KUALA LUMPUR: Nestle (Malaysia) Bhd has allocated a capital expenditure (capex) of RM220mil for this year, marking its highest capex investment in the past five years.
Nestle Malaysia CEO Juan Aranols said an estimated RM100mil will be for the expansion of the Chembong factory in Negri Sembilan to establish the world’s largest MILO Manufacturing Centre of Excellence.
The expansion works is expected to be completed this September.
The remaining capex will be utilised for product innovation, improvement of facilities as well as sustainability efforts.
“Our increased capex plans will further support our focus on leveraging new opportunities for our products, delivering a steady stream of innovations and constantly driving efficiencies that will help us sustain our competitive edge and accelerate growth,” said Aranols at a press briefing held in conjunction with Nestle Malaysia’s annual general meeting yesterday.
Despite the volatile consumer climate, Aranols is confident that demand for Nestle brands would remain.
Innovation is a key growth engine for the group, contributing 10% to sales last year.
Over the next two to four years, innovation is expected to contribute some 15% to total group sales.
Year-to-date, Nestle Malaysia has launched Maggi Pedas Giler 2X and Just Milk strawberry flavoured milk, with more product launches to come over the next few months.
Going forward, the group is likely to face headwinds from the increasing cost of raw materials.
However, there will be minimal impact to Nestle Malaysia’s margins, as the group has implemented internal savings measures and hedging policies to mitigate the impact of higher raw material prices.
“Product price increase is a sensitive issue and we will only consider this after we have exhausted all other possibilities.
“In the event that a price increase is unavoidable, we will ensure that it does not affect the main products consumed by the Bottom 40 (B40) segment.
“The sugar tax is also immaterial to Nestle Malaysia, given that very few of our products are taxable,” Aranols elaborated.
Currently, e-commerce contributes less than 5% to Nestle Malaysia’s sales, though this figure is growing fast.
The group intends to continue engaging with its customers on digital platforms, which has provided relevant insights for product improvements and innovations.
Nestle Malaysia registered a 1.7% year-on-year increase in net profit to RM235.21mil for the first quarter ended March 31, 2019.