2.

0 Nestle Background

Nestlé is a multinational company and is of the world’s largest in food and beverages industry.
Heinrich Nestlé, whom also known as Henri Nestlé, was the founder of Nestlé Company
(Nestle. 2010, “Introduction”, Nestlé [Online] available at [Link]), which headquarter is
in Vevey, Switzerland in the year of 1866. Nestlé Malaysia was established in the year of 1912
in Malaysia as Anglo-Swiss Condensed Milk Company. Nestlé Malaysia head office is now
located in Mutiara Damansara, Petaling Jaya, Selangor, and has 6 sales offices with more than
5000 employees nationwide. Besides, Nestlé manufactures its own products in 7 factories and
markets over 300 Halal products across the nation. (Nestlé. 2010, “Nestlé in Malaysia”, Nestlé
[Online] available at [Link]) Nestlé specialized in foods and beverages industry, a
few of the many well known brands Nestlé has in Malaysia includes Maggi, Nescafé, Milo, Kit
Kat, Nesvita (formerly known as Nestum), as well as pet care products such as Purina and
Friskies.

Nestlé’s vision (Nestlé. 2010, “Corporate Philosophy”, Nestlé [Online] available at

[Link]) is to be the leader in Nutrition, Health, and Wellness Company by
delivering world-class products of the highest consistent quality, reliability, and convenience
based on business excellence principles throughout the operation. Nestlé’s mission (“The
Nestlé Corporate Essence – Our roots and wings” 2007, p.4) is to enhance the quality of life
with good food and beverages, everywhere, so people could live a healthier life. In order to
achieve their vision and mission, Nestlé Nutrition Research Centre (Nestlé. 2010, “Research &
Development”,
3.0 The product the company produce

Nestlé is the world’s leading and trusted food, nutrition, health and wellness company with a
presence in over 100 countries. It operates 456 factories in over 80 countries. In Malaysia,
Nestlé was established in 1912 and currently manufactures, imports, exports and distributes a
wide range of halal products. Guided by the Nestlé Business Principles, we have built our
business on the fundamental principle that to have long-term success for our shareholders, we
have to ensure that all our activities are sustainable and, additionally, create significant value to
the society. Meeting consumers’ needs and demands is vital to our business. At Nestlé, we
continuously innovate and renovate our products to ensure that we offer tastier and more
nutritious products than our competitors. We are committed to increasing the nutritional value of
our products while improving the taste and we have achieved this with initiatives such as
“Nutritional Compass” and “60/40+”. In the last three years, we have already spent more than
half a billion ringgit mostly in manufacturing lines for new products, capacity increase and
technical skills for halal manufacturing. These investments are focused on domestic
consumption and exports. With Nestle Malaysia being the halal hub for Nestle, our export
business has become close to a quarter of our revenues. There are many products that have
been produce by Nestle Malaysia such as Breakfast Cereals, Dairy, Coffee, Food, Ready-to-
Drink, Ice Cream, Confectionery, Chilled Dairy, Junior Foods, NESTLÉ Health Sciences and
many more. Nestle also have produce many new product such as MAT KOOL Panda

MAT KOOL has introduced another fun product which is the MAT KOOL Panda—a cute panda-
shaped ice cream with a rich and creamy combination of vanilla and chocolate; its smooth
texture makes it a delightful treat to share with friends.
Next is NESTLÉ CHEERIOS Oat Crisp

 NESTLÉ Cheerios Oat Crisp is a delicious combination of crispy and toasted whole oat
breakfast cereal flakes and whole grain oat breakfast rings.

 Contains Beta Glucan which helps reduce cholesterol plus easy to prepare in the
morning.

 Each 40g serving of NESTLÉ Cheerios Oats Crisp provides 1.2g of Beta Glucan.

 NESTLÉ Cheerios Oat Crisp offers a convenient, affordable option to help consumers
choose healthier lifestyle and potentially helps reduce cholesterol issues.

