Nestle Sees Real Growth Down, on a Strong Swiss Franc

Source: Adrian Day 10/25/2023

Global Analyst Adrian Day looks at seemingly weak results from two of his core holdings, in each case with a brighter outlook and an opportunity to buy.

Nestle SA (NESN:VX; NSRGY:OTC) reported lower-than-expected quarterly sales and mixed results overall. For the nine months, organic growth was almost 8%, but the strong appreciation in the Swiss franc had a negative impact on sales, and what Nestle calls “real internal growth” was slightly negative.

Organic growth was broad-based across geographies and segments, driven largely by pricing, with the largest contributor again, pet care, with double-digit growth. Overall, net divestitures decreased sales by a little less than 1%. The company said it was confident that real internal growth would turn positive again by year-end and drive growth going forward.

The company continues to invest in its health division. One innovation is the plan to create products for users of new weight-loss drugs like Ozempic after concern that the widespread use of these drugs will affect sales in the convenience food sector. The new products are intended to ensure that drug users receive the necessary nutrients.

The stock fell on the results, now trading at a 52-week low. Valuations are in line with the sector, but with a yield of over 3%, a 10-year high, Nestle is a Buy.

Altius’ Revenue Down, but Much Was Expected

Altius Minerals Corp. (ALS:TSX.V) reported quarterly revenue of $17.9 million, largely in line with forecasts, though the potash revenue declined from over $6 million in the previous quarter to $3.9 million, lower than expected.

Base metals revenue, which saw a more modest decline, was also lower than expected. On the plus side, iron ore revenues increased nearly 50% to $3.5 million, while renewal energy revenues also doubled to $2.6 million. The full year will be down from 2022, as expected, due largely to the closure of the 777 Mine, the end of thermal coal revenue, and lower potash prices from the spike after the Russian invasion of Ukraine.

Altius also updated its Project Generation business and junior equities portfolio, which increased in value to $44.6 million, up from $41.8 million at the end of the last quarter. There were no material changes to the portfolio. Altius ended the quarter with almost $25 million in cash (excluding the cash held at Altius Renewables) and $94 million available under its credit facility.

If you do not already own Altius, you can buy here.

Midland Following Up on Positive Nickel Results

Midland Exploration Inc. (MD:TSX.V) reported assay results from drilling to follow up on the new nickel-copper discovery (called Santos) on the Tȇte Nord property, under option to Rio Tinto. Drilling was intended to test the thickness of the zone discovered in April, and results were deemed satisfactory. The zone remains open in all directions.

A new drilling campaign, set to start next month, will consist of four drill holes to test new targets identified at depth. With multiple partners, several active programs, strong management, and a solid balance sheet, Midland is undervalued. In the near term, there may be some tax-loss selling ahead, while longer term, there may be some fatigue in the name. That’s nothing that a solid discovery won’t negate. In the meantime, the stock is moving into stronger hands.

Midland is a Strong Buy at this price.

Revised Beedie Facility Ahead of Nova Acquisition

Nova Royalty Corp. (NOVR:TSX.V) said that Metalla had amended its convertible loan facility with Beedie in connection with Metalla’s proposed acquisition of Nova. The amount of the existing convertible loan will double to CA$50 million.

Buy.

TOP BUYS in addition to the above include Gladstone Investment Corp. (GAIN: NASDAQ), Hutchison Port Holdings Trust (HPHT:Singapore), Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE), and Lara Exploration Ltd. (LRA:TSX.V).

We are holding off adding to positions in the senior gold companies, given the recent strong rallies. Although, as we discussed last week, the rally in gold is only partly due to the Israeli war, nonetheless, there is a probability that gold and the stocks will retrace at least some of the move if the situation there settles down.

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Important Disclosures:

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Altius Minerals Corp., Midland Exploration Inc., Nova Royalty Corp., Fortuna Silver Mines Inc., and Lara Exploration Ltd.
2. Adrian Day: I, or members of my immediate household or family, own securities of: All. My company has a financial relationship with: All. I determined which companies would be included in this article based on my research and understanding of the sector.
3. Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
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Adrian Day Disclosures

Adrian Day’s Global Analyst is distributed for $990 per year by Investment Consultants International, Ltd., P.O. Box 6644, Annapolis, MD 21401. (410) 224-8885. www.AdrianDayGlobalAnalyst.com. Publisher: Adrian Day. Owner: Investment Consultants International, Ltd. Staff may have positions in securities discussed herein. Adrian Day is also President of Global Strategic Management (GSM), a registered investment advisor, and a separate company from this service. In his capacity as GSM president, Adrian Day may be buying or selling for clients securities recommended herein concurrently, before or after recommendations herein, and may be acting for clients in a manner contrary to recommendations herein. This is not a solicitation for GSM. Views herein are the editor’s opinion and not fact. All information is believed to be correct, but its accuracy cannot be guaranteed. The owner and editor are not responsible for errors and omissions. © 2023. Adrian Day’s Global Analyst. Information and advice herein are intended purely for the subscriber’s own account. Under no circumstances may any part of a Global Analyst e-mail be copied or distributed without prior written permission of the editor. Given the nature of this service, we will pursue any violations aggressively.

( Companies Mentioned: ALS:TSX.V,
MD:TSX.V,
NESN:VX; NSRGY:OTC,
NOVR:TSX.V,
)

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fortuna-silver-mines-inc
fortuna silver mines inc
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lara exploration ltd
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midland exploration inc
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nova royalty corp