7 things I learned from the 2022 Nestlé Malaysia AGM

Nestlé (Malaysia) Berhad has been around in the country for more than a century since 1912. It was listed on Bursa Malaysia in 1989. It is the largest food and beverage manufacturer here that owns a number of popular brands like MILO, NESCAFÉ, Maggi, and Kit Kat. I mentioned the names of these brands to my nine-year-old nephew. To my surprise, he knew all of them.

Here are seven things I learned from the 2022 Nestlé Malaysia AGM.

1. Revenue stood at an all-time high and grew 5.9% year-on-year to RM5.7 billion in 2021 because of improved domestic and export sales amid the pandemic. However, net profit excluding extraordinary items has yet to recover to pre-pandemic levels; it increased 2.9% year-on-year to RM565.3 million in 2021 and was offset by escalating commodity prices and COVID-19 related expenses of RM93 million.

Company secretary Tengku Ida Adura Tengku Ismail explained that the COVID-19 related expenses was due to the company’s extensive employee COVID-19 antigen screening programme. The expenses should reduce in 2022 as the programme was replaced with self-test kits that are cheaper. During lockdowns, only 60% of the workforce were allowed to work in their factories and distribution centres operationally. Almost all employees were vaccinated by August 2021.

2. Dividend per share improved from RM2.32 in 2020 to RM2.42 in 2021 although the nation spent more weeks under lockdowns in 2021 than in 2020. Dividend payout remained close to 100% in the past two years.

3. The ongoing Russia-Ukraine war has a huge impact on the global supply chain as the two countries are major producers of wheat, barley, and sunflower oil. According to CEO Juan Aranols, the company will continue to practise a good hedging policy and leverage its parent group’s procurement capability to soften the impact of escalating commodity prices. Its gross profit margin in Q1 2022 dropped marginally to 34.0% from 35.8% in the previous corresponding quarter. The company will stay efficient to avoid the need of any price adjustments.

4. The company spent RM275 million in 2021 as capital expenditure. This included the commissioning of its plant-based meal solution manufacturing facilities in Shah Alam, Selangor in March 2021 to tap into the fast-growing consumer trend towards alternative protein sources. It launched Harvest Gourmet plant-based foods in Malaysia to secure potential new long-term growth for the company. The initial response for this range of products was encouraging according to Tengku Ida Adura but sales contribution remained, and will remain, small within the next five years.

Construction works at Batu Tiga factory to expand its paste and granulated seasoning lines are ongoing and are expected to be completed by September 2022. These investments showed the company’s long-term commitment to grow their business in Malaysia.

5. Nestlé Malaysia is the leading food and beverage company in Malaysia. MILO, one of the company’s most well-known products among Malaysian consumers, achieved its highest level of in-home penetration since 2017. In 2021, the company also released alternative dairy-free ready-to-drink MILO and NESCAFÉ options to the public. The company also launched the LIFELY TEA range with plant extracts and lower sugar content to cater to more health-conscious consumers. Nestlé Malaysia had the most number of products with the healthier choice logo in 2021.

6. Regarding the prevalence of fake MILO in the market, Aranols believes the incident is rare and does not pose significant losses to the company. The management always engages with the authority to investigate and address such situations as soon as possible, if any.

7. The company also pledged to halve its zero carbon emissions by 2030 and achieve carbon neutrality by 2050 and use 100% reusable or recyclable packaging by 2025. Since the beginning of 2022, all of its operations have been fully powered by renewable energy. The company will also continue to expand its curbside recycling programme in the Klang Valley to collect recyclable packaging waste of Nestlé products.

The fifth perspective

Nestlé Malaysia delivered a resilient and solid financial performance during the pandemic and is expected to do well as Malaysia transitions to the endemic phase. Nestlé Malaysia’s brands continue to resonate with consumers, while it continues to release new products that meet  the younger generations’ needs.

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.

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