Dutch Lady Navigates Dynamic Market: Q1 2025 Revenue Up, Profits Impacted by Strategic Transition
Malaysia’s beloved dairy giant, Dutch Lady Milk Industries Berhad (DLMI), has just unveiled its First Quarter 2025 results, painting a picture of resilient revenue growth amidst a challenging operating landscape. While sales saw a healthy increase, the company’s profitability was tempered by ongoing strategic transition costs and rising raw material prices. Adding a sweet note for shareholders, DLMI also announced an interim dividend, reflecting its commitment to shareholder returns.
Q1 2025 Financial Highlights: A Closer Look
Year-on-Year Performance (Q1 2025 vs. Q1 2024)
DLMI continued its growth trajectory, with revenue showing a steady increase. However, operating profit and net profit experienced a slight dip, largely influenced by one-off transition expenses and external cost pressures.
Current Quarter (Q1 2025)
Revenue: RM373.4 million
Operating Profit: RM34.8 million
Profit Before Taxation (PBT): RM32.9 million
Profit After Taxation (PAT): RM25.0 million
Basic Earnings Per Share (EPS): 39.10 sen
Previous Year Corresponding Quarter (Q1 2024)
Revenue: RM362.8 million
Operating Profit: RM36.3 million
Profit Before Taxation (PBT): RM35.2 million
Profit After Taxation (PAT): RM26.7 million
Basic Earnings Per Share (EPS): 41.70 sen
Key Takeaways (Q1 2025 vs. Q1 2024):
- Revenue Growth: Up by 2.9%, primarily driven by strong sales in core liquid milk, Infant Formula & Toddler (IFT) products, professional range, and newly launched innovations. This growth was partially offset by the discontinuation of some non-core products in Q3 2024 as part of the transition to the new manufacturing facility.
- Profit Decline: Operating profit decreased by 4.1%, and PAT by 6.1%. This includes RM8.3 million in one-off costs related to the new distribution centre transition (down from RM9.6 million in Q1 2024). While accelerated depreciation from the Petaling Jaya factory ceased, other transition costs persisted due to the ramp-up at the new facility and ongoing construction of the dedicated Distribution Centre.
- Adjusted Operating Profit: On a like-for-like basis, excluding one-off costs and accelerated depreciation, operating profit declined by 6.1% to RM43.1 million (from RM45.9 million). This was mainly due to higher dairy and other raw material prices, alongside a negative revaluation of currency hedges as the Malaysian Ringgit strengthened against the USD.
Quarter-on-Quarter Performance (Q1 2025 vs. Q4 2024)
Comparing the current quarter to the immediate preceding one reveals further insights into DLMI’s operational dynamics.
Current Quarter (Q1 2025)
Revenue: RM373.4 million
Operating Profit: RM34.8 million
Profit Before Taxation (PBT): RM32.9 million
Profit After Taxation (PAT): RM25.0 million
Preceding Quarter (Q4 2024)
Revenue: RM366.0 million
Operating Profit: RM42.9 million
Profit Before Taxation (PBT): RM41.5 million
Profit After Taxation (PAT): RM30.7 million
Key Takeaways (Q1 2025 vs. Q4 2024):
- Revenue Growth: Increased by 2.0%, driven by growing sales in liquid milk and IFT products, including new launches.
- Profit Decline: Operating profit fell by 18.9%, and PAT by 18.5%. This significant drop is largely attributed to higher one-off transition costs of RM8.3 million in Q1 2025, compared to RM1.4 million in Q4 2024.
- Adjusted Operating Profit: Excluding these one-off costs, adjusted operating profit saw a milder decline of 2.7% to RM43.1 million (from RM44.3 million). This was due to higher production costs, increased marketing investments to support future growth, and a slightly negative impact from currency hedge revaluations (which were positive in the previous quarter).
Financial Health: Balance Sheet and Cash Flow
DLMI’s balance sheet remains robust, reflecting its continued investment in long-term growth initiatives. The company’s cash flow statement shows a strategic shift in funding for its new facilities.
Condensed Statement of Financial Position (as at 31 March 2025 vs. 31 December 2024)
| Item | 31/03/25 (RM’000) | 31/12/24 (RM’000) | Change (%) |
|---|---|---|---|
| Total Assets | 1,093,701 | 1,073,732 | +1.86% |
| Total Equity | 526,924 | 501,892 | +5.00% |
| Total Liabilities | 566,777 | 571,840 | -0.88% |
| Net Assets Per Share (RM) | 8.23 | 7.84 | +4.97% |
| Cash and Cash Equivalents | 49,654 | 47,796 | +3.88% |
| Non-Current Borrowings | 89,273 | 70,205 | +27.16% |
Balance Sheet Insights: The increase in Total Assets and Total Equity, along with a slight decrease in Total Liabilities, indicates a strengthening financial position. The rise in non-current borrowings reflects the company’s financing strategy for its new manufacturing and distribution facilities.