The packaging is available in 2 pack sizes which is Medium 190g & Large 400g

Nestle also have produce NESTLÉ JUST MILK™

This product has a natural Goodness of Calcium and Protein are good for strong bones, teeth
and muscle growth. It is also available in Full Cream and Low Fat. So the customer can choose
either the Full Cream or the Low Fat flavoure.
Also, not only in Malaysia but also in worldwide, Nestle has produce KIT KAT Green Tea Bites

This is the world’s first Halal KIT KAT Green Tea and now is available in delicious bite sized
morsels! Have a bite of KIT KAT Green Tea BITES and experience one of the sweetest
moments in your life. It has a high quality Japanese green tea confectionary that melts in your
mouth with a nice crispy wafer that will make you crave for more.

From a financial performance perspective, the group has performed very well, growing the top
line at a faster pace than the country’s yearly GDP’s growth and improving profit margins year
after year. We have driven our financial performance by leveraging our strong brands, our
nutritious and healthy products, our manufacturing capabilities and our people. Our overall
performance is reflected in our income statement with growth in sales, profit margins and
earnings per share, as well as a strong balance sheet and cash flow, with a notable
improvement in our trade net working capital, which saw a 30% reduction over three years.
4.0 Determine and explain the sector of the company is in

4.1 The Sector of Nestle Company

In general, Nestle was involved in food and beverage sector which Nestlé company is a Swiss
multinational company that manufactures a variety of snacks and other manufactured products.
The company was founded in 1866 in Vevey, Switzerland. At that time, it was a dairy company
based in Cham, Switzerland by Anglo-Swiss Condensed milk company. Nestle is the world's
largest food company based on its revenue. Nestlé products include baby food, bottled water,
breakfast cereals, coffee, sugar, dairy products, ice cream, pet foods and snacks. Nestlé's 29
brands such as Nespresso, Nescafe, Kit Kat, Smarties, Nesquik, Stouffer, Vittel, and Maggi,
generate over 1 billion Swiss francs (about $ 1.1 billion) in sales each year. Nestlé has about
450 factories, operates in 86 countries, and employs about 328,000 employees. The company
is one of the major shareholders of L'Oréal, the world's largest cosmetics company.

Moreover, Nestle is one of the largest companies in the fast-moving consumer goods (FMCG)
sector and is the market leader in several of the sector’s markets, especially with revenues in
consideration. The FMCG sector is currently dominated by companies in the snacks, food and
beverages industry ([Link], 2015). These companies include Nestle, Tyson Foods,
Coca-Cola and Kraft Heinz.

4.2 Business Activities

Nestle has a wide range of products in its various verticals in different stages of the product
pipeline (Immonen & Saaksvuori, 2008). In the liquid and powdered beverages sector, Nestle
has two main products in the powdered beverages market, Nescafe and Nespresso, with
Nescafe being a cash cow and Nespresso being a star. In the ready prepared and cooked foods,
the Maggi brand, especially Maggi noodles, is a cash cow while in the bullions and dried food,
the Maggi brand is a star, with its major competition being the Knorr brand from Unilever. In the
chocolate vertical, KitKat and Munch are the main products from Nestle falling in the star
category given that although the competition is stiff, the market segment has huge potential for
growth and the company is in a position to increase both market share and revenue.
Nestle Company runs a food product manufacturing business. Nestle's manufacturing activities
include extractive activities, consumer goods production, industrial goods. This is because
Nestle is a well-known company in Malaysia as well as worldwide. Nestle is an organization that
makes nutritious daily meals with added nutrition to ensure continued health. The nesting
process is thus:

1. Extractive production activities

• This activity is the production of raw materials from natural sources of land or ocean.
For example, efforts to grow Robusta-type coffee trees have been carried out to produce
Nescafe instant coffee.

2. Consumer goods production activities

• Consumer products are typically used by users, family members or households for their
own use to meet their needs or requirements but are not intended for re-processing.
Examples of Nestle user products are Nestle Bliss, Nestle Coco Crunch, Nestle Kit Kat
and more.

