12/01/2010 (The Star Online), Petaling Jaya - Nestle (M) Bhd, one of the country’s biggest food manufacturers, sees good opportunities for growth this year, said managing director Peter R. Vogt.

“We have a number of activities in the pipeline in terms of innovation, renovation and further improvement of products to make sure we have topline growth,” he told StarBiz in an interview.

“At the same time, we have activities and initiatives internally to reduce cost – to be more cost-efficient – and to absorb some of the cost increases that are coming from the outside.”

For example, he said, Nestle would absorb the higher sugar cost following the subsidy reduction. “We fully agree with the Government’s policy to reduce and over time abolish this subsidy. If it’s done in a phased manner, we should be able to absorb the cost.”

Vogt declined to give estimates of Nestle’s growth for the full financial year ending Dec 31, 2009.

For the nine months ended Sept 30, 2009, the company reported a 3.8% drop in revenue to RM2.79bil against the same period in 2008, but net profit rose by 0.7% to RM265.6mil. For the third quarter (Q3), net profit fell 8.8% year-on-year to RM79.76mil on the back of 7.8% lower revenue of RM886.8mil.

“The good thing is, you could already see in the fourth quarter (Q4) more positive signs in terms of improvement in consumer demand and overseas economies. So generally, we are positive about 2010,” said Vogt.

His comment on positive signs in Q4 contrasts to Nestle’s remarks when reviewing its performance for Q3 2009.

In a filing with Bursa Malaysia, the company had said: “The domestic market recovery was below our expectation (in Q3). The negative economic sentiment was quite significant, driving consumers to be very cautious in their spending.”

On Nestle’s biggest challenge for 2010, Vogt cited the increase in commodity prices, particularly cocoa and milk. “I think we will have no choice but to make certain (price) adjustments. We try to absorb as much cost as possible, but there are limits, especially if we have these dramatic increases.”

He declined to say how much Nestle had allocated for capital expenditure this year, but said that the company had invested more than RM500mil over the last three years for expanding capacity and upgrading quality.

“The key focus for this year would be on utilising the new capacity rather than further expansion,” he said, adding that some of the investments came on stream only in the last few months or would come on stream in the coming months.

The two major capacity increases are in coffee and non-dairy creamer production. Last year Nestle invested RM110mil to upgrade its existing facilities in Shah Alam to almost double its regional soluble coffee production capacity. Earlier, at the end of 2008, it opened a RM75mil regional non-dairy creamer plant, also in Shah Alam.

On market share, Vogt said last year the company managed to either maintain or grow its share in almost all product categories it was in.

It was reported last month that Unilever suspended palm oil purchases from Sinar Mas Group of Indonesia as the latter was said to contribute to deforestation.

Asked Nestle’s stand on environmental sustainability in the palm oil industry, he said Nestle, which is a member of the Roundtable on Sustainable Palm Oil, was committed to using only certified palm oil by 2015. “But before then, because there isn’t enough certified palm oil available, we would still have to buy from other reputed companies. There will be a gradual change-over because the industry also needs to adapt,” he said, adding that Nestle was a relatively small buyer of palm oil.