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Executive summary

In todays business world, it is an important objective for Organizations to make customers


satisfied because they are the ones who keep the business running. In the past, organizations did
not take interest in managing customer needs but the scenario has been change financial
prospects are changed.. Nestle is one of the leading corporation in the world. It has been working
for a long time in the Malaysia and one of the leading brands. Nestle Malaysia is providing halal
food to more than 40 Muslim countries. It is necessary for investment analyst to seek the
financial performance of the company to understand its growth in the market. This report has
detailed financial analysis of nestle Berhad for the consecutive five years. To view it financial
condition among its competitor. Detailed scenario analysis is done to better assess the future
prospects. Competitors analysis is done to show the company standing and comparison of ratios
are also done. Dividend policy of nestle in Malaysia is discussed in detail.There are various type
of information regarding dividend policy and shareholders wealth provided in this report.
Furthermore, this report also touches on objectives of earnings availed to share holders. The beta
analysis is also done. Summarizations of results are done in the conclusion. All the calculations
are performed by the figures in the Nestle annual reports.

Table of Contents

Introduction3
Mission and vision..3
Financial

ratio

analysis.

...9
Dividend
policy
.17
Competitor
analysis
.19
Scenario
Analysis..
..21

Beta
calculation
.23
Conclusion
.24
References
.25

Nestle Malaysia

Introduction
Nestle is one of the worlds leading dairy business. Nestle is famous for its food and nutrition
plan in all around the world. Nestle is known for its quality oriented and diversified products.
Nestle is one of the successful largest food group with different diversification operated in more
than 115 countries in all around the world. According to the recent company reports 2800
employees are working worldwide. Nestls headquarter is in Vevey, Switzerland. The famous
brands of nestle are Nescafe, Nespresso, Kit Kat, Haagen-Dazs and Movenpick.
Mission vision and objectives of nestle
Nestls mission, in the words of our founder Henri Nestl, is to: positively influence the social
environment in which we operate as responsible corporate citizens, with due regard for those
environmental standards and societal aspirations which improves quality of life. Henri Nestl,
1857
3

Vision of Nestle
From 1857 to present date the company is much more focused and determined on it mission. The
vision of company reflects the management commitment for the customers to provide them with
the best quality food item. Nestle believes that they are responsible for the health of the people.
Well developed research and development infrastructure is owned by the organization to achieve
the good nutrition results. Nestle believes in being social responsible, Corporate social
responsibility means organizations engaged in activities that are socially adequate which shows
their concern for the whole society. Nestle quality products means the trust of consumers to
maintain the level of trust the management is highly interactive to monitor all operational
activities. Nestle ensure the nutritional requirements and maintain the standards for quality to
satisfy the customers. Innovation is the long term vision of nestle food.

Nestle in Malaysia
The main aim of nestle Malaysia is to meet the nutritional needs. To fulfill the nutritional
requirements of the people by providing them quality food. The strategy of nestle Malaysia is to
go international but act local. In Malaysia nestle starts its first factory in 1962, in Petaling Jaya,
near Kuala Lumpur. Nestle the Anglo Swiss manufacturer start their trading in Malaysia in 1912
the Anglo-Swiss Condensed Milk Company. Malaysia is one of the wide market for nestle, their
business is expanding on continuous basis.
Objectives
This report basically measures the financial aspects of nestle Malaysia. The financial indicators
are calculated to show the financial position of nestles Malaysia. The basic objective of this
report is measure the financial ratio and compares these results with potential competitors.
The halal food is exported to the 50 Muslim countries from Malaysia production units. To
expand the production capabilities and meet the halal food requirements, Nestle Malaysia opens
its eighth factory Sri Muda in Selangor. In Asia nestle Malaysia is among the top five nestle
markets and amongst the twentieth in the world markets. (Hofbauer, 2015)
Scope
The scope of this report is to clarify the current scenario of Nestle Malaysia. It will generate the
result that are empirically provides evidences. It helps the investment analysts to gain brief and
clear information regarding the nestle Malaysia also its growing investment opportunities. This
4

