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5 things I learned from the 2020 Nestlé Malaysia AGM

Nestlé Malaysia Berhad owns a number of well-known household brands in Malaysia like the Nescafé, Maggi, and Milo brands. In fact, over nine million cups of Milo are consumed by Malaysians on a daily basis. It’s probably due to this ubiquity that Nestlé Malaysia’s share price has hardly fallen despite the COVID-19 pandemic.

The company has also embarked on the premiumisation of a number of its products like establishing an alliance with Starbucks to launch ‘Starbucks at Home’ premium coffee products. At the same time, Nestlé Malaysia engages with social influencers and has set up a Kit Kat Chocolatery store to appeal to younger consumers of its products.

In 2019, it expanded its Chembong Factory in Negeri Sembilan to manufacture Milo and divested its chilled dairy business.

I could only compile limited notes from Nestle’s online AGM as the internet connection was unstable, but nonetheless, here are five things I learned from the 2020 Nestlé Malaysia AGM:

1. Nestlé Malaysia’s revenue remained flat year-on-year at RM5.5 billion in 2019 but its net profit grew by 2.1% year-on-year to RM672.9 million in 2019. Nestlé Malaysia’s financials were boosted by improved domestic sales of 2.7% year-on-year but offset by export sales that shrank by 9.8%. The management acknowledged that they have experienced difficulties selling their products in some key markets. In 2019, 20% of Nestle(M)’s production was exported to 50 countries worldwide.

Source: Nestlé Malaysia 2019 annual report

2. A number of shareholders were worried about the impact of COVID-19 on Nestlé Malaysia’s revenue in 2020. The management shared that it is still too premature to assess the impact of COVID-19 on the company’s financials. It shared that they have incurred additional costs to secure continuous and alternative supplies of raw materials; and on enhanced safety and hygiene protocols such as additional personal protective equipment for its workers. While the management is confident with the company’s supply continuity, revenue and net profit were down by 1.3% and 20.8% to RM1.4 billion and RM192.5 million respectively in the first quarter of 2020. Nestlé Malaysia’s performance was also dragged down by unfavourable commodity costs and exchange rates. Despite this, the company has pledged to donate RM15 million as part of its COVID-19 relief efforts.

3. Nestlé Malaysia has a quarterly interim dividend policy and continues to pay at least 95% of its net profit as dividends to shareholders. Dividends per share was maintained at 280 sen in 2019. Based on Nestlé Malaysia’s share price of RM138.50, this works out to a dividend yield of 2.0%.

4. Revenue from online purchases of Nestlé Malaysia’s products stood at about RM200 million in 2019. Although it grew at a very fast pace, this amount is relatively small compared to to the total revenue it obtained from traditional retail channels which stood at over RM5 billion in the same financial year. The company continues to work with its long-term distribution partners across Malaysia to capture opportunities to cater to the needs of its consumers like ice-cream home deliveries. Nestlé Malaysia will continue to engage with consumers in different ways as its traditional marketing activities like the Milo Breakfast Campaign had been suspended temporarily due to COVID-19.

5. According to Nielsen Malaysia, Nestlé Malaysia remains the leader in the food and beverage industry in Malaysia, followed by F&N and Dutch Lady. Further, most of Nestlé Malaysia’s products fall below the threshold that would mandate a sugar tax on its products. More products with improved nutrition are in the pipeline to comply with the stricter requirements needed for the Ministry of Health’s Healthier Choice Logo.

Liked our analysis of this AGM? Click here to view a complete list of AGMs we’ve attended »

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Shak Chee Hoi

Chee Hoi is an investor and research analyst at The Fifth Person. He was previously involved in wildlife conservation work with a non-governmental organisation as well as sustainability consultancy work. He personally believes in impacting society and the environment for the greater good.

2 Comments

  1. Is Nestle Malaysia stock traded in SGX? Currency difference may not be favourable to Singapore investors in Malaysia’s stock?

    1. Hi Kim Meng,

      Nestle Malaysia is not traded on the SGX. It gets about 20% of its revenue from export that will benefit from ringgit depreciation and the rest of its revenue from Malaysia alone.

      Yup, you’re right. Ringgit tends to depreciate, so it is a potential
      risk for foreign/Singapore investors.

      Regards,
      Chee Hoi

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