th - nestle.com.my · the company secretary shared that tan sri datuk (dr.) rafiah binti salim had...

Nestlé (Malaysia) Berhad (Company Number 110925-W) (Incorporated in Malaysia)

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Minutes of the 34th Annual General Meeting of Nestlé (Malaysia) Berhad (“the Company”) held on Thursday, 26 April 2018 at 10.00 a.m. at Ballroom B & C, Hilton Kuala Lumpur, 3 Jalan Stesen Sentral, 50470 Kuala Lumpur.

Members of the Board of Directors present:

1. Y.A.M. Tan Sri Dato' Seri Syed Anwar Jamalullail (Non-Independent, Non-Executive Director)

) Chairman

2. Dato' Mohd. Rafik Bin Shah Mohamad (Independent, Non-Executive Director)

) Member

3. Tan Sri Datuk (Dr.) Rafiah Binti Salim (Independent, Non-Executive Director)

) Member

4. Tan Sri Datuk Yong Poh Kon (Independent, Non-Executive Director)

) Member

5. Dato’ Frits van Dijk (Independent, Non-Executive Director)

) Member

6. Toh Puan Dato’ Seri Hajjah Dr. Aishah Ong (Independent, Non-Executive Director)

) Member

7. Alois Hofbauer (Executive Director/Chief Executive Officer)

) Member

8. Martin Peter Kruegel (Executive Director/Chief Financial Officer)

) Member

In attendance:

Tengku Ida Adura Tengku Ismail (Company Secretary)

Attendance of Shareholders (As per the Attendance Lists): 1. The number of shareholders was 1,290. 2. The number of proxies was 391. 3. The corporate representatives from the Minority Shareholders Watchdog

Group and the Employees Provident Fund Board were present.


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1. Chairman of Meeting

Tan Sri Dato' Seri Syed Anwar Jamalullail (“Tan Sri Chairman”) was in the chair and commenced the proceedings of the 34th Annual General Meeting (“AGM”) of the Company.

Tan Sri Chairman thanked the shareholders, the proxies and the members of the

Management team of the Company for their attendance. Thereafter, he proceeded to introduce the members of the Board of Directors and the Company Secretary who were seated with him.

2. Quorum The Company Secretary confirmed that quorum, i.e. at least two (2) members, in

person, by proxy or representatives (for corporations), representing not less than one-third of the issued shares of the Company was present.

Mr. Alois Hofbauer was the proxy for Nestlé S.A. which represented 170,276,563

ordinary shares equivalent to 72.61% of the equity of the Company and the shareholders holding 205,740,893 shares had lodged their proxies within the stipulated time and the holders of 13,328,917 shares had appointed the Chairman to be their proxy. These proxies represented ordinary shares equivalent to 87.74% of the equity of the Company.

As the requisite quorum was present, the meeting was called to order. 3. Presentation of the Annual Report 2017 Tan Sri Chairman presented to the shareholders the Annual Report 2017 and read out

the summary of the Message to Shareholders as published in the Annual Report 2017. 4. Presentation on the Company’s Performance Before Tan Sri Chairman proceeded with the business of the meeting, he invited Mr.

Alois Hofbauer, the Chief Executive Officer of the Company, to present to the shareholders the Company’s performance for the financial year 2017.

Mr. Alois Hofbauer proceeded to present, for the financial year 2017, matters on the

following areas : 1. Nestlé S.A. Group and Nestlé (Malaysia) Berhad Group highlights for the year

2017; 2. Financial Highlights of the Company; 3. The Company’s F.I.T. Strategy, comprising of Fuel to Grow, Innovate to Grow

and Transform to Grow initiatives; 4. Innovation Journey; and 5. Outlook for 2018.


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Mr. Alois Hofbauer also recorded his appreciation to the employees, Board members

and shareholders for their continuous support to the Company. 5. Notice of Annual General Meeting The Notice of AGM dated 28 March 2018, having been circulated within the statutory

period, was taken as read as it was sent and received by shareholders together with the Annual Report for the financial year ended 31 December 2017.

Tan Sri Chairman informed that the AGM was the principal forum for dialogue with

shareholders, and invited all shareholders to enquire about the Company’s operations and raise any questions regarding the agenda and the resolutions tabled at the Annual General Meeting. The Company Secretary thereafter explained the process to raise questions during the meeting.

