Nestle Malaysia’s Net Profit Plunges 72.2% in Q4 FY2024
Challenges Persist for the Company
Nestle (Malaysia) Bhd’s net profit plunged 72.2% for its fourth quarter ended December 31 (Q4 FY2024), its lowest in 11 years, as Malaysians bearing the brunt of higher living costs ditched the company’s products for cheaper alternatives.
Company Background
Nestle Malaysia, a subsidiary of Switzerland-based Nestle SA, is known for its popular food and beverage products such as Milo, Maggi, and Nescafe, the staple of generations of Malaysians.
Q4 Revenue and Profit Drop
The company’s quarterly profit plummeted to RM41.1 million from RM148.1 million a year earlier, as the Malaysian unit of the world’s biggest food company grappled with lower sales and higher input costs. For the full year, net profit fell 37% to RM415.62 million from RM659.87 million in FY2023, the lowest in 14 years.
RHB Research’s Downgrade
RHB Research downgraded the stock to "sell" from "neutral", with a lower target price (TP) of RM77 from RM103 previously, a 14% downside. "We turn cautious on Nestle as the lofty valuation is unwarranted with the earnings profile and demand stickiness looking less robust than expected," it said in a note.
HLIB’s Views
Hong Leong Investment Bank (HLIB) has maintained its "sell" call on the stock with a lower target price of RM78. It also cut Nestle’s FY2025 and FY2026 earnings forecasts by 28%. "Challenges persist, with commodity price volatility and geopolitical tensions weighing on demand, though Nestle continues to expand its product portfolio," it said.
Impact of Boycott
Nestle’s declining sales are not only due to poor consumer sentiment. HLIB alluded to the boycott of the company’s products by a segment of the Malaysian population. "The ongoing boycott sentiment and cost pressures will continue to weigh on its profitability," it noted.
Company Overview
Nestle has been in Malaysia since 1912 and operates 12 manufacturing plants employing over 6,000 Malaysians. Its shares fell 48 sen or 0.5% yesterday to RM88, valuing the group at RM20.64 billion. It has fallen 12% year-to-date and 27.6% over the past one year.
Conclusion
Nestle Malaysia’s net profit plunge is a result of a combination of factors, including lower sales, higher input costs, and a boycott of the company’s products by a segment of the Malaysian population. The company’s challenges persist, and its shares are expected to continue to face pressure in the near term.
Frequently Asked Questions
Q: What is the reason for Nestle Malaysia’s net profit plunge?
A: Lower sales, higher input costs, and a boycott of the company’s products by a segment of the Malaysian population.
Q: What is the impact of the boycott on Nestle’s profitability?
A: The ongoing boycott sentiment and cost pressures will continue to weigh on its profitability.
Q: What is Nestle Malaysia’s outlook for the future?
A: The company’s challenges persist, and its shares are expected to continue to face pressure in the near term.