CORPORATE REPORT 2016 01 Corporate Report 2016 The nation’s leading Nutrition, Health & Wellness company 02 CORPORATE REPORT 2016 KEY HIGHLIGHTS • Turnover for the financial year ended 31 December 2016 hit a record high, increasing by 4.7% to cross the RM5 billion mark for the first time. Domestic as well as Export business showed strong growth. • Growth driven by continuous product innovations as well as strong marketing and trade promotions. • Profit After Tax improved by 7.9% to RM637 million for the financial year ended 31 December 2016. • Cash Flow after Investments increased by 44%, mainly driven by further optimisation of the working capital. CORPORATE REPORT 2016 01 CONTENTS 02 03 06 About Our Product Message This Report Portfolio to Shareholders • Recipe Booklet 10 14 32 Management Business Review Creating Shared Discussion & Value and Meeting Our Analysis Commitments 36 54 Our Leadership Organisation Structure 36 Board of Directors 48 Executive Leadership 52 Nestlé Leadership Team Team 38 Profile of Directors and 49 Profile of Executive Company Secretary Leadership Team 56 58 62 Corporate Corporate Notice of Annual Information Directory General Meeting • Proxy Form 02 CORPORATE REPORT 2016 ABOUT THIS REPORT OUR REPORTING SUITE Nestlé (Malaysia) Berhad (110925-W) (“Company”) produces a range of reports to provide our stakeholders with pertinent information that enable them to gain a better understanding of our business operations across the value chain, from suppliers to top management. Report Assurance Corporate Report We demonstrate accountability and strengthen the trust of our stakeholders by highlighting the The Corporate Report is the primary source performance of our brands and key achievements of information about the Company and its for the year which link back to the Group’s overall subsidiaries (“Group”) and provides an strategic direction. Our stakeholders learn more overview of our overall strategy, financial about our various innovative products, services and Corporate Report 2016 and non-financial milestones as well as key initiatives that have contributed to the business. The nation’s leading Nutrition, Health & Wellness company contributors for the year. Nestlé in Society Report We share our progress in delivering on our commitments by communicating transparently on This report showcases our commitment to material issues which are relevant to both our continue nourishing Malaysians and to deliver internal and external stakeholders. We appoint on our promise of ‘GOOD FOOD, GOOD LIFE’ PricewaterhouseCoopers (“PwC”) to verify that our by highlighting our key Creating Shared Value Report is in accordance with the Global Reporting Nestlé in Society Report 2016 Creating Shared Value and (“CSV”) initiatives. Initiative (“GRI”) 4.0 Standards Comprehensive. meeting our commitments Corporate Governance & Financial Report This Report emphasises our strategy of best practices in corporate governance in order to Throughout the year, the Group publishes a continue earning the trust of Malaysians for range of financial statements, including quarterly generations to come. Our doctrine and principles of financial statements and full audited annual good corporate governance is strongly supported by financial results, in accordance with the Group’s a comprehensive framework of policies, guidelines Corporate Governance & corporate governance framework. and internal controls. Financial Report 2016 CORPORATE REPORT 2016 03 04 CORPORATE REPORT 2016 Goodness of milk, malt and cocoa ACT IV-GO, a combination of PROT OMALT, 6 vitamins and 3 minerals for efficient release of energy from food Balanced nutrition in every cup For more information on the MS 1500:2009 Energy to Go Further, visit www.milo.com.my 1019-05/2004 CORPORATE REPORT 2016 05 06 CORPORATE REPORT 2016 MESSAGE TO SHAREHOLDERS DEAR SHAREHOLDERS Chairman Chief Executive Officer Y.A.M. Tan Sri Dato’ Seri Alois Hofbauer The year 2016 has indeed been a challenging Syed Anwar Jamalullail one, marked by global and domestic economic headwinds. Nevertheless, the Company successfully weathered these challenges, delivering another year of strong profitable growth by leveraging on our resilient strategic business framework and our steadfast commitment to propel the Company to new heights. On this note, on behalf of the Board of Directors, we are pleased to present the Annual Report of the Company for the financial year ended 31 December 2016. Economic Landscape Financial markets across the world were impacted by global economic volatility in 2016, with lingering uncertainties, hazy prospects and subdued demand in both advanced and emerging markets. Despite these tough conditions, domestic demand was stable; and on the back of Malaysia’s sound fundamentals, we