KUALA LUMPUR: Nestle (Malaysia) Bhd has set aside RM220 million for capital expenditure (capex) this year, the highest in five years, to boost production.
Chief executive officer Juan Aranols said RM100 million is allocated to upgrade the Milo capacity at its Chembong factory in Negeri Sembilan.
Meanwhile, the remaining RM120 million is for other factories' capacity upgrading.
Last year, it allocated RM147 million for capex. The highest allocation in the last five years was RM362 million in 2014.
Aranols said Nestle has seven factories in Malaysia, with the Chembong plant currently producing Milo, Kitkat and ice cream products.
The upgraded Milo production will be fully operational in September, and is set to further reinforce Nestle's position in the segment.
Speaking to reporters after its 35th annual general meeting today, he expressed confidence that demand for Nestle products will remain healthy despite the current volatility in consumer markets by championing innovations, the nutrient segment, emerging channels and in-store execution.
Aranols said product innovations contributed 10 per cent to its sales in 2018, and are expected to increase to 15 per cent over the next two to four years. He said Nestle, with an overall 15.7 per cent market share, is the number one player in Malaysia's food and beverages space.
In 2018, the group recorded revenue of RM5.5 billion, up 4.9 per cent from 2017, driven by the domestic and export business.
Its net profit for the financial year ended Dec 31, 2018 (FY18) jumped to RM658.88 million from RM642.55 million the preceding year.
"Our proactive cost management and improved internal efficiencies, in the context of favourable commodity prices, further contributed to our profitability in 2018 and will offset tensions in commodity markets in 2019,” he said.
The group is also banking on its hedging policy to manage the impact of escalating raw material costs, with price adjustment as the last option to drive growth, he added.- Bernama