Nestle expects 2016 to be challenging

(from left) Nestl

KUALA LUMPUR: Nestlé (M) Bhd, which saw its net profit rose to RM99.78mil in the fourth quarter ended Dec 31, 2015, expects 2016 to be a challenging year, both locally and globally”.

“Given the volatile economy, both locally and globally, 2016 is set to be a challenging year. Tough market conditions are expected to persist in the domestic business environment, particularly as consumer sentiment remains weak. However, as a company focused on forward-thinking long-term strategies, we are well-prepared for this demanding climate,” Nestlé managing director Alois Hofbauer said in a statement.

“Nestlé remains positive on Malaysia’s prospects for the mid to long-term, while maintaining a cautious outlook for the short-term. Moving forward, we will continue with our balanced business approach of prudent cost management, in tandem with steady investments for the future,” Hofbauer said.

In the fourth quarter to Dec 31, 2015, the Malaysian arm of the Swiss brand recorded a 8.1% growth in revenue to RM1.98bil from RM1.108bil a year ago.

Nestlé has proposed to declare a final dividend of  RM1.10 per share and a special dividend of 20 sen per share, under single-tier system in respect of financial year ended Dec 31, 2015 (FY15). This will bring total dividends for the year to RM2.60 per share.

“Both domestic and export businesses contributed  to this strong top line performance. The good achievement in the domestic business was supported by the many effective marketing and promotional activities which cushioned the impact of a weak consumer sentiment affected by rising costs and shrinking disposable income.

“The export business continued to show very good growth since the turn around performance in third quarter, registering a strong double digit growth in the fourth quarter.

Nestlé’s net profit for the fourth quarter rose to RM99.78il against RM98.3mil previously mainly due to turnover increase, favourable trends in most of the raw materials, as well as diligent cost management throughout the value chain. In addition, the cost saving initiatives also allowed the group to increase its marketing and trade investments.

For the year ended Dec 31, 2015, Nestlé’s net profit increased by 7.3% to RM590.73mil from RM550.4mil in FY14 on a modest increase in turnover, 0.6% higher at RM4.84bil than previous year.

Commenting on its financial results, Hofbauer said its performance for the year was reflective of the group’s strong and resilient foundation.

“Our bottom line results were primarily driven by improved cost of sales as well as reduced tax expenses for the year. Lower prices for the majority of commodities as well as increased productivity in our factories contributed to the lower cost of sales.”

“Furthermore, the structural improvement in gross profit allowed the group to intensify our marketing and trade investments. These investments were channelled towards launching new innovations for Malaysians in 2015, such as our Milo NutriG, Nescafé Blend & Brew, new additions to our Maggi Royale premium range, Sarawak Sambal Laksa and Johor Seafood Laksa, Nescafé Mountain Wash, Kit Kat Green Tea, Mat Kool Butterfly ice cream, as well as a premium offering for our ice cream sticks range – La Cremeria,” he said.

Hofbauer added that the cost improvements have also helped the group to intensify its consumer promotions, enabling it to move forward on its growth path, despite soft consumer sentiment.