report is helpful for the students also to know how actually the financial aspects are important to
make investment. Different financial ratios can help readers to provide the true investment
scenario.
Limitations
Every report has some limitation in this report there also exist some limitations. In calculating
the financial ratios or when the results are based on calculations. There should be some
calculation errors exist or may be vary from ones calculation to others. The other limitation of
this report is that it is not possible to mention all competitors of nestle Malaysia. It is not possible
to present the detailed competitor analysis.
Companys description The Company was publicly listed on the KLSE now known as Bursa
Malaysia Berhad on 13 December, 1989. The nestle Malaysia Berhad operating as an investment
holding company. Nestle Malaysia institutional share holders details are given below:
1. Employee provident fund shares are 21.38m, it hold 9.31 %( 3 March, 2016).
2. Permodalan Nasional Berhad shares are 10.50m, it hold 4.48%( 27 Feb,2015)
3. Kumpulan Wang Persaraan shares are 4.75m, it hold 2.03%( 27 Feb,2015)
4. Great Eastern Life Assurance Co. Ltd shares are 3.92m, it hold 1.67%( 27 Feb,2015)
5. Public Mutual Bhd shares are 2.53m, it hold 1.08 %( 27 Feb, 2015).
6. Social Security Organization shares are 1.36m, it hold 0.588%( 27 Feb,2015)
7. East spring Investments Bhd shares are 540.80k, it hold 0.23 %( 27 Feb, 2015).
8. Vontobel Asset Management, Inc. shares are 5.23.00k, it hold 0.22%( 30Oct,2015)
9. Dimensional Fund Advisors LP shares are 174.00k, it hold 0.07%( 31Dec,2015)
10. Hong Leong Asset Management Bhd shares are 109.60k, it hold 0.05%( 30 june,2015)
19.72% percent of shares are held by top shareholders, Data from 31 May 2015 - 04 Mar 2016.
Source: FactSet Research Systems Inc. Thomson Reuters (Thomson, 2016)

Nestle Malaysia board of Directors


Board of directors
The nestle Malaysias board of directors and executive members are listed below
5

1. Tan Sri Dato Seri Syed Anwar Jamalullail

Independent, Non-Executive Director

Chairman of the Board of Directors

Chairman of the Audit Committee

Chairman of the Nomination Committee

Malaysian, 63 years of age

2. Dato Mohd. Rafik Bin Shah Mohamad

Independent, Non-Executive Director

Member of the Audit Committee

Member of the Compensation Committee

3. Tan Sri Datuk (Dr.) Rafiah Binti Salim

Independent, Non-Executive Director

Member of the Audit Committee

Member of the Compensation Committee

4. Dato Frits Van Dijk

Independent, Non-Executive Director

Member of the Nomination Committee

Member of Compensation Committee

5. Tan Sri Datuk Yong Poh Kon

Independent, Non-Executive Director

Member of the Nomination Committee

6. Toh Puan Dato Seri Hajjah Dr. Aishah Ong

Independent, Non-Executive Director

Executive Committee
1. Alois Hofbauer

Managing Director

Member of the Compensation Committee


(Appointed with effect from 24 February 2014)

2. Martin Krgel

Executive Director
Responsible for Finance & Control)
(Appointed with effect from 1 October 2014)

3. Gavin Schwarzenbach

Executive Director, Supply Chain

4. Adnan Pawanteh

Executive Director,
Technical & Production, MYSG

5. Kumaran Nowuram

Executive Director, Nestl Liquid Drinks

6. Zainun Nur Abd. Rauf

Executive Director, Group Corporate Affairs

7. Nirmalah Thurai

Country Business Manager, Cereal Partners Malaysia

8. Shahzad Umar

Executive Director, Group Human Resources

9. Chew Soi Ping

Executive Director, Sales, MYSG

The executive committee shows some changes like managing director is appointed in 2014. Alois
hofbauer is working in Australia but know he is working for Malaysia. His working skill and
capabilities are viewed in his past record he is of vision to expand the quality nutritional products
in Asia Pacific. The shareholders are expanding because new investments are being done by the
board members. The Malaysian government policies are very supportive for halal business. The
aim of directors and executives of nestle Malaysia to develop strong relationship with customers.
To acknowledge the support of shareholders provide with them best profitable opportunities.
The executive members of Malaysia are very responsive, they strongly follows the ethics and
code of conduct. Different changes have been done in the financial policies to meet the resource
challenges and properly follow the tax policies of government. The executive members strongly
believed on be ethical and be responsive. (Message by the managing director)
Some important Fact about nestle Malaysia are shown in the table
Facts about Nestle Malaysia
1 Nestle headquarter in Malaysia

Petaling Jaya.
Listed on Bursa Malaysia, formerly Kuala Lumpur

2 2012-2013 sales

Stock Exchange.
4.6 billion Malaysian Ringgit (CHF 1.3 billion) 7.3%

3 Geographic existence

growth compared to previous year


7factories (2014)
1 distribution centre.

