KUALA LUMPUR (May 5): Nestle (Malaysia) Bhd's net profit for the first quarter ended March 31, 2020 fell 20.8% year-on-year (y-o-y) to RM186.31 million, from RM235.22 million previously, due mainly to the impact of Covid-19 on out-of-home channels (lower sales leading to lower absolute margins), higher commodity costs and the earlier Chinese New Year timing.
In a bourse filing, Nestle said revenue for the quarter slipped 1.3% y-o-y to RM1.43 billion, from RM1.45 billion earlier, primarily due to a reduction in domestic sales.
Earnings per share fell to 79.45 sen versus 100.31 sen earlier.
In a separate statement, Nestle Malaysia chief executive officer Juan Aranols said the results for the quarter appeared resilient, given the earlier timing of the Chinese New Year as well as widespread effects of Covid-19 and the movement control order (MCO) on some sectors of activity.
He said the slight contraction in domestic sales during the quarter resulted from a strong performance of in-home consumption channels, offset by a sizeable temporary dip in the out-of-home business.
“More concretely, our out-of-home business, like the rest of the sector, has been affected first by Malaysia’s declining eating-out frequency since the start of the pandemic, followed by general closures of restaurants, coffee shops and many other dine-in outlets since the implementation of the MCO.
““Nonetheless, the impact was mitigated by a strong recovery in export sales, growing 8.8%, and a solid performance of our core food and beverage business as we continued to ensure stable and reliable supply of essential products to the stores,” he said.
Aranols said in the context of the pandemic, the group had prioritised safe working conditions for its personnel.
He said the increased operational expenses for Covid-19 included expenditure for employees' personal protective equipment (PPE), additional safety protocol adaptations across all sites and other arrangements to protect the workforce.
“Temporary allowances have been also provided to employees working in factories, distribution centres and sales during the MCO period to recognise their additional efforts in this situation,” he said.
On the outlook for 2020, Aranols said since the very start of the Covid-19 pandemic back in late January, Nestle had proactively adopted preventive actions to protect its employees.
“Throughout the pandemic, we have been working very closely with the authorities and our business partners to safeguard the health of all employees, while ensuring business continuity to meet our obligations towards the nation as a manufacturer of essential food and beverages,” he said.
Aranols said Nestle will also continue to build its capabilities for the long term.
“This year, we will be allocating the highest capital expenditure (capex) in six years of RM280 million.
“This investment will add new manufacturing capabilities, including expanding the current production capacity for Maggi noodles, as well as a new high-technology production line in Shah Alam that will allow us to enter new high-growth categories with great future potential,” he said.
At the midday break today, Nestle was unchanged at RM139.60, with a market capitalisation of RM32.74 billion.