Dutch Lady to raise prices of key products by 5pc

DUTCH Lady Milk Industries Bhd (Dutch Lady Malaysia) will increase the price of some of its key products by five per cent this year due to rising raw material prices.

The company expects a 25 to 30 per cent hike in dairy raw material prices this year.

"In the recent past, we have seen significant increase in some key dairy raw material prices, driven largely by drought in New Zealand (and), we estimate an increase of 25 to 30 per cent in key material prices this year compared with 2012.

"We are trying to minimise the price increase that will be passed on to consumers by buying dairy raw materials at the right price and the right time," said its managing director Rahul Colaco after the group's post-annual general meeting (AGM) press conference.

Colaco, however, said structural demand and supply imbalance will continue to put upward pressure on raw material prices.

The price increase, estimated at about five per cent, will cover Dutch Lady Malaysia's key products, including specially formulated milk powders and beverages.

In view of the softening of consumer spending and declining growth in fast moving consumers goods, the company is cautiously optimistic on its outlook this year.

"This year is extremely challenging for us, we aim to maintain or slightly grow our market share," Colaco said.

While the local dairy market experienced a 2.1 per cent decline, Dutch Lady Malaysia managed to increase its market position. Its first quarter market share grew 0.7 per cent to 19.3 per cent from 18.6 per cent in the corresponding period last year.

"Our market share is gradually improving, at a pace faster than market growth. In the longer term, we are bullish on the industry as there is a lot of growth potential," said Colaco.

He cited the fact that Malaysians now drink one glass of milk every week, while the ideal ratio would be twice a day.

The company has also budgeted RM20 million for capital expenditure for the financial year ended December 31 2013.

As UHT (ultra high temperature) production capacity has been fully utilised, the company forked out RM18 million for the installation of high speed liquid line and related equipment in the UHT production line.

"The new facility has increased UHT production capacity by 50 per cent to 24,000 packs per hour," he said.

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