KUALA LUMPUR (April 23): Consumer companies in Malaysia may face sustained margin pressure as structurally higher wages and tighter labour conditions reshape their cost structures, Kenanga Research flagged.

Net profit resilience in the sector will be increasingly driven by workforce efficiency, as the impact of rising costs remains uneven across various business models.

"Navigating labour cost pressures is becoming a key driver of margin resilience in the consumer sector," Kenanga said in a note on Thursday, noting that the national minimum wage, currently set at RM1,700, is reviewed every two years.

With the next assessment expected in September 2026, policy measures like the 2% EPF contribution for foreign workers effective October 2025 and a planned multi-tiered levy system are poised to further elevate the cost base.

The research house said Fraser & Neave Holdings Bhd (KL:F&N) and Nestlé (Malaysia) Bhd (KL:NESTLE) emerged as top performers in labour productivity. 

F&N recorded revenue per employee of RM1.35 million and earnings before interest and tax (Ebit) per employee of RM194,100, while Nestle led the pack with revenue per employee of RM1.44 million.

In contrast, retail-heavy players like MR DIY Group (M) Bhd (KL:MRDIY) and AEON Co (M) Bhd (KL:AEON) ranked lower due to their labour-intensive models. 

These companies reported revenue per employee of less than RM460,000 and Ebit per employee below RM50,000, illustrating how retail players lag due to a heavy reliance on frontline staffing for store operations.

The research house also highlighted a critical trade-off between labour cost management and stability. While Farm Fresh Bhd (KL:FFB) stood out for cost efficiency with staff costs at only 5.2% of sales, retailers such as Power Root Bhd (KL:PWROOT) and MR DIY carry significantly higher ratios of 19.2% and 15.0%, respectively.

To mitigate these pressures, companies are moving towards automation. 

This is seen where F&N has invested in automated warehousing, which is expected to save up to RM30 million annually, while MR DIY commenced operations of a RM100 million automated facility in August 2024 to target RM10 million in yearly savings.

Similarly, AEON is expanding its self-checkout counters, which saw utilisation rates rise to 52% in FY2025.

Overall, Kenanga maintained its ‘neutral’ stance on the consumer sector. The research house kept F&N as a top pick with an ‘outperform’ call and a target price of RM37.70, citing its resilient food and beverage profile.

It also maintained an ‘outperform’ call on MR DIY with a target price of RM1.80, pointing to its value-for-money positioning amid ongoing consumer downtrading trends.