6 things I learned from the 2021 Dutch Lady Milk Industries AGM

Established in 1963, Dutch Lady Milk Industries Berhad manufactures and distributes dairy products, namely milk powder, liquid milk, and yogurts. It is the leading dairy company in Malaysia with 150 years of Dutch dairy heritage.

Their products are available almost anywhere across cities and towns in Malaysia. This reflects their wide distribution network across the country. Milk has always been positioned by the company to solve the dual burdens facing children in Malaysia – obesity and stunting. Malaysia also has a relatively low rate of milk consumption compared to the rest of the world.

Here are six things I learned from the 2021 Dutch Lady Milk Industries AGM:

1. Revenue grew 3.2% year-on-year to RM1.1 billion in 2020 due to increased in-home consumption of liquid milk and growing-up milk powder among Malaysian households. Over the same period, Dutch Lady registered a 6.2% year-on-year growth in its sales volume. Likewise, its dairy market share in Malaysia has inched up from 19.9% in 2019 to 20.9% in 2020.

2. On the other hand, net profit excluding non-operating income declined 33.3% year-on-year to RM66.2 million in 2020. As pointed out by a shareholder, its net profit in 2020 was in fact at a five-year low. Gupta attributed the decline to increasing dairy raw materials prices and a weakening ringgit against the United States dollar over the years. Approximately 70% of the raw material prices were hedged in 2020.

The company also had lower sales from the food service sector in 2020 amid the pandemic as the sector continued to be affected by various dine-in restrictions. The company spent more on COVID-19-related expenses such as sanitisation fees and additional distribution expenses as the global and local supply chain was disrupted during the year.

3. Dutch Lady’s products belong mostly to the mainstream or mass-market segment. Managing director Tarang Gupta said the company prioritises its purpose to ‘nourish the nation’ while remaining light on customers’ wallets. In my opinion, it may not be up to the company to easily adjust prices. The dairy business is notorious for price sensitivities unless you own a premium brand.

Dutch Lady is focused on growing its market share for now and will not rule out any price adjustments in the future. The company has also embarked on a community program to source more milk locally and thus reduce foreign exchange rate risk whilst also helping local farmers increase milk supply.

4. Dutch Lady is banking on the food service sector to grow, which was left out in the past. It will cater to the ‘horeca’ (hotels, restaurants, and cafes) channel as well as quick-service restaurants with its current and new products. It will also consider importing Debic cream and butter from its parent company to sell to bakeries locally in the future.

5. As brought up by the Minority Shareholder Watch Group, Dutch Lady’s gross profit margin dropped from 37.9% in 2019 to 32.4% in 2020. In Q4 2020, the company released baby formula Dutch Lady MaxGro. The premium product is expected to bring in more market share for the company and help boost margins. 

6. The company will invest about RM400 million in the coming years on its new plant in Bandar Enstek, Negeri Sembilan via internal funds or borrowings from the parent company. The current factory that is located in Petaling Jaya, Selangor has aged and has little room to meet its future expansion and carbon reduction targets. The new plant is expected to improve its manufacturing efficiency by bringing down the costs. It will also double the manufacturing capacity and be in full operation by 2024. The construction is progressing as planned. Piling is expected to start in Q3 2021.

The fifth perspective

The management expects global dairy prices to trend higher in 2021. In Q1 2021, gross profit margin shrank from 34.9% in Q1 2020 to 33.6% in Q1 2021, while net profit decreased 27.2% over the same period. The company’s financial performance will likely remain lacklustre in the near term. Fluctuations in dairy raw material prices and the depreciation of the ringgit are two of the concerns long term investors should be aware of.

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

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.


  1. Looks like the MD lost his job after the above AGM. He attributes the massive drop in profit margin to rise in raw materials and unfavourable exchange rate. However, looking at the global price of milk, I don’t see an adverse pattern. The price has fluctuated around US 14 per ounce. The RM/USD rate, too, did not change much in 2020. Hopefully the new chairperson and MD, both ladies, would reverse Dutch Lady’s fortune.

    1. Hi EV,

      Thanks for the comment. Like what you pointed out, the raw milk powder price remained elevated while RM was still weak against the USD in 2020. The former MD, Tarang Gupta was actually transferred internally to lead another coy within the group in the Philippines. Internal transfer is quite common for this company though.

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