Highest CAPEX plan in the last 6 years confirmed, State-of-the-art production facility for Plant-Based Meal Solutions unveiled
Turnover of RM1.22 billion for Q2 2020, a moderate contraction vs Q2 2019, mainly due to the disruption of COVID-19 in HORECA (hotel, restaurant and café) channels.
Profit After Tax for Q2 2020 was RM105.5 million, lower than Q2 2019 due to contraction in HORECA sales and costs incurred in the pursuit of the Group’s three non-negotiable priorities under MCO below:
Ensuring safety of employees and business partners.
Ensuring continuity in supply of essential items to all consumers.
Expanding programmes to support communities across Malaysia.
Robust CAPEX plans for 2020 are confirmed and include a new pioneering manufacturing facility for Plant-Based Meal Solutions, for both local and export markets.
Net interim dividend of RM0.70 per share declared.
PETALING JAYA, August 25, 2020 – Nestlé (Malaysia) Berhad registered resilient results for its second quarter ended 30 June 2020, despite the widespread impact of COVID-19 containment measures which affected short- term performance in some channels. Specifically, the impacts of the COVID19 containment measures were hardest felt in the HORECA channels, suffering a decline in activity of approximately 80% during the most rigorous phases of Movement Control Order (MCO) in April and May. These channels show clear signs of recovery as the country entered the Recovery MCO in June.
Review of Performance (Quarter 2, 2020 vs Quarter 2, 2019)
Turnover for the quarter was RM1.22 billion, a moderate decline in comparison to Q2 2019. This was mainly attributed to severe operational restrictions on HORECA channels during the MCO, as well as to the decline in mobility of the public impacting sales in restaurants, R&R rest stops, and office-related channels. For Nestlé, this had some material impact on our NESTLÉ PROFESSIONAL division, as well as our Ready-to-Drink and some food products.
In comparison, in-home consumption channels performed strongly, with solid gains in household penetration for brands such as MAGGI, NESCAFÉ, MILO and NESTLÉ ICE CREAM. This helped to cushion the impact from the temporary difficulties in the HORECA channels during MCO.
According to Mr. Juan Aranols, Chief Executive Officer of Nestlé (Malaysia) Berhad, “As with everybody else, we have had to navigate through the COVID- 19 crisis. We take great pride in having contributed effectively to the supply of essential foods and beverages for Malaysians under MCO, while keeping our people and business partners safe and supporting the community in this difficult time. These were our three key non-negotiable priorities during this critical period.”
“Our financial performance remained solid in absolute terms. Despite a temporary contraction versus the baseline period derived from these COVID- related challenges, particularly impacting the HORECA channels, we can share that the situation in these channels is progressively improving as Malaysia entered into the Recovery MCO phase in June. Throughout the quarter, we also ensured strong sales execution and found new and innovative ways to connect with consumers.”
“For example, MAGGI has been actively reaching out to consumers by sharing recipes and encouraging families to cook tasty and healthy recipes at home. Our NESTLÉ ICE CREAM team successfully deployed a home delivery route to reach households directly. Digital engagement and eCommerce have seen great acceleration. Our factories, distribution centres and sales offices also adapted their ways of working to keep our Nestlé front liners safe.”
Aranols added, “While we prioritised our activities to ensure supply of our core range of essential products, we also delivered a steady stream of new products that will support our acceleration in the second part of the year.” New products launched in the quarter include the extension of the STARBUCKS range, NESCAFÉ Gold Origins, Ready-to-Drink products such as NESCAFÉ Ice Cappuccino, NESCAFÉ Cold Brew Hazelnut and NESTLÉ OMEGA PLUS Dark Chocolate, and an important extension into the fast-growing “goreng” noodle segment, the MAGGI Goreng new range.
Against a challenging backdrop, the Group turned in a solid Profit Before Tax of RM140.1 million and a Profit After Tax RM105.5 million for Q2 2020. Against the comparative baseline, profit was impacted by the HORECA situation under MCO and significant COVID-19-related expenses; necessary to ensure work safety, support to front liners and ensuring continuity across the value chain. To note that the Q2 2019 profit benefitted from a one-off gain of RM19.7 million arising from the divestment of the Petaling Jaya factory.