The Company Secretary also informed that pursuant to Paragraph 8.29(A)(1) of the

Main Market Listing Requirements of Bursa Malaysia Securities Berhad, any resolution contained in the notice of any general meeting was to be voted on by poll. Shareholders were informed that the poll would be conducted at the end of the meeting and that Tricor Investor & Issuance House Sdn. Bhd. and Coopers Professional Scrutineers Sdn. Bhd. had respectively been appointed as the poll administrator and independent scrutineers to validate the votes casted.

AS ORDINARY BUSINESS 6.

To receive the statutory financial statements for the financial year ended 31 December 2017 and the Directors’ and Auditors’ reports thereon.

The Statutory Financial Statements for the Financial Year Ended 31 December 2017 and

the Directors’ and Auditors’ reports were tabled at the Annual General Meeting pursuant to Section 340(1) of the Companies Act 2016. It was for discussion only and not required to be put to vote.

The Chairman then informed that the Company had received questions from the

Minority Shareholders Watchdog Group (“MSWG”). The Company Secretary then read the questions that were posted by MSWG and the Company’s responses to their questions.

The Chairman then invited comments and/or questions from the floor on the Statutory

Financial Statements for the Financial Year Ended (“FYE”) 31 December 2017 and the Directors’ and Auditors’ Reports. Questions raised by the shareholders present at the meeting were answered by the Board of Directors. A summary of the questions raised are enclosed as Annexure – A.


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There being no other questions raised, the Audited Financial Statements of the

Company for the FYE 31 December 2017 together with the Directors’ and Auditors’ Reports thereon were received as properly laid before the AGM.

A summary of questions by MSWG, shareholders/proxies and the Company’s replies

was annexed hereto and marked as “Annexure-A”. 7. Resolution 1:

To re-elect the following Directors retiring in accordance with Article 97.1 of the Company’s Constitution:

(i) Dato' Mohd. Rafik Bin Shah Mohamad

The Company Secretary tabled the resolution for the re-election of Dato' Mohd. Rafik

Bin Shah Mohamad who was retiring in accordance with Article 97.1 of the Company’s Constitution. The Company Secretary shared that Dato' Mohd. Rafik Bin Shah Mohamad had confirmed his willingness to be re-elected.

Ms. Leong Ming Chee, a shareholder, proposed that the resolution be put to vote.

Tan Sri Chairman informed the shareholders that the poll for the resolution would be taken at the end of the meeting.

8. Resolution 2:


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

The Company Secretary tabled the resolution for the re-election of Tan Sri Datuk (Dr.)

Rafiah Binti Salim who was retiring in accordance with Article 97.1 of the Company’s Constitution. The Company Secretary shared that Tan Sri Datuk (Dr.) Rafiah Binti Salim had confirmed her willingness to be re-elected.

Mr. Wan Heng Wah, a shareholder, proposed that the resolution be put to vote.


9. Resolution 3:


(iii) Martin Peter Kruegel


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The Company Secretary tabled the resolution for the re-election of Martin Peter

Kruegel who was retiring in accordance with Article 97.1 of the Company’s Constitution. The Company Secretary shared that Martin Peter Kruegel had confirmed his willingness to be re-elected.

Mr. Loh Kiat Seng, a shareholder, proposed that the resolution be put to vote.


10. Resolution 4:

To re-appoint KPMG PLT as auditors of the Company and to authorise the Directors to fix their remuneration.

The Company Secretary tabled the resolution to re-appoint KPMG PLT as auditors of

the Company and to authorise the Directors to fix the auditors’ remuneration. It was also reported that KPMG PLT had confirmed their willingness to be re-appointed.

Mr. Tang Moi Chan, a shareholder proposed that the resolution be put to vote.


AS SPECIAL BUSINESS

11.

Resolution 5: To approve the payment of a final dividend of 135 sen per share, under a single tier system, in respect of the financial year ended 31 December 2017.

The Company Secretary tabled the resolution for the payment of a final dividend of

135 sen per share, under the single tier system in respect of the FYE 31 December 2017 to the shareholders.

Mr. Ngu Deing Chun Alvin, a shareholder, proposed that the resolution be put to vote.


12. Resolution 6:

To approve the following payments to Directors (i) Director’s fees of RM1,080,000.00 for the financial year ended 31 December

2017.


