Nestlé 2017 revenue up 3% to Rs 37.6 b amidst challenging market conditions

• Continues to invest in Sri Lanka with new products and capacity expansion   

Nestlé Lanka Plc said yesterday it has delivered revenues of Rs. 37.6 billion (up 3.1% over 2016) and a net profit of Rs. 3.6 billion for the full year ending 31 December 2017. 

Revenue for the fourth quarter was Rs. 10 billion (up 15.6% over Q4 2016) with a net profit of Rs. 1.2 billion.

The severe drought and floods, resulting in weak consumer confidence and decline in consumer demand, adversely impacted results. Growth rates were further eroded by an increase in Value Added Tax, which coupled with unprecedented increase in coconut prices, had a negative impact on profit. Enhanced cost saving measures and a focus on driving efficiencies across the value chain helped in partly mitigating these impacts.

The company’s contribution to the exchequer as taxes in 2017 was Rs. 6.5 billion. 

Continuing to believe in the long term prospects of the Sri Lankan market, Nestlé initiated an investment of around Rs. 5 billion in early 2017 to expand production capacity for dairy and coconut based products, which will be funded through a judicious combination of internal accruals and borrowings.

The Board approved an interim dividend of Rs. 25 per share on 22 February and proposed a final dividend of Rs. 25 per share for the full year, to be approved at the company’s Annual General Meeting on 4 May 2018. 

Nestlé Lanka Managing Director Shivani Hegde said: “Nestlé has a strong foundation in Sri Lanka and a solid track record. The FMCG market has been adversely impacted this year due to sluggish consumer demand and rising cost pressures. The dedication and commitment of our people and business partners allowed us to address the significant challenges we faced in the year. I am immensely proud to note that the company, our brands and our people continued to be recognised for their performance and significant contributions. In line with today’s environment, we are intensifying our focus on innovation, operational efficiency and on developing our people’s skills. We enter 2018 with the same passion and determination, to continue to deliver on our purpose of enhancing quality of life and contributing to a healthier future.”

As part of its endeavour to enhance consumers’ quality of life and contribute to a healthier future, Nestlé continued to strengthen its product portfolio. Nestomalt’s portfolio was enhanced with the launch of Nestomalt Plus, which is enriched with the goodness of oats and b-vitamins and Nestomalt Gold RTD, which offers consumers a unique taste with the goodness of fresh local milk and malt. Nestlé’s iconic Maggi brand entered the value-added pasta category with ‘Maggi Pazzta.’ Made with the wholesome goodness of semolina grains, which is high in fibre, Maggi Pazzta only requires five minutes of cooking to serve a delicious pasta meal in a creamy cheese sauce. Maggi’s popular chicken flavoured noodles was also renovated to include eight popular Sri Lankan spices to naturally enhance taste in response to consumer preference for more natural and familiar ingredients. Continuing to offer consumers the goodness of Sri Lankan milk, procured from close to 20,000 farmers, the company introduced Nespray Fortigrow, a full cream milk powder fortified with vitamins A and D. It also introduced Ceregrow, the only toddler cereal in the market with probiotics. The year also saw the launch of Nestum All Family Cereal and Nescafé premix with reduced sugar for coffee machines.

Along with ongoing product renovations to reduce sugar, salt and fat and increase micronutrients like iron, vitamin A and calcium, the company delivered over 400 million servings of micronutrient fortified food and beverages in 2017. Nestlé’s ‘Choose Wellness’ initiative also provided free nutrition advice and diet counselling to more than 40,000 consumers, while the Nestlé ‘Healthy Kids’ program was extended with an e-learning module to increase the program’s reach to 15,000 more children. The program is conducted in collaboration with the Ministry of Education to teach school children about healthy diets and the importance of physical activity.

Nestlé continued its work to help develop thriving, resilient communities. Milk farmers in the North-Central village of Seeppukulama benefited from a milk chilling centre upgraded by Nestlé, offering around 300 farmers increased chilling and storage facilities. Nestlé also kicked off the second phase of its Nestlé Coconut Plan, conducted together with the Coconut Cultivation Board, to train and develop new farmers and home growers to cultivate coconut successfully and increase overall coconut supply.  The company’s total contribution to the rural economy in 2017 was Rs. 8.3 billion for procurement of milk and coconut.

The year also saw the launch of several initiatives to support youth employment in the country under the ‘Nestlé Needs Youth’ program, including a diploma conducted by Nestlé managers for marketing undergraduates of the University of Kelaniya. The company also offered internships to more than 80 young people. 

Nestlé was a recipient of several awards and accolades in 2017. The company received one of the highest number of recognitions at the Best Corporate Citizen Sustainability Awards, winning the highly coveted Best Corporate Citizen in the Manufacturing Sector and Triple Bottom Line - Social Sustainability (People) Award, as well as the Customer/Consumer Relations Award and Top 10 Best Corporate Citizen’s Award. Nestlé was ranked the Most Respected Food and Beverage Company for the second consecutive year in LMD’s Most Respected Entities 2017 and was the highest ranked food company in the LMD 2017 ranking of Most Valuable Brands in Sri Lanka. It was also recognised as one of Sri Lanka’s top corporate performers in the ‘Business Today Top 30’ with an overall rank of No. 11. The company also won its sixth Presidential Export Award, ‘Highest Value Added Exporter’ in the Coconut Kernel Product category in recognition of its strong contribution to national exports. Nestlé’s people development practices won Gold at the SLITAD (Sri Lanka Institute of Training and Development) Awards.  

The popular beverage brand ‘Milo’ won several awards including ‘Student Beverage Brand of the Year,’ ‘Most Outstanding Junior Sports Promoter of the Year,’ ‘Global Master Brand,’ and No. 1 Beverage Brand in Sri Lanka in LMD’s Most Loved Brands ranking. Maggi was voted ‘Youth Food Brand of the Year’ at the SLIM-Nielsen Awards while Maggi and Nestomalt were named Sri Lanka’s Top 10 FMCG brands in the 2017 Brand Footprint Study by Kantar World panel.  

Maggi Noodles, Maggi Coconut Milk Powder, Nespray Nutri-Up RTD, Nescafé Ice Coffee RTD and the company’s Sales Promotions department (sampling operations) were also recognised for their high quality standards at the SLSI (Sri Lanka Standards Institute) Certification Awards.