Nestle India Q2 net profit at Rs231 crore

Nestle India net sales increased 16.7% to Rs.2,256 crore from Rs.1,957 crore during the second quarter of the previous year


Nestle India has been working on reducing its dependence on Maggi noodles. Photo: Bloomberg
Nestle India has been working on reducing its dependence on Maggi noodles. Photo: Bloomberg

New Delhi: Nestle India Ltd’s Maggi noodles, its single largest revenue earner, has been back on shop shelves for about three quarters now, but the company is yet to fully recoup the market share it had before it was forced to recall the popular snack.

The June quarter results of the Swiss packaged food company’s local unit reflect this.

During the April-June period, Nestle India reported a net profit of Rs.230.84 crore, missing the Street’s estimate. The Bloomberg consensus figure was Rs.276 crore.

During the comparable quarter a year ago, Nestle India reported a loss of Rs.64.4 crore—its first in 15 years.

“Results for the quarter ended 30 June 2016 are not entirely comparable with the results of the corresponding period due to the Maggi noodles issue in 2015,” the company said in a statement.

April-June was the first quarter that reflected the financial impact of the ban on Maggi noodles. The loss was linked to the one-time charge of Rs.451.6 crore related to the removal of Maggi noodles from the domestic market after regulator Food Safety and Standards Authority of India (FSSAI), on 5 June 2015, ordered the company to withdraw Maggi noodles, which accounted for about 30% of Nestle India’s revenue.

The FSSAI order was based on the allegations that the product contained lead and monosodium glutamate in excess of the prescribed limits.

During the quarter ended 30 June, Nestle India’s net sales increased 16.7% to Rs.2,256 crore from Rs.1,957 crore during the second quarter of the previous year. Nestle India follows January-December as its financial year.

Sales from the domestic market grew 17.5% and exports increased 7% during the quarter, the company said in its statement.

“It is heartening to see Maggi noodles rebound to market leadership of about 57% after its reintroduction last November,” Suresh Narayanan, chairman and managing director, Nestlé India, said, in a statement.

It is, however, still far below the 80.2% market share it commanded in the quarter to March 2015, according to a May 2015 report published by Nomura Financial Advisory and Securities (India) Pvt. Ltd.

“The Maggi brand has indeed shown resilience and consumer trust in its comeback. I want to thank millions of consumers, well-wishers and thousands of partners for helping us get back strongly,” Narayanan added.

During the period that Nestle India took Maggi off shop shelves, ITC Ltd’s Yippee noodles and Wai Wai noodles from Nepal’s CG Foods gained market share, filling the void.

Yoga guru Baba Ramdev’s Patanjali Ayurveda also joined the race for a share of the market by launching atta (wheat) noodles.

Nestle India has been working on reducing its dependence on Maggi noodles.

It has, during the past quarter, launched more than 25 products across categories. “To harness growth opportunities across all our categories, we have unleashed significant innovation and renovation efforts by launching over 25 products in the last couple of months,” Narayanan said.

“These launches, and more to follow in due course of time, will contribute to the future growth of Nestlé India,” he added.

“A sequential dip in sales of 1.7% is because the noodles category is still not back to its pre-Maggi issue size—still at Rs.2.4 billion per month against Rs.3.2 billion per month. Gross margins improved (quarter-on-quarter), largely led by a change in product mix and some price hikes,” Abneesh Roy, an analyst with Edelweiss Securities Ltd, said.

Nestle India’s shares closed at Rs.7,165.60 apiece, down 0.79% on BSE Ltd on a day the benchmark Sensex ended 0.56% down at 28,051.86 points.

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