Said to Lead Siemens, Alstom Rail Unit: FAZ
- BLT LN : BHP’s Balhuizen Says Co. Seeks Growth in Value, Not Volumes
- DSM NA : DSM Says Prepared to Spend Asset-Sales Proceeds on Acquisitions
- FINGB SS : Fingerprint PT Cut by 30% at Pareto After Sales Warning
- IAG LN : IAG Confirms Air Berlin Bid, Sees It Going to Lufthansa: Rtrs
- IG IM : Italgas Presents Binding Offer for Gas Natural Italy Assets: CEO
- JUST LN : Just Group Holder Cinven to Sell 93m Shares via Placing
- LHN VX : Poupart-Lafarge Is Said to Lead Siemens, Alstom Rail Unit: FAZ
- MAERSKB DC : Maersk May Seek Higher Price For Drilling Business: Jefferies
- MAP SM : Mapfre Says Hurricanes, Earthquakes to Cost Co. EU150M-EU200M
- NESN VX : Nestle Aims for Operating Margin of 17.5% to 18.5% by 2020
- NETS DC : Nets Deal Should Be Straightforward, Highly Likely to Close: UFP
- NEX FP : Nexity to Develop EU50M Office Project for 3M in Paris Suburb
- SAF FP : Safran Sees as Much as EU350 Mln Hit From CFM56-LEAP Transition
- TKA GY : Thyssenkrupp to Increase Stock Capital by EU144.9m, or 10% --> Thyssenkrupp Raises EU1.38b in Share Placement
- UBER IPO : Lyft Is Said to Put U.K. on Shortlist of International Mkts: FT
- UN01 GY : Uniper bidder Fortum made unofficial EUR 19 per share bid in July - Kaupphaleti
- FR FP : Siemens Has Put Option for Valeo E-Engine Venture: Handelsblatt

>>> Europe : Brokers Upgrades & Downgrades - 26th of Sept. 2017

>>> Up
* AstraZeneca Raised to Outperform at Exane
* Bankinter Raised to Market Perform at BBVA, PT EU8
* Evonik Raised to Outperform at Credit Suisse
* KAZ Minerals Raised to Outperform at BMO, PT GBP9
* KAZ Minerals Cut to Underweight at Morgan Stanley, PT 480p
* Kinepolis Raised to Buy at Berenberg
* Nets Raised to Hold at ABG, PT DKK165
* Storebrand Raised to Sector Perform at RBC, PT NOK60
* Tullow Raised to Outperform at RBC, PT 260p
* Vicat Raised to Buy at SocGen, PT EU73

>>> Down
* Akzo Nobel Cut to Hold at SocGen, PT EU80
* Aurubis Cut to Sell at Bankhaus Lampe
* Calgon Carbon Cut to Neutral at Baird
* Fingerprint PT Cut by 30% at Pareto After Sales Warning
* Novo Nordisk Cut to Neutral at Exane
* Roche Cut to Underperform at Exane
* SSAB Cut to Equal-weight at Morgan Stanley, PT SEK43
* WPP Cut to Equal-weight at Morgan Stanley, PT GBP16

>>> Initiation
* Essentra New Buy at Stifel, PT 640p
* Yoox Net-A-Porter New Buy at HSBC, PT EU37

>>> Call

>>> Asian Update

Asia Mid-Session Market Update: Tensions escalate between N. Korea and US; NZ records larger than expected trade deficit

***Asia Summary***
- Asian equity markets opened mostly to the downside as tension on the Korean peninsula brought back risk aversion and a flow to safe haven assets after North Korea foreign minister declared that the N. Korea can shoot down US warplanes flying in international airspace and described Trump’s recent comments as a declaration of war. Commodities continue to rise being led by copper. Korean banks remain under pressure as South Korea FSC announced financial reforms for retail customers, including changes to interest rates on overdue loan payments. Chinese real estate names came off yesterday’s lows on fresh curbs announce over the weekend.

- The yuan declined to the lowest level against its currency basket in nearly 4-weeks as the PBOC weakens the daily fix. In an SCMP piece it is noted that China could be heading towards a free-floating currency after a group of economists, including officials from PBoC suggested the time was ripe for such a move.

- As expected late yesterday Japan PM Abe called for a snap election. Japan Fin Min Aso said that should call for election if planning big changes to taxes. He also warned that it will be difficult to meet the FY20 primary surplus goal. NZD/USD continued to be weaker after its rapid decent yesterday on election results.

