2 days ago
Boycott pressure persists, but Nestlé leans on efficiency, new launches
NESTLE's reported a sequential revenue decline of -6% quarter-on-quarter (QoQ) in quarter two of 2025 (2Q25) due to the high base effect in 1Q25, which was buoyed by elevated festive season demand.
However, on a year-on-year (YoY) basis, revenue improved by +10%, supported by uptick in domestic demand (+6% YoY) and a sharp rebound in export sales (+21% YoY).
This underscores Nestle Malaysia's importance as the largest halal-certified production hub within the global Nestle Group, with growing regional demand visibility.
The group continues to navigate rising commodity costs through a steadfast focus on operational efficiency, cost savings initiatives, and greater digitalisation.
The company remains measured on further price adjustments, recognising the fragile consumer sentiment and the broader impact of inflationary pressures on household spending.
Nevertheless, selective price increases have been implemented across certain categories to partially offset cost inflation, executed with a focus on value delivery and minimising volume attrition.
'Despite these efforts, we continue to view the overall sales may continue to be weighed down by a fragile external environment, as the ongoing boycott against Western-affiliated brands continues to dampen demand, and are unlikely to fully revert to baseline levels in the near term,' said Hong Leong Investment Bank (HLIB).
The group reaffirmed its strategic focus on product innovation and portfolio renewal to drive incremental consumption.
Recent launches include Omega Gold Triple Action, Energecal Complete, Maggi Air Fryer Series, Milo Biscuits, Kit kat 3-in-1, and Nescafé Coffee Concentrate, with the latter highlighted as a key innovation aligned to global strategic priorities.
Nestlé continues to strengthen its presence in health-focused and convenience-driven categories, in tandem with evolving consumer preferences.
Management remains confident that innovation-led demand and category expansion will support growth and mitigate brand dilution from external political noise.
HLIB reiterate hold for Nestle with unchanged target price of RM80.00. Additionally, they reckon the boycott sentiment coupled with the cost pressure will continue to put a strain on its earnings moving forward. —July 28, 2025
Main image: Nestle Professional
