PETALING JAYA: Nestle (M) Bhd
’s extensive range of staple products and cost efficiency measures are expected to sustain the group’s earnings, despite constrained consumer purchasing power.
TA Research in a report said it expects Nestle’s fourth quarter ending Dec 31, 2024 (4Q24) to remain challenging due to cautious consumer spending and headwinds from rising raw material costs, specifically cocoa and coffee.
“Nonetheless, we anticipate that the group will maintain its gross profit margin through cost efficiency measures and price revisions. Accordingly, we project a gross margin of 31.2% for financial year 2024 (FY24), compared to 31.6% in FY23.”
Kenanga Research meanwhile said Nestle is expected to see gradual improvement in the near term.
“Notably, its parent company Nestle S.A. has revised its full-year sales growth target to 2% and adjusted its own earnings per share growth outlook to “broadly flat”, while maintaining its plans to slow down on price hikes as consumers become more cost-conscious.
“Additionally, we opine profit margins are likely to remain under pressure due to high commodity prices, particularly for cocoa and coffee, driven by supply concerns. Nonetheless, Nestle’s extensive range of staple food products should help to mitigate some impact.”
Nestle reported a turnover of RM4.75bil for the nine months ended Sept 30, 2024 (9M24), representing a decline of 11.4% compared with the same corresponding period last year.
In a statement on its latest financial performance, the group said exports continued to show strong dynamism while local sales were impacted by consumer hesitancy amid cautious spending and affordability concerns. For 9M24, Nestle Malaysia registered a net profit of RM374.5mil.
The group said while this is a contraction from the previous year, its results demonstrated its ability to maintain a healthy profitability level in a challenging environment, enabling the company to declare a second interim dividend of RM0.35 per share for FY24.
