Nestle India posts 25% jump in Q1 profit
India was a bright spot for global consumer goods major Nestle in the March quarter, reporting a 24.7% year-on-year growth in consolidated net profit to Rs 737 crore, while consolidated revenue rose 21% for the period versus last year to Rs 4,831 crore. The results beat Street estimates by a wide margin, with a poll of analysts by Bloomberg pegging net profit and revenue for the March quarter at Rs 671 crore and Rs 4,366 crore each. Nestle follows a January-December accounting year.
India’s strong performance came as the Swiss major’s global sales volume dipped for the January-March period, with the KitKat maker’s candy business being the only sweet spot. Confectionary sales volumes — which Nestle calls real internal growth — increased by about 6% even as most other units’ sales declined for the period. Globally, Nestle hiked prices sharply by 7.6% to drive organic confectionary sales by 13.5%, its results showed.
India clearly bucked this trend, with the company seeing broad-based growth across its business segments, including confectionary (which includes KitKat and Munch), beverages (driven by Nescafe), prepared dishes and cooking aids (led by Maggi) and milk products and nutrition.
In a post-results earnings’ call on Tuesday, Nestle CEO Mark Schneider lauded the performance of South Asia, which includes India, saying it recorded strong double-digit growth across most categories. Growth, he said, was supported by distribution expansion in rural areas, e-commerce momentum and increased focus on premiumisation.
Nestle India’s earnings before interest tax depreciation and amortisation (Ebitda) grew nearly 20% year-on-year to Rs 1,129 crore for the March quarter, also beating Bloomberg consensus estimates for the period, which had pegged operating profit (Ebitda) at Rs 1,020 crore.
The uptick seen in operating and net profit for the quarter under review came as inflationary pressures eased in commodities such as edible oils and wheat and packaging material, the company said. However, the Maggi maker said near-term challenges included the cost of fresh milk, fuel, and green coffee which were expected to remain firm because of continued increase in demand and price volatility.
“I am pleased to share that we have continued to deliver robust sales growth this quarter, which is a healthy balance of pricing, volume, and mix,” Suresh Narayanan, chairman & MD, Nestle India, said, adding that this was the highest growth for the company in a quarter in the last 10 years, excluding an exceptional quarter in 2016 which was off a low base in 2015.
“Confectionery led by KitKat, and Munch posted strong growth, supported by consumer-led campaigns, innovation and engagement. While beverages saw robust growth and market share gains led by Nescafe and growth momentum in prepared dishes and cooking aids (which includes Maggi) was aided by market presence, media campaigns and focused consumer activations,” Narayanan said.
Nestle’s out-of-home (OOH) channel also continued to accelerate rapidly in the quarter under review, while e-commerce, organised trade and exports saw strong growth during the period.
“Our performance in e-commerce continued with significant growth in quick commerce. We accelerated our sustained growth journey in RURBAN (Rural+Urban), which was complemented by strong momentum in metro and mega cities. Rural growth was also strong, secular and robust, being volume-led, which gives greater confidence and impetus to our efforts to enhance our footprint,” Narayanan said.
On April 12, Nestle had declared an interim dividend of Rs 27 per share. This will be paid on and from May 8 along with the final dividend for 2022, which is Rs 75 per share, the company said.
The Nestle India stock closed trade flat on the BSE at Rs 20,663 per share on Tuesday, even as the broader BSE Sensex was marginally up at 0.12% versus the previous day’s close to 60,130.71. In the last one year, Nestle has outperformed the market with a healthy return of around 14%, BSE data shows.