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MarketScreener Homepage  >  Equities  >  Swiss Exchange  >  Nestlé S.A.    NESN   CH0038863350

NESTLÉ S.A.

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Nestlé Unwraps New Initiative to Cut Plastic Waste

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01/16/2020 | 09:24am EST

By Saabira Chaudhuri

Nestlé SA pledged to cut its use of plastic made from fossil-fuels by a third in five years and said it would invest up to 2 billion Swiss francs ($2.08 billion) to find more recycled material, a particularly big challenge for the food industry.

Sellers of everything from soap to soft drinks are under pressure from consumers and regulators to use less fossil-based plastic -- the production of which contributes to climate change -- as well as prevent plastic trash ending up in the ocean.

In response, big consumer-goods companies including Unilever PLC and Procter & Gamble Co. have rushed to promise reductions in fossil-based plastic, saying they will switch to recycled material, use refillable containers or scrap packaging entirely.

But changing to recycled plastic is especially challenging for companies because they need high-quality material that is safe for direct contact with food. Recycling the packaging typically used for coffee, instant noodles or candy bars is difficult and expensive because it is often made from multiple types of material, like plastic melded with aluminum or paper.

Sellers of fresh food also rely on plastic film -- used to wrap cucumber and broccoli -- and thin plastic bags for loose items, that often can't be recycled.

Even when plastic is technically recyclable, it often isn't collected and recycled. That is partly because, until recently, there has been little demand for recycled plastic, so even highly recyclable plastic -- like drinks bottles -- leak into the environment.

To spur collection, Nescafé and Purina pet-food maker Nestlé Thursday said it would spend more than 1.5 billion francs on recycled plastic that is approved for contact with food. It also earmarked 250 million francs to invest in start-ups researching new materials, refill systems and recycling technologies. It said it would fund the efforts by making cost savings elsewhere.

Nestlé's target of a one-third reduction in the 1.67 million metric tons of fossil-based plastic it used in 2018 is a challenge. Just 2% of its plastic packaging by weight is currently made from recycled material.

The world's largest packaged food company is transitioning away from plastic to paper on some of its products, like Nesquik powder and Munch chocolate bars, but so far such efforts have been niche or had mixed success.

To date, there is almost no market for the hard-to-recycle material often used in food packaging. However, new legislation in some countries, like India, is forcing consumer goods companies to pay to collect plastic trash. It is being used to build roads or burned for energy but companies are researching ways to use it to make new packaging.

Recycling efforts are being further challenged by China's ban on scrap imports. For decades, the country took many of the world's recyclables and turned them into new products. Its absence from the market has hit demand and raised costs for municipalities, propelling some to scrap their recycling programs entirely.

Nestlé's announcement Thursday follows similar pledges from rivals.

Dove soap maker Unilever said last year it would halve its use of fossil-based plastic by 2025, saying much of that drop would come from an absolute reduction in plastic by switching to refillables, smaller containers or not using any packaging at all.

Procter & Gamble last year pledged to halve its fossil-based plastic by 2030, while Mars Inc. and PepsiCo have also announced similar targets.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
BROCCOLI CO., LTD. -2.55% 1570 End-of-day quote.2.15%
GRAND PARADE INVESTMENTS LIMITED 9.09% 3.6 End-of-day quote.1.41%
LME ALUMINIUM CASH 0.15% 1681 End-of-day quote.-5.14%
LONDON COFFEE -1.07% 1765 End-of-day quote.0.00%
LONDON SUGAR 1.86% 417.2 End-of-day quote.15.99%
NESTLÉ S.A. 1.58% 109.46 Delayed Quote.2.65%
NEW YORK COCOA -0.14% 2900 End-of-day quote.14.90%
NOODLES & COMPANY 0.00% 8.52 Delayed Quote.57.58%
PEPSICO, INC. -0.05% 145.53 Delayed Quote.6.53%
PROCTER & GAMBLE COMPANY 0.46% 125.44 Delayed Quote.-0.02%
UNILEVER N.V. -0.35% 54.86 Delayed Quote.7.46%
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Financials (CHF)
Sales 2020 90 554 M
EBIT 2020 16 369 M
Net income 2020 12 234 M
Debt 2020 28 435 M
Yield 2020 2,56%
P/E ratio 2020 25,3x
P/E ratio 2021 23,5x
EV / Sales2020 3,80x
EV / Sales2021 3,70x
Capitalization 315 B
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Mean consensus OUTPERFORM
Number of Analysts 28
Average target price 112,00  CHF
Last Close Price 109,46  CHF
Spread / Highest target 11,5%
Spread / Average Target 2,32%
Spread / Lowest Target -16,9%
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Managers
NameTitle
Ulf Mark Schneider Chief Executive Officer & Director
jeff hamilton President
Paul Bulcke Chairman
Magdi Batato Executive Vice President-Operations
François-Xavier Michel Marie Roger Chief Financial Officer & Executive Vice President
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