Friday April 27, 2012
Nestle Malaysia plans major capex investment
By SHARIDAN M. ALI
sharidan@thestar.com.my
KUALA LUMPUR: Nestle (M) Bhd's expansion plan for additional capacity at its manufacturing facility in Shah Alam will reflect a significant jump in its capital expenditure (capex) for 2013 and 2014.
Managing director Peter R. Vogt said the company planned quite a sizeable investment to expand its manufacturing facility in Shah Alam.
“At the moment our engineering department is working on which production lines should be added and what is the exact size of investment needed,” he told reporters after the company's AGM yesterday.
Last year, Nestle Malaysia bought a piece of land adjacent to the company's plant in Shah Alam from British American Tobacco (M) Bhd (BAT) for RM36mil cash.
As for this year's capex, Vogt said it would spend about RM180mil, where a large portion of it would be for the upgrading of equipment.
“We are running 80% to 90% of capacity utilisation in many areas of our production thus we need to upgrade a lot of basic equipment,” he said.
Asked if Nestle was planning to increase the prices of its products, Vogt said the company had no plan to do so for the time being but was closely monitoring the price movements of commodities.
“We are buying forward or hedging certain commodities to minimise the impact of cost spike. We also are continuing with our Nestle Continuous Excellence initiatives, where every year we find new ways to save on cost.
“The objective of all these is to maintain the current price as long as we can,” he said.
Some of Nestle Malaysia's main raw materials used in its products are coffee, cocoa powder and milk solids.
On new product launches, Vogt said Nestle had strategised to have fewer but good quality product launches that would have long and strong marketability.
“The best example is our newest product Nescafe Dolce Gusto Espressomachine where we are planning to expand on its variety of beverages.
“Another good example is Milo, which is still strong in the market even after 40 to 50 years,” he said.
Asked whether Nestle Malaysia would market Pfizer's baby food products soon following the recent announcement that Nestle SA was acquiring Pfizer's infant nutrition division, Vogt said the transaction would need necessary regulatory approvals that would take six to 12 months.
“It's too early to say now how we are going to integrate this new development into Nestle Malaysia,” he said.
Despite the many uncertainties that could dampen global economic growth and further drive volatility in commodity costs, Nestle Malaysia on Wednesday announced a good set of financial results.
Its net profit for its first quarter ended March 31 was up 7.5% to RM158.1mil from the same quarter last year.
Turnover for the quarter stood at RM1.16bil, which reflected an 8.5% increase from a year ago.
The growth was driven by both domestic and export sales.
Vogt noted that Nestle Malaysia, which celebrated its 100th anniversary in Malaysia this year, had achieved the highest level rating in the 2011 Creating Shared Value (CSV) report, which accompanied the group's corporate and financial reports.
“The report was externally verified by Bureau Veritas Certification for an A+rating in accordance with Global Reporting Initiative 3.0 standards for the food Processing sector,” he said.
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