KUALA LUMPUR, Nov 3 ― CGS-CIMB Securities Sdn Bhd (CGS-CIMB) has lowered its financial year 2022 earnings forecast on Nestle (Malaysia) Bhd by 10.6 per cent on the expected impact of the sugar tax on pre-mixed beverages.

Starting April 1 next year, the government is expanding the excise duty on sugary drinks to include pre-mixed beverages.

"We estimate that up to 25-30 per cent of Nestle’s sales (Milo, Nescafe, etc) are contributed by pre-mixed beverage products.

"In our view, Nestle could potentially raise its selling prices to fully pass on the sugar tax, and lower the total sugar content in its products,” it said in a note today.

On the other hand, CGS-CIMB said Nestle would also be hit by the Cukai Makmur, a one-off prosperity tax on companies that make more than RM100 million in profit during the assessment year 2022.

The research firm reiterated its ‘hold’ recommendation on Nestle, believing the beverages company’s current valuations would be supported by the defensive nature of its business (consumer staples), strong global brand name and strong product innovations.

Yesterday, Nestle Malaysia announced a higher net profit of RM148.02 million for the third quarter ended September 30, 2021 (Q3 2021) from RM128.39 million in Q3 2020, supported by resilient demand in its core food and beverages (F&B) business, resulting in a growth of 5.5 per cent.

Revenue edged up 3.6 per cent year-on-year to RM1.44 billion in Q3 2021 from RM1.39 billion previously, on the back of solid sales growth in both domestic and export markets, which grew by 3.4 per cent and 4.5 per cent, respectively.

At 10.36am, Nestle’s share fell RM1.00 to RM134.00 with 10,400 shares changing hands. ― Bernama