3. Industrial product production activities

• Industrial products refer to raw materials or semi-finished materials that can be

reprocessed to produce finished goods. For example, Chilean Puri production was
produced through a factory that has been operating since November last year to meet the
demands of Nestle Manufacturing [Link] produces products like Maggi chili sauce.
5.0 Nestle financial ratios and performance for each key areas.

Liquidity Ratio

𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒕
5.1 Current ratio = 𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

2018 2017

1,215,416 1,073,111
CR = CR=
1,782079 1,651,110
 0.68  0.65

- 2018 has the best current ratio than 2017.

𝒕𝒐𝒕𝒂𝒍 𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒕−𝒊𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚

5.2 Quick ratio = 𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

2018 2017

1,215,416  530,378 1,073,111  467,316

QR = QR=
1,782,079 1,651,110
685,038 605,795
 
1,782,079 1,651,110
 0.38  0.37
- 2017 has the best quick ratio than 2018.

𝒔𝒂𝒍𝒆𝒔
5.3 Total asset turnover = 𝒕𝒐𝒕𝒂𝒍 𝒂𝒔𝒔𝒆𝒕

2018 2017

3,381,380 3,309,386
TAT = TAT =
2,847,282 2,616,823
 1.19  1.26

- 2017 has the best total asset turnover than 2018.

 𝒐𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝒊𝒏𝒄𝒐𝒎𝒆 (𝑬𝑩𝑰𝑻)
5.4 Operating profit margin = 𝒔𝒂𝒍𝒆𝒔

2018 2017

875,890 812,216
OPM = OPM =
3,381,380 3,309,386
 26%  25%
- 2018 has the best operating profit margin than 2017.

𝒕𝒐𝒕𝒂𝒍 𝒅𝒆𝒃𝒕
5.5 Debt ratio = 𝒕𝒐𝒕𝒂𝒍 𝒂𝒔𝒔𝒆𝒕

2018 2017

2,192,949 1,980,929
DR = DR =
2,847,282 2,616,823
 0.77  0.76
- 2017 has the debt ratio than 2018.

𝒏𝒆𝒕 𝒊𝒏𝒄𝒐𝒎𝒆
5.6 Return on equity = 𝒔𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓 𝒆𝒒𝒖𝒊𝒕𝒚

2018 2017

39,501 36,060
ROE = ROE =
654,333 635,894
 6%  5%
- 2018 has the best return on equity than 2017
6.0 Syariah compliance listed companies.

The Nestle company is listed in the syariah as consumer products and services. So far the
nestle company been producing a halal product. Halal is about trust, responsibility, respect and
strict compliance according to syariah requirements. As leading nutrition, health and wellness
company, Nestle Malaysia has been the centre of halal excellence of the nestle group for close
three decades. Nestle interest in halal stemmed from social responsibility and respect for its
Muslims employees and consumers.

The Nestle halal policy clearly states that all food and beverage product that are manufactured,
distributed and imported by nestle Malaysia are guaranteed Halal.

Nestle Malaysia has also been recognised as the Centre of Halal

Excellence for its expertise and proactive efforts in the promotion of
Halal products worldwide. Until today, Nestle Malaysia only produces
100 per cent halal food. In 1996, Nestle Malaysia was the first group to voluntarily request
the Halal certification for all of its food products. However, this
does not mean that the food products were not halal prior to that.
Nestle is committed to ensuring that the products it distributes in
Brunei and Malaysia are certified Halal by recognised Islamic
authorities, Department of Islamic Development Malaysia (JAKIM) which
includes the Halal logo on the packaging. Its products and premises are thoroughly and
regularly inspected under strict hygienic conditions in line with the Islamic faith.

Nestle Malaysia uses halal ingredients imported from all over the
country which are certified by the Islamic Food & Nutrition Council
of America (IFANCA). It follows the guidelines for intermarket supply
of halal food detailing established in 1997, which includes export of
halal products.