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The Company Secretary tabled the resolution for the payment of Director’s fees of

RM1,080,000.00 for the FYE 31 December 2017 to the shareholders. Mr. Ng Weng Choong, a shareholder, proposed that the resolution be put to vote.

The Company Secretary informed the shareholders that the poll for the resolution would be taken at the end of the meeting.

13. Resolution 7:

To approve the following payments to Directors (ii) Director’s benefits of RM250,000.00 for the financial period from 1 July 2018

to 30 June 2019. The Company Secretary tabled the resolution for the payment of Director’s benefits of

RM250,000.00 for the financial period from 1 July 2018 to 30 June 2019 to the shareholders.

Mr. Wan Heng Wah, a shareholder, proposed that the resolution be put to vote.

The Company Secretary informed the shareholders that the poll for the resolution would be taken at the end of the meeting.

14. Resolution 8:

Proposed Renewal of Shareholders’ Mandate and Proposed New Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue of Trading Nature as set out under Section 2.3(a) of the Circular to Shareholders dated 28 March 2018.

The resolution for the proposed renewal of Shareholders’ Mandate and proposed new

Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue of Trading Nature as set out under Section 2.3(a) of the Circular to Shareholders dated 28 March 2018 was tabled. The Company Secretary explained that Nestlé S.A., as a related party and major shareholder of the Company, together with person(s) connected to them would abstain from voting on the resolution.

Ms. Leong Ming Chee, a shareholder, proposed that the resolution be put to vote.


15. Resolution 9:

Retention of Independent Director: (i) Dato' Mohd. Rafik Bin Shah Mohamad


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The Company Secretary tabled the resolution for the retention of Dato' Mohd. Rafik

Bin Shah Mohamad who has served for a cumulative term of more than nine (9) years in the Company, as an Independent Director of the Company until the conclusion of the next AGM, in accordance with the Malaysian Code on Corporate Governance (“MCCG”).

Ms. Leong Ming Chee, a shareholder proposed that the resolution be put to vote.


16. Resolution 10:

Retention of Independent Director: (ii) Tan Sri Datuk (Dr.) Rafiah Binti Salim

The Company Secretary tabled the resolution for the retention of Tan Sri Datuk (Dr.)

Rafiah Binti Salim who has served for a cumulative term of more than nine (9) years in the Company, as an Independent Director of the Company until the conclusion of the next AGM, in accordance with the MCCG.

Ms. Soon Yoke Leng, a shareholder, proposed that the resolution be put to vote.


17. Resolution 11:

Proposed amendments to the Company’s Constitution The Company Secretary tabled the resolution to amend the existing Constitution of the

Company, the details of amendments were as set out in Part B of the Circular to Shareholders dated 28 March 2018. It was noted that the proposed Special Resolution, if passed, would bring the Company’s Constitution in line with the Companies Act 2016, the updated Main Market Listing Requirements of Bursa Malaysia Securities Berhad and the new MCCG and also to enhance administrative efficiency.

Mr. Sing Chaw @ Seng Kong Choo, a shareholder proposed that the resolution be put

to vote. Tan Sri Chairman informed the shareholders that the poll for the special resolution would be taken at the end of the meeting.

18. Any Other Business It was noted that there was no notice received for any other business.


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19. Voting Process Tan Sri Chairman invited the representative from the poll administrator, Tricor Investor

& Issuing House Services Sdn. Bhd., to give an explanation on the e-voting process prior to the commencement of e-voting.

The meeting then proceeded to vote and was adjourned at 12.00 noon for the counting

of votes. 20. Announcement of Poll Results At 12.20 p.m., Tan Sri Chairman reconvened the AGM for the declaration of poll results

as follows:- Resolution Vote For Vote Against Total Votes

No. of Shares % No. of Shares

% No. of Shares %

1 203,577,598 99.97667 47,509 0.02333 203,625,107 100

2 203,494,698 99.93586 130,609 0.06414 203,625,307 100

3 203,836,098 99.98165 37,409 0.01835 203,873,507 100

4 203,776,407 99.98160 37,500 0.01840 203,813,907 100

5 203,873,007 99.99975 500 0.00025 203,873,507 100

6 203,873,098 99.99980 409 0.00020 203,873,507 100

7 203,873,298 99.99990 209 0.00010 203,873,507 100

8 33,596,844 99.99970 100 0.00030 33,596,944 100

9 203,822,998 99.98906 22,309 0.01094 203,845,307 100

10 203,556,098 99.96601 69,209 0.03399 203,625,307 100

11 203,653,398 99.99995 109 0.00005 203,653,507 100

Based on the poll results, Tan Sri Chairman declared that all resolutions tabled at the

AGM were carried. It was RESOLVED as follows:- Resolution 1

THAT Dato' Mohd. Rafik Bin Shah Mohamad, the Director retiring in accordance with Article 97.1 of the Constitution of the Company, be hereby re-elected as Director of the Company.

