~A~ 1 2 JAN
Nestle upbeat on
growth opportunities
Innovation, renovation and product improvement to boost topline
By M. HAFIDZ MAHPAR
hafidz@thestar.com,my
PETALING JAVA: Nestle (M) Bhd, ~
one of the country's biggest food
manufacturers, sees good opportu-
nities for growth this year, said man-
aging direc;tor Peter R Vogt .
"We have a number of activities in
the pipeline in terms of innovation,
renovation and further improve-
ment of products to make sure we
have top line growth," he told StarBiz
in an intelView.
"At the same time, we have activi-
ties and initiatives internally to
red uce cost - to be more cost-effi-
cient - and to absorb some oflhe
cost increases that are coming from
the outside."
For example, he said, Nestl~
would absorb the higher sugar cost
follOWing the subsidy reduction.
"We fully agree with the
Government's policy to reduce and
over time abolish this subsidy. If it's
done in a phased manner, we should
be able to absorb the cost."
Vogt declined to give estimates of
Nestle's growth for the full financial
year ending Dec 31. 2009.
For the nine months ended Sept
3D, 2009, the company reported a
3.8% drop in revenue to RM2.79bil
against the_same period in 2008. but
net profit rose by 0.7% to RM265.6mil.
For the third quarter (Q3), net profit
fell 8.8% year-on-year.to RM79.76mil
on the back of7.8% lower revenue of
RM886.8mil:
Peter R. Vogt ... 'We fully agree with the Government's policy to reduce
and over time abolish this (sugar) subsidy.'
"The good thing is, you could
already see in the fourth quarter
(Q4) more positive signs in terms of
improvement in consumer demand
and overseas economies. So gener-
ally, we are positive about 2010,"
.said Vogt.
His comment on positive signs in
Q4 contrasts to Nestle's remarks
when reviewing its performance for
Q32009.
In a filing with Bursa Malaysia. the
company had said: "The domestic
market -recovery was below our
expectation (in Q3). The negative
economic sentiment was quite sig-
nificant, driving consumers to be
. ments came on stream only in the
very cautious in t'heir spending."
On Nestle's biggest challenge for
2010, Vogt cited the increase in com-
modity prices, particularly cocoa and
milk. "J think we will have no choice
but to make certain (price) adjust-
ments. We tIY to absorb as much cost
as possible, but there are limits, espe-
cially if we have these dramatic
increases."
He declined to say hownluch
Nestle had allocated for capital
expenditure this year, but said that
the company had invested more
fhan RM500mii over the last three
years for expanding capacity and
upgrading quality.
'The key focus for this year would
be on utilising the new capacity
rather than further expansion." he
said, adding that some of the invest-
last few months or would come on
stream in the coming months.
The two major capacity increases
are in coffee and non-dairy creamer
production. Last year Nestle invested
RM110mil to upgrade its existing
facilities in Shah Alam to almost
double its regional soluble coffee
production capacity. Earlier, at the
end of 2008, it opened a RM75mii
regional non-dairy creamer plant,
also in Shah Alam.
On market share, Vogt said last
year the company managed to either
maintain or grow its share in almost
all product categories it was in.
·It was reported last month that
Unilever suspended palm oil pur-
chases from Sinar Mas Group of
Indonesia as the latter was said to
contribute to deforestation.
Asked Nestle'S stand on environ-
mental sustainability in the palm oil
industry, he said Nestle, which is a
member of the Roundtable on
Sustainable Palm Oil, was committed
to using only certified palm oil by
2015. "But before then, because there
isn't enough certified palm oil avail-
able, we would still have to buy from
other reputed companies. There will
be a gradual change-over because
the industIY also needs to adapt," he
said, adding that Nestle was a rela-
tively small buyer of palm oil