Dutch Lady’s FY17 outlook pinched by costlier commodities

KUCHING: Dutch Lady Milk Industries Bhd’s ( Dutch Lady) financial year 2017 ( FY17) outlook is being pinched by higher costs in raw materials such as milk powder.

According to report by the research arm of Kenanga Investment Bank Bhd (Kenanga Research), during the first quarter of FY17 (1QFY17), Dutch Lady reported a net profit of RM31.9 million which was a 6 per cent decrease year over year ( y- o- y) and below their expectations.

Gross margins also saw pressure as they fell by 41,0 per cent or 2.5 points.

“The negative deviation was a result of wider- than- expected impact from the recovery in commodities prices,” the research explained while highlighting that milk powder prices had shown an increase of circa 40 per cent y- o- y for 1QFY17.

Meanwhile, quarter on quarter ( q- o- q), the company was able to maintain its 1QFY17 revenue but witnessed an 8 per cent drop in its profit- before- tax.

Higher commodity prices were again to blame for this, but Dutch Lady added that it was in conjunction with higher operation costs from a weaker ringgit and continued investments in advertising and promotions.

“The less optimistic economy outlook coupled with the higher material prices and weakening of the ringgit is expecting to result in a challenging climate for the business environment “Nonetheless we will remain focused in 2017 to leverage on the established Dutch Lady brand and its quality offerings to win the hearts of Malaysian consumers,” said Saw Choo Lee, managing director of Dutch Lady in a statement on Friday.