4 No of employees
5 No
of
halal

1 R&D centre in Singapore.


5000
products More than 500, exported to more than 50 countries

manufacturing in Malaysia

worldwide.
Halal centre of excellence for the Nestl Group
8

6 New investments
7 Manufacturing
products

150 million Malaysian Ringgit (about CHF 47 million)


in Milo, Nescafe, Nestl Omega, Nestl Low Fat Milk,

Malaysia
Source: www.nestleMalaysia.com

Nestl Full Cream

Financial analysis
Financial analysis is basically the selection, valuation and interpretation of organizations
financial data along with other important financial information. It helps the organizations
management to view the investment opportunities as well as financial decision making. It helps
the organizations internally also; financial analysis is useful in evaluating the employees
performance, operational efficiencies, and the policies regarding credits. Externally financial
analysis helps to estimate the prospective investment opportunities and to better understand the
borrowers credit value (Malaysia Investment Development Authority. 2012). Organizations
done financial analysis on quarterly basis to better view the financial resources and capabilities
for long term decision making. Several ratios are used to present the organizational financial
performance.
The financial analyst needs to summarize the financial figures from firms financial data from
multiple sources. The prime source of data is firms annual report, the firms annual reports
includes the balance sheet, the income statement and the cash flow statement. Besides all these
information some important informations are also required that is provided in the financial
statements of firm. It includes the information regarding firms stock, share price and the prices
of market securities. The other source of information is economic data it includes the gross
domestic product, consumer price indicators. It will result in assessing the present conditions and
future projection of company.
Financial analysts used all this financial information in interpreting, summarize and present the
findings in an understandable manner (Mansfield, E. R 1982). It enables the investment
managers to judge the present and the future financial circumstances and the operating
performance of the company. In this report we introduce the financial ratios of nestle Malaysia,
using the pertinent information regarding nestle from its published annual and financial reports.
Make comparison with its previous years to present its current and previous financial standing in
the market. These results are also compared with its competitors.

Balance Sheet
Items (in %)

2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013- 2014- Latest
12

12

12

12

12

12

12

12

12

12

Qtr

2.49

3.83

1.98

1.55

1.50

2.74

2.62

1.82

0.73

0.67

0.59

Cash & ShortTerm


Investments
Accounts
Receivable
Inventory
Other Current
Assets

19.29 22.67 27.86 27.67 20.69 21.39 25.85 21.58 19.56 16.08 15.41
32.85 30.85 28.76 23.89 22.04 19.94 22.23 20.73 24.23 22.04 28.38

Total Current
Assets
Net PP&E
Intangibles
Other LongTerm Assets
Total Assets
Accounts
Payable

54.64 57.35 58.59 53.11 44.24 44.07 50.69 44.13 44.52 38.79 44.37
35.00 33.71 32.44 38.15 50.23 50.46 44.44 49.64 50.10 56.17 52.03
5.35

4.55

3.82

3.68

3.56

3.43

3.05

3.20

2.92

2.65

2.44

5.02

4.39

5.14

5.06

1.97

2.04

1.82

3.02

2.45

2.40

1.16

100.00 100.00 100.00100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

4.58 18.88

6.38

3.30

4.91

0.21

0.14

1.18

1.59

1.05

1.21

1.17

0.58

1.61

2.24

2.13

Short-Term Debt 19.20


Taxes Payable
Accrued

3.53 13.87

10

Balance Sheet
Items (in %)
Liabilities
Other ShortTerm Liabilities

2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013- 2014- Latest
12

12

12

12

12

12

12

12

12

12

Qtr

26.32 40.63 34.32 54.47 36.33 35.04 43.87 48.78 51.18 50.93 43.46

Total Current
Liabilities
Long-Term Debt
Other LongTerm Liabilities
Total Liabilities

