KUALA LUMPUR: Nestle (Malaysia) Bhd is confident of securing RM400 million in sales this year backed by new products launches.
Chief executive officer Alois Hofbauer said the company would be launching between 40 and 50 new products annually including on-the-go consumption segment mainly in confectionery and culinary products.
"We churn out healthier products for consumers. We always innovate and reinvest into our brands, while continue to improve the efficiency across all our supply chain," he told reporters after the company's shareholders meeting today.
Last year, the food and beverage manufacturer's new products launches contributed about RM380 million sales.
Hofbauer pointed out the company's sales target contribution from new products would derived about 10 per cent of its domestic sales.
Hofbauer said Nestle will also be allocating RM180 million in capital expenditures to grow its culinary and confectionery products as well as to enhance the efficiency of its infrastructure manufacturing.
"We are well prepared with our strong portfolio of some of Malaysia's most loved brands with our highly-capable and committed team," he added.
Hofbauer raised optimism that the company will record another positive growth this year, attributed to ringgit's appreciation, stable commodity prices and efficient manufacturing facilities as well as supply chain.
"We are quite confident in improving our gross margins in 2018. We will come quite close like what we did in 2016, close to 50 per cent from our overall products," he said.
The improvement was important for Nestle to allow them to invest further into new products and marketing as well as trade promotion growth, Hofbauer said.
Maybank IB Research believed Nestle’s domestic operation might continue its positive momentum towards year end.
“We make no changes to our earnings forecasts with a target price of RM105.20 per share,” it said, while maintaining a ‘sell’ recommendation due to lofty valuations.
The research firm said Nestle Malaysia’s would benefit from stronger ringgit value against the US dollar and possibly some selected weaker raw material prices.
“We are looking at gross margins of 38.0 per cent or 38.5 per cent for the financial year ending December 31, 18 (FY18) compared to 36.7 per cent in FY17,” it said.
Currently, domestic consumption contributes about 80 per cent of Nestle Malaysia's sales, while remaining 20 per cent for export market.
"We export to over 50 countries including in the Middle East and South East Asia to Nestle's affiliates," he said, noting that the export value constitutes about RM1 billion.
According to Bloomberg Intelligence, Nestle Malaysia recorded the highest total returns of 70.74 per cent among its consumers product peers in the local stock exchange.
Its year-to-date total returns stands at 32.17 per cent. Its share closed RM2.60 lower at RM136.50 with 212,900 shares done today.
Nestle Malaysia manufactures and markets more than 500 halal products and the country is the biggest Halal producer for Nestle.
Nestle's net profit in the first quarter ended March 31, 2018 increased RM231.22 million from RM230.69 million in the same period a year ago.
Revenue rose 4.38 per cent to RM1.43 billion from RM1.37 million driven by higher domestic sales and export sales.