Turnover for the quarter remained stable at RM1.43 billion amidst COVID-19 and an earlier Chinese New Year vs 2019.
Exports recovery and solid sales for in-home consumption have compensated for the temporary closure of Out-of-Home retail channels under the Movement Control Order.
New CAPEX projects amounting to RM280 million; highest investment in the last six years.
Nestlé (Malaysia) Berhad recorded resilient results for its first quarter ended 31 March 2020, in a market defined by the efforts to control the COVID-19 situation under the Movement Control Order (MCO). The Group has also announced an allocation of RM280 million for capex, highest in six years, to grow the business in 2020.
Review of Performance (Quarter 1, 2020 vs Quarter 1, 2019)
Turnover for the quarter stood at RM1.43 billion, fundamentally on par with the previous year's corresponding quarter at RM1.45 billion, which had benefited from a more favourable Chinese New Year timing.
According to Mr. Juan Aranols, Chief Executive Officer of Nestlé (Malaysia) Berhad, 'Our results for the quarter appear resilient, given the earlier timing of Chinese New Year and the widespread effects of COVID-19 and the MCO in some sectors of activity. The slight contraction in domestic sales during the quarter resulted from a strong performance in in-home consumption channels, offset by a sizeable temporary dip in the Out-of-Home business. More concretely, our Out-ofHome business, like the rest of the sector, has been affected first by Malaysia's declining eating out frequency since the start of the pandemic, followed by the general closure of restaurants, coffeeshops and many other dine-in outlets, since the implementation of the MCO.'
'Nonetheless, this impact was mitigated by a strong recovery of export sales, growing at 8.8%, and the solid performance in our core food and beverage business, as we continued to ensure a stable and reliable supply of essential products to the stores. The performance of the business in the quarter was supported by the Group's strong sales execution, successful introduction of new products (KIT KAT Ice Cream, in particular) and strong marketing campaigns such as the Nestlé Salary For Life Contest (Peraduan Nestle Gaji Seumur Hidup), the biggest nationwide contest ever organised by Nestlé Malaysia, offering Malaysians the chance to win a 'Salary for Life' of RM3,000 every month, amongst many other prizes.'
The Group registered a Profit Before Tax of RM246.3 million for the quarter under review, while Profit After Tax stood at RM186.3 million. Profit margins remained solid in spite of higher commodity costs and earlier Chinese New Year, but were impacted by currency exchange volatility and, most importantly, by the impact of the COVID-19 situation on the Out-of-Home channel margins because of the temporary contraction of sales, as well as incremental expenses to protect the safety of our employees and ensure the operational continuity of the Company amidst the COVID-19 pandemic.
In the context of the pandemic, the Group has prioritised the safe working conditions of the personnel. Increased operational expenses for COVID-19 include expenditure for employees' Personal Protective Equipment, additional safety protocol adaptations across all sites and other arrangements to protect the workforce. Temporary allowances have been also provided to employees working in factories, distribution centres and sales during the MCO to recognise their additional efforts in this situation. Additionally, Nestlé has allocated significant funds to provide relief efforts to medical front liners, including a partnership with the Malaysian Red Crescent Society.
Mr. Aranols added, 'Since the very start of the COVID-19 pandemic back in late January, we have proactively adopted preventive actions to protect our people. Throughout the pandemic, we have been working very closely with the authorities and our business partners to safeguard the health of all employees, while ensuring business continuity to meet our obligation towards the nation, as a manufacturer of essential foods and beverages.'
'The challenges associated to COVID-19 will persist in the months to come. Whilst it is difficult to anticipate the full extent of the changes this pandemic will trigger, we are adapting to the 'new normal' and are confident in our ability to tap into new opportunities for growth in 2020. We are capturing growth opportunities across all channels, including the e-commerce acceleration and the increased demand for home-delivery products. We continue to expand the range of Nestlé products available for consumers shopping online. We will continue with our innovation drive and we have a strong pipeline of new products coming in the second part of the year.'
'Overall, we remain committed to delivering another year of solid and resilient results against a background of uncertainties and external challenges. We will also continue to build capabilities for the long-term. This year, we will be allocating the highest capital expenditure in six years, RM280 million. This investment will add new manufacturing capabilities, including expanding current production capacity for MAGGI Noodles, as well as a new high technology production line in Shah Alam that will allow us to enter into new high growth categories with great future potential.'
'We are confident in Malaysia's potential and capability to see economic recovery once the current COVID19 crisis is behind us, and we are committed to play our part in supporting the nation and extending a helping hand to those Malaysians in need during this difficult time. As Malaysia has just entered a phase of reopening the economy under the CMCO, we want to encourage all Malaysians, starting from all the members of the Nestlé family and our business partners, to follow strictly the Government recommendations so that we all can continue succeeding together in the fight against the pandemic,' concluded Mr. Aranols.
About Nestlé Malaysia
Nestlé is the world's largest food and beverage manufacturer. Headquartered in Switzerland, Nestlé is present in 189 countries around the world, and our 328,000 employees are committed to Nestlé's purpose of enhancing quality of life and contributing to a healthier future. Our performance is driven by our Nutrition, Health and Wellness strategy present in Malaysia. Since 1912, we have been nourishing Malaysians for over a century through our quality brands and products, 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, please visit www.nestle.com.my or our Facebook page at http://www.facebook.com/NestleMalaysia
For more information, please contact:
Nestlé (Malaysia) Berhad
Tel: (+603) 7965 6650
E-mail: [email protected]
Yasmin Kadir or Rachel Ng
Tel: (+603) 7958 8348
E-mail: [email protected]
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