Nestlé shares soared to their highest since 2008. The company will cut 6% of its workforce

Shares in Swiss food giant Nestlé rose more than 8%, hitting their highest since 2008. The company reported quarterly sales above expectations and announced it would cut 16,000 jobs. After a period of internal crisis and weak results, Nestlé's new head Philippe Navratil aims to restore sales and optimize the company's portfolio.

Shares of food producer Nestlé rose in price by more than 8% at trading in Switzerland on October 16, reaching the maximum since 2008. Such growth was recorded after the company reported quarterly sales above expectations and announced plans to cut 16,000 jobs, Bloomberg writes. Its cost-saving target has now been raised from 2.5 billion Swiss francs to 3 billion francs (about $3.7 billion) by the end of 2027.

The layoffs will take place over the next two years and will affect about 6% of the workforce, with most of the positions to be cut being office staff. "The world is changing and Nestlé needs to change faster," said CEO Philippe Navratil. - This will require difficult but necessary decisions to reduce headcount."

At the same time, Nestlé reported a 4.3% rise in third-quarter sales, helped by higher prices and an improvement in real internal growth (RIG), a key indicator closely watched by Wall Street. In the second quarter, weakness in this indicator was one of the factors behind the manufacturer's stock decline. RBC Capital Markets analyst James Edwards said this was the biggest area of concern for investors and pointed to Navratil's pledge to make further increases in RIG a priority.

"While the situation is still fragile, we believe these results will help Nestlé to partially restore investor confidence," said Vontobel analyst Jean-Philippe Berschy.

Nestlé securities have lost about 9% over the past 12 months, CNBC notes. The company has been under pressure from investors unhappy with slowing sales growth, problems in one of the largest consumer markets - China - and internal management crises that have weakened the food giant's position against competitors.

In September, the company changed its CEO due to the resignation of Laurent Frakes, who was fired for concealing a romantic relationship with a subordinate. As a result of the scandal and Chairman of the Board Paul Bulke left his post early, he was replaced by the former head of Inditex Pablo Isla, Bloomberg recalls.

Nestlé's new chief Navratil, a 20-plus-year "veteran" of the company who previously ran the Nespresso business, has said he intends to maintain the Frakes strategy of increasing ad spending, betting on a few key brands and getting rid of unprofitable divisions. But analysts were skeptical. "Many long-term investors need to hear more from someone who is relatively unknown in the market before they change their attitude to a more positive one," Deutsche Bank wrote at the time.

The new chief's initial focus will be on restoring sales growth and business in China, he promised. Investors are also awaiting news on the partial sale of the troubled bottled water division, the underperforming vitamins business and plans for Nestlé's 20 percent stake in L'Oréal.

This article was AI-translated and verified by a human editor