Nestle India’s Net profit jumps by 14.6% in last quarter of FY 20-21

Revenue from operations for the quarter ended 31 March was up 8.5% at ₹3,610.82 crore from the ₹3,325.27 crore it reported in the year-ago period

Packaged foods company Nestlé India on Tuesday reported a 14.65% jump in March quarter net profit at ₹602 crore, slightly ahead of Street estimates, as the company reported double-digit growth in domestic sales and key brands reported strong growth helped by in-home consumption.

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Revenue from operations for the quarter ended 31 March was up 8.5% at ₹3,610.82 crore from the ₹3,325.27 crore it reported in the year-ago period.

The maker of Maggi noodles reported a 10.2% jump in domestic sales that stood at ₹3,442 crore for the quarter as key brands in its portfolio, benefiting from at-home consumption, posted double-digit growth, which the company said was broad-based and largely driven by volumes and mix.

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The company, however, said that recent “sharp escalations” in key raw material prices is posing a challenge. It specially pointed to headwinds in commodity and packaging materials.

Total expenses for the quarter stood at ₹2,828.61 crore, up 6.1% from the year-ago period. Nestlé India follows a January-December financial year.

“While the Nestlé India family has learnt to cope with the operating volatility in the pandemic, recent sharp escalations in key raw material prices poses challenges that we will resolutely respond to, while maintaining the integrity of our business model,” said Suresh Narayanan, chairman and managing director, Nestlé India.

Key brands such as Maggi noodles, Kitkat, Nescafe Classic, Maggi sauces, Milkmaid and Maggi Masala-Ae-Magic performed well and achieved double-digit growth, he said. Demand in out-of-home consumption channel further improved during the quarter but continues to be impacted by covid-19.

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Large fast-moving consumer goods companies were expected to perform well in the March quarter, helped by a lower base in the year-ago quarter when sales were partially impacted as the country moved to a lockdown. Nestlé India, however, reported a jump in sales on a higher base quarter.

“Nestlé India reported strong first quarter results with overall numbers marginally ahead of our expectations,” said Abneesh Roy, executive vice-president, Edelweiss Securities. “Overall sales increased by 9% year-on-year (y-o-y) on a relatively high base compared to other peers at around 11%. The good part was both gross margins and earnings before interest, taxes, depreciation and amortization or Ebitda margins expanded strongly. This is a very rare feat in the March quarter for consumer companies as most will see a gross margin compression,” he said.

During the quarter, e-commerce continued to deliver a strong performance and grew by 66%. By the end of the first quarter, the contribution of e-commerce to domestic business stood at 3.8%. Export sales were lower by 12.9% due to lower exports to affiliates, the company said.

Ebitda margin expanded 168 basis points (bps) y-o-y and gross margins expanded by 223bps y-o-y.

Nestlé aims to set up vaccination camps across its factories. “This will provide the much-needed vaccination of our employees in the eligible age group. We are in the process of extending our pioneering industry commitment of Nestlé Suraksha medical insurance protection to our distributor salesforce against covid-19 for an additional year,” Narayanan added.