46.70 46.79 54.25 62.06 40.80 40.53 45.68 48.78 51.32 56.71 59.45
7.68

7.35

0.32

0.16 19.15 18.34 16.87

4.42

4.03

3.66

3.27

7.10

7.53

5.67

6.72

7.36

5.56

5.90

5.91

6.93

6.64

5.44

61.48 61.67 60.25 68.94 66.88 65.52 67.99 60.57 60.91 66.26 68.63

Total
Stockholders'
Equity

38.52 38.33 39.75 31.06 33.12 34.48 32.01 39.43 39.09 33.74 31.37

Total Liabilities
& Equity

100.00 100.00 100.00100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

Financial ratio analysis includes the following ratios:


1.
2.
3.
4.
5.

Liquidity ratio
Activity ratio
Financial leverage
Profitability ratio
Market ratio

1. Liquidity ratio
Liquidity ratios determine the companys ability to meet its short term obligations by using the
assets that more quickly converted into the cash. The assets that are quickly converted into the
cash are termed as liquid assets. They are shown as current assets in the financial statements.
Current assets are used for the daily base operations of companies known as the working capital
of the organization (Wyss, R. V. 2012). Net working capital is calculated as current assets exceed
the current liabilities.

11

Liquidity ratio calculations include:


Current ratio
It indicates the ratio of current assets to current liabilities: it indicate the companys ability to
meet its current liabilities with current assets. 2:1 is the best indicator it mean double the current
assets are taken as good financial indicator to meet its short term liabilities. We have calculated
the nestle Malaysia current ratio of five years, data has been taken from nestle annual report.
Formula: Current assets\Current liabilities
Years
2010
2011
2012
2013
2014

Ratio
1.09
1.11
0.90
0.87
0.68
Nestle Malaysia

Operating cycle
The role of operating cycle is to estimate the time that has been taken to produce cash from the
investment in goods and services. The net operating cycle means the total time taken to produce
cash.
Formula
Operating cycle = no of days of inventory + no of days of receivables
Net operating cycle= operating cycle no of days of receivables

Years
2010
2011
2012
2013
2014

Net operating cycle


509
582
829
664
857

Quick ratio
It is basically calculations of the quick liquid assets to satisfy the current liabilities. It is also
known as asset test ratio
Formula
12

Quick ratio = current assets inventory/current liabilities


Years
2010
2011
2012
2013
2014

Quick ratio
0.56
0.54
0.46
0.48
0.40

Net working Capital


It indicates the ratio of current assets minus current liabilities to sales. It means that it shows the
firm liquidity in terms of sales.
Formula
Net working capital to sales ratio = Current Assets- current liabilities/sales
Years
2010
2011
2012
2013
2014

Net working capital MYR


63
100
-89
-142
-413

Results summarizes
The liquidity ratios of Nestle show the average results. The current ratio and quick ratio shows
the lower rates then their past years trends (Williams, A. S., & Shoesmith, F. 2010). These ratios
should be increasing because the short term obligations are based on the liquidity of the current
assets. Net working capital shows very bad trends from its past years it shows negative
calculations. The days of operating cycle is also increasing from the past years. The operating
cycle lower days are considered as good because it needs less current ratio margin. Lower
operating cycle increases the firms low risk financial condition.
2. Profitability Ratios
Profitability ratios indicates the profit of the organization against it sales and expenses. It express
the profit margins to show the how much is left after the cost of goods sales. It is very important
for the firm to know how much firm is capable of making new investment. Following ratios are
calculated to indicate the firms profitability ratios.
Gross profit margin
13

It indicates how much is left behind after cost of goods sales.