Resolution 2

THAT Tan Sri Datuk (Dr) Rafiah Binti Salim, the Director retiring in accordance with Article 97.1 of the Constitution of the Company, be hereby re-elected as Director of the Company.

Resolution 3

THAT Martin Peter Kruegel, the Director retiring in accordance with Article 97.1 of the Constitution of the Company, be hereby re-elected as Director of the Company.


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Resolution 4 THAT KPMG PLT, having indicated their willingness to continue in office, be hereby re-appointed as the Auditors of the Company for the ensuing year at a remuneration to be fixed by the Directors.

Resolution 5

THAT the final dividend of 135 sen per share, under a single-tier system, in respect of the FYE 31 December 2017 be and is hereby approved for payment on 31 May 2018 to members who are registered in the Company’s records on 15 May 2018.

Resolution 6

THAT the payment of Directors’ fees amounting to RM1,080,000.00 for the FYE 31 December 2017 be hereby approved.

Resolution 7

THAT the payment of Directors’ benefits amounting to RM250,000.00 for the financial period from 1 July 2018 to 30 June 2019 be hereby approved.

Resolution 8

THAT approval be hereby given for the renewal of the mandate granted by the shareholders of the Company on 27 April 2017 and new shareholders’ mandate pursuant to paragraph 10.09 of the Main Market Listing Requirements of the Bursa Malaysia Securities Berhad, authorising the Company and/or its subsidiaries to enter into the recurrent related party transactions of a revenue or trading nature as set out in Section 2.3(a) of the Circular to Shareholders dated 28 March 2018 with the related parties mentioned therein which are necessary, for the Company and/or its subsidiaries’ day-to-day operations and which are carried out in the ordinary course of business on terms which are not more favourable to the related parties than those generally available to the public and are not to the detriment of minority shareholders.

That the authority conferred by such mandate shall commence upon the passing of this resolution and continue to be in force until:-

(i) the conclusion of the next AGM of the Company following the forthcoming AGM

at which such mandate is approved, at which time it will lapse, unless by a resolution passed at the next AGM, the mandate is renewed;

(ii) the expiration of the period within which the next AGM of the Company after

the forthcoming AGM is required to be held pursuant to Section 340(2) of the Companies Act 2016 (but must not extend to such extension as may be allowed pursuant to Section 340(4) of the Companies Act 2016); or

(iii) revoked or varied by resolution passed by the shareholders in a general meeting;

whichever is earlier;


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THAT the Directors be and are hereby authorised to complete and do all such acts and things (including executing such documents as may be required) to give effect to the transactions contemplated and/or authorized by this resolution.

Resolution 9

THAT Dato' Mohd. Rafik Bin Shah Mohamad be hereby retained as an Independent Director of the Company until the conclusion of the next AGM, in accordance with the MCCG.

Resolution 10

THAT Tan Sri Datuk (Dr.) Rafiah Binti Salim be hereby retained as an Independent Director of the Company until the conclusion of the next AGM, in accordance with the MCCG.

Resolution 11

THAT the alterations, modifications, additions or deletions to the Company’s Constitution as set out in Part B of the Circular to Shareholders dated 28 March 2018 accompanying the Company’s Annual Report for the FYE 31 December 2017 be and are hereby approved.

21. Closure of Meeting Tan Sri Chairman informed that Toh Puan Dato’ Seri Hajjah Dr. Aishah Ong and Tan Sri

Datuk Yong Poh Kon who had attained the retirement age would be retiring after the conclusion of the AGM and he, on behalf of the Board, recorded his appreciation to them for their past services and contribution to the Company.

There being no other business to be discussed, the meeting was duly concluded at

12.25 p.m. with a vote of thanks to Tan Sri Chairman.