Review of performance: Year-to-date 2020 vs Year-to-date 2019
For its first half ended June 30, 2020, the Group’s Turnover stood at RM2.65 billion, a minor reduction compared with RM2.79 billion in the previous year’s corresponding period. This was due to the anticipated earlier timing of Chinese New Year impact on our sales, as well as the COVID-19 impacts in Q2.
The Group’s F&B business registered a slight increase of 0.6% in the first half, driven by strong local sales, supported by solid sales execution and effective marketing campaigns. One of the highlights of the period was the successful Nestlé Salary For Life Contest (Peraduan Nestlé Gaji Seumur Hidup), the largest nationwide campaign by Nestlé in Malaysia to date, receiving over 1.3 million entries.
Aranols added, “Peraduan Nestlé Gaji Seumur Hidup reflects our appreciation to Malaysians for their support for over 100 years. This is why we extended the contest period and added more prizes, giving more Malaysians a chance to participate and win. Moreover, going beyond awarding prizes, we took the opportunity to incorporate a social cause in this campaign by channelling RM684,000 to 17 charity organisations, whose critical work supports many thousands of Malaysians and their families in these trying times.” As part of its COVID-19 relief efforts, Nestlé has also been actively supporting the Malaysian Red Crescent Society and contributed a significant amount of food donations to front liners and communities in need, as well as a number of other initiatives.”
The Group recorded resilient profit margins for the first half, with a Profit Before Tax of RM386.4 million and Profit After Tax of RM291.8 million. The contraction against the same period of 2019 reflects the impact of COVID-19 on HORECA channels, the significant expenses needed to preserve work safety and operational continuity, and the one-off gains related to the Petaling Jaya divestment benefitting the Q2 2019 baseline.
Reflecting the Group’s commitment to delivering value to shareholders, the Board declared an interim dividend of RM0.70 per share for the financial year ending 31 December 2020, same level as the first interim dividend of 2019.
Mr Aranols added, “We continue to work hard in the ‘new normal’ to turn external challenges into new opportunities. We are encouraged to see a steady and progressive recovery since the start of RMCO, especially in the HORECA channels, and we remain confident in our ability to deliver resilient result in 2020.”
“As we embark on the second half of the year, we will continue to ensure the safety of our people and business partners and play our part to support communities. Our teams are focused on driving excellence in operations and commercial execution to accelerate growth. We have also a very strong innovation pipeline across categories that will further support our performance in months to come. We continue to invest in the future, as reflected by our robust plans and expansion into new categories with high-growth potential.”
“We can now disclose that a significant investment is going into our Shah Alam factory where we are building a pioneering manufacturing facility for Plant-Based Meal Solutions. This is an area of high strategic priority for the Nestlé group worldwide and we are honoured to host Nestlé’s first facility in Southeast Asia, that will support growth locally and for export markets.”
“We also remain more committed than ever to drive sustainability as a key priority, as demonstrated by our decision to transition 100% of our UHT range to paper straws by end-2020, eliminating over 200 million plastic straws per year. We will be making further announcements in the coming weeks on our other environmental initiatives to address climate change.”
“With these plans in place, we are optimistic that the Group is well-positioned to deliver sustainable earnings, for the balance of the year and beyond,” concluded Mr Aranols.
About Nestlé Malaysia
Nestlé is the world’s largest food and beverage manufacturer. Headquartered in Switzerland, Nestlé is present in 189 countries around the world, and our 328,000 employees are committed to Nestlé’s purpose of enhancing quality of life and contributing to a healthier future. Our performance is driven by our Nutrition, Health and Wellness strategy present in Malaysia. Since 1912, we have been nourishing Malaysians for over a century through our quality brands and products, whilst maintaining our Halal excellence and integrity. This is in line with our promise of delivering GOOD FOOD, GOOD LIFE to all. To learn more, please visit www.nestle.com.my or our Facebook page at http://www.facebook.com/Nestle.Malaysia
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