Condensed Statement of Cash Flow (for 3 months ended 31 March 2025 vs. 31 March 2024)
Current Period (Q1 2025)
Net Cash Generated from Operating Activities: RM4,943k
Net Cash Used in Investing Activities: (RM17,655k)
Net Cash Generated from Financing Activities: RM14,570k
Net Increase in Cash and Cash Equivalents: RM1,858k
Previous Year Corresponding Period (Q1 2024)
Net Cash Generated from Operating Activities: RM12,736k
Net Cash Used in Investing Activities: (RM27,540k)
Net Cash Used in Financing Activities: (RM3,186k)
Net Decrease in Cash and Cash Equivalents: (RM17,990k)
Cash Flow Insights: While operating cash flow saw a decrease, DLMI significantly reduced cash outflow from investing activities (largely due to lower additions to property, plant, and equipment compared to the previous year). A notable improvement was seen in financing activities, which turned strongly positive due to borrowings raised to fund the new production and distribution facilities, leading to a net increase in cash and cash equivalents for the quarter, a positive shift from the previous year’s decrease.
Navigating the Future: Risks and Prospects for 2025
DLMI acknowledges that the operating environment in 2025 remains challenging, shaped by a confluence of global and domestic uncertainties. These factors are expected to drive higher input costs and exert margin pressures throughout the year.
Key Challenges Identified:
- Geopolitical Developments: Ongoing global uncertainties can impact supply chains and market stability.
- Foreign Exchange Volatility: The Malaysian Ringgit’s instability against the USD directly affects import costs for raw materials.
- Rising Commodity and Dairy Raw Material (DRM) Prices: These are expected to continue pushing up production costs.
- Regulatory Updates: Potential new regulations could impact cost structures and supply chains.
DLMI’s Strategic Response and Outlook:
Despite the headwinds, DLMI remains cautiously optimistic, underpinned by the strength of its brands and the increasing recognition of milk’s nutritional value among Malaysians. The company is actively implementing several strategic initiatives:
- New Facility Transition: Having successfully completed the production transition to the new IR4.0 manufacturing facility in Bandar Enstek, DLMI is now focused on completing its new Distribution Centre in Enstek, expected to be operational by mid-2025. This move reinforces operational excellence and supply chain resilience, enabling innovation like the new Dutch Lady Sip & Seal Packs.
- Cost Optimization and Organizational Efficiency: DLMI is committed to optimizing costs and cash flow. It is implementing a “fit-for-purpose” organization to enhance effectiveness, lower its fixed cost base, and counter inflationary and exchange rate pressures.
- Securing Financing: The company is utilizing cash generated from operations and working capital to fund Property, Plant & Equipment (PPE) investments. It has also drawn down USD20.1 million (RM89.3 million) from an available USD35 million intercompany loan facility to support ongoing capital investments.
- Commitment to Local Dairy Farmers: DLMI continues to support local dairy farmers, aiming to improve both the quantity and quality of locally produced fresh milk.
Dividend Announcement: A Return to Shareholders
On May 22, 2025, DLMI declared a standard single-tier first interim dividend of RM0.25 per share, amounting to RM16 million, for the financial year ending 31 December 2025. This dividend will be paid on June 17, 2025, to shareholders on record as of June 10, 2025.
Summary and Investment Considerations
Dutch Lady Milk Industries Berhad’s Q1 2025 results demonstrate a company adept at driving revenue growth even as it navigates significant internal transitions and external market pressures. The strategic investments in the new manufacturing and distribution facilities, while impacting short-term profitability through one-off costs, are crucial for DLMI’s long-term operational efficiency, innovation capabilities, and market leadership. The continued focus on cost optimization and supply chain resilience, coupled with the strength of its brand and commitment to nourishing Malaysians, positions DLMI to tackle the evolving market landscape.
However, investors should be mindful of the following key points:
- Ongoing Transition Costs: While accelerated depreciation has ceased, other transition-related costs for the new distribution centre and production ramp-up will continue to impact profitability in the near term.
- External Headwinds: The persistent volatility in foreign exchange rates and rising commodity/dairy raw material prices will likely continue to exert pressure on input costs and profit margins.
- Financing for Growth: The increase in borrowings highlights the significant capital expenditure required for the new facilities, though the company indicates sufficient committed undrawn facilities.
Overall, DLMI appears to be executing a long-term strategy to solidify its market position and enhance operational capabilities, even if it means some short-term profit fluctuations. The declared dividend also signals confidence in future cash generation.
Your Thoughts?
DLMI is clearly in a transformative phase, investing heavily in its future. What are your thoughts on their strategic direction and how they are balancing growth with these significant investments? Do you believe these long-term plays will pay off for the company and its shareholders?
Share your insights in the comments section below!