***Key economic data***
- (NZ) NEW ZEALAND AUG TRADE BALANCE (NZD): -1.24B V -0.83BE; YTD: -3.2B V -2.91BE
- (KR) South Korea Sept Consumer Confidence: 107.7 v 109.9 prior (5-month low)
- (JP) JAPAN AUG PPI SERVICES Y/Y: 0.8% V 0.6%E
- (NZ) New Zealand Aug RBNZ New Residential Mortgage Lending y/y: -16% v -24% prior

***Speakers and Press***
China/Hong Kong
- (CN) China could be heading towards a free-floating currency after a group of economistds, including officials from PBoC suggested the time was ripe for such a move - SCMP

Korea
- (KR) South Korea Financial Services Commission (FSC) Chairman Jong-Ku announces financial reforms for retail customers, including changes to interest rates on overdue loan payments

Japan
- (JP) Bank of Japan (BOJ) Jul Meeting Minutes: Most: Vital for Japan that BOJ achieves 2% target
- (JP) Japan Economic Revitalization Min Motegi: Japan not at the point to consider sales tax above 10%, most important issue it to raise Japan potential growth
- (JP) Moody's: Japan elections unlikely to have implications for sovereign rating; refreshed mandate for reform would be credit positive

New Zealand/Australia
- (NZ) New Zealand Shadow Board: See little urgency for RBNZ to raise rates
- (AU) ASX will likely suspend most of Australian listed gold sector if WA government budget with new gold royalty increase is passed – Australian
- (AU) Australia Treasurer Morrison: Final budget outcome A$4.4B better than forecasted, final budget A$33.2B

US
- (US) Fed's Kashkari (dove, voter): Do not see signs of economy overheating; do not see inflation taking off no need to tap breaks; Fed should not be under any pressure to raise rates

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei -0.4%, Hang Seng -0.1%; Shanghai Composite +0.1%, ASX200 -0.1%, Kospi -0.2%
- Equity Futures: S&P500 -0.1%; Nasdaq100 -0.0%, Dax -0.2%, FTSE100 +0.0%

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.1862-1.1846; JPY 111.80-111.50; AUD 0.7948-0.7922;NZD 0.7277-0.7236
- Dec Gold +0.4% at $1,316/oz; Nov Crude Oil +0.2% at $52.34/brl; Dec Copper +0.9% at $2.96/lb
- (AU) Australia sells A$150M in 2030 indexed bonds; avg yield 1.0024%; bid-to-cover 3.34x
- (CN) PBOC OMO: To inject CNY50B in 14 and 28-day reverse repos v injected CNY200B in 14 and 28-day reverse repo prior; drains net CNY80B
- USD/CNY (CN) China PBOC sets yuan reference rate at 6.6076 v 6.5945 prior
- (JP) Japan MoF sells ¥499.4B v ¥500B in 0.90% 40-yr bonds; avg yield 1.015%; bid to cover: 3.24x (highest bid-to-cover since 2015)

***Equities notable movers***
Australia/New Zealand
- KMD.NZ Reports FY17 (NZ$) Net 38.0M v 33.5M y/y; EBIT 57.0M v 56Me; Rev 445.3M v 425.6M y/y; +7.5%

Japan
- 8303.JP Anbang ends talks to acquire stake in Shinsei - FT

South Korea
- 023530.KR Trading to be halted effective Sept 28th before being relisted as Lotte Holdings; +8%
- 010140.KR Awarded KRW1.12T contract for containership for Europe; +7%

>>> US After Hours Summary: ASNA +15%, SNX +9%, RHT +4% following earn


After Hours Summary: ASNA +15%, SNX +9%, RHT +4% following earnings/guidance, GHL +13% on leveraged recapitalization plans

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: ASNA +15.2%, SNX +9%, RHT +4.1%

Companies trading higher in after hours in reaction to news: ACTA +27.8% (Actua to sell its three majority-owned businesses for $549 million in cash; intends to distribute substantially all net proceeds to stockholders), GHL +12.8% (plans leveraged recapitalization with major share repurchase; to borrow $300 mln and shortly launch contingent tender offer to repurchase up to 9 mln shares at $17/share), PRQR +9.3% (announces 'positive' top-line results from Phase 1b safety and tolerability clinical trial of QR-010, a novel investigational RNA therapeutic in subjects with cystic fibrosis), NDRO +5.6% (announced a special cash distribution), ITUS +3.9% (continued strength), SFLY +2.8% (confirmed integration with the Apple Photos app for macOS High Sierra), BEAT +2.4% (still looking around -- note that Aeterna Zentaris appointed Jeffrey Whitnell as Interim CFO effective today - served as VP Finance & Controller of Lifewatch Services - was acquired by BioTelemetry)

