Nestle Malaysia reports 3.9% year-over-year decline in Q1 net earnings, hindered by higher commodity prices and unfavorable exchange rates; turnover rises 8.8% to 1.84B ringgits, supported by robust domestic and export sales

PETALING JAYA, Malaysia , April 27, 2023 (press release) –

Turnover increased by 8.8% to RM1.84 billion , supported by robust domestic and export sales. Strong growth in core food & beverage (F&B) business as well as the Out-of-Home (OOH) business. Profit After Tax (PAT) slightly drops by 3.9% due to higher commodity prices and unfavourable exchange rates.

Key Highlights:

* Profit After Tax slightly drops by 3.9% due to higher commodity prices and unfavourable exchange rates with cost mitigation measures to minimize consumer impact.

* For the first quarter of 2023, the Group delivered a higher turnover of RM1.84 billion , an increase of 8.8%.

* This was driven by improved domestic and export sales, which increased by 10% and 4% respectively on the back of a strong baseline in the previous year.

* However, PAT decreased by 3.9% due to higher commodity prices and unfavourable exchange rates, with various cost mitigation measures implemented to minimize the impact on consumers and to protect margins.

* For the quarter under review, the Group recorded a Profit Before Tax and Profit After Tax of RM262.3 million and RM197.1 million respectively.

Original Press Release:

PETALING JAYA , April 25 -- Nestlé issued the following news release:

- Continues to Build on Stable Consumption Momentum in spite of Inflationary Pressures

KEY HIGHLIGHTS

* Turnover increased by 8.8% to RM1.84 billion , supported by robust domestic and export sales.

* Strong growth in core food & beverage (F&B) business as well as the Out-of-Home (OOH) business.

* Profit After Tax (PAT) slightly drops by 3.9% due to higher commodity prices and unfavourable exchange rates with cost mitigation measures to minimize consumer impact.

Nestlé ( Malaysia ) Berhad recorded a resilient performance for its first quarter ended 31 March 2023 . This was achieved on the back of robust domestic and export sales and the Group’s steadfast focus on demand generation activities, supported by efficiencies and savings to cushion the impact of external headwinds, namely the flow through of high commodity costs and weakening of the Ringgit. Both elements are expected to subside in H2 2023.

Review of performance: Quarter 1, 2023 vs Quarter 1, 2022

For the first quarter of 2023, the Group delivered a higher turnover of RM1.84 billion , an increase of 8.8% from RM1.69 billion in the same quarter of 2022. This was driven by improved domestic and export sales, which increased by 10% and 4% respectively on the back of a strong baseline in the previous year. Performance was very solid both in the core F&B business as well as the OOH business under Nestlé Professional, which continued to be on a positive post-pandemic trajectory. However, PAT decreased by 3.9% due to higher commodity prices and unfavourable exchange rates, with various cost mitigation measures implemented to minimize the impact on consumers and to protect margins.

Mr Juan Aranols, Chief Executive Officer of Nestlé ( Malaysia ) Berhad said, “In line with our mission, our performance continues to be based on delivering high-quality, great-tasting and nutritious products that meet the diverse needs of Malaysians. Our wide product portfolio and continuous product innovation help us to remain well in tune with consumers’ expectations. This focused strategy is well supported by effective consumer engagement and excellence in sales execution across all relevant channels and platforms, including digital and on-ground activation.”

Reflecting its product innovation focus, the Group introduced exciting offerings in the quarter under review such as the KIT KAT Pink Ice Cream which was a huge success through the Lunar New Year festivities, amongst other Ice Cream innovations. The Group also rolled out improved taste and texture versions of its HARVEST GOURMET plant-based burger as well as a number of important new launches such as the STARBUCKS Ready-to-Drink range and the 2023 edition of NESCAFÉ Classic Kopi Kedah , made with 100% Malaysian home-grown coffee beans. At the end of the quarter, MAGGI introduced its newest Curry Stock Cube , set to become a favourite choice amongst Malaysian home cooks.

For the quarter under review, the Group recorded a Profit Before Tax and Profit After Tax of RM262.3 million and RM197.1 million respectively, slightly lower compared with the high profits achieved in the same quarter last year, before the escalation of commodity costs that followed from Q2 2022.

Mr Aranols added, “We remain focused on delivering a solid financial performance while advancing our Environmental, Social and Governance (ESG) agenda. Amongst other initiatives, this included expanding our NESCAFÉ Grown Respectfully programme to Kelantan with the aim of further developing local coffee farming. When it comes to progressing towards plastic neutrality, our door-to-door waste collection project continues to advance and we are already reaching nearly 140,000 households. Project RELeaf also continues to advance, and we are going to complete very soon the first of the 3 million trees to be planted under this programme.

“Alongside this, we continued to support vulnerable communities through various programmes, such as our Back-to-School initiative in collaboration with Empire Project , providing 2,500 students and 1,200 households with school essentials and F&B products totalling close to RM800,000 . In addition, as part of our annual initiative to provide support to communities in need during the holy month of Ramadan , we distributed more than 185,000 bowls of wholesome MAGGI bubur lambuk meals across the nation; as well as donated 20,000 pints of La Cremeria Nestlé Ice Cream to bring some joyful moments of celebration to these communities.

Prospects

Mr Aranols commented, “The global turbulences continue in 2023. While headline inflation has started to decline, it is still elevated, compounded by uncertainties in commodity prices and currency rates. Recent disruptions in financial markets have also exposed global vulnerabilities, with some downside risks for the global economy affecting potentially the dynamism of our export markets.”

“Nevertheless, while food commodity prices are expected to remain high through the first half of the year, we are optimistic this will improve in the latter half of the year. Over the long-term, we remain confident in the prospects of Malaysia , as demonstrated by our next wave of capital investments, with RM1.0 billion planned for the 2023 – 2025 cycle.”

“As we move forward, we are dedicated to accelerating our ESG objectives, with clear plans in place. This includes reducing our carbon emissions directly by reducing our emissions and indirectly through our reforestation efforts such as Project RELeaf. We will further phase out virgin plastics and support local farmers to transition towards regenerative agriculture through our Farmer Connect programmes. In tandem, to drive sustainable growth, we will continue to uphold the trust of Malaysians by reinforcing our capabilities to deliver products that consistently fulfil consumer expectations for quality, nutrition and taste.”

About Nestlé Malaysia

Nestlé is the world’s largest food and beverage manufacturer. Headquartered in Switzerland , Nestlé is present in more than 180 countries around the world, and our 270,000 employees are committed to Nestlé’s purpose of unlocking the power of food to enhance quality of life for everyone, today and for generations to come. Our performance is driven by our Nutrition, Health and Wellness strategy. Nourishing Malaysians since 1912, Nestlé has earned the trust of our consumers through our quality brands and products. We are committed to improving the lives of the communities in which we operate, whilst maintaining our Halal excellence and integrity.

This is in line with our promise of delivering GOOD FOOD, GOOD LIFE to all. To learn more about how we have been nourishing Malaysians for over a century, do visit www.nestle.com.my or our Facebook page at http://www.facebook.com/Nestle.Malaysia.

Source: Nestlé

[Category: Financial Results]

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