Financial Review

Nestlé Malaysia was able to produce positive results for 2019, against a volatile and challenging
backdrop. The first without Chilled Dairy was divested by the end of 2018. Sales amounted to
RM5,5 billion in the financial year. Net of this effect, the increase in revenue was 1.6%, led by
strong domestic sales at 4.7%. In view of rising commodity prices and loTheyr export
requirements, it has been achieved. They have protected consumer access by means of a number
of efficiency measures that have produced viable investments, reducing any need for rising
prices. The main driving force of development was their domestic performance, which was
supported by effective marketing, strong sales operations and a host of thrilling innovative
products that Theyre Theyll aligned with customers. This helped them to maintain and improve
their leadership in several categories. On the basis of these strong results the Group increased
profits after tax to RM 673 million, by 2.1 percent. Despite increasing commodity cost, profits
before tax amounted to RM876 million.
For the financial year ended 31 December 2019 , the Board of Directors announced a final
dividend of RM 1,40 per share. The cumulative annual dividends would therefore hit RM 2,80,
which is equal to last year's record-high dividends. Mr. Aranols said, "They reaffirm
theirdedication to sustainable capital creation and to generate strong short-term returns for
theirshareholders with this dividend. They do so when creating continuous potential for the
future and They remain dedicated to contributing positively to society on multiple fronts”.

With this in mind, Nestlé Malaysia expanded its environmental protection activities in 2019, in
particular the plastic waste campaign, considerably. The first move was to conclude the removal
of disposable straws through the UHT brand and collection and to step up educational initiative
in schools through the MILO and Tetrapack CARETon Campaign. In its Nestlé Kinabatangan
Rileeaf project, reforestation efforts along the loTheyr Kinabatangan River in Sabah have
continued, and by mid-2020 it will achieve one million trees. In its Nestlé Kinabatangan Rileeaf
project, reforestation efforts along the loTheyr Kinabatangan River in Sabah have continued, and
by mid-2020 it will achieve one million trees. An internal task force for "Green Gladiators" also
alloTheyd for Nestlé Malaysia employees to mobilize energy and thinking so that progress on
environmental initiatives can be speededed up.

Breakdown of Revenue 2019

In 2019, Nestle Malaysia has recorded RM 5,518,076 in group revenue and from which, its sales
breakdown is as follows:

Segment 1: Food & Beverage (F&B)

This segment is employed in the manufacture and commercialization of a wide array of F&B
products from brands like MILO , MAGGI, Kit Kat, Nestum etc. Over the past 10 years, CAGR
has achieved sales and profit of 4.1 and 8.8 percent. Revenues in 2009 rose from RM 3.08 billion
to RM 4.68 billion in 2019 , up from Ringgit 4.43 billion in 2018. This culminated in a rise to
RM 744.9 million in 2019 in their net income from RM 350.4 million in 2009.

Segment 2: Global Managed Businesses (GMB)

This segment derives income from 4 subdivisions which include:

– “Nestle Nutrition: Milk Powders for Babies and Toddlers”.

– “NESPRESSO: Coffee Machines and Capsules (started since 2016)”

– “Nestle Professional: F&B products to F&B operators”.

– “Nestle Health Science: Innovative Products for the Healthcare Industry”. – Annual Report
2019

Overall, with its sales and operating income CAGR hit 5.8 and 4.0 per cent. The revenue grew
from RM 660.3 million in 2009 to Ringgit 836.08 million in 2019. It led to growth from RM
118.9 million in 2009 to RM 172.2 million in 2019 in operating income.

Profitability
In the last 10 years, Nestle Malaysia has produced CAGR sales of 4.6 percent and 7.2 percent. In
2009, sales rose to RM 5.52 billion by 2018 from RM 3.74 billion. The shareholder earnings
Theyre increased from RM 351.8 million in 2009 to RM 658.9 million in 2018. Their results
increased. As discussed above, this is driven by revenue growth in the two segments.

BetTheyen 2009 and 2018, Nestlé Malaysia generated cash flows of 7.22 billion RM. This has
invested out of which:

– Capital expenditures of RM 1.85 billion.

– 344.3 million RM in long-term total loan repayments.

– Dividend distributions to the new owners of RM 5.16 billion.

Nestle Malaysia is thus a cash cow that has agreed to shell out much of its cash profits in the
form of dividends to compensate its shareholders.

Balance Sheet Strength

Nestle Malaysia, with gross non-current liabilities of RM 410.9 million as of 31 December 2018 and
shareholders ' equity of RM 654.3 million. The gear ratio is thus 62.8%. In 2018, Nestle Malaysia, which
became part of its free cash balance of RM 1.0 billion, invested RM 39.5 million on net funding expenses.
Therefore, Nestle Malaysia has a strong balance sheet, despite being heavily focused, because it can
sustain its debts.

Who Owns Nestle Malaysia?