achieved good growth in a difficult year. Our resilience is underpinned by our strong portfolio of successful brands, a highly capable talent pool and above all, our culture of continuous improvement in our operations and emphasis on innovation. Reigniting the Growth: Our FIT Approach Our improved performance for the year was driven by our commitment to reignite the growth of the Company, propelled by our long-term strategy known as FIT. This represents the key pillars of ‘Fuel to Grow’, ‘Innovate to Grow’ and ‘Transform to Grow’. Our FIT strategy focuses on enhancing efficiencies and encouraging innovation throughout the Company, with highly- engaged employees to fuel our growth. Financial Performance The Group achieved a milestone by crossing the threshold of RM5 billion in revenue, with a turnover of RM5.1 billion for the year. CORPORATE REPORT 2016 07 Message to Shareholders The key driver for this performance is processes to align better with our Internal As Malaysia’s number one F&B manufacturer, reflected in our FIT strategy. In line with this Controls and to encourage the sharing of the Company is well-positioned to capitalise strategy, we continuously invest in marketing compliance documents. We drove awareness on the vast inherent potential of the nation. and trade activities, product innovations, as programmes to promote the importance of Supported by strong short-term results, well as productivity improvements throughout compliance processes and we revamped we are focused on ensuring the long-term, our operations. both our Corporate Governance, Risk and sustainable growth of the Company by Internal Control statements to better reflect leveraging on our FIT strategy to maintain our Through these initiatives, we successfully our commitment to best-in-class governance momentum. expanded our market share in major product practices. categories and strengthened growth in both As the world’s leading Nutrition, Health domestic and export markets. Domestic Awards & Recognition and Wellness Company, our core objective sales continued to be a key contributor, remains unchanged: to provide Malaysians achieving solid 3.3% growth despite a soft In recognition of our employee engagement with high quality, great-tasting nutritious F&B market in Malaysia. This was driven by efforts, the Company received several top offerings that help our consumers lead the Group’s continuous product innovations in level accolades in 2016, including ‘The Most healthier lives. tandem with successful marketing and trade Popular Graduate Employer in the FMCG promotions. Similarly, the export business Category’ for the fourth consecutive year Appreciation demonstrated strong growth with an increase by Grad Malaysia, Bronze for Best Graduate of 9.6%, an excellent improvement compared Programme at the Asia Recruitment Awards As we mark the end of another successful with the previous year. 2016 and Top 3 Most Attractive Employers in year, the Board would like to thank the Malaysia at the Randstad Award 2016. Management Team for their unwavering Dividends commitment and guidance in leading the For the first time ever, Nestlé Malaysia was Company forward. We are committed to deliver the best value also awarded ‘Company of the Year’ by The to our shareholders via consistent dividend Edge Billion Ringgit Club 2016 in recognition We would also like to extend our deepest payments. In line with this, the Board of of our strong financial results over the years gratitude to all employees for their invaluable Directors proposed a final dividend of RM1.30 as well as our unwavering commitment contributions to the Company. per share for the financial year ended towards Creating Shared Value. 31 December 2016. Last but not least, to our consumers, The Company was also recognised in the partners, distributors and customers, thank Cumulatively, this will bring total dividends Minority Shareholder Watchdog Group you for your continued support and loyalty to for the year to an all-time high of RM2.70 (“MSWG”) Awards 2016. This award our Company and brands. per share. acknowledges public-listed companies that demonstrate best practices for corporate Corporate Governance governance, disclosures, transparency and good corporate governance. We believe that the highest standards of corporate governance are critical to Along with this, MILO earned the leading the success of our business today. Good people’s choice award, at the Putra Brand Y.A.M. Tan Sri Dato’ Seri governance underpins the delivery of our Awards 2016 for its excellent product Syed Anwar Jamalullail strategy to become the best at what we innovation efforts as well as its commitment Chairman do and generate sustainable returns for to continuously strengthen the brand. shareholders. The Nestlé Board