Formula
Gross profit margin = Gross income / Sales
Years
2010
2011
2012
2013
2014

Gross profit margin %


33.4
32.8
34.1
35.5
35.3

Operating profit margin


Is the ratio of operating profits, indicates the how much is left after the operating expense
Formula
Operating profit margin = operating income / sales
Net profit margin
It is the ratio of total income to sales that how much is left after all expense
Formula
Net profit margin = Net income / Sales
Years
2010
2011
2012
2013
2014

Net profit margin MYR


12.11
12.33
14.42
15.34
15.08

Result summarizes
Profitability ratios indicate the return money after the sale and meeting all expenses. These ratios
are very important for the investors and the shareholders to see the returns of company (Wet, J.,
& Mpinda, M. 2013). The higher trends are considered as good indicators. From the past years
net profit margin and gross margin is increasing but from the years 2013 2014 are equal there
is no increase in the profitability of the Nestle. Overall it shows the good scenario of increasing
trends. Economic downturn has effect on the stock market may be the investments are the
reasons in average profitability ratios.
14

3. Activity ratios
Activity ratios measured that how well the assets are used. It indicates that how well firm is
utilizing its investment to work. The most common activity ratios are
Inventory turnover
It indicates the cost of goods sold to inventory
Formula
Inventory turnover = cost of goods sold/ inventory
Years
2010
2011
2012
2013
2014

Inventory turnover
7.30
7.03
6.47
7.54
7.98

Asset turnover
It indicates the ratio of sales to the total assets
Formula
Total asset turnover = Sales / Total assets
Years
2010
2011
2012
2013
2014

Asset turnover
2.31
2.49
2.33
2.40
2.19

Result summarizes
The activity ratios of nestle are not much improving from the last five years. Only the few points
of increase is shown which average in no is. The activity ratios indicates the how well the
investment in assets are generating the revenues (Trueman, B., Wong, M. H. F., & Zhang, X. J.
2003). The total asset turnover is not on much increasing trends it shows that the calculations of
2014 are less 2013. This indication is not satisfactory organization must see its asset turnover
reasons. Redirect its activity analysis to get good turnover.

15

4. Financial Leverage ratios


Financial leverage ratios are used to check the financial risk that company has to own. How the
particular level of mix of debt and equity is utilized.
Following ratios are calculated the leverage ratios
Equity ratio = total debt / total shareholders equity
Years
2010
2011
2012
2013
2014

Debt/equity
0.53
0.53
0.13
0.11
0.12

Result summarizes
The financial leverage from the past five years shows the decreasing trend which shows the less
risk in debts. The latest year show the increase of one point.
5. Market ratios
It deals with the financial condition and performance of the organization; it provides useful
information for managers and creditors. It includes the following ratios
Earnings per share = net income to shareholders/ no of shares out standing
Years
2010
2011
2012
2013
2014
Result Summarization

Debt/equity
1.67
1.95
2.16
2.40
2.35

The earnings per share are very important for the mangers to estimate the financial conditions
and for the creditors also. The continuous increasing trends are summarized from the past five
years. There is significant increase is assumed from 2013 2014. This enhances the investors
interest for Malaysia. The people are waiting for the long term investment, earnings per share is
very important source of information for them.

Dividend policy of nestle


16

The best possible dividend policy is defined as the policy that maximizes the stock prices of the
company which consequently maximizes the shareholders wealth. Thus, it may lead to the
improvement of the economic growth. In shareholders point of view, they prefer current dividend
to future income. In other words, dividend is the important determinant in order to examine the
shareholders wealth (Hussainey et al., 2011). Nestle Malaysia is dealing in the highly
competitive food markets; their dividend policy that based on stock rate is growing on quarterly
basis. Their dividend policy is always according to their competitors moves regarding dividend.
Executive stock option are readily opened in nestle Malaysia. There are different in policies are
assumed because there are executive level changes are don in 2013.
There are no exact rules and regulations for dividend payouts in Malaysia companies are free in
deciding the payout ratio. In food sector like nestle, unilever and Dutch lady milk. Basically
there are two kinds of dividend policies that are followed by nestle Malaysia. Managed dividend
policy is positively followed in some quarters when it is believed that investors should return
maximum profits and increased in share price is related. Yet, residual dividend policy is
implemented by firm which payout left cash as dividend after attractive speculation ( Malkawi
2012). But as Dutch lady milk changes its dividend payout ratios. Ultimately nestle follows the
managed dividend policy

date

Revenue
Financial No Financial
(RM,000
Year
. Quarter
)

Profit
Net
Earning Dividen NTA
Before
Profit
Per Share
d
(RM
Tax
(RM,000
(Cent)
(Cent)
)
(RM,000)
)

