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Nestlé plans $20B cash distribution to shareholders; 9-month sales rise 2.9%

Nestlé SA on Oct. 17 said it plans to distribute up to CHF20 billion, or $20.1 billion, in cash to shareholders as it reported a 2.9% year-over-year growth in total sales for the first nine months of 2019.

The Swiss food giant reaffirmed its full-year guidance for 2019, projecting a 3.5% increase in organic sales growth, full-year underlying trading operating profit margin at or above 17.5% and an increase in underlying EPS in constant currency.

The company said the distribution will be mostly through a share buyback program that will start in January 2020 and through one or more special dividends over the period of 2020 to 2022, depending on market conditions.

"With prudent investments and a disciplined approach to acquisitions our value creation model is generating profitable growth and attractive cash returns for our shareholders," Nestlé CEO Mark Schneider said in a statement.

Nestlé reported total sales of CHF68.37 billion for the nine-month period, up 2.9% from CHF66.42 billion a year ago on the back of its strong performance in the U.S. and of its Purina PetCare brand.

The company said its Starbucks Corp. licensing deal and $2.3 billion purchase of Atrium Innovations helped offset the divestment of its Gerber Life Insurance business. Net acquisitions contributed a 0.7% positive impact on the group's sales for the period. Foreign exchange reduced sales by 1.5%.

On Oct. 1, Nestlé completed its CHF10.2 billion sale of Nestlé Skin Health unit. The company said the strategic review of its Herta charcuterie business is ongoing, with completion slated for 2019-end.

For the nine-month period, Nestlé reported organic growth of 3.7% year over year and 3.5% if businesses under review are excluded. Real internal growth was 3.0%, and pricing contributed 0.7% with "temporary softness" in the third quarter due to phasing of pricing steps and decreasing coffee prices, the company said.

Sales in the Americas, comprising Nestlé's North America and Latin America operations, jumped 9.5% to CHF24.0 billion from CHF21.9 billion as real internal growth came in at 2.7%. Nestlé attributed the growth to "a robust pipeline of new product launches," including the launch of Starbucks creamers.

In Europe, the Middle East and North Africa, the company saw sales inch down 0.6% to CHF13.7 billion as pricing declined by 1.7% due to decreasing coffee prices.

For the company's Asia, Oceania and sub-Saharan Africa business, sales inched up 0.9% to CHF 15.9 billion, despite slower momentum in China and a challenging environment in Pakistan.

Nestlé also announced plans to integrate its bottled water division Nestlé Waters into its three geographical zones, effective Jan. 1, 2020.