Signed as a correct record of the proceedings:

- SIGNED -

---------------------------------------------------------------- Y.A.M. Tan Sri Dato' Seri Syed Anwar Jamalullail Chairman


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Annexure – A Questions from MSWG and Summary of Comments, Questions and Answers during the AGM 1. Questions from MSWG:- “Strategic & Financial Matters 1. It is reported in the Management Discussion & Analysis on page 24 of the

Annual Review 2017 that a key highlight of the year 2017 was the Group’s decision to establish a Global Procurement Hub in Malaysia. Please explain further on how the Company will benefit from the establishment of the Global Procurement Centre Hub in Malaysia?

2. As stated in Note 8 on page 75 of the Corporate Governance & Financial Report

2017 (“CGFR”), the trade receivables of the Group has increased by 26.0% from RM209.9 million in FYE 2016 to RM264.3 million in FYE 2017.

i. What are the reasons for the growth in trade receivables to outpace

the revenue’s growth rate of 3.9% for the FYE 2017?

ii. Will there be a concern on impairment of trade receivables and its recoverability?

3. How many new products does the Company intend to launch in FY 2018? Is there a

concern that the new launches could squeeze and cannibalise the existing products in the respective markets?

4. We refer to page 43 of the CGFR which states that the number of personnel in the

Group has reduced in the past 5 years from 5,847 in FYE 2013 to 5,338 in FYE 2017 despite the expansion of the Group’s operation and revenue.

i. What are the reasons for the decline in the number of personnel?

ii. Please share with shareholders your view on whether automating the

Group’s activities can result in a lower number of personnel and hence mitigate the increasing labour cost?

iii. We refer to Note 13.1 on page 78 of the CGFR and note one-off lump-sum

payments to 50% of the pensioners who elected to accept the lump-sum payment in exchange of their monthly pension. In this regard, please explain the increase in retirement benefits from RM86.1 million in FYE 2016 to RM89.7 million in FYE 2017 despite the decline in the number of personnel and pensioners in FYE 2017.


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Corporate Governance - Practice 4.5 & 4.7 of the MCCG 1. Practice 4.5 of the MCCG requires the board to disclose in its annual report the

company’s policies on gender diversity, its targets and measure to meet those targets. For Large Companies, the board must have at least 30% women directors. Practice 4.7 of the MCCG requires the Nominating Committee to be chaired by an Independent Director or the Senior Independent Director.

The Company had departed from both Practice 4.5 & 4.7 as stated on pages 23 and 25 respectively of its Corporate Governance Report. We took note of the explanations by the Company that it is undergoing a review process in order to adhere to the Practices. However, there was no timeframe given for the Company to meet either of the targets of at least 30% women director or the appointment of an Independent Director to be the Chairman of its Nominating Committee.

We wish to highlight that under paragraph 3.2 (c) of Practice Note 9 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, Large Companies must disclose the timeframe required to achieve the application of the Practices.”

The Company had responded to MSWG’s questions, in summary as follows:-

Strategic & Financial Matters

1. The Global Procurement Hub marked a new way for the Nestlé S.A. Group to manage procurement on a global scale, adapting to a rapidly changing environment to remain competitive. The Hub provided a wide range of services, including the management of global procurement for specific raw materials such as cocoa and coffee, packaging materials, as well as other procurement-related services for all markets.

In Malaysia, the Global Procurement Hub would source for the required ingredients, materials and services from around the world to supply the needs of over 100 countries globally.

The Hub would help deliver significant Nestlé S.A. Group-wide efficiencies and higher stakeholder satisfaction with their vendors, suppliers and consumers, as well as enable the Group to strengthen their commitment to responsible sourcing.

2. (i) Trade Receivables for the FYE 2017 had increased by 26% as compared

with that of FYE 2016 (year-on-year comparison). However it was also noted that the increase was limited to 17% when comparing the average Trade Receivables for 2017 with that of 2016.


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The increase of Trade Receivables at the end of the year was mainly driven by a slightly different phasing of Chinese New Year. The slightly later Chinese New Year in 2018 resulted in a slightly higher stock levels at the year end of 2017 as compared with 2016. The higher stock levels then led to the higher Accounts Receivables’ amounts. A material part of this effect had been normalized in the first quarter of 2018.

(ii) There was no concern on significant impairment as the Company had a stringent control process in place.

