KUALA LUMPUR: A cup of milo will cost more next month as Nestle Malaysia plans to increase the price of Malaysia's favourite beverage by 5% to 7% from May 1.
Nestle's managing director Alois Hofbauer said the price increase was inevitable following the price hike in milk products last February due to higher raw material prices.
"Commodities costs are going high, including milk, coffee and cocoa, we have to find ways to offset headwinds internally as we could not absorb all these (costs) increases," he told a press conference after the company's AGM here yesterday.
Hofbauer doesn't rule out the possibility of more price hikes in future as commodities prices are not expected to ease this year.
However, he stressed that any price hikes would be gradual to avoid increasing consumers burden, which in turn could affect demand for its products.
Malaysia Dry Foodstuff Importer & Exporter Association had earlier said that it was informed by Nestle that prices for Milo products will be increased.
Meanwhile, Nestle said it has put in place contingency plans to ensure its manufacturing operations are not affected by the current water rationing exercise.
"We will focus on leveraging ground water of which two of its wells have been reactivated, besides possibly bringing tankers from Negri Sembilan," said Hofbauer, adding that the group will look to have more wells.
Although its manufacturing complex in Shah Alam is not affected by the water rationing exercise, he acknowledged that if the situation prolongs, Nestle will be facing a big challenge as it could not operate without water supply.
"We won't let the plants shut down, therefore we have contingency plans, making sure water supply can last for a long time," he added.
Nestle expects its new manufacturing plant in Taman Sri Muda, Shah Alam to start operations by year-end and add another 75% to its production capacity of ready-to-drink segment.
For the financial year ended March 31, 2014, Nestle recorded a lower net profit of RM183.53 million compared with RM184.42 million a year ago, mainly due to higher operating expenses arising from promotional activities.
Hofbauer, however still believes local sales will continue its fast growing trend, while export sales could be leveraged on the new manufacturing facilities which comprise of another 15 new production lines, doubled from the current capacity.
Currently, export sales account for about 24% of its total sales.
Meanwhile, Nestle has set aside RM280 million in capital expenditure for the current financial year, a bulk of it will be used to fund the new manufacturing plant.
