KUCHING: Nestle (Malaysia) Bhd (Nestle Malaysia) saw flattish figures for the first quarter of financial year 2014 (1Q14) with its net profits at RM183.5 million.
The research team at TA Securities Holdings Bhd (TA Research) said Nestle’s 1Q14 net profit of RM183.5 million was flat compared to corresponding period last year, accounting for 30 per cent and 31 per cent of its estimates and streets estimates respectively.
No dividends were declared just as that reported in the corresponding quarter last year.
“Sales grew by 3.7 per cent year on year (y-o-y) to RM1.3 billion, led by domestic consumption which grew by 9.2 per cent,” it observed.
“The robust growth was partly attributed to a ‘healthy lifestyle’ campaign carried out last month where a range of key Nestle products were offered in economic value packs.
“As a result, several product segments such as confectionery, foods and liquid drinks posted strong double digit growth. On the hindsight, export sales continued to decline since second half of 2013 due lower demand from affiliated companies. However, when compared against 1Q FY13, export sales were slightly higher.”
In spite of positive sales growth, TA Research pinpointed operating profit being marginally lower by 1.5 per cent y-o-y to RM243.3 million. This, it said, is due to higher nvestment in campaign which took place earlier compared to last year.
“As a result, operating margin contracted by one percentage point. Favorable commodity mix (exception to milk powder), operation efficiency and lower tax expense, however, helped to offset the shortfall in net profit which stood at RM183.5 million.”
Meanwhile, analysts with RHB Research Institute Sdn Bhd opined that Nestle’s gross margin trended higher to 37.2 per cent against 36.5 per cent in 1Q13, mainly driven by stronger revenue and stable commodity prices, except for milk powder.
“To ramp up its manufacturing capacity, Nestle is building a new Sri Muda factory in Shah Alam, which is slated to commence operation by 4Q14. We are positive on the expansion as it will help fuel its future growth.”