After Hours Losers:

Companies trading lower in after hours in reaction to news: GNCA -48.2% (announces strategic shift to immuno-oncology/development of neoantigen cancer vaccines; corporate restructuring and exploration of strategic alternatives for GEN-003), KDMN -16.6% (announces proposed public offering of common stock and warrants), QEP -6.5% (closes Pinedale divestiture; reduced 2017 oil production guidance to midpoint of 19.75 MMbbl, natural gas production to midpoint of 167.5 Bcf and NGL production to midpoint of 5.5 MMbbl), SBRA -6% (reaffirms 2017 and updates 2018 outlook; closed sale/leaseback transaction, begun the process for sale of remaining 43 facilities leased to Genesis Healthcare; plans to offer 16,000,000 shares of its common stock in an underwritten public offering), TXMD -5.9% (launches public offering of 12.4 million shares of common stock), SRC -5.1% (files mixed securities shelf offering), CSGP -1.8% (files mixed securities shelf offering; commences public offering of $750.0 mln of common stock)

>>> US Close Dow -0.24% S&P -0.22% Nasdaq -0.88% Russell +0.08%

Closing Market Summary: Technology Tumbles

The U.S. equity market slipped on Monday as investors dialed back their technology holdings with just a few days left in the third quarter. Naturally, the tech-heavy Nasdaq (-0.9%) was the weakest major average, but found support at its 50-day simple moving average (6,362). Meanwhile, the S&P 500 and the Dow lost 0.2% apiece.

Wall Street rotated out of the S&P 500's technology sector, which has led the stock market's 2017 campaign, in favor of some groups that have struggled so far this year, such as energy (+1.5%), consumer staples (+0.7%), telecom services (+0.9%), and real estate (+0.3%). 

In addition to a sector rotation, there was a market-cap rotation on Monday, evidenced by the S&P MidCap 400 (+0.2%) and the small-cap Russell 2000 (+0.1%), both of which finished ahead of the broader market. The Russell 2000 also settled at a new all-time high.

Facebook (FB 162.87, -7.67) was one of the weakest technology components, dropping 4.5% to settle below its 50-day simple moving average (169.11) for the first time since July 6. Fellow mega-cap tech names like Apple (AAPL 150.55, -1.34), Microsoft (MSFT 73.26, -1.15), and Alphabet (GOOGL 934.28, -8.98) also struggled, losing between 0.9% and 1.6%.

Chipmakers also tumbled on Monday, sending the PHLX Semiconductor Index lower by 2.0%. NVIDIA (NVDA 171.00, -8.00) and Micron Technology (MU 34.87, -1.20) exhibited particular weakness, losing 4.5% and 3.3%, respectively. Micron will release its latest earnings report on Tuesday afternoon.

Tech stocks were weak from the jump, but the sell off intensified after North Korea's foreign minister said that U.S. President Donald Trump has effectively declared war on his country and, therefore, Pyongyang has the right to take countermeasures against the U.S, including shooting down U.S. strategic bombers even if they're not in North Korean airspace.

The White House responded by saying the allegation is "absurd."

U.S. Treasuries held gains in the early morning and then advanced to new session highs following the North Korea comments. The benchmark 10-yr yield, which moves inversely to the price of the 10-yr Treasury note, slipped four basis points to 2.22%, settling near its session low. The 2-yr yield held up a bit better, finishing just one basis point below its flat line at 1.42%. 

In Europe, Angela Merkel won a fourth term as Germany's chancellor on Sunday, but the far-right Alternative for Germany (AfD) party did better than expected, effectively weakening Ms. Merkel's CDU/CSU alliance. The euro dropped 0.9% to 1.1849 against the U.S. dollar on Monday while the German bund yield tumbled five basis points to 0.40%.

Investors did not receive any economic data on Monday.

However, on Tuesday, market participants will receive several economic reports, including the Case-Shiller 20-City Composite Home Price Index for July (consensus +5.8%) at 9:00 ET, the Conference Board's Consumer Confidence Index for September (consensus 119.4) at 10:00 ET, and August New Home Sales (consensus 577K) also at 10:00 ET.

  • Nasdaq Composite +18.3% YTD
  • Dow Jones Industrial Average +12.8% YTD
  • S&P 500 +11.5% YTD
  • Russell 2000 +7.0% YTD