Vevey, Switzerland, Oct 22 - Cash-rich Nestle SA, the world's biggest food group, said it was speeding up a programme to buy back shares and was likely to raise fresh funds from the sale of its stake in eye care firm Alcon.
The firm, viewed as a possible counterbidder for UK confectioner Cadbury, declined to comment on Thursday on possible merger activity but said an extra 3 billion Swiss francs ($2.97 billion) would be returned to shareholders this year.
Nestle would probably now complete its 25 billion franc share buyback programme late in the first half of next year, by which time it might also have more cash if, as expected, it sells its stake in Alcon, head of investor relations Roddy Child-Villiers told an analyst call after the firm reported in-line nine-months sales growth.
"We will update about Alcon as and when what is clearly a strong likelihood becomes a certainty," he said.
"Even if the option is exercised very early in the option period, in other words in January sometime, it is still going to take a number of months before that deal closes and we get the cash in from Novartis," he said.
Shares in Nestle, which have rallied in recent days on hopes it will exercise its Alcon sale option soon, were up 2.35 percent to 46.92 Swiss francs at 0901 GMT, versus a flat DJ Stoxx European food and beverage index.
"The buyback message could help and probably trigger speculation the company will use a fair chunk of Alcon proceeds (which we see happening in Q1) on another buyback," Kepler analyst Jon Cox said in a client note.
Nestle sold 25 percent of Alcon to Swiss drugmaker Novartis last year for $11 billion and agreed an option to sell its 52 percent from January next year. Novartis did not comment on Thursday on the possibility of exercising its Alcon option.
The fact that Alcon's share price has recently risen so that Nestle's "put" option is almost equivalent to that of Novartis' "call" has increased the likelihood of a sale, analysts say.
SPARE CASH FOR BUYS?
Asked whether Nestle might spend its cash on possible acquisitions, Child-Villiers would only say that the firm tended to focus on "bolt-on" buys. It would consider its options when the current share buyback ended in mid-2010.
Nestle did not comment on whether on whether it might enter the fray for Cadbury, which is being pursued by Kraft Foods Inc .
Reporting sales figures, Nestle said volume growth doubled from the first half to 1 percent for the first nine months, compared with analysts' forecasts for 0.9 percent, while sales took a 5.2 percent hit from currency effects, largely due to the strong Swiss franc.
Organic sales growth was 3.6 percent, in line with the market consensus.
Nestle said its best known brands, including Nescafe coffee, Nestea, Nesquik and Nespresso, powered sales in the third quarter and would continue to propel the company's expansion in both emerging and wealthy markets.
More basic products including long-life milk in Brazil also sold well and Nestle said it saw similarly solid growth in pet care products, ice cream and chocolate in many markets.
Sales fell 2.2 percent to 79.5 billion francs, compared to an average analyst forecast of 80.3 billion Swiss francs.
Nestle repeated its full-year outlook for "volume-driven organic sales acceleration" after it dropped its previous target of "at least approaching 5 percent" in August when it reported disappointing first-half organic sales growth of 3.5 percent.
Before the figures, analysts were predicting full-year organic growth of 3.9 percent, rising to 4.5 percent in 2010.
Nestle's struggling bottled water business saw some improvement, particularly in Europe after a marketing drive, with organic growth down 1.8 percent to 7.2 billion francs, compared with a fall of 2.9 percent in the first half.
Nestle's hottest new brand, Nespresso premium coffee capsules, reported 28 percent organic growth.