Nestle allocates RM220m capex for 2019, highest in past five years

25 Apr 2019 / 14:51 H.

PETALING JAYA: Nestle Malaysia Bhd has set aside RM220 million in capital expenditure (capex) for 2019, the highest in the past five years.

“Some RM100 million of the capex will go to our Chembong factory to establish the world’s largest milo manufacturing centre,” said its CEO Juan Aranols (pix) at a media briefing after its AGM yesterday.

The additional capacity from the upgrade of the Chembong plant is expected to come in September this year, but will see partial capacity starting from July.

Last October, Nestle announced plans to move all existing Milo manufacturing assets in the Petaling Jaya factory to the Chembong factory in Negri Sembilan.

The remaining RM120 million capex will be utilised to increase the capacity of six other factories. Nestle spent RM147 million of capex in 2018.

With regard to the upcoming sugar tax due in July, Aranols said while he could not disclose the exact number of affected products the impact is expected to be immaterial.

Moving forward, Nestle expects product innovation to contribute 15% to its sales within the next two to four years.

“This is more of an aspirational target, looking at the quality of the project and ideas at Nestle, I think we can accelerate the speed and contribution of our innovation. This would happen gradually in the horizon of two to four years,” Aranols explained.

Nestle found a hit last year with Maggi Pedas Giler 2x, which has seen its market share surge to 40.1% of the instant noodle bowl category from 3.7% in March 2018.

For 2019, the group expects the growth momentum recorded in the first quarter to be maintained throughout the year. Its first-quarter net profit rose 1.7% to RM235.22 million from RM231.22 million a year ago.

However, it is expecting some headwinds this year from the commodity market.

“Obviously, we look at various strategy to manage any external volatility, at Nestle we have a very good hedging policy in place. In fact, we’re proactive on this as we have anticipated the possibility of raw material prices movement so we’re already quite forward thinking in our plans to accommodate any impact,” said Nestle CFO, Craig Connolly, adding that the group will also drive internal savings to manage external impact.

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