KUALA LUMPUR: Despite some cost and currency headwinds, Nestlé (Malaysia) Bhd continued to deliver positive growth momentum in the second quarter (2Q) ended 30 June 2019, posting a turnover of RM1.34 billion, 2 per cent higher same quarter last year, driven by 4.5 per cent domestic growth.
The company said the positive earnings were driven by sustained consumer demand, supported through marketing investments that also resulted in improved market shares.
Net profit was at RM156.9 million representing a slight dilution in comparison to same quarter last year due to a planned increase in marketing investment, as well as some unfavourable net impact from exchange rates and commodity prices.
Domestic growth cushioned exports, which remained slightly below expectations, reflecting uncertain and volatile conditions in international markets.
"Our growth momentum acceleration in 2Q demonstrates the strength of our domestic business and the strong sustained demand for our brands, driven by focused sales execution, attractive innovations, increased marketing support and efforts to capture opportunities during the festive season", Nestle chief executive officer Juan Aranols said in a statement.
The Group maintained its focus with new products launched in Q2, such as its new propositions for NESCAFÉ GOLD, MAGGI Pedas Giler Seafood, MAGGI
Pedas Giler 2X Ayam Bakar and LA CREMERIA Summer Berries Yogurt.
Touching on the slight dilution of margins during the quarter as compared to last year, Aranols said the quarterly profitability, whilst remaining strong, has
been impacted by the phasing of its marketing spending as well as some one-off warehousing expenses in preparation for the factory expansion in Chembong, Negeri Sembilan.
"This comes on top of higher cost of commodities mitigated by robust hedging strategies in place,” he said.
Operating profit and profit before tax stood at RM208 million and RM199 million respectively for the quarter.
For its first half ended June 30, 2019, the Group’s turnover increased to RM2.79 billion, 1.8 per cent higher when compared to the first half of 2018.
Growth is driven by strong domestic sales growing at
6.1 per cent.
Successful product innovations and portfolio enhancements have continued to drive domestic growth momentum in the first half of 2019.
These include launches introduced in Q1 such as NESCAFÉ Blend & Brew White Coffee, NESTUM Brown Rice, and NESCAFÉ Tarik Kurang Manis.
The Group recorded a slight increase in operating profit of RM529 million while net profit came in at RM392 million, marginally below the corresponding period in 2018, arising from the expiration of the
investment incentive.
The company has declared an interim dividend of RM0.70 per share for the financial year ending 31 December 2019, the same value of dividend paid in 2018.
"We remain confident in our full year performance against a backdrop of global uncertainties and volatility.
"Our fundamentals remain solid and we continue to work hard to maintain the strong endorsement of our brands by the Malaysian consumers. Amongst many other elements, our plans for the second half of the year include an exciting stream of new product launches in the market, including our most recent launch, the introduction of the STARBUCKS At Home range, building on Nestlé’s Global Coffee Alliance with STARBUCKS.
“We will continue to proactively capture efficiencies and savings to invest behind our brands and protect our margins as the best way to counter rising commodity costs and protect the accessibility to our brands by consumers,” Aranols said.