25/02/201 31/12/201
6
5

31/12/201
5

1,198,94
2

118,677

99,789

42.55

130.00

3.02
0

22/10/201 31/12/201
5
5

30/09/201
5

1,218,38
5

205,225

179,161

76.40

65.00

3.45
0

12/08/201 31/12/201
5
5

30/06/201
5

1,142,90
1

159,556

123,903

52.84

65.00

2.95
0

20/04/201 31/12/201
5
5

31/03/201
5

1,277,72
9

244,252

187,878

80.12

0.00 4.110

17

23/02/201 31/12/201
5
4

31/12/201
4

1,108,76
2

117,496

98,304

41.92

175.00

3.31
0

27/10/201 31/12/201
4
4

30/09/201
4

1,157,29
5

189,820

150,075

64.00

0.00

3.07
0

30/06/201

1,270,16

155,057

118,478

50.52

60.00

238,813

183,527

78.26

0.00

124,444

100,455

42.84

175.00

177,315

136,591

58.25

0.00

174,180

140,238

59.80

60.00

243,115

184,417

78.64

0.00

112,864

99,479

42.42

155.00

173,970

127,299

54.29

0.00

144,008

120,495

51.38

55.00

206,827

158,080

67.41

0.00

101,847

87,066

37.13

125.00

138,080

110,000

46.91

0.00

127,775

106,549

45.44

55.00

191,107

152,686

65.11

0.00

45,004

39,259

16.74

12/08/201 31/12/201
4

17/04/201 31/12/201
4

24/02/201 31/12/201
4

12/11/201 31/12/201
3

22/08/201 31/12/201
3

30/04/201 31/12/201
3

21/02/201 31/12/201
3

01/11/201 31/12/201
2

30/08/201 31/12/201
2

25/04/201 31/12/201
2

23/02/201 31/12/201
2

04/11/201 31/12/201
1

18/08/201 31/12/201
1

20/04/201 31/12/201
1

24/02/201 31/12/201

2
1
4
3
2
1
4
3
2
1
4
3
2
1

4
31/03/201
4
31/12/201
3
30/09/201
3
30/06/201
3
31/03/201
3
31/12/201
2
30/09/201
2
30/06/201
2
31/03/201
2
31/12/201
1
30/09/201
1
30/06/201
1
31/03/201
1

4 31/12/201

4
1,272,71
2
1,138,311
1,208,04
1
1,214,22
2
1,227,35
1
1,099,79
9
1,142,99
4
1,149,52
2
1,164,12
8
1,188,96
1
1,171,46
8
1,155,56
7
1,184,99
8
963,893

3.01
0
4.26
0
3.48
0
3.59
0
3.01
0
3.99
0
3.20
0
3.36
0
2.81
0
3.57
0
2.73
0
2.93
0
2.58
0
3.28
0

115.00 2.62

18

28/10/201 31/12/201
0

26/08/201 31/12/201
0

21/04/201 31/12/201
0

3
2
1

30/09/201
0
30/06/201

991,076
1,050,86

31/03/201

1,020,48

132,652

113,187

48.27

0.00

117,470

100,153

42.71

50.00

170,617

138,798

59.19

0.00

2.94
0
2.47
0
3.03
0

Results summarizes
The dividend payouts are very attractive for the share holders. As the trends shows in the above
table the dividend payout ratio is continuously increasing and people are more concentrated to
invest in the nestle Malaysia Berhad (Wahab et al., 2008).. In the start of 2016 the payouts are
positive of starting 130 and earnings per share are good. In competition with Dutch lady milk
nestle follows the managed dividend policy and believes in increasing the wealth of investors
(Salim & Yadav, 2012 ). As a financial analyst it is suggested that the people who are interested
in investing shares nestle Malaysia shows the positive impacts in making long term investments.
Nestle Malaysia has shifted it concerns towards the maximization of shareholders wealth as this
is reported in the annual reports.
Competitors analysis
The major competitors of nestle Malaysia are Dutch lady milk and Kelloggs. This competitors
analysis is helpful for the investors to compare the financial position and standing of the
companies. This is helpful in making investment decision. It will show the financial ratios
analysis. Malaysia is very emerging market in halal food and government policies are very
supportive for the companies to expand their business in ethical manner.
Year
2014

