Nestlé posts stronger 2Q earnings

by HARIZAH KAMEL / pic by MUHD AMIN NAHARUL

NESTLÉ (M) Bhd’s net profit for the second quarter ended June 30, 2021 (2Q21), increased 27.47% year-on-year (YoY) to RM134.53 million from RM105.53 million in 2Q20 on the back of strong top line growth.

The earnings were slightly moderated by higher commodity prices and increased marketing spend in the period compared to the Movement Control Order (MCO) period in 2020, the fast-moving consumer goods company noted in its exchange filing yesterday.

Earnings per share for the quarter was 57.37 sen against 45 sen in 2Q21. Nestlé’s board declared an interim dividend of 70 per share, payable on Oct 7. The dividend rate was equal to its first interim dividend of 2020.

The group’s quarterly revenue rose 13.16% YoY to RM1.38 billion driven by robust domestic sales growth of 15.8%, on the back of the group’s strong core food and beverage (F&B) business, which grew by 8.4% in 2Q.

The Out-Of-Home (OOH) business under Nestlé Professional saw a solid improvement against very low sales in the same quarter last year when the early lockdowns had the most dramatic impact on this sector of activity.

The focus on supplying the local market amidst operational restrictions had some impact on the export business, which only grew by 2.5%.

CEO Juan Aranols said Nestlé’s key priority remains to ensure people’s safety and supply continuity, which has required an immense effort and resilience from all its teams.

“Systematic antigen testing of the workforce and solid containment standard operating procedures have been instrumental in keeping our sales and operations running to fulfil the solid demand we have seen across most of our brands.

“While Covid-19 continues to have an impact in the short term, we continue building capabilities for the future, entering new high growth categories, as well as advancing on our environmental sustainability programmes,” he said.

The group delivered a sizable stream of new products during the quarter such as the roll-out of the Harvest Gourmet plant-based range into the retail market and the introduction of dairy-free versions of Milo and Nescafe.

For the first half of 2021 (1H21), Nestlé’s turnover increased to RM2.83 billion from RM2.65 billion, mainly driven by domestic sales which grew by 7.7%, as the core F&B business recorded a 6.7% increase while the OOH business continued its gradual but firm recovery against low sales registered in the same period last year due to the impact of the MCO.

Commenting on prospects for the remaining part of the year, Aranols stated that the progress in the national vaccination programme has been impressive, citing “with the light at the end of the tunnel now in sight, we hope for all Malaysians suffering from this pandemic to protect their lives and recover their livelihoods”.

Throughout 1H21, Nestlé has continued to provide relief to communities, contributing some RM7.5 million to food banks and support to non-governmental organisations, as well as encouraging Malaysians to get vaccinated.

Counting on a progressive normalisation of economic activities, Nestlé noted the main challenge ahead will come from the impact of rising food commodity costs that had mitigated through 1H with its hedging policies.

This impact will, however, become more noticeable in the months ahead.

“That being said, we remain confident to deliver another solid year in 2021, with good sales growth and resilient bottom-line performance,” said Aranols.