Photo: Maggi instant noodles on a supermarket shelf in Kuala Lumpur, Malaysia, on March 10, 2020. Rohaiza Dabu/Shutterstock.com

Halal Industry

Nestlé Malaysia first-quarter profit falls 21%, will allocate highest capex in 6 years


Nestlé Malaysia posted profit after tax of 186.31 million ringgit ($43.22 million) for the first quarter of the year, a 20.8% fall from the 235.22 million ringgit it earned in the same period in 2019.

The company was quick to highlight in its media statement on Tuesday (May 5) that revenue was “stable” and “resilient”. Turnover for the three months ending Mar 31 was 1.43 billion ringgit, which is almost flat from the previous year’s corresponding quarter at 1.45 billion ringgit.

“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 (movement control order) in some sectors of activity,” said CEO Juan Aranols.

The KitKat maanufacturer said its profit margins were impacted by currency exchange volatility and the impact of the COVID-19 crisis on its out-of-home channel margins because of the temporary contraction of sales, as well as incremental expenses to protect the safety of its employees and ensure its operational continuity amid the pandemic.

Malaysia’s movement restrictions imposed to curb the spread of the coronavirus started Mar 18 and were only this week eased for some segments.

“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,” Aranols added.

Nestlé Malaysia’s business was hit by the general closure of restaurants and other eateries for dine-in services. However, it says this contraction was mitigated by export sales that grew by 8.8% and a “solid” performance in its core food and beverage business.

The company expects disruption from the pandemic to persist through the next few months, and these will be compounded by pressure from volatile exchange rates and higher prices for some commodities.

HIGHEST CAPEX IN 6 YEARS

Nestlé Malaysia also announced an allocation of 280 million ringgit for capital expenditure, its highest in six years, to grow its business in 2020.

It said the investment will add new manufacturing capabilities, including expanding the company’s current production capacity for its famous Maggi noodles, as well as a new production line in Shah Alam, the state capital of Selangor which borders Kuala Lumpur.

All products that are manufactured, imported and distributed by Nestlé Malaysia are certified halal by JAKIM (Department of Islamic Development Malaysia).

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