Curren
t ratio

Quic
k
ratio

Net
workin
g
capital

Gross
profit
margi
n%

Net
profit
margi
n

Inventor
y
turnover

Asset
turnove
r

Nestle
Malaysia
Dutch
lady milk
Kellogg
s

0.68

0.40

-413

35.3

15.08

7.98

2.19

Financia
l
Leverag
e
Equity
0.12

1.44

0.92

79

32.8

14.8

6.53

2.63

2.2

0.56

0.28

-253

34.3

8.1

6.99

0.89

7.7

EPS

2.3
5
1.7
2
1.7
2

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Result summarizes
In comparison analysis the major strengths of nestle Malaysia should be improved. In halal food
Dutch lady milk and Kelloggs are the biggest competitors of Nestle. Summarizes the results of
financial analysis comparing with Dutch lady milk and Kelloggs overall the performance of
nestle is good. The current ratio is lower than both competitors. Quick ratio with 0.40 also shows
lower rate because these ratios are the indicator of liquidity in terms of short term obligation.
Gross profit margin and net profit margin has also shown the good calculation then the other two
competitors. Financial leverage shows the average calculations then the other two competitors it
indicates the Nestle is capable of taking any risk. Earnings per share indicate the good returns.
The debt and equity ratio is very well balanced by the nestle, that is why nestle investment
opportunities are higher than the other two competitors because it is very low in nos. But the
liquidity ratios should need financial mangers consideration to improve its calculations.
SWOT analysis of Nestle Berhad
On the basis of above comparison SWOT analysis is done to clarify the major strengths,
weakness, opportunities and threats.
Strengths
The major financial strengths of Nestle are the dividend payouts and having good production
capabilities.
In some of its products Nestle is becoming the market leader.
Nestle Malaysia overall financial performance is capable of new investments.
The financial team is very coordinating.
New investment opportunities are offered to shareholders.
New factor or production plant is added to increase the capacity for the manufacturing to
meeting the issues of delay.

Weakness
The major weaknesses of nestle is that there liquidity is not managed from two years.
There financial resources are mix of good and average.
The financial analysts are not that much capable.
Threats
20

The major threats are the growing competition local or international.


Economic downturn is also a big threat.
New capacity building should be risky.
Inflation is the biggest threat to satisfy shareholders, it is difficult to have continuous increase in
payouts
Opportunities
Go for cheaper and quality oriented raw material.
New capacity buildings are important investment.
Take new investment risk its ratios show positive trends as well.
New technology advancement is very important
Increasing their just in time speculation
As the digitization increases, there are several issues rising in food requirement available .
Scenario Analysis
Scenario analysis means that it is the process estimations of the expected values of portfolio in a
given time to assume the specific changes in the portfolio trends. Scenario analysis is useful in
making the future projection focused on the expected rates of returns; financial analysis can help
to design the scenario of the firms cash flows and several payouts.
The expected cash flows or liquidity of assets is valued as risky. Future projections are very
important to make for the risky assets and cash flows of the company. The more precise
measures are taken to understand the scenario portfolio. The results may vary from the
projections. Because of the time duration different factor like inflations, changing in the policies
and cash flow trend in other areas may be not expected. This is intent to do for the risk
assessment as much possible to be responsive for the future trends to be stable in the highly
competitive environment.
Best and worst scenario analysis
The best scenario is that with the risky assets, the actual cash flows of the firms may be varying
from the expectations. In best scenario the assets values are set to be the preeminent and
expected to be the possible best outcomes. In terms of good cash flows generated from the assets
this projection leads to the best scenario analysis portfolio. For evaluating the firm best possible

