Nestlé carves out water brands into $5.6B joint venture with Platinum Equity

Nestlé shares fell sharply on Thursday after the Swiss food giant reported a 31.4% decline in first-half net income and announced a deal to spin off its storied water brands into a joint venture with U.S. private equity firm Platinum Equity.

Earnings Weighed Down by Write-Downs

The company posted net profit of CHF 3.47 billion for the first half of 2026, down from CHF 5.07 billion a year earlier, dragged lower by CHF 1.3 billion in non-cash write-downs tied to businesses now classified as held for sale, along with increased restructuring costs from its cost-savings program. Reported sales slipped 2.5% to CHF 43.1 billion, hurt by a 6.2% headwind from foreign exchange movements, though organic growth came in at 3.6%, with real internal growth improving to 1.8% in the second quarter. Shares dropped more than 6% in Zurich trading.Nestlé Global+2

CEO Philipp Navratil framed the results as progress toward medium-term targets. "Our RIG-led growth strategy is delivering," he said in the company's press release. "Emerging markets growth accelerated, and we delivered solid performance in developed markets."Nestlé Global

The company maintained its full-year guidance of 3% to 4% organic sales growth and projected free cash flow above CHF 9 billion.Investing.com+1

Water Brands Headed to Joint Venture

Alongside earnings, Nestlé announced a deal to combine its Waters & Premium Beverages unit — home to Perrier, S.Pellegrino, and Acqua Panna — into a 50-50 joint venture with Platinum Equity called Peranel. The transaction assigns an enterprise value of €4.9 billion ($5.6 billion) to the new entity and is expected to generate approximately €3 billion (CHF 2.8 billion) in cash proceeds for Nestlé upon closing, which is anticipated in the first half of 2027.Platinum Equity+2

The water business delivered 5.1% organic growth in the first half, with the premium brands S.Pellegrino and Maison Perrier leading the way. The carve-out is part of a broader portfolio overhaul: Nestlé also disclosed that its mainstream vitamins, minerals and supplements business and its ice cream unit are now classified as assets held for sale, with sale processes underway.Nestlé Global

Broader Restructuring in Focus

The results underscore the scale of transformation underway at Nestlé as it seeks to sharpen its focus on four core categories: coffee, petcare, nutrition, and food and snacks. The company's Fuel for Growth cost-savings program has delivered CHF 1.7 billion in cumulative savings and is on track to reach CHF 2.0 billion by year-end. Nestlé also completed the acquisition of the remaining stake in smart food brand yfood and divested Blue Bottle Coffee during the period.Nestlé Global

Underlying earnings per share fell a more modest 2.4% to CHF 2.22, and free cash flow surged 46% to CHF 3.4 billion, suggesting the operational picture is steadier than the headline profit drop implies.Investing.com+1