Nestlé third quarter results; announces 16,000 job cuts

Nestle announced Thursday it would cut 16,000 jobs as the company’s new CEO, Philipp Navratil, seeks to accelerate the consumer goods giant’s turnaround.

In a bid to improve operational efficiency, the company announced it would eliminate 12,000 white-collar jobs and an additional 4,000 positions would be cut over the next two years.

Shares were last trading up 7.2 on Thursday.

Under the leadership of its former CEO Laurent Freixe, Nestlé had already announced a savings program worth 2.5 billion Swiss francs ($3.14 billion). This amount has now been accelerated to reach 3 billion Swiss francs by the end of 2027.

The company reported a better-than-expected organic growth rate of 4.3% in the third quarter, as it faces an uncertain consumer outlook amid U.S. tariffs and rising prices for raw materials, such as cocoa and coffee beans.

Real internal growth (RIG) notably returned to positive territory in the third quarter – up 1.5% – as the maker of Nespresso and KitKat saw its growth investments pay off, also helped by easier comparisons.

A failure on RIG in the second quarter caused Nestlé shares to significantly underperform. Before the results, HSBC analysts already expected RIG to return to positive territory “due to easier comparisons, progressively greater profits from Nestlé’s own shares and reduced elasticity effects from price increases”.

However, the company’s operations in Greater China continued to underperform, with the region negatively impacting organic growth by 80 basis points and actual real growth by 40 basis points. Nestlé added that “new management is now in place and executing on its business transformation plan.”

The company’s strategy of focusing on winners and turning around losers helped generate better-than-expected sales in the third quarter, said Jon Cox, head of European consumer equities at Kepler Chevreux.

“Overall, it’s extremely positive and it certainly gives the impression, operationally, that the company has turned a corner with better performance while the management upheavals over the summer take a back seat,” Cox said, adding that he expects the stock to respond very positively.

The Vevey, Switzerland-based consumer goods giant is under pressure from investors as its operational and stock performance lags behind its peers.

Its shares are down more than 40% from their December 2021 high and have fallen 9% over the past 12 months.

Nestlé has had a turbulent year, as its CEO Laurent Freixe was ousted on September 1 over an undisclosed romantic relationship.

His successor, Navratil, is the former CEO of the company’s Nespresso business. He pledged to “fully embrace the company’s strategic direction, as well as the action plan in place to drive Nestlé’s performance,” and pledged to “accelerate execution and drive the value creation plan with intensity.”

Just two weeks later, Nestlé was forced to accelerate the departure of its chairman Paul Bulcke, due to pressure from institutional shareholders over its handling of Freixe’s allegations.

Bulcke, also a former CEO of Nestlé, resigned from his role earlier than expected, handing over the reins to vice-chairman and chairman-elect Pablo Isla, former CEO of Inditex, who was expected to take over after Nestlé’s AGM in April 2026.

Analysts believe that the new management duo will have to regain investor confidence.

“Many long-term investors should have more information about someone who is relatively unknown to the market before becoming more positive,” Deutsche Bank analysts wrote in a September note.

Although the initial focus will be on resuming volume growth and its China business, longer-term investors will be keen to receive updates on the partial sale of Nestlé’s troubled water unit as well as its underperforming vitamins business, as well as plans for its 20% stake in L’Oréal.

“Now we need to do more and move faster to accelerate our growth momentum,” Navratil said Thursday in a company earnings release.

“As Nestlé moves forward, we will be rigorous in our approach to resource allocation, prioritizing opportunities and businesses with the highest return potential.”