21

revenue growth rate and the operating margins at the highest level to seek profitable future. This
is not always possible to achieve possible returns as project in the scenario
Worst scenario
The worst scenario is that with the risky assets, the actual cash flows of the firms may be varying
from the expectations. In worst scenario the assets values are set to be the worst and expected to
be the possible worst outcomes. In terms of good cash flows generated from the assets this
projection leads to the worst scenario analysis portfolio. For evaluating the firm worst possible
revenue growth rate and the operating margins at the lowest level to seek bad future. This is not
always possible to achieve possible returns as project in the scenario.
Best possible scenario
In the best possible scenario techniques the expected cash flows are not drawn. This technique
tries to build the optimum level of realistic indicators to generate the real indication. For the
future projection of revenue growth and margin maximization have to see the possible indicators
for these prospects. The growth and the margin combination are used to analyze this future
prospect.
Nestle scenario analysis
Funding is the main element of the healthcare policy formation of Nestle . The three major
constructs of policy formation context, process and actors considers the funding a major aspect
to initiate the healthcare policy. Fundamental rules for health care explain that how well the
funding is planned, it results in good implementation of healthcare planning. Funds are generated
by the two modes. Through direct mode, funds are generated through executive stocks. In Nestle
the funding policy is very clearly stated tax that is directly levy on firms like insurance, on
employees payroll. The other mechanism for collecting funds is through charitable trust. The
funding policies vary from region to region.
Best and the worst scenario
The scenario analysis of the nestle is focused on the earnings per share or the payouts that are
indicated in the financial analysis by the past 4 and current 1 scenario. Malaysian halal food is
very competitive and it holds the large no of investors. So the nestle Berhad indicates the best
possible payouts to maintains its shareholders trust. The returns are expected on the highest level
and the margin ratios are considered to be the strong in the future. New investments are to be to
expand the business on the continuous basis. The current ratio and quick ratio are not so
supported for the nestle good scenario. The continuous fluctuation in the current acids can be
seen as the worst scenario for the nestle Malaysia. The pricing policy is also a good and bad
scenario for nestle because as the price of dairy farming is increasing. It is very difficult to

22

manage the standard pricing policy. The quality raw materials substitutes should be planned to
overcome this future prospect.
Result summarization
The results of scenario analysis shows the positive prospects but to determine the future
projection it is important to improve the financial condition of the organization as well.
Organization should carefully manage the current assets to current liabilities because it impacts
on the long term liabilities and debts. Overall the future suspects are growing.
Beta calculation for the nestle Berhad
Levered/Unlevered Beta of Nestle Malaysia Bhd
The Beta is a relevant measure of volatility. Nestle Malaysia Bhd. shows a Beta of around 0.06.
This is significantly lower than 1. The volatility of Nestle Malaysia Bhd. according to this
measure is significantly lower than the market volatility. The beta calculation is basically the
summarization of the whole results and it shows not significant profitable market indicators for
the organization

International Peers
Market
Company Name

Ctry

Cap.
last (m$)

Nestle Malaysia Bhd.

MYS

4 211

International Peers Median

Year-To-Date

Beta
1-Year

Price Change
(in local currency)

0.06

0.8%

0.77

-4.0%

Nestle S.A.

CHE

223 962

0.81

-4.0%

Nestle India Ltd.

IND

7 436

0.72

-10.6%

Parmalat S.p.A.

ITA

4 996

0.14

0.9%

Danone SA

FRA

43 643

0.77

2.6%

The beta calculations should be improved as it is not in the negative trend as its international
competitors shows some negative means. The financial prospect are very difficult to handle
because every government has its own rules and regulations. Economic downturn is also
23

suspected in 2013- 2015 that impacts the financial conditions of the organizations. Inflation and
increase cost of the raw material to manage the price is very difficult to handle

Conclusion
This report shows the results of the five year financial ratios of the Nestle Berhad different ratio
show different indicators. Competitor analysis is also given to show how the company stands in
the competitor environment. Detailed dividend policy is explained to the dividend policy of the
nestle Berhad. Scenario analysis is also done to explain the expected future projections of the
nestle Malaysia Berhad.
The contemporary nestle issues affect the national and international policy in terms of resolving
the issues like increase in digitization, lack of strategic fit and funds. As the population increases,
competition regarding public and private organizations is also increasing. Consumers want the
quick response and compare the available healthcare products to. These issues are increasing day
by day, thus the health care reforms are very important to be discussed.
To address these arising issues it is important to consider the financial prospects. Management
concerns regarding investment facilities needs to be addressed. Increase in the population means
an expectation to increase the capacity of facilities.. Training and monitoring for the financial
analyst staff should be organized on the continuous basis.
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