Nestlé MY sees jump in profit due to higher sales and marketing spend efficiencies

Nestlé Malaysia registered a higher profit before tax of RM751.8 million for 2021, up by 3.7% from the same period last year, while profit after tax grew by 3.1% to RM569.8 million. This was primarily due to the higher sales achieved and marketing spend efficiencies, offset slightly by increased commodity prices as well as the significant COVID-19 related expenses, which amounted to approximately RM93 million.

For the fourth quarter ended 31 December 2021, the Group registered a turnover of RM1.47 billion, an increase of 1.9% compared to the third quarter of 2021. This was mainly driven by an increase in export sales.

Profit before tax was lower at RM146.8 million mainly due to the impact of higher commodity prices as well as higher operating expenses. Higher operating expenses were driven by higher marketing spend, which were lower in Q3 2021 due to the EMCO restrictions at the time, as well as expenses incurred due to the flood situation in December 2021.

Total turnover for the Group during Q4 2021 increased by 7.1% to RM1.47 billion from RM1.37 billion in the same quarter of 2020, driven by higher domestic and export sales, which grew by 6.0% and 10.8% respectively. The Group’s F&B business was a key driver, recording a strong growth of 6.4%, while OOH channels maintained a positive trajectory following the easing of restrictions, even though still well behind pre-COVID levels.

Moving forward, Nestlé said continued volatility is expected as the pandemic transitions towards an endemic phase while new variants remain a global short term risk factor and global supply chains remain highly disrupted.

The Group added that its sustainability agenda will make further progress this year. For example, it kickstarted the year transitioning to 100% renewable electricity for all its operations in Malaysia, allowing the company to reduce emissions by 75,000 tonnes of CO2 equivalent every year.

It has also accelerated its planting activities for Project RELeaf. Last December, it partnered Sime Darby Platation, which will see the planting of one million trees to contribute to its target of three million trees by 2023. The Group will also continue to expand its door-to-door recycling programme to reach out to more communities, and will also pioneer the implementation of environmentally friendlier packaging solutions allowing to reduce the use of virgin plastics.

Meanwhile, on a global level, EVP and CFO François Roger said during a recent financial earnings call for its Q4 2021 results that the company increased the amount of marketing spending during the year in absolute value in Swiss francs. Addressing the perception that the company cut spending during the second half of last year, to reach a certain level of profit, Roger said the company spent more in absolute value in H2 than in H1 2021. 

However, he clarified that Nestlé did reduce its marketing spend in H2 2021 versus H2 2020 because the company doubled down on spending in the second half of 2020 after cutting down in the first half. 

"I think that this is something that is, to a certain extent, the beauty of what we have achieved in 2021," Roger said. Despite difficult conditions, he explained that the company has been able to invest for the future, in marketing and sustainability as well as capex. "So we are really investing for the long term, and marketing spend is really at the heart of it," he explained, adding that Nestlé is happy with the amount of investment it carried out last year. 

CEO Mark Schneider also emphasised the marketing spend in H2 202 after the lull in the first half, adding that the company also faced supply chain pressures and shortages of products. Hence, it is important to become more tactical in marketing and promotion spend because Nestlé does not want to promote something it is unable to deliver. 

"So that also had some bearing, more than any financial headroom that may have been a governor. So it's really about doing the best you can under the circumstances and your supply chain availability," he added.

On the advertising front, Nestlé appointed GroupM Malaysia's OpenMind and IPG Mediabrands Singapore's Thrive to manage media strategy, planning and buying duties last year. It also named dentsu Indonesia to manage full-funnel media, including eCommerce, social, programmatic, SEO, and performance for all its brands.

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