3. The success on the “Innovation & Renovation” pipeline was not measured on

the number but on the total turnover of the new launches. In year 2017, new products had contributed approximately 10% to the total turnover. The Company would continue to focus on new innovation to remain competitive in the market.

4. (i) “Growth” was the most important business target. In order to continue

with growth, the Company had to make sure that its products stay affordable and competitive in the market. It was in the Company’s DNA to identify and realize efficiency and effectiveness on a permanent basis. With that, the Company was now able to sell and produce more with a lower number of employees. The reduction of number of employees happened in an evolutionary manner and in full adherence to the corporate values.

(ii) Automation was an appropriate tool to keep the Company competitive. The Company would continue to automate its processes and main focus areas would be its factories. The Company would also look into automation of some of its office activities.

(iii) The retirement benefits liability of RM89.7 million was in respect of the number of the remaining pensioners after 50% of the original total group of pensioners had opted a lump sum payment. The one-time payment did not have any impact on the defined benefit liability. The increase of pension liability reflected the lower level of assets. The future payments of monthly amount to the pensioners was guaranteed because the underfunded amount would be paid by the Company and had been provided for in the books of the Company.

Corporate Governance - Practice 4.5 & 4.7 of the MCCG

1. The Board took note of the point raised and would review the application of

the Practices in MCCG on an annual basis.


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2. Mr. Woo Khai Yoon, a shareholder, raised the following questions:- i. The Company had recorded impressive returns on shareholders’ fund over the

last 20 years with almost 100% pay-out of profits as dividends. There was also substantial increase in return on equity and on assets employed over the years. However, he commented that from a banking point of view, the increase in the Company’s debt : equity ratio from 1.5 : 1 to 3 : 1 was not very good as it indicated the Company was relying on liabilities to grow. He enquired whether it would be possible for the Company to grow its profit and turnover without ever increasing its shareholders’ funds indefinitely i.e. increase in capital via a bonus issue or rights issue, as there would be a limit to borrowings from banks or from the holding company.

ii. He noted that the Company had been borrowing from its holding company and

asked if there was any limit to the borrowings for the Company to grow in the forthcoming years. He also commented that the Company’s return on assets was higher than its cost of borrowing and that was translated to an indefinite increase in equity.

The Chief Finance Officer of the Company, Mr. Martin Peter Kruegel, replied as

follows:- i. On the increase in equity, the Company was relying on its shareholder and

bank loans to fund its business. At the moment, the Company’s debt : equity ratio was healthy and there was no intention to increase shareholders’ funds. The Company had carried out re-financing via inter-company funding which had a lower interest rate. He added that the Company’ financing structure was healthy and sustainable and did not require an increase in equity.

ii. The Company had obtained an inter-company loan in 2017 at a fixed interest

rate from a related company within Nestlé S.A Group for long term financing to grow the Company’s business and for investment in capital expenditures (“CAPEX”). In the event of fluctuating CAPEX requirements, the Company would also need to source for other short term loans from third parties. He informed that the Company was not exposed to currency fluctuation as there was hedging in place.

Tan Sri Chairman also informed that the Company had obtained approval from Bank Negara on the inter-company loan.

3. Mr. Bhupinder Singh, a proxy, raised the following matters:- i. He was disappointed that there was no notification on the distribution of

breakfast vouchers upon registration of attendance at the AGM and that many shareholders were not able to redeem their breakfast in time before the commencement of the meeting.


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ii. He hoped Nestlé could come out with a completely sugarless MILO. iii. It was difficult to read the expiry dates on Nestlé’s yoghurt products due to the

dark colour of its packaging and the font size of the prints. iv. Enquiry on the import of raw material and the impact of the strengthening of

Ringgit Malaysia. v. The packaging of Nestlé’s milk products needed improvement to avoid spill-

over upon opening. vi. He suggested that the Company consider a share-split exercise in view of the

exceptionally high share price of its shares. The Board had responded as follows:- i. Mr. Alois Hofbauer extended his apologies for the inconvenience caused from

the distribution of breakfast vouchers. (Notification of breakfast voucher distribution could be found in the Letter to Shareholders dated 28 March 2018 on the administrative details for the AGM 2018, sent out together with the Annual Report 2017)

ii. The Company had launched MILO Kosong, which was not sugarless but

contained only 6g of natural sugar (from milk and malt) and it would continue to work on healthier products.

