Nestle’s Q2 earnings driven by higher margin

Nestle (Malaysia) Bhd’s net profit for the second quarter ended June 30 rose 2.93% to RM166.16 million from RM161.44 million a year ago due to higher margin.

In a filing with Bursa Malaysia, the company said its gross profit margin increased by 10 basis points from 37.8% to 37.9%.

Nestle saw a slight increase in operating expenses from RM265 million to RM271 million, which was mainly attributed to the one-time costs from the start-up of the new national distribution centre (NDC). Pre-tax profit increased from RM211.9 million to RM214.4 million.

Revenue for the quarter rose 1.98% to RM1.31 billion from RM1.28 billion a year ago driven by the launch of new products and strong consumers and trade promotions.

In addition, increased festive sales during the Hari Raya period in June contributed to the company’s positive growth.

“In the second quarter, we also started operations in our new NDC. This move from the existing NDC to the new NDC resulted in a shift of sales from June (Q2) to July (Q3) because of the required and planned ramp-up of the operations in the new NDC, which will support strong growth in years to come,” it said.

The board of directors has declared an interim dividend of 70 sen per share amounting to RM164.15 million in respect of financial year ending Dec 31 which will be paid on Sept 27.

For the six months ended June 30, net profit rose 1.34% to RM397.38 million from RM392.13 million a year ago while revenue for the period rose 3.13% to RM2.74 billion from RM2.66 billion a year ago.

During the period, Nestle saw higher domestic sales and an increase in its export business. It said that the domestic growth was driven by strong demand, especially during the festive seasons.

The group continued to deliver strong innovations and renovations during the period, which have set a solid base for growth in the second half of the year.