This article first appeared in The Edge Malaysia Weekly on November 13, 2023 - November 19, 2023

Nestlé (Malaysia) Bhd, which makes everyday food and beverage (F&B) products such as Milo, Maggi and Nescafé, has won The Edge Billion Ringgit Club (BRC) award for highest return on equity (ROE) over three years among big-cap companies.

The company, which has been present in the local F&B industry for more than a century, was the BRC’s Company of the Year in 2016. It also took home the highest ROE over three years award in 2017 as well as the best corporate responsibility (CR) initiatives award in 2012 and 2021.

Despite inflationary and cost pressures, Nestlé’s profit after tax (PAT) rose from RM552.7 million in the financial year ended Dec 31, 2020 (FY2020) to RM569.8 million in FY2021 and then RM620.3 million in FY2022.

“The group results were strong in 2022, with the highest growth rate in many years and solid progress in profitability, on the back of both robust domestic sales and export growth. While we could not avoid implementing price increases to protect the substance of our margins amid the surge in global commodity prices, we did this mindfully of the impact on the rakyat while advancing multiple efficiency and saving measures to moderate the intensity of those increases as much as possible. Profitability, as a result, in combination with sales growth, was resilient,” Nestlé says in its 2022 annual report.

FY2022 profit was, however, below RM672.9 million in FY2019.

Nonetheless, based on the BRC methodology, Nestlé delivered a commendable adjusted weighted ROE of 90.5% for FY2020, 100% for FY2021 and 102.6% for FY2022, bringing the average over three years to 99.4%. This is above all but one of its peers in the Consumer Products & Services sector, but is above all peers among BRC members in the Big Cap category (those with market capitalisation between RM10 billion and RM40 billion).

Nestlé has consistently delivered on its commitment to distribute at least 95% of net profits as dividends. A dividend of RM2.62 was paid in FY2022, representing a total dividend of RM614 million. This is higher than the dividend paid in FY2021 of RM2.42 (representing a total payout of RM567 million) and in FY2020 of RM2.32 (RM544 million).

With a product portfolio ranging from F&B and confectionery to dairy products and infant nutrition, Nestlé’s exceptional performance can be attributed to a confluence of factors, including its robust portfolio of well-loved brands, strategic product diversification and an unwavering commitment to sustainable practices.

Nestlé has been operating commercially in Malaysia since 1912, marking 111 years in the country this year. Its dedication to upholding halal standards places the Malaysian operations as the world’s largest halal Nestlé producer, with six factories and one national distribution centre here.

Noting “rising challenges such as climate change, food security, affordability and cybersecurity” in its 2022 annual report, Nestlé says it “will continue to remain focused on what matters: meeting the needs of Malaysian consumers and making steady and decisive progress in the delivery of our ESG (environmental, social and governance) commitments”.

For the first half of FY2023, Nestlé’s PAT grew 0.8% year-on-year (y-o-y) to RM378.06 million, from RM374.83 million, as revenue rose 7.8% y-o-y to RM3.59 billion, from RM3.33 billion, on the back of higher domestic sales.

On its prospects for the rest of FY2023, Nestlé says it remains confident of delivering another year of solid sales growth, improved cash-flow performance, resilient profitability and shareholder return, despite multiple factors of uncertainty such as a weakened ringgit and the ongoing volatility in the commodity and energy markets.

“We will do this by delivering high-quality, nutritious and great-tasting products that cater to the diverse needs and expectations of Malaysians,” it says in its financial statement.

The company will continue to drive and advance its ESG agenda on different fronts, including reforestation, packaging sustainability and progressive decarbonisation of operations.

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