iii. Mr. Alois Hofbauer explained that there were limitations for printing the

manufacturing and expiry dates on the yoghurt’s packaging and he apologized for the consumers’ difficulty in reading those dates.

iv. On the import, Mr. Martin Peter Kruegel informed that costs of sales had

started to decrease with the currency appreciation. It was expected that total costs for the FYE 2018 would be lower than that of 2017, with an increase in profit margin. It was also anticipated that the quantum of costs of sales would be compatible with that of 2016.

v. The Company would look into its milk packaging together with its suppliers. vi. Mr. Alois Hofbauer took note of the suggestion on share-split and he reported

that there was no plan for the aforementioned corporate exercise at the moment.


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4. Mr. Keh Yeow Hwee, a shareholder, congratulated the Company, its Board and Management for the good results achieved in 2017. He then asked on the following:-

i. The shareholder quoted some examples of retail companies which were

affected by online businesses in terms of sales and profit margin. He enquired whether the long term profitability of the Company’s normal retail channel would be affected by online businesses.

ii. It was noted that the Employees’ Provident Fund Board (“EPF”) had been

actively trading in the Company’s shares i.e. acquired approximately 7.8 million shares and disposed of about 10.7 million shares from July 2017 to April 2018. He enquired on the Board’s views on the share trading and whether there had been any discussion between the Company and EPF on the trading.

The Board’s replies to the enquiries were as follows:- i. Mr. Alois Hofbauer reported that e-ecommerce had been growing fast i.e. at a

rate of three (3) to five (5) times every year and that the e-commerce business had yet to reach its maturity. For rural areas, traditional grocery stores were still important. He added that the on-the-go and bowl noodles’ products had increasingly contributed to the Company’s sales and profitability and that sales from convenience stores had recorded an increase in the first quarter of 2018.

ii. Tan Sri Chairman explained that EPF, a substantial shareholder, has two (2)

separate accounts for investments and for trading to gain profits. The Company had not been discussing with EPF on the latter’s share trading.

At this juncture, the representatives from EPF also expressed their concurrence with the Company’s reply and added that they had no further comment on the trading by EPF on the shares of Nestlé.

5. Mr. Jason Tan, a shareholder, congratulated the Company for its performance and

its ability to reduce costs and expenses in 2017. The following questions were raised:-

i. Reason for the increase in tax expenses in 2017 as compared with 2016. ii. Reason for the negative amount in the Company’s hedging reserve. Mr. Martin Peter Kruegel answered as follows:- i. There was a one-off item which resulted in an extraordinarily low tax rate in

2016. Hence the tax rate for 2016 should not be used as a benchmark as it could be misleading.


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ii. There was no hedging loss recorded. In the Company’s Profit and Loss

Statements, the negative figure for hedging was neutralised by a corresponding accounting entry in the cost of sales.

6. Mr. Tan Lim Beng, a proxy, commented on the high share price of the Company’s

shares. He then cited a nutritional product from another company and enquired whether the Company would launch any similar nutritional product.

Mr. Alois Hofbauer took note of the proxy’s comments and his suggestion for Nestlé

to look into nutritional products. He further explained that the Company does already have a similar nutritional product available in the market.

7. Mr. Wan Heng Wah, a shareholder, complimented the profits achieved by the

Company for the FYE 2017 and in the first quarter of 2018. He enquired on the profitability expectations for the subsequent financial quarters and whether the Company had exploit all means to ensure it could maintain its positive financial results. He then referred to the statements made by the Company in its Annual Report 2017 that the Company had not increased its product prices but had worked on costs, operational and productivity efficiency. He further asked if the Company would be able to avoid price increase, in view of the increase in commodity prices and its negative impact on costs, and the steps taken to ensure that customers’ and shareholders’ interests were safeguarded.

Mr. Martin Peter Kruegel responded that the Company would take into

consideration the following three (3) factors before implementing any price increase:-

(i) Protection of profitability by growing the business;

(ii) Internal efficiency - Sustainability of business; and

(iii) External efficiency – Distributors and other stakeholders.

He represented that under normal circumstances, the Company would be able to

protect its profitability and price increase would be the last resort to be taken. The Company was confident with the profit outlook for 2018 and anticipated lower commodity prices, appreciation of the Ringgit Malaysia and hence, was optimistic with the financial performance for 2018.

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