Write an article about Nestle on road to recovery as boycott sentiment eases .Organize the content with appropriate headings and subheadings (h1, h2, h3, h4, h5, h6), Retain any existing tags from Many Malaysians have opted for cheaper alternatives over Nestle’s range of F&B products. (Nestle Malaysia pic)
PETALING JAYA: Things are looking up for Nestle (Malaysia) Bhd as rising sales and easing of a consumer boycott precipitated a 20% jump in net profit for its second quarter ended June 30 (Q2 FY2025).
Q2 net profit rose to RM112.11 million from RM93.59 million a year ago while revenue increased 9.5% to RM1.67 billion, on the back of higher export and domestic sales.
However, for the first six months of FY2025, net profit dipped 5.4% to RM273.45 million from RM289.11 million last year despite revenue rising 4% to RM3.44 billion.
Nevertheless, the consensus-beating Q2 earnings saw investors piling into the dividend stock, pushing it up 11% or RM8.60 over the past two days to close at RM85.50, valuing the group at RM20.05 billion.
MIDF Research said domestic sales registered positive growth, supported by sustained brand strength, effective pricing execution, and the successful rollout of new product innovations.
It added that export sales also held firm, leveraging Nestle Malaysia’s role as the group’s largest global halal manufacturing hub.
The subsidiary of Switzerland-based Nestle SA has been operating in Malaysia since 1912. It is known for its food and beverage offerings including Milo, Maggi and Nescafe, the staple of generations of Malaysians.
“Nestle is gradually recovering from the boycott-related revenue decline and elevated input cost base seen in 2024. We stay cautious but acknowledge its structural strength and recovery potential,” it said in a note today.
MIDF maintained its “hold” recommendation on the stock with an unchanged target price (TP) of RM77.90.
Double whammy
The current bullish sentiment among investors is understandable given that FY2024 was a year to forget for Nestle Malaysia.
Its FY2024 net profit tumbled 37% to RM415.62 million from RM659.87 million in FY2023, the lowest in 14 years. Its Q4 FY2024 net profit plunged 72.2% to RM41.1 million from RM148.1 million a year earlier.
The company was hit by a double whammy last year as consumers increasingly ditched its wide range of F&B products for cheaper alternatives while others joined in the boycott against Western brands over the Gaza conflict.
Brands such as McDonald’s, Starbucks, Burger King and Nestle have come under fire for their perceived association with Israel in the ongoing Middle East conflict.
Meanwhile, RHB Research has upgraded its call to “buy” from “neutral” and raised its TP for the stock to RM95 from RM77 previously.
The research house said Nestle’s first-half results were above expectations and expects its recovery to pick up steam, spurred by margin expansion.
“This, together with the demand normalisation stemming from improving sentiment on its brands, lead us to believe its prospects may have turned the corner.
“We upgrade our call to ‘buy’ as we think its comeback is timely in view of the pick-up in investor appetite for defensive stocks amid uncertain market conditions,” it said in a note today.
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