Message from Our Chairman & CEO (Annual Report 2019)

From right: Y.A.M Tan Sri Dato' Seri Syed Anwar Jamalullail, Chairman and Juan Aranols, Chief Executive Officer

DEAR SHAREHOLDERS,

Weathering 2019’s economic volatility and challenging environment, our company, Nestlé Malaysia, was able to push through to record another year of growth. Our focus on growth driven by strong and sustained demand-generating activities, funded through internal efficiencies paid back once again. At the same time, we continued to make all the necessary efforts to future-proof the Company, building capabilities for long-term success.

More than ever, our focus to deliver solid performance on the business metrics comes together with a commitment to build our business in a sustainable, respectful and environmentally-friendly manner.

SOCIOECONOMIC LANDSCAPE

The global trading environment experienced a challenging year, with overall economic activity weighed down by weakening demand and foreign currency fluctuations. Nevertheless, Malaysia’s domestic growth was bolstered by resilient private consumption and stable labour market conditions. Beyond the short-term conjuncture, the push to embrace Industry 4.0 and new technologies continued and this was accompanied by an increased call for solutions to prevailing environmental issues.

In this context, Nestlé Malaysia was able to tap on domestic demand opportunities throughout the year with effective sales and marketing activities, as well as adapting our portfolio to evolving consumer needs reflective of changing lifestyles and consumption behaviours.

OUR FOCUS ON SUSTAINABLE AND PROFITABLE GROWTH

We are fortunate to hold a special position in Malaysia, with well-established brands that resonate deeply with consumers. This is a solid foundation to deliver growth sustainably over time. We drive growth by strengthening our relevance to consumers across multiple channels and through our product innovations. Moreover, we nurture the ‘love’ of Malaysians for Nestlé brands by remaining relevant in our communication, delivering our high-quality products and ensuring that our brands play a clear role in driving positive societal values, from the MILO brand advocating the long-term benefits of healthy and active lifestyles, to the MAGGI brand fostering Malaysian women empowerment.

PROTECTING TRUST

We are committed to uphold and protect the trust we have earned over the years. Underlying this is our purpose of enhancing quality of life and contributing to a healthier future, anchored by our commitment to enable happier and healthier lives for individuals and families; develop thriving, resilient communities and help to safeguard and protect the planet's resources for future generations.

Holding ourselves to strict standards of integrity and ethical practices, we are guided by the Nestlé Corporate Business Principles. Alongside our business objectives, we strive to be a force for good in all that we do. This is a core tenet at the foundation of everything that we do.

FINANCIAL PERFORMANCE

Overcoming economic headwinds and an intensely competitive environment, our market-leading brands continued to win the hearts and minds of consumers.

This was supported by continuous product innovation coupled with effective marketing and trade activities. With these key growth drivers, we delivered another year of positive earnings, recording solid domestic growth, advancing market share in a number of our categories and making solid progress in profit after tax.

DIVIDENDS

Once again, we are proud to reward the trust of our shareholders with a consistent dividend payment. The Board declared a final dividend of RM1.40 per share, resulting in a full-year proposed dividend payout of RM2.80 per share.

CORPORATE GOVERNANCE

Our corporate governance framework is premised on best practices in transparency and accountability. To enhance this further, in 2019 we undertook a Board Effectiveness Evaluation, conducted by an external advisory team to review the performance of our Board, Board Committees and individual Directors.

The exercise is aligned with the Malaysian Code on Corporate Governance and Main Market Listing Requirements of Bursa Malaysia Securities Berhad. Further details can be found on page 16 of the Corporate Governance & Financial Report 2019.

KEY ACHIEVEMENTS

We continued to grow ahead of competition in most categories. We managed to offset the pressure from rising commodity costs while honouring our commitment to minimise price increases and protect Malaysians' access to our brands. This was possible through our relentless effort in driving efficiency and sustainable savings.

Key milestones in 2019 included the expansion of our Chembong Factory in Negeri Sembilan, establishing the world’s largest MILO manufacturing site and the successful completion of the Chilled Dairy business divestment.

We announced a significant step forward in our war against plastic waste, as the first food and beverage company in ASEAN to introduce paper straws at a large scale for packaged drinks. We also played an important role in captaining the industry in its journey to address a number of environmental challenges.

We were once again honoured during the year with several accolades bestowed on the Company such as the MSWG-ASEAN Corporate Governance Awards, the Putra Brand Awards and Malaysia’s 100 Leading Graduate Employers Awards, amongst others. All these recognitions reflect the quality of the work done by our teams and their commitment behind the Company’s success. For the full list of our key recognition during the year, refer to page 98 of the Nestlé in Society Report 2019.

OUTLOOK

The year 2020 is off to a very complex start with a number of crises unfolding around the world and downside risks on the economic side, locally and globally. In a year of high volatility and multiple elements of disruption, we will continue to focus on what we do best: work hard every day to deliver great quality products to all Malaysians, as well as our consumers in export markets. We remain confident in our strong fundamentals and we will continue to focus on delivering growth while managing the risks triggered by the volatile external environment.

We will continue to advance in our efforts to leverage new emerging channels and expand our portfolio with great-tasting, high-quality innovations. This will constantly be complemented by our efforts to find efficiencies and savings that can be reinvested to fund sustained growth while protecting our margins. We will also step up our environmental agenda with multiple initiatives that will accelerate our impact towards driving solutions to the multiple environmental challenges that the planet, and Malaysia, are confronted with.

We look forward to continue strengthening our relationships with our employees, customers, suppliers, business partners and shareholders. We are immensely thankful to Malaysians for their continued trust in the Company and love for our brands. As we work towards a healthier future for all, we are ever-mindful of our responsibility to support our consumers in fulfilling their health and wellness aspirations through our trusted portfolio of products.

A final note of appreciation for the efforts of the Board, the Management Team and all the members of the large Nestlé family. Each and everyone’s contribution has been instrumental in the good results of 2019.