Nestle S.A., as of 28 February 2019 Continues to keep being Nestle Malaysia's largest
shareholder with 72,61% shares. In the meantime, Nestle Malaysia owns 7.39% of its
shareholdings while the second biggest shareholder is the Employees Provident Fund ( EPF)
commission. In combination, they currently hold an overall share of 80 percent in Nestle
Malaysia. The remaining 20% was kept primarily by renowned financial entities such as:

– State Street Bank & Trust Company: 0.63%

– Vanguard Total International Stock Index Fund: 0.40%

– Citibank New York (Norges Bank 14): 0.37%

– Vanguard Emerging Markets Stock Index Fund: 0.36%

– GIC Private Limited for Government of Singapore (C): 0.24%

Growth Initiative 1: Nestle Distribution Centre (NDC)

Nestle Malaysia opened 515,000 sq. of its new state-of-the-art NDC. High density warehouse
room planned to accommodate up to 20 percent more items following a 20 percent decrease in
storage space relative to the previous distribution center at the beginning of 2018. It is one of
Nestlé Malaysia's main programs to improve productivity and cut costs into the future.
Growth Initiative 2: MILO Manufacturing Centre

In Chembong, Negeri Sembilan, the company announced on 9 October 2018 that it would
expand MILO. Nestle Malaysia would invest RM 100.0 million in this project and the plant
would be the largest manufacturing center in the world once it has been completed.

P/E Ratio

Presently, Nestle Malaysia is trading at RM 145.50 per share. In 2018, it made RM 2.81 in
earnings per share (EPS). Hence, its P/E Ratio is 51.78, close to its highest in 10 years.

Strategies

The current CEO has a good track record leading to the rapid development of his plan for
Nutrition, Theyllbeing and Theyllness (NHW). The portfolio has been repositioned more quickly
and its high growth and marginal divisions have been specifically focused. The sales growth of
the food and beverage industry has been threatened by the pace of production. Set a certain
margin target and already has goals in advance. The company is in the process of meeting its
2020 margin growth, productivity gains and overall cost savings targets. Substantial share capital
was returned to shareholders, including dividends and share repurchases, returning more than
CHF 10 billion in 2017.

Invest in high-growth categories and geographies.

They are open to strategically spending in all groups behind growth prospects. Emerging markets
accounted for 42% of the turnover in 2019 and grew 4.7%. It's twice as quick as advanced
markets. They continue to work to regain productivity and competitiveness of businesses that
struggle to succeed. In declining from or to non-core firms such as Nestlé Skin Care, they are
starting to transform their portfolio into lucrative and extremely rising businesses. The proposal
to reverse the Gerber baby food business in the United States has been further developed.
Innovation, particularly with organic offerings and healthy snacks, supported the improvement.
Manage their portfolio and focus on categories where Nestlé has an ability to win. From the
beginning of 2020 the company “Nestlé Waters” will be integrated into the three geographical
areas of the Group. This has been added to the focus on high segments, like sparkling, premium
still and aromatic water. This has been achieved. The sales of their US ice cream company were
also announced.

• We have made good strides in their Structural Savings Plan in the engineering,
production and administration areas.
• Gross CHF 1.9 billion savings for the 2016-2020 period or 76% as planned were
produced by the end of 2019.
• 16 plants were closed or sold in 2019 with a high fixed overhead of 5,5%.
• The number of raw materials and packaging requirements decreased during the second
consecutive year, resulting in a reduction in flexibility and expense.

 In the form of R&D funding, brand sponsorship and capital spending, long-term
commitments to foster sustainable income growth.
 All programs are particularly dedicated to the most socially effective measures.
 The pattern was kept back by working capital.
 At the end of 2019, their 5 quarters total working capital was 0.6 percent below the
previous year's average of 80 bps.
 Funds are a central factor of the asset management strategy.
 Targets are geographically and culturally aligned with their organization and offer
competitive financial benefits.
 They are selective in buying price in order to optimize their return on investment capital.
 Good oversight is in place for acquisitions with clear transition strategies, effective
transparency and goals.
 They have created a new Group strategy and Business Development function to better
identify internal and external growth strategic opportunities as of 1 January 2020.
 They also shown their commitment to sustain a high degree of reinvestment in the
business while consistently rising the return on share capital.
Operational Review of Nestle Malaysia

They work in a dynamic world of increasingly evolving consumer conditions, especially for
healthy lifestyles as well as for coping with environmental problems such as climate change.
This trend, which materializes worldwide and gains momentum in Malaysia, requires that all
players on the rapidly moving consumer goods market adapt business models and modes of
operation quickly.

For example, with its campaign for MAGGI CUKUP RASA, "Tak Kenal, Tak Cinta," MAGGI
brand has expressed the commitment to support women's empowerment, especially among
young mothers; encouraging women to empowers themselves and to explore new things from
their comfort zones. While cooking was a key component of this initiative, it also encouraged
Malaysian women to seek their own goals and life ventures.

We tried to educate Malaysians, through the MILO brand, about the value of a safe and active
lifestyle. In addition to exercise in sports, the company also invites people to have a full
breakfast daily, supported by their campaign MILO Malaysia Breakfast Day (MBD), in which
more than 88,000 Malaysians participated in 2019. They were also pleased to remember the
simple truth of MILO as a delicious beverage with the goodness of milk, malt and cocoa to
Malaysian people.