Nestle Malaysia Delivers 100% ROE in Consumer Staples

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Background

Nestle (Malaysia) Berhad is a food and beverage manufacturer and distributor in Malaysia and internationally.

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It is a subsidiary of Nestle S.A. (NESN SW), the world’s largest food manufacturer.

The company is originally Swiss. The Malaysian branch was founded in 1912 and now has 8 factories, employing more than 5,500 people.

Business Description

NESZ Malaysia provides a variety of foods and beverages, including cereals, powdered milk, instant coffee and noodles, ice cream, chocolate, chilled dairy products and ready-to-drink (RTD) products (milk, juices, coffee, chocolate milk). The primary brands are Milo, Nescafé, Maggi, Drumstick, and Kit Kat brands. The RTD segment is currently the push for growth, followed by noodles.

It also manufactures and sells yogurt, health science products, as well as infant and maternal nutrition products. These products are mainly sold under the brands Lactokid, Comfortis, Nestle Omega Plus and Nestle Bliss.

Nestle Malaysia

NESZ is now ready to take advantage of the online buying trend, being well positioned using platforms such as Lazada, Shoppee, and 11street. E-commerce sales contributed only 2% of total sales but grew rapidly.

In addition, it produces and markets more than 500 halal products, foods prepared as prescribed by Muslim law. These products are sold in Malaysia and 50 other countries. NESZ also has a child health program present in 177 schools reaching over 10,000 students.

Leadership

Seri Syed Anwar Jamalullail has been the Chairman of NESZ since 2009. He has held senior positions in many companies throughout his career and currently also holds Chairmanship in Cahya Mata Sarawak Berhad (CMS MK), Lembaga Zakat Selangor, Pulau Indah Ventures Sdn. Bhd and Malakoff Corporation Berhad (MLK MK). He is also the Chancellor of SEGi University, Malaysia. He received his Bachelor of Arts degree in Accounting from Macquarie University, Australia and is also a  Chartered Accountant and a Certified Practising Accountant.

Nestle Malaysia

Alois Hofbauer is currently serving as the CEO of NESZ and has been operating in this position since 2013. He joined the company in 1990 and has worked in many positions in multiple countries. He is a graduate of the Swiss Business School Institute for Management Development and the University of Innsbruck in Economics and Business, Austria.

World Class Benchmarking

Profitable Growth has been excellent throughout the years, consistently ranked at #1 since 2013. Ranked among the top 60 of 600 large Consumer Staples companies worldwide.

While Profitability has consistently ranked #1, Growth has had below-average rankings in most years. NESZ’s overall Profitable Growth rank is mainly driven by exceptionally high Profitability.

Nestle Malaysia

Asset utilization and Profit margin have ranked high over the whole time period. Asset utilization improved one step to #2 from #3 in the past 12 months.

Sales growth ranked better than in 2014-2015 but ranked below average at #6 in the past 12 months. Margin change has seen fluctuations and ranked poorly at #8 in the most recent period.

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About the Author

Dr. Andrew Stotz, CFA
Dr. Andrew Stotz, CFA is the CEO of A. Stotz Investment Research, a company providing institutional investors with ready-to- invest portfolios in Asia that aim to beat the benchmark through superior stock selection. The company also provides buy- and sell-side clients with financial models to value any company in the world and World Class Benchmarking to determine what companies are financially world class. Previously, as Head of Research at CLSA, Andrew was voted No. 1 Analyst in Thailand in the Asiamoney Brokers Polls for 2008 and 2009. He was also voted No. 1 Analyst in Thailand in the 2009 Institutional Investor magazine All-Asia Research Team Report. Andrew earned his PhD in finance at the University of Science and Technology of China in Anhui province, with a focus on answering questions raised by fund managers and analysts during his career about picking stocks and managing portfolios. In addition, Andrew has been a lecturer in finance for 22 years at various universities in Thailand. Since 2013, he has been the president of the CFA Society of Thailand. He is also the author of How to Start Building Your Wealth Investing in the Stock Market.

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