This article first appeared in The Edge Malaysia Weekly on September 16, 2024 - September 22, 2024

Having been in this country for more than 110 years, Nestlé (M) Bhd (KL:NESTLE) continues to deliver on its philosophy of “Good Food, Good Life” through its diverse food and beverage (F&B) offerings, which include halal-certified, made-in-Malaysia products like Milo, Maggi and Nescafé.

For the second year running, the Malaysian unit of the world’s largest F&B company won The Edge Billion Ringgit Club (BRC) award for Highest Return on Equity (ROE) Over Three Years in the Big Cap category of companies with a market capitalisation of between RM10 billion and RM40 billion.

Nestlé Malaysia also won this award in 2017, as well as the award for Best Corporate Responsibility (CR) initiatives in 2012 and 2021. Its highest achievement at the BRC was taking home the Company of the Year award in 2016.

In the face of elevated commodity prices — including that of coffee and cocoa — and foreign exchange volatility, Nestlé Malaysia delivered solid earnings growth in the financial year ended Dec 31, 2023 (FY2023). Its net profit grew 6.4% year on year to RM659.9 million in FY2023 from RM620.33 million in FY2022, when its earnings gained 8.9% from RM569.8 million in FY2021. Its net profit came in at RM343.7 million in FY2020.

The continued improvement in FY2023 was fuelled by resilient domestic demand, which experienced a strong rebound in FY2022 following the easing of pandemic restrictions globally. FY2023’s earnings per share rose to RM2.81 from FY2022’s RM2.64.

Following the stellar results, Nestlé Malaysia announced a third interim dividend of RM1.28 per share, six sen more than the third interim dividend of RM1.22 per share it announced in FY2022, taking its FY2023 dividend payout to RM2.68, up from RM2.62 in the previous year.

“The year 2023 witnessed an economically volatile landscape, marked by persistent inflationary pressures, heightened commodity prices and unfavourable exchange rates, as well as geopolitical tensions, aggravated by conflicts and humanitarian crises,” Nestlé Malaysia said in its 2023 annual report.

“Against this background, Nestlé Malaysia delivered another year of resilient results and progress at multiple levels. Business growth was primarily driven by local sales which grew 9.9%, contributing to a higher turnover of RM7.1 billion in 2023. As in previous years, this was the result of our holistic strategy, including robust commercial planning and execution, successful innovations across brands and a constant search for efficiencies to generate the funds needed to continue investing in our brands.”

Based on the BRC methodology, Nestlé Malaysia delivered an impressive ROE of 100% for FY2021, 102.6% for FY2022 and 101.4% for FY2023, reflecting an average adjusted weighted growth per year of 101.5% over three years.

Nestlé Malaysia’s sustained performance builds on the solid foundation established through its 112-year legacy in the country, having operated commercially in Malaysia since 1912. Its dedication to upholding halal standards places the Malaysian operations as the world’s largest halal Nestlé producer, with six manufacturing sites and a network of 58 sales offices located strategically across the nation.

Overseeing operations from its headquarters in Selangor, Nestlé Malaysia says it remains committed to ensuring a steady supply of high-quality and nutritious products that meet Malaysians’ expectations in terms of taste and are well attuned to evolving lifestyles in the years to come.

“By immersing ourselves in the nuanced needs and evolving tastes of our consumers, we can unlock valuable insights that inspire and inform our product development efforts. These insights fuel the continuous product innovation that allows our much-loved brands to maintain a strong presence and relevance in the lives of Malaysians,” says Nestlé.

Recognising emerging trends in healthier and more sustainable options, the company proactively expanded its plant-based offerings in 2023. From its Harvest Gourmet plant-based meals to its dairy-free drinks under the Milo and Nescafé brands, the F&B group has now added the Nestlé Goodnes brand, providing an even wider range of delicious and nutritious plant-based choices.

Its net profit for the first half of financial year 2024 ended June 30 (1HFY2024) fell 23.5% year on year to RM289.11 million from RM378.06 million on the back of an 8% year-on-year decline in sales to RM3.31 billion. The company attributed the decline to “subdued consumer sentiment and cautious spending observed during the Chinese New Year and Hari Raya festive seasons” versus “a historically high record number, hence a very high baseline of reference” in 1H2023. Even so, it said profitability for the first half of 2024 “remains at a healthy level, allowing the board to declare a first interim dividend of 70 sen per share, the same level as the prior year”.

Looking ahead, Nestlé Malaysia expects the challenging conditions in its consumer business “to remain throughout the third quarter [before] moderating progressively towards the end of the year, with a return to growth latest by the first half of 2025”.

The company says it will “continue to build on its fundamental strengths to continue providing Malaysians with the best range of great tasting halal products that meet their health, nutrition and lifestyle expectations, and always anchored on its foundation of quality and safety”.

“As we have done for the last 112 years, this remains Nestlé Malaysia’s one and only truth: investing in Malaysia for the long run, creating jobs and development opportunities for Malaysians and contributing to the betterment of communities across the nation while leading the way for the industry towards a greener more sustainable future,” it said in its financial statement for 1H2024.

According to its 2023 annual report, Nestlé SA (which has less than 2% sales recorded in its home base of Switzerland) owned 72.6% of Nestlé Malaysia while the Employees Provident Fund had a 6.65% stake as at Feb 29, 2024.

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